UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number: 811-22061

Name of Fund:   BlackRock Funds II

BlackRock 20/80 Target Allocation Fund

BlackRock 40/60 Target Allocation Fund

BlackRock 60/40 Target Allocation Fund

BlackRock 80/20 Target Allocation Fund

BlackRock Core Bond Portfolio

BlackRock Credit Strategies Income Fund (Formerly BlackRock Secured Credit Portfolio)

BlackRock GNMA Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock U.S. Government Bond Portfolio

Fund Address:    100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds II, 55          East 52^nd Street, New York, NY 10055

Registrant’s telephone number, including area code:   (800) 441-7762

Date of fiscal year end: 09/30/2016

Date of reporting period: 09/30/2016

Item 1 – Report to Stockholders

SEPTEMBER 30, 2016        

  ANNUAL REPORT BLACKROCK^®

BlackRock Funds II

▶   BlackRock Credit Strategies Income Fund

▶   BlackRock GNMA Portfolio

▶   BlackRock Inflation Protected Bond Portfolio

▶   BlackRock Investment Grade Bond Portfolio

▶   BlackRock U.S. Government Bond Portfolio

Not FDIC Insured ◾ May Lose Value ◾ No Bank Guarantee

Table of Contents

	Page
The Markets in Review	3
Annual Report:
Fund Summaries	4
About Fund Performance	15
Disclosure of Expenses	16
The Benefits and Risks of Leveraging	16
Derivative Financial Instruments	16
Financial Statements:
Schedules of Investments	17
Statements of Assets and Liabilities	81
Statements of Operations	83
Statements of Changes in Net Assets	84
Statements of Cash Flows	87
Financial Highlights	88
Notes to Financial Statements	112
Report of Independent Registered Public Accounting Firm	138
Important Tax Information	138
Disclosure of Investment Advisory Agreement	139
Officers and Trustees	144
Additional Information	148

           Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports and prospectuses by enrolling in the electronic delivery program. Electronic copies of shareholder reports and prospectuses are also available on BlackRock’s website.   TO ENROLL IN ELECTRONIC DELIVERY:   Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:   Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.   Shareholders Who Hold Accounts Directly with BlackRock:   1. Access the BlackRock website at blackrock.com   2. Select “Access Your Account”   3. Next, select “eDelivery” in the “Related Resources” box and follow the sign-up instructions

2 BLACKROCK FUNDS II SEPTEMBER 30, 2016

The Markets in Review

Dear Shareholder,

Most asset classes produced strong returns over the past year, particularly risk assets such as equities and high yield bonds. Central bank policy decisions continued to provide support to financial markets, while changing economic outlooks and geopolitical risks have been major drivers of investor sentiment.

The Federal Reserve (the “Fed”) has long been in the spotlight, particularly leading up to the decision to end its near-zero interest rate policy at the end of 2015, and after, as investors remained focused on the anticipated pace of future rate hikes. With the European Central Bank and the Bank of Japan having moved into stimulus mode, the divergence in global monetary policies drove heightened market volatility heading into 2016 and caused the U.S. dollar to strengthen considerably. The year had a rough start as the strong dollar challenged U.S. companies that generate revenues overseas, and pressured emerging market currencies and commodities prices. Low and volatile oil prices and signs of slowing growth in China were also meaningful factors behind the decline in risk assets early in the year. However, as the first quarter wore on, these pressures abated and a more tempered outlook for U.S. rate hikes helped financial markets rebound.

Volatility spiked in late June when the United Kingdom shocked investors with its vote to leave the European Union. Uncertainty around how the British exit might affect the global economy and political landscape drove investors to high-quality assets, pushing already low global yields to even lower levels. However, risk assets recovered swiftly in July as economic data suggested that the consequences had thus far been contained to the United Kingdom.

With a number of factors holding global interest rates down — central bank accommodation, an aging population, and weak productivity growth — assets offering decent yield have become increasingly scarce. As a result, income-seeking investors have stretched into riskier assets despite high valuations in many sectors. History implies that high valuations and low growth results in lower returns for risk assets. Still, perceived safe havens have their own risks, and investors are wise to carefully assess risk and potential reward.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to adjust accordingly as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.40	%		15.43	%
U.S. small cap equities (Russell 2000® Index)		13.18			15.47
International equities (MSCI Europe, Australasia, Far East Index)		4.88			6.52
Emerging market equities (MSCI Emerging Markets Index)		9.75			16.78
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.17			0.27
U.S. Treasury securities (BofA Merrill Lynch 10- Year U.S. Treasury Index)		2.25			5.59
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		2.68			5.19
Tax-exempt municipal bonds (S&P Municipal Bond Index)		2.53			5.84
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		11.38			12.74
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of September 30, 2016 BlackRock Credit Strategies Income Fund

      Investment Objective

BlackRock Credit Strategies Income Fund’s (the “Fund”) investment objective is to seek to provide high current income, with a secondary objective of long-term capital appreciation.

Effective July 1, 2016, the Fund changed its name to BlackRock Credit Strategies Income Fund and its investment strategies. Under its new investment strategies, the Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in fixed-income securities.

      Portfolio Management Commentary

How did the Fund perform?

• On July 1, 2016, the Fund’s name was changed from BlackRock Secured Credit Portfolio to BlackRock Credit Strategies Income Fund. From October 1, 2015 to June 30, 2016, the Fund was managed to the S&P/LSTA Leveraged Loan Index and a customized reference benchmark consisting of a market-value-weighted blend of the S&P/LSTA Leveraged Loan Index and the secured bond component of the Bloomberg Barclays High Yield Index (“Secured Loan/Bond Index”). From July 1, 2016 to September 30, 2016, the Fund’s benchmark became a customized performance benchmark comprised of the returns of the Bloomberg Barclays Global High Yield Index (25%), S&P/LSTA Leveraged Loan Index (25%), Bloomberg Barclays U.S. CMBS Investment Grade Index (25%) and JPMorgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI Broad Diversified) (25%). For the 12-month period ended September 30, 2016, the Fund underperformed its new customized performance benchmark and former benchmarks.

What factors influenced performance?

• The largest detractor from performance was the Fund’s positioning in U.S. Treasuries during the latter part of the period as interest rates crept higher in anticipation of a potential rate hike by the Fed. Additionally, a position in the floating rate loan interest (“bank loan”) of an integrated energy company detracted over the period. Positions in select preferred equity securities also weighed on performance.

• The largest contributor to performance for the period was the Fund’s bank loan allocation, with positive contributions across a variety of segments including technology, health care/pharmaceutical, consumer-driven, gaming, and cable and satellite. High yield bond exposures also were additive, with the strongest performing positions in commodity-related areas, including metals and mining and both midstream and independent energy. In addition, industrial credits within technology, telecommunications and health care helped returns. A long high yield position implemented via the Bloomberg Barclays High Yield Index also contributed to performance as spreads compressed during the period. Lastly, positions added late in the period in investment grade bonds generated positive results, in particular within the energy sector.

Describe recent portfolio activity.

• From October 1, 2015 to June 30, 2016, there were no significant changes to the Fund’s broad investment strategy. The Fund remained positioned with an up-in-quality bias in bank loans, along with a preference toward more stable issuers in the high yield universe. The Fund added to higher quality assets over the course of the first nine months of its fiscal period, specifically BBB and BB credits. From a sector standpoint, exposures were increased within technology and health care, and reduced within pharmaceuticals and lodging.

• From July 1, 2016 through September 30, 2016, the Fund transitioned from its prior mandate, the BlackRock Secured Credit Portfolio. The change broadened the Fund’s investment universe from predominantly secured instruments across bank loans and secured high yield bonds, to a multisector mandate across credit asset classes. The change also prompted a meaningful reduction in the Fund’s bank loan allocation, significantly reducing exposure down to 37% of portfolio assets as of September 30. Proceeds from sales of bank loan investments were redeployed into other credit asset classes where the investment adviser saw the most compelling opportunities for yield and total return potential. These areas included U.S. and European high yield bonds, European bank capital securities and collateralized loan obligations (“CLOs”), which offered attractive valuations versus similarly rated investment grade corporate issues. The Fund also built diversifying allocations to investment grade corporate credit and emerging markets across higher quality sovereigns and corporates. Lastly, exposure to securitized assets in the form of commercial mortgage-backed securities was increased given that the investment adviser felt the recent underperformance of the sector provided an attractive entry point.

Describe portfolio positioning at period end.

• At period end, the Fund held 37% of its portfolio in U.S. bank loans, 24% in U.S. high yield bonds, 8% in high quality CLOs, 5% in European high yield bonds, 5% in U.S. investment grade corporates, 5% in European bank capital securities, 4% in securitized credit and 4% in emerging market debt.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

4 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock Credit Strategies Income Fund

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   Under normal market conditions, the Fund invests at least 80% of its net assets in fixed-income securities, including bank loans and bonds, issued primarily, but not exclusively, by below investment grade issuers. The Fund’s total returns prior to July 1, 2016, are the returns of the Fund when it followed a difference investment objective and different investment strategies under the name BlackRock Secured Credit Bond Portfolio.

³  Market value-weighted index designed to measure the performance of U.S. leveraged loan market. It mirrors the market-weighted performance of the largest institutional leveraged loans based upon market weightings, spreads and interest payments.

⁴  A multi-currency flagship measure of the global high yield debt market. The index represents the union of the U.S. High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive.

⁵  The index measures the market of conduit and fusion CMBS deals with a minimum current deal size of $300mn. The index is divided into two subcomponents: the U.S. Aggregate-eligible component, which contains bonds that are Employee Retirement Income Security Act of 1974, as amended (“ERISA”) eligible under the underwriter’s exemption, and the non-U.S. Aggregate-eligible component, which consists of bonds that are not ERISA eligible.

⁶  A market capitalization weighted index consisting of U.S.-dollar-denominated emerging market corporate bonds. According to J.P. Morgan, this index limits the weights of those index countries with larger corporate debt stocks by only including a specified portion of these countries’ eligible current face amounts of debt outstanding.

⁷  A customized performance benchmark comprised of the returns of the Bloomberg Barclays Global High Yield Index (25%), the S&P/LSTA Leveraged Loan Index (25%), the Bloomberg Barclays U.S. CMBS Investment Grade Index (25%) and the JPMorgan Corporate Emerging Markets Bond Index Broad Diversified Index (CEMBI Broad Diversified Index) (25%)

⁸  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

										Average Annual Total Returns2,9
										1 Year						5 Years						Since  Inception10
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		4.66	%		4.36	%		5.15	%		6.09	%		N/A			5.35	%		N/A			5.36	%		N/A
Investor A		4.31			3.91			4.91			5.72			3.08	%		5.06			4.53	%		5.08			4.68	%
Investor C		3.66			3.32			4.51			5.04			4.04			4.30			4.30			4.32			4.32
Class K		4.72			4.51			5.17			6.14			N/A			5.40			N/A			5.42			N/A
S&P/LSTA Leveraged Loan Index		—			—			6.08			5.46			N/A			5.24			N/A			4.90			N/A
Bloomberg Barclays Global High Yield Index		—			—			9.97			13.51			N/A			8.56			N/A			8.15			N/A
Bloomberg Barclays U.S. CMBS Investment Grade Index		—			—			2.84			5.22			N/A			4.84			N/A			6.04			N/A
JPMorgan CEMBI Broad Diversified Index		—			—			6.96			11.61			N/A			7.05			N/A			6.58			N/A
Customized Reference Benchmark		—			—			6.45			8.94			N/A			6.45			N/A			6.46			N/A
Secured Loan/Bond Index11		—			—			6.93			6.36			N/A			N/A	12		N/A			N/A	12		N/A

⁹  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 15 for a detailed description of share classes, including any related sales charges and fees.

¹⁰  The Fund commenced operations on February 26, 2010.

¹¹ A market value-weighted blend of the S&P/LSTA Leveraged Loan Index and secured bond component of the Bloomberg Barclays High Yield Index.

¹²  The Secured Loan/Bond Index commenced in April 2012. As a result, the table does not include performance information for 5 years and since inception for this benchmark.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 5

BlackRock Credit Strategies Income Fund

Expense Example
	Actual			Hypothetical2
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period1	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period1	Annualized Expense Ratio
Institutional	$1,000.00	$1,051.50	$3.45	$1,000.00	$1,021.71	$3.40	0.67%
Investor A	$1,000.00	$1,049.10	$4.73	$1,000.00	$1,020.46	$4.66	0.92%
Investor C	$1,000.00	$1,045.10	$8.51	$1,000.00	$1,016.75	$8.39	1.66%
Class K	$1,000.00	$1,013.20	$0.94	$1,000.00	$1,007.28	$0.94	0.57%

¹  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio. For Class K Shares, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 60/366 (to reflect the period from August 1, 2016, the commencement of operations, to September 30, 2016).

²  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 16 for further information on how expenses were calculated.

      Portfolio Information

Portfolio Composition	Percent of Total Investments1
Corporate Bonds		40	%
Floating Rate Loan Interests		39
Asset-Backed Securities		10
Preferred Securities		5
Non-Agency Mortgage-Backed Securities		3
U.S. Treasury Obligations		1
Investment Companies		1
Foreign Agency Obligations		1

¹  Total investments exclude short-term securities and options purchased.

Credit Quality Allocation2	Percent of       Total Investments1
AAA/Aaa3		2	%
AA/Aa		1
A		6
BBB/Baa		18
BB/Ba		31
B		31
CCC/Caa		3
N/R		8

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed U.S. Treasury Obligations as AAA/Aaa.

6 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Fund Summary as of September 30, 2016 BlackRock GNMA Portfolio

      Investment Objective

BlackRock GNMA Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund’s Institutional Shares and Class K Shares performed in line with the benchmark, the Bloomberg Barclays GNMA MBS Index, while the Fund’s Service, Investor A and Investor C Shares underperformed the benchmark.

What factors influenced performance?

• Positive contributors to performance during the twelve-month period included higher coupon mortgage-backed security (“MBS”) positions focused on specified pools comprising seasoned 30-year mortgages. The Fund’s stance with respect to both overall portfolio duration (and corresponding interest rate sensitivity) and positioning along the yield curve also added to performance. The Fund’s allocation to commercial mortgage-backed securities (“CMBS”) contributed positively to performance, in particular as risk-based assets rallied after the middle of February. A long position in 10-year Treasury Inflation Protected Securities also contributed to performance, as these issues benefited from declining interest rates and a modest uptick in inflation expectations over the 12 months.

• Detractors from performance during the 12-month period included allocations to agency collateralized mortgage obligations (“CMOs”). Fixed-rate payer positions in swaps/swaptions held as a buffer against CMBS holdings also detracted from performance, as interest rates declined. The Fund’s allocation to and selection within 15-year MBS also detracted from performance during the period.

Describe recent portfolio activity.

• The Fund reduced its duration overweight during the 12 months, and ended the period with an essentially neutral duration relative to the benchmark. The Fund also reduced its duration overweight within MBS, returning to a flat stance relative to the benchmark. An allocation to the most highly secured, senior agency CMBS was closed out while a smaller allocation to interest-only agency CMBS was initiated. The Fund increased its allocation to agency CMOs.

• The Fund held a relatively small position in derivatives, primarily in futures and swaps, as a strategy to manage allocations to other assets. The use of derivatives did not have a material impact on fund performance.

Describe portfolio positioning at period end.

• Relative to the Bloomberg Barclays GNMA MBS Index, the Fund ended the period with a neutral stance with respect to duration relative to the benchmark. The portfolio favored allocations in shorter duration, high coupon pools balanced by underweights to more current coupon, longer duration pools. At the end of the period, the Fund continued to hold an essentially neutral weight in agency MBS. This reflects the view that investors’ prepayment concerns, given the decline in mortgage rates, are likely to be balanced by the global demand for incremental income from high quality, liquid alternatives. The theme of demand for high quality yield was further expressed within the portfolio through the non-benchmark allocation to agency CMBS, or multi-family collateral backed by the government-sponsored enterprises.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of       Total Investments1
U.S. Government Sponsored Agency Securities	99%
U.S. Treasury Obligations	1

¹  Total investments exclude short-term securities and options purchased.

Credit Quality Allocation2	Percent of       Total Investments1
AAA/Aaa3	100%

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 7

BlackRock GNMA Portfolio

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   Under normal circumstances, the Fund invests at least 80% of its assets in GNMA securities.   ³   An unmanaged index comprised of mortgage-backed pass through securities of GNMA.

      Performance Summary for the Period Ended September 30, 2016

										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		1.53	%		1.46	%		1.61	%		3.54	%		N/A			2.63	%		N/A			4.97	%		N/A
Service		1.18			1.17			1.34			3.08			N/A			2.25			N/A			4.62			N/A
Investor A		1.12			1.09			1.44			3.19			(0.94	)%		2.27			1.44	%		4.60			4.18	%
Investor C		0.47			0.46			0.96			2.31			1.31			1.50			1.50			3.83			3.83
Class K		1.56			1.53			1.53			3.47			N/A			2.64			N/A			4.98			N/A
Bloomberg Barclays GNMA MBS Index		—			—			1.54			3.49			N/A			2.42			N/A			4.69			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 15 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

      Expense Example

	Actual				Hypothetical7
			Including Interest Expense and Fees	Excluding Interest Expense and Fees		Including Interest Expense and Fees		Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Expenses Paid During the Period6	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Ending Account Value September 30, 2016	Expenses Paid During the Period6
Institutional	$1,000.00	$1,016.10	$2.88	$2.78	$1,000.00	$1,022.21	$2.89	$1,022.31	$2.79
Service	$1,000.00	$1,013.40	$4.69	$4.54	$1,000.00	$1,020.41	$4.71	$1,020.56	$4.56
Investor A	$1,000.00	$1,014.40	$4.54	$4.44	$1,000.00	$1,020.56	$4.56	$1,020.66	$4.46
Investor C	$1,000.00	$1,009.60	$8.36	$8.26	$1,000.00	$1,016.75	$8.39	$1,016.85	$8.29
Class K	$1,000.00	$1,015.30	$2.73	$2.63	$1,000.00	$1,022.36	$2.74	$1,022.46	$2.64

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.57% for Institutional, 0.93% for Service, 0.90% for Investor A, 1.66% for Investor C and 0.54% for Class K), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.55% for Institutional, 0.90% for Service, 0.88% for Investor A, 1.64% for Investor C and 0.52% for Class K), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 16 for further information on how expenses were calculated.

8 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Fund Summary as of September 30, 2016 BlackRock Inflation Protected Bond Portfolio

      Investment Objective

BlackRock Inflation Protected Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize real return, consistent with preservation of real capital and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund underperformed its benchmark, the Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index.

What factors influenced performance?

• The Fund’s overweight positioning with respect to U.S. inflation breakeven rates was the primary detractor from performance relative to the benchmark over the 12-month period, as inflation expectations and Treasury Inflation Protected Securities’ (“TIPS”) prices declined. (“Breakeven rate” refers to the level of inflation required for a TIPS investor to equal the return on a comparable nominal fixed-rate issue.) Additional detractors included the Fund’s allocation to Italian real and nominal rates, as well as its long Japanese inflation breakeven positioning.

• In the non-U.S. dollar area, the Fund’s allocation to long New Zealand real rates contributed positively to performance during the period. The Fund’s aggregate currency positioning was another positive contributor.

• The Fund utilized derivatives in the form of options, futures, swaps and currency transactions during the period. The use of derivatives had a slightly negative impact on returns.

Describe recent portfolio activity.

• The Fund’s exposure to inflation breakevens was reduced in the wake of the market volatility witnessed in the first quarter of 2016. As the period

progressed, the allocation to U.S. inflation breakevens was gradually increased on the investment adviser’s views regarding the fundamental long-term drivers of inflation. Within Europe, the Fund’s overweight peripheral breakeven positioning was reduced ahead of the U.K.’s “Brexit” referendum on leaving the European Union. Later in the period, as the European Central Bank (“ECB”) demonstrated its commitment to an accommodative policy stance, the Fund maintained its long core and peripheral breakeven positioning in Europe, though at a reduced level. The Fund’s allocation to New Zealand inflation linked bonds and Japanese breakevens was maintained.

Describe portfolio positioning at period end.

• At period end, the Fund maintained its long U.S. inflation bias based on a number of factors. These include the Fed’s apparent willingness to let inflation overshoot their target, economic measures of inflation that have remained steady, and a spreading of inflation across the services sector. The Fund favored long core and peripheral breakeven positioning in Europe, though at a reduced level, based on an accommodative ECB. The Fund continued to short German bonds based on excessive valuations. Additionally, the Fund continued to view Japanese inflation linked bonds as attractive, given their deflation floor, which guarantees a return of principal at maturity, and the Bank of Japan’s extended monetary stimulus. Overall, Fund positioning was biased toward curve steepening at the end of the period.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of Total Investments1
U.S. Treasury Obligations	94%
Foreign Government Obligations	5
Non-Agency Mortgage-Backed Securities	1

¹  Total investments exclude short-term securities and options purchased.

Credit Quality Allocation2	Percent of Total Investments1
AAA/Aaa3	95%
AA/Aa	3
A	1
BBB/Baa	1

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed U.S. Treasury Obligations as AAA/Aaa.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 9

BlackRock Inflation Protected Bond Portfolio

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   Under normal circumstances, the Fund invests at least 80% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and U.S. and non-U.S. corporations.   ³   An unmanaged index that measures the performance of the inflation-protected public obligations of the U.S. Treasury.

      Performance Summary for the Period Ended September 30, 2016

										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		(1.22	)%		(1.29	)%		2.83	%		5.97	%		N/A			1.55	%		N/A			4.40	%		N/A
Service		(1.50	)		(1.56	)		2.79			5.66			N/A			1.24			N/A			4.12			N/A
Investor A		(1.49	)		(1.64	)		2.70			5.59			1.37	%		1.22			0.40	%		4.09			3.67	%
Investor C		(2.14	)		(2.18	)		2.29			4.83			3.83			0.50			0.50			3.33			3.33
Class K		(1.12	)		(1.18	)		2.88			5.98			N/A			1.66			N/A			4.51			N/A
Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index		—			—			2.69			6.58			N/A			1.93			N/A			4.48			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 15 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

      Expense Example

	Actual				Hypothetical7
			Including Interest Expense and Fees	Excluding Interest Expense and Fees		Including Interest Expense and Fees		Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Expenses Paid During the Period6	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Ending Account Value September 30, 2016	Expenses Paid During the Period6
Institutional	$1,000.00	$1,028.30	$2.44	$2.14	$1,000.00	$1,022.66	$2.43	$1,022.96	$2.13
Service	$1,000.00	$1,027.90	$3.91	$3.61	$1,000.00	$1,021.21	$3.90	$1,021.51	$3.60
Investor A	$1,000.00	$1,027.00	$4.17	$3.86	$1,000.00	$1,020.96	$4.15	$1,021.26	$3.85
Investor C	$1,000.00	$1,022.90	$7.71	$7.40	$1,000.00	$1,017.45	$7.69	$1,017.75	$7.38
Class K	$1,000.00	$1,028.80	$1.93	$1.63	$1,000.00	$1,023.16	$1.93	$1,023.46	$1.62

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.48% for Institutional, 0.77% for Service, 0.82% for Investor A, 1.52% for Investor C and 0.38% for Class K), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.42% for Institutional, 0.71% for Service, 0.76% for Investor A, 1.46% for Investor C and 0.32% for Class K), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 16 for further information on how expenses were calculated.

10 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Fund Summary as of September 30, 2016 BlackRock Investment Grade Bond Portfolio

      Investment Objective

BlackRock Investment Grade Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

On July 29, 2016, the Board approved a proposal, effective October 1, 2016, to change the name of BlackRock Investment Grade Bond Portfolio to BlackRock Managed Income Fund. The Board also approved certain changes to the Fund’s investment objective, investment strategies, benchmark and a change in the Fund’s fiscal year end. Please refer to the Subsequent Events note in the Notes to Financial Statements for further details.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund underperformed its benchmark, the Bloomberg Barclays U.S. Credit Index.

What factors influenced performance?

• An overweight position in capital securities detracted from performance, even though the Fund’s defensive approach added value due to the sector’s weaker returns in late 2015. The Fund’s underweight in the metals & mining industry — which rallied on the strength of the rebound in commodity prices — had an adverse impact on results, as did security selection within the sector. Security selection in the tobacco sector also detracted, as the Fund’s key overweight positions underperformed during the year.

• The largest positive contributors included security selection in financials and capital securities, both of which rallied following the U.K.’s vote to exit the European Union. (Capital securities are dividend-paying securities that combine some features of both corporate bonds and preferred stocks, while generally providing higher yields to compensate for being less senior in the issuer’s capital structure.) Positions in high-yield and emerging-market bonds also contributed to performance. The Fund’s tactical duration positioning, as well as its bias in favor of a flattening yield curve, made a further positive contribution. (Duration is a measure of interest rate sensitivity; bond prices rise as yields fall. The yield curve flattens when long-term bonds outperform shorter-term issues.)

• The Fund held derivatives during the period in order to manage specific risks. However, this aspect of its strategy did not have a material impact on results.

Describe recent portfolio activity.

• The Fund decreased its allocation to the industrials sector, mainly by reducing its weightings in the midstream energy, metals & mining and communications industries. The Fund added exposure to the technology, food & beverage, pharmaceutical and consumer cyclical services industries. The Fund also reduced its overweight to the banking industry.

• From a quality perspective, the Fund increased its weighting in A and B rated bonds while reducing its position in BBB and BB rated credits.

• The Fund had an elevated cash position at the end of the period due to the transition in the Fund’s investment mandate.

Describe portfolio positioning at period end.

• The Fund’s key overweights were in the banking, technology, pharmaceuticals, midstream energy and cable & satellite industries. Conversely, the Fund was underweight in the oil field services and metals & mining groups. The Fund had a neutral positioning with respect to both duration and the yield curve. (Duration is a measure of interest rate sensitivity.)

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of       Total Investments1
Corporate Bonds	88%
Preferred Securities	6
Foreign Government Obligations	2
Foreign Agency Obligations	2
Taxable Municipal Bonds	1
U.S. Government Sponsored Agency Securities	1

¹  Total investments exclude short-term securities and options purchased.

Credit Quality Allocation2	Percent of       Total Investments1
AAA/Aaa3	4%
AA/Aa	8
A	27
BBB/Baa	57
BB/Ba	3
B	1

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 11

BlackRock Investment Grade Bond Portfolio

      Total Return Based on a $10,000 Investment

  ¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   Under normal circumstances, the Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade bonds and investments that are the economic equivalent of investment grade bonds. The Fund’s total returns prior to July 29, 2013 are the returns of the Fund when it followed different investment strategies under the name BlackRock Long Duration Bond Portfolio.

³  An unmanaged index that includes publicly issued U.S. corporate and non-corporate securities which include foreign agencies, sovereigns, supranationals and local authorities that meet the specified maturity, liquidity, and quality requirements.

⁴  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

										Average Annual Total Returns2,5
										1 Year						5 Years						Since  Inception6
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		2.24	%		1.91	%		4.78	%		8.06	%		N/A			4.44	%		N/A			7.12	%		N/A
Investor A		1.86			1.61			4.63			7.74			3.43	%		4.07			3.22	%		6.77			6.28	%
Class K		2.31			2.08			4.82			8.12			N/A			4.53			N/A			7.21			N/A
Bloomberg Barclays U.S. Credit Index		—			—			4.76			8.30			N/A			4.83			N/A			5.80			N/A

⁵  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 15 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on October 19, 2007.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

      Expense Example

	Actual			Hypothetical8
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period7	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period7	Annualized Expense Ratio
Institutional	$1,000.00	$1,047.80	$2.67	$1,000.00	$1,022.46	$2.64	0.52%
Investor A	$1,000.00	$1,046.30	$4.21	$1,000.00	$1,020.96	$4.15	0.82%
Class K	$1,000.00	$1,048.20	$2.31	$1,000.00	$1,022.81	$2.28	0.45%

⁷  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/ 366 (to reflect the one-half year period shown).

⁸  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 16 for further information on how expenses were calculated.

12 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Fund Summary as of September 30, 2016 BlackRock U.S. Government Bond Portfolio

      Investment Objective

BlackRock U.S. Government Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund underperformed the benchmark, the Bloomberg Barclays U.S. Government/Mortgage Index.

What factors influenced performance?

• The most significant negative contributors to the Fund’s return relative to the benchmark included allocation- and selection-based strategies with respect to U.S. Treasuries. Fixed-interest payer positions in 5-year and 10-year swaps also detracted from the Fund’s performance relative to the benchmark as rates declined over the period.

• The most significant positive contributions to performance came from allocation-based strategies with respect to commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”), as well as selection-based strategies across 15-year and 30-year residential mortgage-backed securities (“MBS”). Holdings of agency collateralized mortgage obligations benefited performance marginally, as did strategies with respect to global interest rates and currency exposures.

Describe recent portfolio activity.

• During the 12-month period, the Fund reduced its underweight stance with respect to overall portfolio duration (and corresponding interest rate sensitivity), and ended the period only modestly underweight in duration relative to the benchmark. With respect to the MBS allocation, a large portion of the Fund’s mortgage duration underweight was trimmed, and the Fund ended the period only slightly underweight in mortgage duration relative to the benchmark. The Fund maintained a position in 10-year Treasury Inflation Protected Securities on the view that valuations reflected an overly weak outlook for inflation.

• The Fund held derivatives during the period in order to manage specific risks. This aspect of its strategy did not have a material impact on results.

Describe portfolio positioning at period end.

• Relative to the Bloomberg Barclays U.S. Government/Mortgage Index, the Fund ended the period with a modest duration underweight relative to the benchmark. The Fund was also slightly underweight mortgage duration relative to the benchmark. The Fund continued to hold a small allocation in CMBS, with a preference for issues with relatively low market sensitivity.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of       Total Investments1
U.S. Government Sponsored Agency Securities	52%
U.S. Treasury Obligations	39
Asset-Backed Securities	4
Non-Agency Mortgage-Backed Securities	3
Corporate Bonds	2

¹  Total investments exclude short-term securities, options purchased, options written and TBA sale commitments.

Credit Quality Allocation2	Percent of       Total Investments1
AAA/Aaa3	99%
N/R	1

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 13

BlackRock U.S. Government Bond Portfolio

      Total Return Based on a $10,000 Investment

  ¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   Under normal circumstances, the Fund invests at least 80% of its assets in bonds that are issued or guaranteed by the U.S. government and its agencies. The Fund invests primarily in the highest rated government and agency bonds and maintains an average portfolio duration that is within ±20% of the duration of the Bloomberg Barclays U.S. Government/ Mortgage Index (the benchmark).

³  An index that measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of Ginnie Mae, Fannie Mae and Freddie Mac.

      Performance Summary for the Period Ended September 30, 2016

										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		1.34	%		1.19	%		1.73	%		3.67	%		N/A			2.28	%		N/A			4.15	%		N/A
Service		1.15			0.87			1.54			3.47			N/A			2.07			N/A			3.90			N/A
Investor A		0.99			0.93			1.56			3.42			(0.72	)%		1.97			1.14	%		3.78			3.35	%
Investor B1		0.53			0.47			1.31			2.91			(1.09	)		1.45			1.08			3.30			3.30
Investor C		0.26			0.19			1.17			2.53			1.53			1.16			1.16			2.96			2.96
Investor C1		0.45			0.39			1.27			2.82			N/A			1.36			N/A			3.21			N/A
Class R		0.76			0.58			1.43			3.06			N/A			1.67			N/A			3.54			N/A
Bloomberg Barclays U.S. Government/Mortgage Index		—			—			1.75			3.84			N/A			2.37			N/A			4.48			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 15 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

      Expense Example

	Actual				Hypothetical7
			Including Interest Expense and Fees	Excluding Interest Expense and Fees		Including Interest Expense and Fees		Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Expenses Paid During the Period6	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Ending Account Value September 30, 2016	Expenses Paid During the Period6
Institutional	$1,000.00	$1,017.30	$3.74	$3.14	$1,000.00	$1,021.36	$3.75	$1,021.96	$3.14
Service	$1,000.00	$1,015.40	$4.70	$4.09	$1,000.00	$1,020.41	$4.71	$1,021.01	$4.10
Investor A	$1,000.00	$1,015.60	$5.41	$4.80	$1,000.00	$1,019.70	$5.42	$1,020.31	$4.81
Investor B1	$1,000.00	$1,013.10	$7.92	$7.32	$1,000.00	$1,017.20	$7.94	$1,017.80	$7.33
Investor C	$1,000.00	$1,011.70	$9.28	$8.67	$1,000.00	$1,015.84	$9.30	$1,016.44	$8.69
Investor C1	$1,000.00	$1,012.70	$8.33	$7.72	$1,000.00	$1,016.80	$8.34	$1,017.40	$7.74
Class R	$1,000.00	$1,014.30	$6.72	$6.11	$1,000.00	$1,018.40	$6.73	$1,019.00	$6.12

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.74% for Institutional, 0.93% for Service, 1.07% for Investor A, 1.57% for Investor B1, 1.84% for Investor C, 1.65% for Investor C1 and 1.33% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.62% for Institutional, 0.81% for Service, 0.95% for Investor A, 1.45% for Investor B1,1.72% for Investor C, 1.53% for Investor C1 and 1.21% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. See “Disclosure of Expenses” on page 16 for further information on how expenses were calculated.

14 BLACKROCK FUNDS II SEPTEMBER 30, 2016

About Fund Performance

• Institutional Shares and Class K Shares (Class K Shares are available only in Credit Strategies Income Fund, GNMA Portfolio, Inflation Protected Bond Portfolio and Investment Grade Bond Portfolio) are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to BlackRock Credit Strategies Income Fund’s Class K Shares inception date of August 1, 2016, Class K Share performance results are those of Institutional Shares (which have no distribution or service fees) and were restated to reflect Class K Share fees.

• Service Shares (available only in GNMA Portfolio, Inflation Protected Bond Portfolio and U.S. Government Bond Portfolio) are not subject to any sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to certain eligible investors.

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% for all Funds included in this report, except for BlackRock Credit Strategies Income Fund, which is subject to an initial sales charge of 2.50%, and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

• Investor B1 Shares (available only in U.S. Government Bond Portfolio) are subject to a maximum CDSC of 4.00% declining to 0% after six years. In addition, these shares are subject to a distribution fee of 0.50% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately ten years. (There is no initial sales charge for automatic share conversions.) Prior to July 18, 2011, U.S. Government Bond Portfolio’s Investor B1 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor B1 Shares fees.

• Investor C Shares (available only in Credit Strategies Income Fund, GNMA Portfolio, Inflation Protected Bond Portfolio and U.S. Government Bond Portfolio) are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries.

• Investor C1 Shares (available only in U.S. Government Bond Portfolio) are subject to a 1.00% CDSC if redeemed within one year of purchase. However, the CDSC does not apply to redemptions by certain employer-sponsored retirement plans or to redemptions of shares acquired through reinvestment of dividends and capital gains by existing shareholders. In addition, these shares are subject to a distribution fee of 0.55% per year and a service fee of 0.25% per year. Prior to July 18, 2011, U.S. Government Bond Portfolio’s Investor C1 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor C1 Shares fees.

• Class R Shares (available only in U.S. Government Bond Portfolio) are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans. Prior to July 18, 2011, U.S. Government Bond Portfolio’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Shares fees.

Investor B1 and C1 Shares of U.S. Government Bond Portfolio are only available for dividend and capital gain reinvestment by existing shareholders, and for purchase by certain employer-sponsored retirement plans.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date/payable date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Manager”), each Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Funds’ expenses. Without such waiver and/or reimbursement, the Funds’ performance would have been lower. The Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 5 of the Notes to Financial Statements for additional information on waivers and/or reimbursements. The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 15

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on April 1, 2016 and held through September 30, 2016, except with respect to BlackRock Credit Strategies Income Fund’s Class K Shares which are based on a hypothetical investment of $1,000 on August 1, 2016 (commencement of operations) and held through September 30, 2016) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and

then multiply the result by the number corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.” The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

The Benefits and Risks of Leveraging

The Funds may utilize leverage to seek to enhance returns and NAV. However, these objectives cannot be achieved in all interest rate environments.

The Funds may utilize leverage by entering into reverse repurchase agreements. In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by each Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is distributed to the Funds’ shareholders, and the value of these portfolio holdings is reflected in the Funds’ per share NAV. However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other ongoing costs of leverage exceed a Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage.

Furthermore, the value of each Fund’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can also influence the value of portfolio investments. As a result, changes in interest rates can influence each Fund’s NAV positively or negatively in addition to the impact on each Fund’s performance from leverage. Changes in the direction of interest rates are difficult to predict accurately, and there is no assurance that a Fund’s leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Fund’s NAV and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV of a Fund’s shares than if the Fund were not leveraged. In addition, each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of the leverage instruments, which may cause the Funds to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund incurs expenses in connection with the use of leverage, all of which are borne by the Funds’ shareholders and may reduce income.

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument.

The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

16 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock Credit Strategies Income Fund
	(Percentages shown are based on Net Assets)

Asset-Backed Securities (a)		Par   (000)		Value
ALM VII Ltd.:
Series 2012-7A, Class BR, 3.33%, 10/15/28 (b)	USD		1,000	$	1,000,000
Series 2012-7A, Class CR, 4.68%, 10/15/28 (b)			1,000		988,960
ALM VII R Ltd., Series 2013-7RA, Class C, 4.16%, 4/24/24 (b)			250		243,603
ALM VIII Ltd., Series 2013-8A, Class CR, 4.80%, 10/15/28 (b)			1,000		989,600
ARES CLO Ltd., Series 2015-4A, Class C, 4.93%, 10/15/26 (b)			1,000		990,141
ARES XXV CLO Ltd.:
Series 2012-3A, Class BR, 2.30%, 1/17/24 (b)			1,000		1,000,000
Series 2012-3A, Class CR, 3.05%, 1/17/24 (b)			1,000		1,000,000
Atlas Senior Loan Fund II Ltd., Series 2012-2A, Class DR, 4.73%, 1/30/24 (b)			1,000		994,229
Atlas Senior Loan Fund Ltd.:
Series 2012-1A, Class A3LR, 3.26%, 8/15/24 (b)			1,000		1,000,000
Series 2012-1A, Class B1LR, 4.66%, 8/15/24 (b)			1,000		1,000,000
Atrium IX, Series 9A, Class D, 4.33%, 2/28/24 (b)			1,000		982,500
Ballyrock CLO Ltd., Series 2016-1A, Class C, 3.52%, 10/15/28 (b)			1,000		995,000
Bayview Opportunity Master Fund IIa Trust, Series 2016-RPL3, Class A1, 3.47%, 7/28/31 (c)			976		974,862
Carlyle Global Market Strategies CLO Ltd.:
Series 2012-3A, Class BR, 4.17%, 10/14/28 (b)			1,000		1,000,000
Series 2013-3A, Class B, 3.33%, 7/15/25 (b)			1,000		997,798
Series 2016-3A, Class C, 4.79%, 10/20/29 (b)			1,000		988,600
CIFC Funding Ltd., Series 2014-3A, Class C1, 3.50%, 7/22/26 (b)			1,000		999,136
Finn Square CLO Ltd., Series 2012-1A, Class A2R, 2.54%, 12/24/23 (b)			1,000		1,000,000
Flatiron CLO Ltd., Series 12-1AR, Class BR, 4.25%, 10/25/21 (b)			1,000		1,000,000
GoldenTree Loan Opportunities VIII Ltd., Series 2014-8A, Class D, 4.31%, 4/19/26 (b)			1,000		984,200

Asset-Backed Securities (a)		Par   (000)		Value
LCM XV LP, Series 15A, Class C, 3.93%, 8/25/24 (b)	USD		1,000	$	1,000,010
Madison Park Funding X Ltd., Series 2012-10A, Class A2, 2.10%, 1/20/25 (b)			1,000		995,433
Madison Park Funding XI Ltd., Series 2013-11A, Class A1B, 2.16%, 10/23/25 (b)			1,000		999,930
Neuberger Berman CLO XIII Ltd., Series 2012-13A, Class C, 3.56%, 1/23/24 (b)			1,000		1,008,200
Neuberger Berman CLO XXII Ltd., Series 2016-22A, Class D, 4.67%, 10/17/27 (b)			1,000		970,800
OCP CLO Ltd.:
Series 2013-3A, Class B, 3.43%, 1/17/25 (b)			1,000		999,989
Series 2016-12A, Class A1, 2.43%, 10/18/28 (b)			1,000		999,000
Sound Point CLO III Ltd., Series 2013-2A, Class D, 4.58%, 7/15/25 (b)			250		247,476
THL Credit Wind River CLO Ltd., Series 2014-2A, Class A2, 1.83%, 7/15/26 (b)			1,000		999,794
U.S. Residential Opportunity Fund II Trust:
Series 2016-1II, Class A, 3.47%, 7/27/36 (c)			100		99,729
Series 2016-2II, Class A, 3.47%, 8/27/36 (c)			952		952,039
U.S. Residential Opportunity Fund III Trust:
Series 2016-1III, Class A, 3.47%, 7/27/36 (c)			984		985,672
Series 2016-2III, Class A, 3.47%, 8/27/36 (c)			991		989,998
U.S. Residential Opportunity Fund IV Trust, Series 2016-1IV, Class A, 3.47%, 7/27/36 (c)			871		871,111
VOLT XLVIII LLC, Series 2016-NPL8, Class A1, 3.50%, 7/25/46 (c)			980		980,193
VOLT XXXV, Series 2016-NPL9, Class A1, 3.50%, 9/25/46 (c)			1,000		999,933
Voya CLO Ltd., Series 2016-3A, Class C, 4.71%, 10/18/27 (b)			1,000		978,101
York CLO 1 Ltd., Series 2014-1A, Class D, 4.80%, 1/22/27 (b)			1,000		986,307
Total Asset-Backed Securities — 9.5%					35,192,344

      Portfolio Abbreviations

AKA	Also Known As	FKA	Formerly Known As	PIK	Payment-in-kind
AUD	Australian Dollar	GBP	British Pound	RB	Revenue Bonds
BRL	Brazilian Real	GO	General Obligation Bonds	REIT	Real Estate Investment Trust
BZDIOVER	Overnight Brazil CETIP - Interbank Rate	HICP	Harmonised Index of Consumer Price Index	REMIC	Real Estate Mortgage Investment Conduit
CAD	Canadian Dollar	HUF	Hungarian Forint	RUB	Russian Ruble
CHF	Swiss Franc	INR	Indian Rupee	SAR	Saudi Arabian Riyal
CLO	Collateralized Debt Obligation	JPY	Japanese Yen	SEK	Swedish Krona
CLP	Chilean Peso	KRW	South Korean Won	TBA	To-be-announced
CNH	Chinese Yuan Offshore	LIBOR	London Interbank Offered Rate	TRY	Turkish Lira
COP	Colombian Peso	MXIBTIIE	Mexico Interbank TIIE 28-Day	TWD	New Taiwan Dollar
CPI	Consumer Price Index	MXN	Mexican Peso	USD	U.S. Dollar
CPURNSA	Consumer Price All Urban Non-Seasonally Adjusted Index	MYR NOK NZD	Malaysian Ringgit Norwegian Krone New Zealand Dollar	UKRPI USGI ZAR	UK Retail Price Index United States Government Issue South African Rand
ETF	Exchange-Traded Fund
EUR	Euro
EURIBOR	Euro Interbank Offered Rate

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 17

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Common Stocks		Shares		Value
Equity Real Estate Investment Trusts (REITs) — 0.0%
Ovation Acquisition I, LLC (Acquired 12/28/15, cost $593) (d)(e)			593	$	593
Health Care Providers & Services — 0.0%
New Millennium Holdco, Inc. (Millennium Health LLC) (e)			418,385		4
New Millennium Holdco, Inc. (Millennium Health LLC) (e)			392,559		4
					8
Oil, Gas & Consumable Fuels — 0.0%
Denbury Resources, Inc.			12,000		38,362
Southcross Holdings Borrower LP			34		11,900
					50,262
Total Common Stocks — 0.0%					50,863
Corporate Bonds		Par   (000)
Aerospace & Defense — 0.3%
Bombardier, Inc.:
6.00%, 10/15/22 (a)	USD		86		77,830
6.13%, 1/15/23 (a)			100		88,750
7.50%, 3/15/25 (a)			213		196,226
KLX, Inc., 5.88%, 12/01/22 (a)			235		243,225
TransDigm, Inc., 6.38%, 6/15/26 (a)			313		323,173
					929,204
Air Freight & Logistics — 0.1%
XPO Logistics, Inc.:
6.50%, 6/15/22 (a)			344		358,620
6.13%, 9/01/23 (a)			186		190,650
					549,270
Airlines — 0.3%
Air Canada Pass-Through Trust, Series 2013-1, Class C, 6.63%, 5/15/18 (a)			109		113,360
American Airlines Group, Inc., 4.63%, 3/01/20 (a)			121		122,210
American Airlines Pass-Through Trust, Series 2013-2, Class C, 6.00%, 1/15/17 (a)			551		556,015
Continental Airlines Pass-Through Certificates, Series 2012-3, Class C, 6.13%, 4/29/18			190		198,550
US Airways Pass-Through Trust, Series 2013-1, Class B, 5.38%, 5/15/23			290		301,736
					1,291,871
Auto Components — 0.3%
Icahn Enterprises LP/Icahn Enterprises Finance Corp., 4.88%, 3/15/19			250		251,250
Schaeffler Finance BV, 4.75%, 5/15/21 (a)			560		579,880
Schaeffler Verwaltung Zwei GmbH, 3.25% (3.25% Cash or 4.00% PIK), 9/15/23 (f)	EUR		200		223,719
					1,054,849
Banks — 1.0%
Allied Irish Banks PLC, 4.13%, 11/26/25 (b)			200		215,740
Barclays PLC, 5.20%, 5/12/26	USD		1,000		1,029,948
CIT Group, Inc.:
5.25%, 3/15/18			430		448,275
5.00%, 8/01/23			240		254,100
HSBC Holdings PLC, 3.60%, 5/25/23			220		227,215
Kasikornbank PCL, 2.38%, 4/06/22			400		400,000
Mizuho Financial Group, Inc., 2.84%, 9/13/26			350		351,607
RHB Bank Bhd, 2.50%, 10/06/21			250		249,637
United Overseas Bank Ltd., 2.88%, 3/08/27 (b)			200		199,670

Corporate Bonds		Par   (000)		Value
Banks (continued)
Woori Bank, 4.75%, 4/30/24	USD		400	$	432,663
					3,808,855
Beverages — 0.2%
Anheuser-Busch InBev Finance, Inc., 4.90%, 2/01/46			750		892,336
Biotechnology — 0.7%
AbbVie, Inc., 4.70%, 5/15/45			1,250		1,345,975
Amgen, Inc., 4.40%, 5/01/45			140		147,059
Gilead Sciences, Inc., 4.15%, 3/01/47			940		960,765
					2,453,799
Building Products — 0.4%
Builders FirstSource, Inc., 5.63%, 9/01/24 (a)			50		51,250
Masonite International Corp., 5.63%, 3/15/23 (a)			129		136,095
Ply Gem Industries, Inc., 6.50%, 2/01/22			275		283,250
Standard Industries, Inc.:
5.13%, 2/15/21 (a)			135		141,750
5.50%, 2/15/23 (a)			222		231,990
6.00%, 10/15/25 (a)			535		572,450
USG Corp., 9.50%, 1/15/18			120		130,320
					1,547,105
Chemicals — 0.9%
Axalta Coating Systems LLC, 4.88%, 8/15/24 (a)			388		397,457
Chemours Co.:
6.63%, 5/15/23			94		91,650
7.00%, 5/15/25			235		230,887
Huntsman International LLC, 5.13%, 11/15/22			501		521,040
INEOS Group Holdings SA, 5.63%, 8/01/24 (a)			200		196,250
Momentive Performance Materials, Inc., 3.88%, 10/24/21			305		254,294
Platform Specialty Products Corp.:
10.38%, 5/01/21 (a)			51		54,953
6.50%, 2/01/22 (a)			542		527,095
PQ Corp., 6.75%, 11/15/22 (a)			319		338,140
PSPC Escrow Corp., 6.00%, 1/02/23	EUR		200		210,144
WR Grace & Co-Conn, 5.13%, 10/01/21 (a)	USD		330		350,625
					3,172,535
Commercial Services & Supplies — 0.4%
Acosta, Inc., 7.75%, 10/01/22 (a)			191		157,097
ADT Corp.:
3.50%, 7/15/22			315		303,187
4.13%, 6/15/23			25		24,625
4.88%, 7/15/32 (a)			109		95,647
Laureate Education, Inc., 9.25%, 9/01/19 (a)			76		72,390
Mobile Mini, Inc., 5.88%, 7/01/24			80		83,400
Prime Security Services Borrower LLC/Prime Finance, Inc., 9.25%, 5/15/23 (a)			412		449,080
WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (a)			310		321,625
					1,507,051
Communications Equipment — 0.4%
Alcatel-Lucent USA, Inc., 6.45%, 3/15/29			650		719,063
CommScope Technologies Finance LLC, 6.00%, 6/15/25 (a)			265		282,556
CommScope, Inc.:
4.38%, 6/15/20 (a)			334		344,020
5.50%, 6/15/24 (a)			31		32,550

See Notes to Financial Statements.

18 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Communications Equipment (continued)
Hughes Satellite Systems Corp.:
5.25%, 8/01/26 (a)	USD		72	$	71,100
6.63%, 8/01/26 (a)			54		52,110
					1,501,399
Construction & Engineering — 0.4%
Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (a)			230		230,000
Engility Corp., 8.88%, 9/01/24 (a)			51		51,637
GS Engineering & Construction Corp., 4.50%, 7/21/21 (g)			600		609,004
Modular Space Corp., 10.25%, 1/31/19 (a)(e)(h)			556		233,520
Xi’an Municipal Infrastructure Construction Investment Group Co. Ltd., 2.80%, 9/13/19			350		352,724
					1,476,885
Consumer Finance — 0.4%
Ally Financial, Inc.:
4.63%, 3/30/25			305		312,625
8.00%, 11/01/31			580		714,850
Navient Corp.:
6.63%, 7/26/21			52		52,390
5.50%, 1/25/23			117		107,347
7.25%, 9/25/23			82		82,000
6.13%, 3/25/24			64		59,600
5.88%, 10/25/24			124		112,840
					1,441,652
Containers & Packaging — 1.2%
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.:
6.25%, 1/31/19 (a)			700		714,875
4.07%, 5/15/21 (a)(b)			411		417,165
4.25%, 1/15/22	EUR		100		114,603
4.63%, 5/15/23 (a)	USD		340		341,700
7.25%, 5/15/24 (a)			220		234,300
Ball Corp., 5.00%, 3/15/22			183		197,183
Reynolds Group Issuer, Inc.:
5.75%, 10/15/20			323		333,094
8.25%, 2/15/21			100		104,250
4.13%, 7/15/21 (a)(b)			820		832,300
5.13%, 7/15/23 (a)			74		76,405
7.00%, 7/15/24 (a)			599		642,427
Sealed Air Corp., 6.88%, 7/15/33 (a)			265		284,213
Signode Industrial Group Lux SA/Signode Industrial Group U.S., Inc., 6.38%, 5/01/22 (a)			35		35,437
					4,327,952
Diversified Consumer Services — 0.0%
Service Corp. International, 4.50%, 11/15/20			55		56,237
Diversified Financial Services — 0.8%
Altice Financing SA, 7.50%, 5/15/26 (a)			234		243,653
APT Pipelines Ltd., 4.20%, 3/23/25			67		69,224
BCD Acquisition, Inc., 9.63%, 9/15/23 (a)			25		26,125
Double Eagle Acquisition Sub, Inc., 7.50%, 10/01/24 (a)			94		95,645
FBM Finance, Inc., 8.25%, 8/15/21 (a)			40		41,800
Goodman Australia Industrial Fund Bond Issuer Pty Ltd., 3.40%, 9/30/26			325		326,685
Mercury Bondco PLC, 8.25% (8.25% Cash or 9.00% PIK), 5/30/21 (f)	EUR		300		347,420
Mitsubishi UFJ Lease & Finance Co. Ltd., 2.25%, 9/07/21	USD		500		499,885

Corporate Bonds		Par   (000)		Value
Diversified Financial Services (continued)
RH International Finance Ltd., 3.88%, 7/20/21	USD		200	$	199,052
Virgin Media Secured Finance PLC:
5.50%, 8/15/26 (a)			550		561,000
6.25%, 3/28/29	GBP		400		554,101
					2,964,590
Diversified Telecommunication Services — 1.5%
CenturyLink, Inc., 6.75%, 12/01/23	USD		205		213,200
Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)			164		168,100
Consolidated Communications, Inc., 6.50%, 10/01/22			30		29,100
Frontier Communications Corp.:
6.25%, 9/15/21			100		96,125
10.50%, 9/15/22			50		53,000
7.13%, 1/15/23			30		27,975
7.63%, 4/15/24			240		224,400
6.88%, 1/15/25			484		428,340
GCX Ltd., 7.00%, 8/01/19			394		392,323
Intelsat Jackson Holdings SA:
7.25%, 10/15/20			43		33,325
5.50%, 8/01/23			62		42,935
Level 3 Financing, Inc.:
4.41%, 1/15/18 (b)			126		126,473
5.38%, 8/15/22			430		449,350
5.13%, 5/01/23			387		398,610
5.38%, 1/15/24			231		240,673
SBA Communications Corp., 4.88%, 9/01/24 (a)			936		943,020
Telecom Italia Capital SA:
6.38%, 11/15/33			29		29,507
6.00%, 9/30/34			241		238,650
7.20%, 7/18/36			130		138,450
Telecom Italia Finance SA, 7.75%, 1/24/33	EUR		200		299,711
Wind Acquisition Finance SA, 7.38%, 4/23/21 (a)	USD		200		209,000
Zayo Group LLC/Zayo Capital, Inc.:
6.00%, 4/01/23			496		520,800
6.38%, 5/15/25			300		318,000
					5,621,067
Electric Utilities — 0.7%
Duke Energy Corp.:
2.65%, 9/01/26			260		255,129
4.80%, 12/15/45			1,000		1,135,277
Southern Co., 4.40%, 7/01/46			1,000		1,078,998
					2,469,404
Electrical Equipment — 0.2%
Cortes NP Acquisition Corp., 9.25%, 10/15/24 (a)			114		114,000
Sensata Technologies BV, 5.00%, 10/01/25 (a)			266		271,985
Sensata Technologies UK Financing Co. PLC, 6.25%, 2/15/26 (a)			325		351,813
					737,798
Electronic Equipment, Instruments & Components — 0.3%
CDW LLC/CDW Finance Corp.:
6.00%, 8/15/22			75		79,875
5.00%, 9/01/23			623		643,247
Foxconn Far East Ltd., 2.25%, 9/23/21			400		398,832
					1,121,954
Energy Equipment & Services — 0.2%
Ensco PLC, 4.50%, 10/01/24			48		34,560

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 19

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Energy Equipment & Services (continued)
Noble Holding International Ltd.:
4.63%, 3/01/21	USD		30	$	24,000
6.95%, 4/01/25			30		23,700
Transocean, Inc.:
3.75%, 10/15/17			124		124,620
6.00%, 3/15/18			245		246,225
8.13%, 12/15/21			26		24,830
5.05%, 10/15/22			81		63,484
Weatherford International LLC, 6.80%, 6/15/37			30		21,600
Weatherford International Ltd.:
7.75%, 6/15/21			40		39,600
6.50%, 8/01/36			72		51,120
5.95%, 4/15/42			32		21,920
					675,659
Equity Real Estate Investment Trusts (REITs) — 1.2%
Communications Sales & Leasing, Inc./CSL Capital LLC, 8.25%, 10/15/23			120		125,939
Crown Castle International Corp., 5.25%, 1/15/23			932		1,055,341
Equinix, Inc., 5.88%, 1/15/26			335		360,125
ESH Hospitality, Inc., 5.25%, 5/01/25 (a)			489		488,389
GEO Group, Inc.:
5.88%, 10/15/24			265		227,900
6.00%, 4/15/26			127		107,950
GLP Capital LP/GLP Financing II, Inc., 4.38%, 11/01/18			73		76,103
Iron Mountain, Inc., 4.38%, 6/01/21 (a)			440		455,813
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc.:
5.63%, 5/01/24 (a)			1,156		1,253,913
4.50%, 9/01/26 (a)			88		88,000
RHP Hotel Properties LP/RHP Finance Corp., 5.00%, 4/15/21			200		206,000
					4,445,473
Food & Staples Retailing — 0.3%
Albertsons Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC:
6.63%, 6/15/24 (a)			165		171,600
5.75%, 3/15/25 (a)			104		103,740
Rite Aid Corp., 6.13%, 4/01/23 (a)			661		713,331
					988,671
Food Products — 0.6%
CP Foods Holdings Ltd., 0.50%, 9/22/21 (g)			400		400,000
FAGE International SA/FAGE USA Dairy Industry, Inc., 5.63%, 8/15/26 (a)			200		206,000
JBS USA LUX SA/JBS USA Finance, Inc.:
7.25%, 6/01/21 (a)			180		186,075
5.75%, 6/15/25 (a)			185		181,763
Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., 5.88%, 1/15/24 (a)			63		67,253
Post Holdings, Inc.:
7.75%, 3/15/24 (a)			364		407,680
8.00%, 7/15/25 (a)			222		254,051
5.00%, 8/15/26 (a)			130		129,350
TreeHouse Foods, Inc., 6.00%, 2/15/24 (a)			138		148,523
WhiteWave Foods Co., 5.38%, 10/01/22			106		120,443
					2,101,138
Health Care Equipment & Supplies — 0.3%
Alere, Inc., 6.38%, 7/01/23 (a)			209		213,180
DJO Finco, Inc./DJO Finance LLC/DJO Finance Corp., 8.13%, 6/15/21 (a)			733		679,857

Corporate Bonds		Par   (000)		Value
Health Care Equipment & Supplies (continued)
Hologic, Inc., 5.25%, 7/15/22 (a)	USD		187	$	198,454
					1,091,491
Health Care Providers & Services — 1.5%
Acadia Healthcare Co., Inc.:
5.13%, 7/01/22			370		366,300
6.50%, 3/01/24			60		62,850
Amsurg Corp., 5.63%, 7/15/22			390		398,775
Centene Corp.:
5.63%, 2/15/21			352		373,120
4.75%, 5/15/22			117		120,803
6.13%, 2/15/24			33		35,805
CHS/Community Health Systems, Inc., 5.13%, 8/15/18			113		114,130
DaVita, Inc., 5.00%, 5/01/25			217		217,814
HCA, Inc.:
7.50%, 2/15/22			5		5,738
4.75%, 5/01/23			5		5,213
5.00%, 3/15/24			650		685,750
5.25%, 4/15/25			24		25,590
5.88%, 2/15/26			404		430,765
5.25%, 6/15/26			314		333,625
4.50%, 2/15/27			60		60,375
Series 1, 5.88%, 5/01/23			350		372,750
HealthSouth Corp.:
5.13%, 3/15/23			45		44,887
5.75%, 11/01/24			52		53,852
MEDNAX, Inc., 5.25%, 12/01/23 (a)			189		198,686
MPH Acquisition Holdings LLC, 7.13%, 6/01/24 (a)			290		311,750
RegionalCare Hospital Partners Holdings, Inc., 8.25%, 5/01/23 (a)			308		318,010
Surgery Center Holdings, Inc., 8.88%, 4/15/21 (a)			75		80,063
Tenet Healthcare Corp.:
4.35%, 6/15/20 (b)			565		567,881
6.75%, 6/15/23			448		416,640
					5,601,172
Hotels, Restaurants & Leisure — 0.9%
Aramark Services, Inc.:
5.75%, 3/15/20			9		9,248
4.75%, 6/01/26 (a)			75		75,375
BC ULC/New Red Finance, Inc., 6.00%, 4/01/22 (a)			345		361,387
Boyd Gaming Corp., 6.88%, 5/15/23			87		94,177
Caesars Entertainment Resort Properties LLC, 8.00%, 10/01/20			786		812,527
Hilton Domestic Operating Co., Inc., 4.25%, 9/01/24 (a)			74		75,480
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC:
5.00%, 6/01/24 (a)			36		37,620
5.25%, 6/01/26 (a)			97		102,577
MGM Resorts International:
8.63%, 2/01/19			325		366,437
6.75%, 10/01/20			39		43,680
6.63%, 12/15/21			420		472,500
6.00%, 3/15/23			5		5,425
4.63%, 9/01/26			72		70,200
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (a)			67		68,173
Scientific Games International, Inc.:
7.00%, 1/01/22 (a)			93		98,347
10.00%, 12/01/22			199		183,577

See Notes to Financial Statements.

20 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Hotels, Restaurants & Leisure (continued)
Station Casinos LLC, 7.50%, 3/01/21	USD		325	$	343,727
					3,220,457
Household Durables — 0.3%
Beazer Homes USA, Inc., 6.63%, 4/15/18			70		71,260
CalAtlantic Group, Inc., 5.88%, 11/15/24			190		203,300
Lennar Corp., 4.88%, 12/15/23			125		128,125
PulteGroup, Inc., 5.50%, 3/01/26			298		312,900
TRI Pointe Group, Inc., 4.88%, 7/01/21			265		271,625
					987,210
Household Products — 0.2%
Spectrum Brands, Inc.:
6.63%, 11/15/22			580		626,400
5.75%, 7/15/25			155		167,400
					793,800
Independent Power and Renewable Electricity Producers — 0.3%
AES Corp., 6.00%, 5/15/26			94		99,405
Calpine Corp.:
5.38%, 1/15/23			90		89,663
5.88%, 1/15/24 (a)			93		98,231
5.50%, 2/01/24			47		46,413
Dynegy, Inc.:
7.38%, 11/01/22			280		276,500
5.88%, 6/01/23			10		9,075
7.63%, 11/01/24			15		14,730
NRG Energy, Inc., 6.63%, 1/15/27 (a)			407		398,860
NRG Yield Operating LLC, 5.38%, 8/15/24			150		154,125
					1,187,002
Insurance — 1.1%
Allstate Corp., 5.75%, 8/15/53 (b)			1,500		1,610,625
Assicurazioni Generali SpA, 5.50%, 10/27/47 (b)	EUR		200		233,096
Credit Agricole Assurances SA, 4.50% (b)(i)			400		443,209
HUB International Ltd.:
9.25%, 2/15/21 (a)	USD		126		131,103
7.88%, 10/01/21 (a)			181		184,620
Solera LLC/Solera Finance, Inc., 10.50%, 3/01/24 (a)			735		819,525
Union Life Insurance Co. Ltd., 3.00%, 9/19/21			600		588,848
					4,011,026
Internet & Direct Marketing Retail — 0.0%
Netflix, Inc.:
5.50%, 2/15/22			14		15,068
5.75%, 3/01/24			35		37,625
					52,693
IT Services — 0.7%
APX Group, Inc.:
6.38%, 12/01/19			80		81,500
7.88%, 12/01/22 (a)			45		47,137
First Data Corp.:
5.38%, 8/15/23 (a)			28		28,840
7.00%, 12/01/23 (a)			755		798,413
5.75%, 1/15/24 (a)			1,387		1,425,143
Sabre GLBL, Inc., 5.25%, 11/15/23 (a)			150		152,625
					2,533,658
Life Sciences Tools & Services — 0.3%
Crimson Merger Sub, Inc., 6.63%, 5/15/22 (a)			330		291,225

Corporate Bonds		Par   (000)		Value
Life Sciences Tools & Services (continued)
Jaguar Holding Co. II/Pharmaceutical Product Development LLC, 6.38%, 8/01/23 (a)	USD		724	$	752,960
Sterigenics-Nordion Holdings LLC, 6.50%, 5/15/23 (a)			47		48,880
					1,093,065
Machinery — 0.4%
Allison Transmission, Inc., 5.00%, 10/01/24 (a)			105		107,625
CRRC Corp Ltd., 0.00%, 2/05/21 (g)(j)			500		520,000
Gates Global LLC/Gates Global Co., 6.00%, 7/15/22 (a)			358		340,100
Schaeffler Holding Finance BV:
6.25% (6.25% Cash or 6.75% PIK), 11/15/19 (a)(f)			200		207,250
6.75% (6.75% Cash or 7.25% PIK), 11/15/22 (a)(f)			200		228,500
SPX FLOW, Inc.:
5.63%, 8/15/24 (a)			98		99,470
5.88%, 8/15/26 (a)			53		53,596
					1,556,541
Marine — 0.1%
Onorato Armatori SpA, 7.75%, 2/15/23	EUR		195		211,387
Media — 4.1%
Altice Luxembourg SA, 7.75%, 5/15/22 (a)	USD		200		213,500
Altice U.S. Finance I Corp., 5.38%, 7/15/23 (a)			613		633,689
Altice U.S. Finance II Corp., 7.75%, 7/15/25 (a)			611		659,880
AMC Networks, Inc., 5.00%, 4/01/24			135		135,844
Cablevision Systems Corp.:
7.75%, 4/15/18			183		193,523
8.00%, 4/15/20			10		10,475
CCO Holdings LLC/CCO Holdings Capital Corp.:
5.13%, 2/15/23			100		104,250
5.88%, 4/01/24 (a)			251		267,792
5.75%, 2/15/26 (a)			155		164,300
5.50%, 5/01/26 (a)			386		402,405
5.88%, 5/01/27 (a)			55		58,575
Cengage Learning Acquisitions, Inc., 0.00%, 4/15/20 (e)(j)			76		—
Cequel Communications Holdings I LLC/Cequel Capital Corp., 5.13%, 12/15/21 (a)			525		523,693
Charter Communications Operating LLC/Charter Communications Operating Capital:
4.91%, 7/23/25 (a)			210		231,642
6.48%, 10/23/45 (a)			998		1,206,903
Clear Channel Worldwide Holdings, Inc., 6.50%, 11/15/22			1,380		1,436,925
Comcast Corp., 3.20%, 7/15/36			675		660,216
Cox Communications, Inc., 3.35%, 9/15/26 (a)			765		771,161
CSC Holdings LLC:
10.13%, 1/15/23 (a)			218		251,245
5.25%, 6/01/24			349		331,550
6.63%, 10/15/25 (a)			286		310,310
10.88%, 10/15/25 (a)			200		234,000
DISH DBS Corp.:
5.13%, 5/01/20			110		114,125
6.75%, 6/01/21			90		97,200
7.75%, 7/01/26 (a)			455		483,437
DISH Network Corp., 3.38%, 8/15/26 (a)(g)			93		101,835
Gray Television, Inc., 7.50%, 10/01/20			67		69,579
iHeartCommunications, Inc.:
9.00%, 12/15/19			425		336,281

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 21

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Media (continued)
9.00%, 3/01/21	USD		74	$	55,130
9.00%, 9/15/22			260		189,150
MDC Partners, Inc., 6.50%, 5/01/24 (a)			369		341,325
Midcontinent Communications & Midcontinent Finance Corp., 6.25%, 8/01/21 (a)			45		47,137
National CineMedia LLC, 5.75%, 8/15/26 (a)			30		31,125
Nexstar Escrow Corp., 5.63%, 8/01/24 (a)			90		90,225
Nielsen Finance LLC/Nielsen Finance Co., 5.00%, 4/15/22 (a)			140		144,550
Outfront Media Capital LLC/Outfront Media Capital Corp., 5.63%, 2/15/24			43		44,720
Radio One, Inc., 7.38%, 4/15/22 (a)			110		110,550
SFR Group SA, 7.38%, 5/01/26 (a)			771		788,108
Sirius XM Radio, Inc.:
4.63%, 5/15/23 (a)			55		55,000
5.38%, 4/15/25 (a)			135		139,387
TEGNA, Inc., 5.13%, 10/15/19			40		41,050
Tribune Media Co., 5.88%, 7/15/22			349		353,144
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, 3.50%, 1/15/27	EUR		400		442,602
Univision Communications, Inc.:
8.50%, 5/15/21 (a)	USD		105		108,675
5.13%, 5/15/23 (a)			285		288,563
5.13%, 2/15/25 (a)			1,370		1,378,563
Viacom, Inc., 3.45%, 10/04/26			125		124,931
Virgin Media Receivables Financing Notes I DAC, 5.50%, 9/15/24	GBP		150		194,859
					14,973,129
Metals & Mining — 2.0%
Anglo American Capital PLC, 2.50%, 4/29/21	EUR		200		222,717
ArcelorMittal:
7.25%, 2/25/22	USD		31		35,185
8.00%, 10/15/39			94		101,520
7.75%, 3/01/41			190		198,075
Constellium NV:
4.63%, 5/15/21	EUR		100		99,514
5.75%, 5/15/24 (a)	USD		750		693,750
First Quantum Minerals Ltd.:
7.00%, 2/15/21 (a)			55		49,225
7.25%, 5/15/22 (a)			165		146,025
FMG Resources August 2006 Property Ltd., 9.75%, 3/01/22 (a)			265		307,400
Freeport-McMoRan, Inc.:
2.38%, 3/15/18			1,159		1,141,615
3.10%, 3/15/20			210		201,075
4.00%, 11/14/21			126		119,227
3.55%, 3/01/22			38		34,580
3.88%, 3/15/23			433		388,583
5.40%, 11/14/34			57		47,310
5.45%, 3/15/43			271		217,477
Joseph T Ryerson & Son, Inc., 11.00%, 5/15/22 (a)			221		243,100
Novelis Corp.:
6.25%, 8/15/24 (a)			507		538,054
5.88%, 9/30/26 (a)			259		265,151
Steel Dynamics, Inc.:
5.13%, 10/01/21			190		197,363
5.50%, 10/01/24			80		83,800
Teck Resources Ltd.:
3.00%, 3/01/19			120		118,200
3.75%, 2/01/23			75		68,719
8.50%, 6/01/24 (a)			381		436,245
6.13%, 10/01/35			32		30,080
6.00%, 8/15/40			75		69,187
6.25%, 7/15/41			166		158,945
5.20%, 3/01/42			97		82,935

Corporate Bonds		Par   (000)		Value
Metals & Mining (continued)
United States Steel Corp., 8.38%, 7/01/21 (a)	USD		291	$	318,281
Vedanta Resources PLC, 8.25%, 6/07/21			500		505,000
Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (a)			387		394,740
					7,513,078
Multiline Retail — 0.2%
Dollar Tree, Inc.:
5.25%, 3/01/20			22		22,825
5.75%, 3/01/23			597		642,521
JC Penney Corp., Inc.:
6.38%, 10/15/36			24		20,640
7.40%, 4/01/37			34		31,450
					717,436
Oil, Gas & Consumable Fuels — 5.5%
Antero Midstream Partners LP/Antero Midstream Finance Corp., 5.38%, 9/15/24 (a)			20		20,250
California Resources Corp., 8.00%, 12/15/22 (a)			308		204,820
Callon Petroleum Co., 6.13%, 10/01/24 (a)			30		31,050
Carrizo Oil & Gas, Inc., 6.25%, 4/15/23			300		297,000
Cenovus Energy, Inc.:
5.70%, 10/15/19			43		46,157
5.20%, 9/15/43			30		26,939
Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24 (a)			731		789,480
Chesapeake Energy Corp.:
6.50%, 8/15/17			15		15,225
3.93%, 4/15/19 (b)			179		167,365
6.63%, 8/15/20			48		45,180
6.88%, 11/15/20			50		46,750
8.00%, 12/15/22 (a)			20		20,275
5.50%, 9/15/26 (a)(g)			97		97,000
CONSOL Energy, Inc.:
5.88%, 4/15/22			788		724,960
8.00%, 4/01/23			20		19,400
Continental Resources, Inc.:
4.50%, 4/15/23			123		118,080
3.80%, 6/01/24			385		352,275
4.90%, 6/01/44			30		25,200
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp.:
6.00%, 12/15/20			10		10,075
6.13%, 3/01/22			60		60,600
6.25%, 4/01/23			45		45,563
DCP Midstream LLC:
6.45%, 11/03/36 (a)			126		122,535
6.75%, 9/15/37 (a)			140		138,250
Denbury Resources, Inc., 9.00%, 5/15/21 (a)			171		179,123
Encana Corp.:
3.90%, 11/15/21			140		140,277
6.50%, 2/01/38			148		153,375
5.15%, 11/15/41			222		198,994
Energy Transfer Equity LP:
7.50%, 10/15/20			137		150,357
5.88%, 1/15/24			416		431,600
5.50%, 6/01/27			185		184,075
Energy Transfer Partners LP, 5.15%, 3/15/45			1,000		926,282
Enterprise Products Operating LLC, 4.46%, 8/01/66 (b)			1,500		1,413,900
Extraction Oil & Gas Holdings LLC/Extraction Finance Corp., 7.88%, 7/15/21 (a)			110		114,400
Genesis Energy LP/Genesis Energy Finance Corp.:
5.75%, 2/15/21			40		40,000

See Notes to Financial Statements.

22 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
6.75%, 8/01/22	USD		270	$	278,203
Great Western Petroleum LLC/Great Western Finance, Inc., 9.00%, 9/30/21 (a)			71		71,177
Gulfport Energy Corp.:
7.75%, 11/01/20			155		161,006
6.63%, 5/01/23			80		82,000
Halcon Resources Corp., 8.63%, 2/01/20 (a)			155		155,775
Hilcorp Energy I LP/Hilcorp Finance Co.:
7.63%, 4/15/21 (a)			65		66,787
5.00%, 12/01/24 (a)			123		117,773
Kinder Morgan Energy Partners LP, 4.25%, 9/01/24			1,000		1,029,267
MEG Energy Corp.:
6.50%, 3/15/21 (a)			583		475,874
7.00%, 3/31/24 (a)			73		57,670
Murphy Oil Corp., 6.88%, 8/15/24			84		86,831
NGPL PipeCo LLC:
7.12%, 12/15/17 (a)			1,072		1,120,240
9.63%, 6/01/19 (a)			125		131,406
7.77%, 12/15/37 (a)			123		133,455
Oasis Petroleum, Inc.:
6.50%, 11/01/21			205		195,775
6.88%, 3/15/22			17		16,278
ONEOK, Inc., 7.50%, 9/01/23			139		155,680
Parsley Energy LLC/Parsley Finance Corp.:
7.50%, 2/15/22 (a)			120		127,500
6.25%, 6/01/24 (a)			71		73,307
PDC Energy, Inc., 7.75%, 10/15/22			141		150,517
QEP Resources, Inc.:
5.38%, 10/01/22			377		374,173
5.25%, 5/01/23			50		49,250
Range Resources Corp.:
5.88%, 7/01/22 (a)			14		14,140
5.00%, 3/15/23 (a)			270		263,925
Rockies Express Pipeline LLC:
6.85%, 7/15/18 (a)			88		92,620
6.00%, 1/15/19 (a)			35		36,750
5.63%, 4/15/20 (a)			70		73,850
6.88%, 4/15/40 (a)			131		134,930
RSP Permian, Inc., 6.63%, 10/01/22			102		106,845
Sabine Pass Liquefaction LLC:
6.25%, 3/15/22			290		316,825
5.75%, 5/15/24			511		549,964
5.63%, 3/01/25			140		150,500
5.88%, 6/30/26 (a)			227		246,721
5.00%, 3/15/27 (a)			50		51,250
Sanchez Energy Corp., 6.13%, 1/15/23			520		417,300
Seven Generations Energy Ltd.:
8.25%, 5/15/20 (a)			3		3,191
6.75%, 5/01/23 (a)			58		60,175
6.88%, 6/30/23 (a)			15		15,600
SM Energy Co.:
5.63%, 6/01/25			120		112,800
6.75%, 9/15/26			51		51,510
Southwestern Energy Co.:
7.50%, 2/01/18			21		21,998
5.80%, 1/23/20			140		139,650
4.10%, 3/15/22			220		199,650
6.70%, 1/23/25			40		40,000
Sunoco Logistics Partners Operations LP, 3.90%, 7/15/26			155		158,056
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., 5.50%, 9/15/24 (a)			152		153,140
Targa Resources Partners LP/Targa Resources Partners Finance Corp.:
6.38%, 8/01/22			60		62,100

Corporate Bonds		Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
5.13%, 2/01/25 (a)	USD		31	$	31,039
5.38%, 2/01/27 (a)			17		17,106
Tesoro Logistics LP/Tesoro Logistics Finance Corp., 6.25%, 10/15/22			229		244,457
TransCanada Trust, 5.88%, 8/15/76 (b)			1,700		1,798,652
Whiting Petroleum Corp.:
5.00%, 3/15/19			110		106,425
Series C-1, 5.75%, 3/15/21 (g)			140		143,910
Williams Cos., Inc.:
3.70%, 1/15/23			5		4,850
4.55%, 6/24/24			112		114,190
5.75%, 6/24/44			462		475,860
Williams Partners LP, 3.90%, 1/15/25			1,000		997,915
WPX Energy, Inc.:
5.25%, 1/15/17			30		30,225
7.50%, 8/01/20			55		58,163
6.00%, 1/15/22			126		125,764
8.25%, 8/01/23			195		209,625
					20,298,427
Paper & Forest Products — 0.1%
Louisiana-Pacific Corp., 4.88%, 9/15/24 (a)			33		33,000
Norske Skog AS, 11.75%, 12/15/19	EUR		300		284,798
					317,798
Personal Products — 0.2%
NBTY, Inc., 7.63%, 5/15/21 (a)	USD		593		606,236
Pharmaceuticals — 1.1%
Capsugel SA, 7.00% (7.00% Cash or 7.75% PIK), 5/15/19 (a)(f)			22		22,055
Endo Finance LLC, 5.75%, 1/15/22 (a)			190		175,275
Mallinckrodt International Finance SA/Mallinckrodt CB LLC:
4.88%, 4/15/20 (a)			121		123,420
5.63%, 10/15/23 (a)			87		83,303
5.50%, 4/15/25 (a)			102		96,900
Mylan NV, 3.95%, 6/15/26 (a)			1,000		1,007,537
Shire Acquisitions Investments Ireland DAC, 3.20%, 9/23/26			745		749,007
Teva Pharmaceutical Finance Netherlands III BV, 4.10%, 10/01/46			730		726,538
Valeant Pharmaceuticals International, Inc.:
6.75%, 8/15/18 (a)			167		167,835
5.38%, 3/15/20 (a)			76		70,300
7.00%, 10/01/20 (a)			104		100,880
6.38%, 10/15/20 (a)			686		643,125
7.50%, 7/15/21 (a)			10		9,681
5.63%, 12/01/21 (a)			46		41,055
5.50%, 3/01/23 (a)			7		5,985
5.88%, 5/15/23 (a)			71		61,237
6.13%, 4/15/25 (a)			181		155,886
					4,240,019
Real Estate Management & Development — 1.1%
Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 8/15/17 (a)			18		18,090
Fantasia Holdings Group Co. Ltd.:
11.50%, 6/01/18			200		216,536
7.38%, 10/04/21			800		807,309
Greenland Hong Kong Holdings Ltd., 3.88%, 7/28/19			650		643,185
Jinan West City Investment & Development Group Co. Ltd., 3.13%, 10/11/21			450		450,325
Kaisa Group Holdings Ltd., 6.56% (6.56% Cash or 6.56% PIK), 6/30/20 (f)			21		19,747

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 23

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Corporate Bonds		Par   (000)		Value
Real Estate Management & Development (continued)
Powerlong Real Estate Holdings Ltd., 4.88%, 9/15/21	USD		500	$	485,102
Realogy Group LLC/Realogy Co-Issuer Corp.:
5.25%, 12/01/21 (a)			87		91,540
4.88%, 6/01/23 (a)			859		872,959
Theta Capital Pte Ltd., 7.00%, 4/11/22			400		422,244
Xinyuan Real Estate Co. Ltd., 8.13%, 8/30/19			200		197,641
					4,224,678
Road & Rail — 0.2%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 5.13%, 6/01/22 (a)			195		195,609
Avis Budget Finance PLC, 4.13%, 11/15/24	EUR		200		219,054
Florida East Coast Holdings Corp., 6.75%, 5/01/19 (a)	USD		286		293,150
Hertz Corp.:
4.25%, 4/01/18			52		53,300
7.38%, 1/15/21			5		5,194
5.50%, 10/15/24 (a)			117		116,561
					882,868
Semiconductors & Semiconductor Equipment — 0.3%
Advanced Micro Devices, Inc., 7.50%, 8/15/22			29		29,761
Micron Technology, Inc.:
5.25%, 8/01/23 (a)			101		99,737
5.63%, 1/15/26 (a)			44		42,130
Microsemi Corp., 9.13%, 4/15/23 (a)			13		14,820
NVIDIA Corp., 3.20%, 9/16/26			390		393,071
NXP BV/NXP Funding LLC, 4.13%, 6/01/21 (a)			306		327,803
Semiconductor Manufacturing International Corp., 0.00%, 7/07/22 (g)(j)			250		285,313
Versum Materials, Inc., 5.50%, 9/30/24 (a)			67		68,843
					1,261,478
Software — 0.8%
BMC Software Finance, Inc., 8.13%, 7/15/21 (a)			330		299,475
Infor U.S., Inc., 6.50%, 5/15/22			655		663,187
Informatica LLC, 7.13%, 7/15/23 (a)			116		108,460
Oracle Corp., 4.00%, 7/15/46			1,250		1,291,641
SS&C Technologies Holdings, Inc., 5.88%, 7/15/23			204		214,710
Veritas U.S., Inc./Veritas Bermuda Ltd., 7.50%, 2/01/23	EUR		200		215,460
					2,792,933
Specialty Retail — 0.3%
Asbury Automotive Group, Inc., 6.00%, 12/15/24	USD		185		190,550
L Brands, Inc., 6.88%, 11/01/35			362		394,580
Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)			270		225,450
Penske Automotive Group, Inc., 5.38%, 12/01/24			140		140,700
					951,280
Technology Hardware, Storage & Peripherals — 0.8%
Apple Inc., 3.85%, 8/04/46			1,165		1,191,518
Diamond 1 Finance Corp./Diamond 2 Finance Corp.:
7.13%, 6/15/24 (a)			588		646,711
8.35%, 7/15/46 (a)			500		598,675
Western Digital Corp.:
7.38%, 4/01/23 (a)			393		432,300

Corporate Bonds		Par   (000)		Value
Technology Hardware, Storage & Peripherals (continued)
10.50%, 4/01/24 (a)	USD		35	$	40,600
					2,909,804
Textiles, Apparel & Luxury Goods — 0.0%
Hanesbrands, Inc., 4.88%, 5/15/26 (a)			60		61,350
Thrifts & Mortgage Finance — 0.1%
Jefferies Finance LLC/JFIN Co-Issuer Corp., 7.38%, 4/01/20 (a)			200		195,000
MGIC Investment Corp., 5.75%, 8/15/23			55		57,200
Rialto Holdings LLC/Rialto Corp., 7.00%, 12/01/18 (a)			45		45,675
					297,875
Trading Companies & Distributors — 1.0%
Aircastle Ltd.:
5.13%, 3/15/21			33		35,269
5.50%, 2/15/22			427		460,093
5.00%, 4/01/23			122		127,795
American Builders & Contractors Supply Co., Inc., 5.75%, 12/15/23 (a)			128		133,120
BlueLine Rental Finance Corp., 7.00%, 2/01/19 (a)			423		369,067
HD Supply, Inc.:
5.25%, 12/15/21 (a)			725		766,687
5.75%, 4/15/24 (a)			647		679,350
Herc Rentals, Inc.:
7.50%, 6/01/22 (a)			112		115,920
7.75%, 6/01/24 (a)			200		205,500
United Rentals North America, Inc.:
4.63%, 7/15/23			706		723,650
5.75%, 11/15/24			115		119,313
5.50%, 7/15/25			3		3,060
					3,738,824
Wireless Telecommunication Services — 0.9%
Sprint Capital Corp.:
6.90%, 5/01/19			280		288,750
6.88%, 11/15/28			490		459,987
Sprint Communications, Inc.:
9.00%, 11/15/18 (a)			425		469,094
7.00%, 8/15/20			60		60,300
Sprint Corp.:
7.25%, 9/15/21			35		35,131
7.88%, 9/15/23			336		338,100
7.13%, 6/15/24			470		458,250
7.63%, 2/15/25			55		54,450
T-Mobile USA, Inc.:
6.63%, 4/28/21			240		252,600
6.73%, 4/28/22			208		218,400
6.00%, 3/01/23			280		299,127
6.50%, 1/15/26			430		475,687
					3,409,876
Total Corporate Bonds — 37.6%					138,673,345
Floating Rate Loan Interests (b)
Advertising — 0.1%
Affinion Group, Inc., Tranche B Term Loan, 6.75%, 4/30/18			297		288,029

See Notes to Financial Statements.

24 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Aerospace & Defense — 0.5%
B/E Aerospace, Inc., Term Loan, 3.75%-3.85%, 12/16/21	USD		232	$	234,209
Sequa Corp., Initial Term Loan, 5.25%, 6/19/17			271		236,462
TransDigm, Inc.:
Delayed Draw Tranche F Term Loan, 3.75%, 6/09/23			127		127,109
Initial Tranche F Term Loan, 3.75%, 6/09/23			169		168,932
Tranche D Term Loan, 3.75%-3.84%, 6/04/21			196		195,338
Tranche E Term Loan, 3.75%, 5/14/22			99		99,235
Tranche F Term Loan, 3.75%, 6/09/23			643		642,337
					1,703,622
Air Freight & Logistics — 0.3%
Ceva Group PLC (FKA Louis No.1 PLC/TNT Logistics), Pre-Funded L/C Loan, 6.50%, 3/19/21			183		146,085
Ceva Intercompany BV, Dutch BV Term Loan, 6.50%, 3/19/21			185		147,713
Ceva Logistics Canada ULC (FKA TNT Canada ULC), Canadian Term Loan, 6.50%, 3/19/21			33		26,428
Ceva Logistics U.S. Holdings, Inc. (FKA Louis U.S. Holdco, Inc.), U.S. Term Loan, 6.50%, 3/19/21			259		207,444
XPO Logistics, Inc., Refinanced Term Loan, 4.25%, 11/01/21			486		488,113
					1,015,783
Airlines — 0.2%
Air Medical Group Holdings, Inc., Initial Term Loan, 4.25%, 4/28/22			290		287,256
Delta Air Lines, Inc., 2014 Term B-1 Loan, 3.25%, 10/18/18			144		144,398
Northwest Airlines, Inc.:
Term Loan B757-200 (N551), 2.46%, 9/10/18			11		11,078
Term Loan B757-200 (N554), 2.46%, 9/10/18			11		11,078
Term Loan B757-300 (N550), 2.46%, 3/10/17			11		11,050
Term Loan B757-300 (N583), 3.08%, 3/10/17			5		4,521
Term Loan B757-300 (N584), 3.08%, 3/10/17			5		4,638
US Airways, Inc., Tranche B-1 Term Loan (Consenting), 3.50%, 5/23/19			189		189,071
					663,090
Beverages — 0.1%
Blue Ribbon LLC, 2016-1 New Term Loan (First Lien), 5.00%, 11/15/21			530		532,256
Biotechnology — 0.4%
AMAG Pharmaceuticals, Inc., Initial Term Loan, 4.75%, 8/17/21			218		217,821
Grifols Worldwide Operations Ltd., U.S. Tranche B Term Loan, 3.45%, 2/27/21			1,089		1,098,661
					1,316,482
Building Products — 0.6%
Continental Building Products, Inc., Term Loan, 3.50%, 8/18/23			370		371,003
CPG International, Inc., Term Loan, 4.75%, 9/30/20			719		719,563
Jeld-Wen, Inc. (Onex BP Finance LP), Initial Loan, 5.25%, 10/15/21			411		413,613
Ply Gem Industries, Inc., Term Loan, 4.00%, 2/01/21			386		388,361

Floating Rate Loan Interests (b)		Par   (000)		Value
Building Products (continued)
Wilsonart LLC:
Initial Term Loan, 4.00%, 10/31/19	USD		313	$	313,586
Tranche B Term Loan, 4.00%, 10/31/19			199		199,528
					2,405,654
Capital Markets — 0.3%
Moxie Patriot LLC, Construction B-1 Advances, 6.75%, 12/19/20			363		354,455
Royal Holdings, Inc.:
Initial Term Loan (First Lien), 4.50%, 6/20/22			219		220,716
Initial Term Loan (Second Lien), 8.50%, 6/19/23			260		256,100
SAM Finance Luxembourg S.à r.l. (Santandar), Dollar Term Loan, 4.25%, 12/17/20			432		435,518
					1,266,789
Chemicals — 0.8%
Ascend Performance Materials Operations LLC, Term B Loan, 6.50%, 8/12/22			324		319,018
Axalta Coating Systems Dutch Holding B BV (Axalta Coating Systems U.S. Holdings, Inc.), Refinanced Term B Loan, 3.75%, 2/01/20			387		389,226
Chemours Co., Tranche B Term Loan, 3.75%, 5/12/22			456		451,393
MacDermid, Inc. (Platform Specialty Products Corp.):
Tranche B Term Loan (First Lien), 5.50%, 6/07/20			745		745,791
Tranche B-2 Term Loan, 5.50%, 6/07/20			74		73,895
Tranche B-3 Term Loan, 5.50%, 6/07/20			358		358,950
Oxea Finance & Cy SCA (Oxea Finance LLC), Tranche B-2 Term Loan (First Lien), 4.25%, 1/15/20			622		590,640
PQ Corp., Tranche B-1 Term Loan, 5.75%, 11/04/22			219		220,242
					3,149,155
Commercial Services & Supplies — 1.6%
ADS Waste Holdings, Inc., Initial Tranche B-2 Term Loan, 3.75%, 10/09/19			484		484,619
Allied Universal Holdco LLC (FKA USAGM Holdco LLC):
Amendment Delayed Draw Term Loan, 4.50%, 7/28/22			60		60,177
Incremental Term Loan, 5.50%, 7/28/22			596		597,021
Initial Loan (Second Lien), 9.50%, 7/28/23			375		371,561
Initial Term Loan (First Lien), 4.75%, 7/28/22			147		145,842
Aramark Corp., U.S. Term F Loan, 3.34%, 2/24/21			411		413,025
Dealer Tire LLC, Initial Term Loan, 5.50%, 12/22/21			361		364,024
Erie Acquisition Holdings, Inc. (GCA Services Group, Inc.), Term Loan (First Lien), 5.75%-5.98%, 3/01/23			382		384,345
iQor U.S., Inc., Term B Loan (First Lien), 6.00%, 4/01/21			169		145,243
KAR Auction Services, Inc.:
Tranche B-2 Term Loan, 4.06%, 3/11/21			115		116,099
Tranche B-3 Term Loan, 4.38%, 3/09/23			342		346,745
Livingston International, Inc., Initial Term B-1 Loan (First Lien), 5.50%, 4/18/19			111		104,587
Packers Holdings LLC, Initial Term Loan, 4.75%, 12/02/21			491		492,478
Prime Security Services Borrower LLC (AKA Protection 1 Security Solutions), Term B-1 Loan (First Lien), 4.75%, 5/02/22			409		412,680

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 25

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Commercial Services & Supplies (continued)
Spin Holdco, Inc., Initial Term Loan (First Lien), 4.25%, 11/14/19	USD		835	$	830,492
U.S. Security Associates Holdings, Inc., Initial Term Loan, 6.00%, 7/14/23			185		185,000
W3 Co., Term Loan (Second Lien), 9.25%, 9/13/20			55		21,762
Waste Industries USA, Inc., Term B Loan, 3.50%, 2/27/20			439		440,867
					5,916,567
Communications Equipment — 0.1%
Commscope, Inc., Tranche 5 Term Loan (2015), 3.75%, 12/29/22			208		209,655
Riverbed Technology, Inc., First Amendment Term Loan, 5.00%, 4/25/22			351		353,531
					563,186
Construction & Engineering — 0.4%
Aecom Technology Corp., Term B Commitment, 3.75%, 10/15/21			85		85,614
Brand Energy & Infrastructure Services, Inc. (FKA FR Brand Acquisition Corp.), Initial Term Loan, 4.75%, 11/26/20			505		498,393
CNT Holdings III Corp., Term Loan (First Lien), 5.25%, 1/22/23			517		520,204
Stonewall Gas Gathering LLC, Loan, 8.75%, 1/28/22			229		232,613
					1,336,824
Construction Materials — 0.3%
Faenza Acquisition GmbH (CeramTec Acquisition Corp.):			51		51,083
Dollar Term B-3 Loan, 4.25%, 8/30/20
Initial Dollar Term B-1 Loan, 4.25%, 8/30/20			166		167,131
Initial Dollar Term B-2 Loan, 4.25%, 8/30/20			18		18,525
Headwaters, Inc., Term B-1 Loan, 4.00%, 3/24/22			327		328,062
Quikrete Holdings, Inc., Initial Loan (First Lien), 4.00%, 9/28/20			387		389,834
					954,635
Containers & Packaging — 0.7%
Ardagh Holdings USA, Inc. (Ardagh Packaging Finance SA), New Term Loan, 4.00%, 12/17/19			655		657,388
Berry Plastics Corp.:
Term D Loan, 3.50%, 2/08/20			199		198,629
Term H Loan, 3.75%, 10/01/22			561		562,601
BWay Intermediate Co., Inc., Initial Term Loan, 5.50%-7.00%, 8/14/20			652		654,836
Kleopatra Holdings 2 SCA:
Initial German Borrower Dollar Term Loan, 5.00%, 4/28/20			112		113,427
Initial U.S. Borrower Dollar Term Loan, 5.00%, 4/28/20			263		265,418
					2,452,299
Distributors — 0.2%
American Tire Distributors, Inc., Initial Term Loan, 5.25%, 9/01/21			345		339,923
Fram Group Holdings, Inc./Prestone Holdings, Inc.:
Loan (Second Lien), 11.00%, 1/29/18			326		279,829
Term Loan (First Lien), 7.00%, 7/29/17			233		223,273
					843,025

Floating Rate Loan Interests (b)		Par   (000)		Value
Diversified Consumer Services — 0.5%
Bright Horizons Family Solutions LLC (FKA Bright Horizons Family Solutions, Inc.):
Term B Loan, 3.75%-5.25%, 1/30/20	USD		289	$	290,673
Term B-1 Loan, 4.25%-5.75%, 1/30/20			296		296,308
Houghton Mifflin Harcourt Co., Term Loan, 4.00%, 5/28/21			370		366,092
ServiceMaster Co. LLC, Initial Term Loan, 4.25%, 7/01/21			967		975,556
					1,928,629
Diversified Financial Services — 0.9%
AlixPartners LLP, Initial Term Loan, 4.50%, 7/28/22			515		515,552
Camelot Finance LP (Camelot Cayman LP) (AKA Thomson Reuters Intellectual Property & Science), Initial Term Loan, 3.75%, 9/15/23			420		420,315
Jefferies Finance LLC (JFIN Co-Issuer Corp.) AKA Project Shot Put, Term Loan, 4.50%, 5/14/20			741		729,516
MGM Growth Properties Operating Partnership LP, Term B Loan, 4.00%, 4/25/23			823		829,798
SolarWinds Holdings, Inc., 2016 Refinancing Term Loan, 5.50%, 2/03/23			603		608,919
SS&C European Holdings S.à r.l., Term B-2 Loan, 4.00%, 7/08/22			119		120,254
					3,224,354
Diversified Telecommunication Services — 2.5%
Avaya, Inc., Term B-7 Loan, 6.25%, 5/29/20			442		325,790
Consolidated Communications, Inc., Term Loan B, 3.00%, 9/29/23			150		150,845
Electric Lightwave Holdings, Inc. (FKA Integra Telecom Holdings, Inc.):
Term B-1 Loan (Second Lien), 9.75%, 2/12/21			238		231,016
Term B-1 Loan, 5.25%, 8/14/20			371		367,877
Hawaiian Telcom Communications, Inc., Term Loan, 5.25%, 6/06/19			168		168,849
Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19			827		785,838
Level 3 Financing, Inc.:
Tranche B 2020 Term Loan, 4.00%, 1/15/20			1,175		1,179,994
Tranche B-III 2019 Term Loan, 4.00%, 8/01/19			230		231,249
Ligado Networks LLC (FKA New LightSquared LLC), Junior Loan, 13.50%, 12/07/20 (e)(h)			3,027		1,952,705
LTS Buyer LLC (Sidera Networks, Inc.), Term B Loan (First Lien), 4.09%, 4/13/20			1,193		1,193,072
Telesat Canada, U.S. Term B-2 Loan, 3.50%, 3/28/19			362		362,149
Virgin Media Investment Holdings Ltd.:
E Facility, 4.25%, 6/30/23	GBP		270		350,543
F Facility, 3.65%, 6/30/23	USD		516		518,133
Zayo Group LLC (Zayo Capital, Inc.), 2021 Term Loan, 3.75%, 5/06/21			836		839,062
Ziggo BV:
Term Loan B1 Facility, 3.65%, 1/15/22			276		276,016
Term Loan B2, 3.65%, 1/15/22			168		167,651
Term Loan B3, 3.70%, 1/15/22			52		52,094
					9,152,883
Electric Utilities — 0.9%
Energy Future Intermediate Holding Co. LLC (EFIH Finance, Inc.), Term Loan, 4.25%, 12/19/16			1,631		1,642,630

See Notes to Financial Statements.

26 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Electric Utilities (continued)
Green Energy Partners/Stonewall LLC, Term B-1 Conversion Advances, 6.50%, 11/13/21	USD		425	$	412,250
Texas Competitive Electric Holdings Co. LLC (TXU):
2017 Term Loan (Extending), 5.00%, 10/10/17			815		234,459
Term C Loan, 5.00%, 10/31/17			226		228,008
Term Loan, 5.00%, 10/31/17			993		999,901
					3,517,248
Electrical Equipment — 0.2%
Cortes NP Acquisition Corp., Term Loan B (First Lien), 5.00%, 9/29/23			920		897,000
Electronic Equipment, Instruments & Components — 0.2%
CPI Acquisition, Inc., Term Loan (First Lien), 5.50%, 8/17/22			179		174,735
Dell International LLC (EMC Corp.), Term B Loan, 4.00%, 9/07/23			515		517,899
					692,634
Energy Equipment & Services — 0.2%
Drillships Financing Holding, Inc. (Ocean Rig), Tranche B-1 Term Loan, 6.00%, 3/31/21			667		331,987
Seventy Seven Operating LLC, Term Loan, 3.75%, 6/25/20			63		54,639
Weatherford International Ltd., Loan, 1.96%, 7/13/20			395		375,636
					762,262
Equity Real Estate Investment Trusts (REITs) — 0.1%
Communications Sales & Leasing, Inc. (CSL Capital LLC), Term Loan, 5.00%, 10/24/22			217		218,228
RHP Hotel Properties LP, Tranche B Term Loan, 3.59%, 1/15/21			293		294,044
					512,272
Food & Staples Retailing — 0.9%
Albertson’s LLC:
2016-1 Term B-4 Loan, 4.50%, 8/25/21			785		790,320
2016-1 Term B-5 Loan, 4.75%, 12/21/22			195		197,297
Term B-6 Loan, 4.75%, 6/22/23			171		172,625
Rite Aid Corp.:
Tranche 1 Term Loan (Second Lien), 5.75%, 8/21/20			215		215,404
Tranche 2 Term Loan (Second Lien), 4.88%, 6/21/21			590		590,737
U.S. Foods, Inc. (AKA U.S. Foodservice, Inc.), Initial Term Loan, 4.00%, 6/27/23			1,232		1,240,893
					3,207,276
Food Products — 0.6%
Chobani LLC, Term B Loan (First Lien), 5.25%, 9/29/23			300		298,500
Dole Food Co., Inc., Tranche B Term Loan, 4.50%-6.00%, 11/01/18			255		255,866
Hostess Brands LLC:
Term B Loan (First Lien), 4.50%, 8/03/22			659		662,775
Term B Loan (Second Lien), 8.50%, 8/03/23			39		39,259
Pinnacle Foods Finance LLC, Tranche G Term Loan, 3.25%, 4/29/20			440		441,901
Reddy Ice Corp.:
Term B Loan (First Lien), 6.75%-8.00%, 5/01/19			290		264,409
Term B Loan (Second Lien), 10.75%, 11/01/19			200		155,334
					2,118,044

Floating Rate Loan Interests (b)		Par   (000)		Value
Gas Utilities — 0.1%
Samchully Midstream 3 LLC, Initial Term Loan, 5.75%, 10/20/21	USD		374	$	340,363
Health Care Equipment & Supplies — 0.7%
Alere, Inc. (FKA IM U.S. Holdings LLC), B Term Loan, 4.25%, 6/20/22			632		626,390
Auris Luxembourg III S.à r.l. (AKA Siemens Audiology), Facility B4, 4.25%, 1/17/22			412		413,799
DJO Finance LLC, Initial Term Loan, 4.25%, 6/08/20			580		569,261
Immucor, Inc. (FKA IVD Acquisition Corp.), Term B-2 Loan, 5.00%, 8/17/18			377		367,402
Ortho-Clinical Diagnostics Holdings Luxembourg S.à r.l., Initial Term Loan, 4.75%, 6/30/21			489		477,764
					2,454,616
Health Care Providers & Services — 2.3%
Acadia Healthcare Co., Inc., Tranche B-2 Term Loan, 3.75%, 2/16/23			414		416,344
ADMI Corp. (AKA Aspen Dental), Initial Term Loan, 5.25%, 4/29/22			422		424,123
AmSurg Corp., Initial Term Loan, 3.50%, 7/16/21			575		574,985
Change Healthcare Holdings, Inc. (FKA Emdeon, Inc.), Term B-2 Loan, 3.75%, 11/02/18			824		825,372
CHG Healthcare Services, Inc. (FKA CHG Buyer Corp.), Term Loan (First Lien), 4.75%, 6/07/23			754		761,026
CHS/Community Health Systems, Inc.:
Incremental 2018 Term F Loan, 4.08%, 12/31/18			299		297,265
Incremental 2019 Term G Loan, 3.75%, 12/31/19			295		289,757
Curo Health Services Holdings, Inc., Term B Loan (First Lien), 6.50%, 2/07/22			199		198,746
DaVita Inc. (FKA DaVita HealthCare Partners, Inc.), Tranche B Term Loan, 3.50%, 6/24/21			608		610,778
Envision Healthcare Corp. (FKA Emergency Medical Services Corp.):
Initial Term Loan, 4.25%, 5/25/18			377		377,277
Tranche B-2 Term Loan, 4.50%, 10/28/22			227		227,620
MPH Acquisition Holdings LLC, Initial Term Loan, 5.00%, 6/07/23			636		643,908
National Mentor Holdings, Inc., Tranche B Term Loan, 4.25%, 1/31/21			146		146,539
Press Ganey Holdings, Inc.:
Term B Loan (First Lien), 4.25%, 10/05/23			260		260,000
Term B Loan (Second Lien), 8.25%, 9/30/24			135		133,650
Surgery Center Holdings, Inc., Initial Term Loan (First Lien), 4.75%, 11/03/20			293		293,055
Surgical Care Affiliates, Inc., Initial Term Loan, 4.25%, 3/17/22			575		578,153
Team Health, Inc., New Tranche B Term Loan, 3.84%, 11/23/22			676		678,571
U.S. Renal Care, Inc., Initial Term Loan (First Lien), 5.25%, 12/30/22			331		316,707
Vizient, Inc., Initial Term Loan, 6.25%, 2/13/23			505		510,357
					8,564,233
Health Care Technology — 0.1%
IMS Health, Inc., Term B Dollar Loan, 3.50%, 3/17/21			438		439,063
Hotels, Restaurants & Leisure — 1.9%
Amaya Holdings BV:
Initial Term B Loan (First Lien), 5.00%, 8/01/21			903		901,472

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 27

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Hotels, Restaurants & Leisure (continued)
Initial Term B Loan (Second Lien), 8.00%, 8/01/22	USD		297	$	294,549
AMF Bowling Centers, Inc., Term B Loan (First Lien), 5.00%, 9/19/23			412		410,113
B.C. Unlimited Liability Co. (New Red Finance, Inc.) (AKA Burger King/Tim Hortons), Term B-2 Loan, 3.75%, 12/10/21			1,006		1,012,694
Bass Pro Group LLC, New Term Loan (2015), 4.00%, 6/05/20			230		229,177
Boyd Gaming Corp., Term B Loan, 5.50%, 8/14/20			143		143,914
Caesars Entertainment Resort Properties LLC, Term B Loan, 7.00%, 10/11/20			1,182		1,178,054
CCM Merger, Inc. (MotorCity Casino Hotel), Term Loan, 4.50%, 8/06/21			389		389,040
Eldorado Resorts, Inc., Initial Term Loan, 4.25%, 7/25/22			375		375,988
ESH Hospitality, Inc., Initial Term Loan, 3.75%, 8/30/23			155		156,025
Hilton Worldwide Finance LLC:
Series B-1 Term Loan, 3.50%, 10/26/20			49		49,187
Series B-2 Term Loan, 3.03%-3.21%, 10/25/23			226		227,251
Jack Ohio Finance LLC (FKA ROC Finance LLC), Funded Term B Loan, 3.75%, 6/20/19			320		312,534
KFC Holding Co. (AKA Yum! Brands), Term B Loan, 3.28%, 6/16/23			423		425,858
La Quinta Intermediate Holdings LLC, Initial Term Loan, 3.75%, 4/14/21			106		106,125
Scientific Games International, Inc.:
Initial Term B-2 Loan, 6.00%, 10/01/21			225		225,771
Initial Term Loan, 6.00%, 10/18/20			192		192,161
Station Casinos LLC, Term B Facility Loan, 3.75%, 6/08/23			367		369,374
					6,999,287
Household Products — 0.1%
Spectrum Brands, Inc., USD Term Loan, 3.50%-5.25%, 6/23/22			368		369,221
Independent Power and Renewable Electricity Producers — 0.6%
Calpine Corp., Term Loan (2015), 4.00%, 1/15/23			417		418,934
Dynegy Finance IV, Inc., Term Loan, 5.00%, 6/27/23			680		684,930
Eastern Power LLC (Eastern Covert Midco LLC) (AKA TPF II LC LLC), Term Loan, 5.00%, 10/02/21			378		381,055
Exgen Texas Power LLC, Term Loan, 5.75%, 9/18/21			309		251,735
Granite Acquisition, Inc.:
Term B Loan (First Lien), 5.00%, 12/17/21			390		385,512
Term C Loan (First Lien), 5.00%, 12/17/21			17		17,264
					2,139,430
Insurance — 1.0%
AmWINS Group LLC:
New Term Loan (First Lien), 4.75%, 9/06/19			192		193,160
Term Loan (Second Lien ), 9.50%, 9/04/20			200		202,334
AssuredPartners, Inc., First Lien Term Loan, 5.75%, 10/21/22			718		721,004
Asurion LLC (FKA Asurion Corp.), Incremental Tranche B-4 Term Loan, 5.00%, 8/04/22			928		932,200
Sedgwick Claims Management Services, Inc.:

Floating Rate Loan Interests (b)		Par   (000)		Value
Insurance (continued)
2016 New Term Loan, 5.25%, 3/01/21	USD		499	$	501,867
Initial Loan (Second Lien), 6.75%, 2/28/22			560		553,000
Solera LLC (Solera Finance, Inc.), Dollar Term Loan, 5.75%, 3/03/23			457		461,677
					3,565,242
Internet Software & Services — 0.5%
CAMP International Holding Co.:
Initial Term Loan (First Lien), 4.75%, 8/18/23			85		84,830
Initial Term Loan (Second Lien), 8.25%, 8/18/24			30		30,000
Cotiviti Corp., Term Loan B, 3.61%, 9/22/23			858		859,671
Go Daddy Operating Co. LLC, Initial Term Loan, 4.25%, 5/13/21			481		483,314
GTCR Valor Companies, Inc., Initial Term Loan (First Lien), 7.00%, 6/16/23			404		384,293
Trader Corp., Term Loan, 4.00%, 8/09/23			105		105,460
					1,947,568
IT Services — 1.1%
Engility Corp. (FKA TASC, Inc.):
Term B1 Loan, 4.88%, 8/12/20			30		30,275
Term B2 Loan, 5.75%-7.25%, 8/14/23			56		56,092
First Data Corp.:
2021 Extended Dollar Term Loan, 4.53%, 3/24/21			1,333		1,342,414
2022 Dollar Term Loan, 4.28%, 7/08/22			200		201,050
IG Investments Holdings LLC, Extended Tranche B Term Loan, 6.00%, 10/31/21			727		728,504
Sabre GLBL, Inc. (FKA Sabre, Inc.):
Incremental Term Loan, 4.50%, 2/19/19			286		287,054
Term B Loan, 4.00%, 2/19/19			290		291,097
Vantiv LLC (FKA Fifth Third Processing Solutions LLC), Term B Loan, 3.50%, 6/13/21			316		316,372
WEX, Inc., Term B Loan, 4.25%, 6/30/23			653		659,870
					3,912,728
Leisure Products — 0.0%
Leslie’s Poolmart, Inc., Tranche B Term Loan, 5.25%, 8/16/23			100		100,583
Life Sciences Tools & Services — 0.9%
DPX Holdings BV (FKA JLL/Delta Dutch Newco BV), 2015 Incremental Dollar Term Loan, 4.25%, 3/11/21			1,179		1,176,664
InVentiv Health, Inc. (FKA Ventiv Health, Inc.), Term Loan B, 3.75%, 9/29/23			812		813,246
Jaguar Holding Co. I (AKA Pharmaceutical Product Development, Inc.), Initial Term Loan, 4.25%, 8/18/22			1,080		1,083,265
Sterigenics-Nordion Holdings LLC, Initial Term Loan, 4.25%, 5/16/22			424		425,232
					3,498,407
Machinery — 1.1%
Accudyne Industries Borrower SCA/Accudyne Industries LLC (FKA Silver II U.S. Holdings LLC), Refinancing Term Loan, 4.00%, 12/13/19			790		737,023
Ameriforge Group, Inc., Initial Term Loan (Second Lien), 8.75%, 12/21/20			90		12,000
Filtration Group Corp., Term Loan (First Lien), 4.25%, 11/20/20			578		579,638
FPC Holdings, Inc., Initial Loan (First Lien), 5.25%, 11/19/19			334		296,710

See Notes to Financial Statements.

28 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Machinery (continued)
Gates Global LLC, Initial Dollar Term Loan, 4.25%, 7/06/21	USD		1,029	$	1,012,869
Mueller Water Products, Inc., Initial Loan, 4.00%-4.09%, 11/24/21			291		293,471
Navistar, Inc., Tranche B Term Loan, 6.50%, 8/07/20			285		285,536
Rexnord LLC/RBS Global, Inc., Term B Loan, 4.00%, 8/21/20			482		482,186
Safway Group Holding LLC, Initial Term Loan, 5.75%, 8/21/23			240		241,399
					3,940,832
Media — 3.1%
Acosta, Inc. (FKA Acosta Holdco, Inc.), Tranche B-1 Loan, 4.25%, 9/26/21			160		151,875
Advantage Sales & Marketing, Inc.:
Initial Term Loan (First Lien), 4.25%, 7/23/21			252		249,149
Term Loan (Second Lien), 7.50%, 7/25/22			159		151,037
Altice France SA (Numericable-SFR SA):
Term B-5 Loan, 4.56%, 7/29/22			548		552,035
Term B-6 Loan, 4.75%, 2/10/23			207		208,462
Term B-7 Loan, 5.00%, 1/15/24			622		627,661
Altice U.S. Finance I Corp. (Cequel Communications LLC), Initial Term Loan, 4.25%-5.75%, 12/14/22			772		776,469
Cengage Learning, Inc., 2016 Refinancing Term Loan, 5.25%, 6/07/23			180		179,326
Charter Communications Operating LLC (AKA CCO Safari LLC):
Term H Loan (2016), 3.25%, 8/24/21			123		123,559
Term I Loan (2016), 3.50%, 1/24/23			911		916,788
Creative Artists Agency LLC, Amendment No. 3 Incremental Term Loan, 5.00%-6.50%, 12/17/21			550		553,217
CSC Holdings LLC (FKA CSC Holdings, Inc. (Cablevision)), Initial Term Loan, 5.00%, 10/09/22			1,096		1,096,764
iHeartCommunications, Inc. (FKA Clear Channel Communications, Inc.):
Tranche D Term Loan, 7.27%, 1/30/19			949		729,076
Tranche E Term Loan, 8.02%, 7/30/19			250		190,973
Liberty Cablevision of Puerto Rico LLC (FKA San Juan Cable LLC), Term B Loan (First Lien), 4.50%, 1/07/22			460		453,390
Live Nation Entertainment, Inc., Term B-1 Loan, 3.59%, 8/17/20			107		106,934
MGOC, Inc. (FKA Media General, Inc.), Term B Loan, 4.00%, 7/31/20			168		168,114
Mission Broadcasting, Inc., Term B Loan (First Lien), 3.00%, 9/26/23			92		92,878
Nexstar Broadcasting, Inc., Term B Loan (First Lien), 4.25%, 9/26/23			1,038		1,042,297
Telenet Financing USD LLC, Term Loan AD Facility, 4.36%, 6/30/24			715		720,161
Tribune Media Co. (FKA Tribune Co.), Term B Loan, 3.75%, 12/27/20			779		783,953
Univision Communications, Inc., Replacement First Lien Term Loan, 4.00%, 3/01/20			1,056		1,057,728
UPC Financing Partnership, Facility AN, 4.08%, 8/31/24			365		365,752
					11,297,598
Metals & Mining — 0.5%
Novelis, Inc., Initial Term Loan, 4.00%-4.09%, 6/02/22			728		731,112

Floating Rate Loan Interests (b)		Par   (000)		Value
Metals & Mining (continued)
Reynolds Group Holdings, Inc., U.S. Term Loan, 4.25%, 2/05/23	USD		1,083	$	1,086,541
WireCo WorldGroup, Inc., Term Loan B, 5.50%, 7/21/23			220		220,642
					2,038,295
Multiline Retail — 0.3%
Dollar Tree, Inc., Term B-3 Loan, 3.06%, 7/06/22			254		255,293
Evergreen Acqco 1 LP, New Term Loan, 5.00%, 7/09/19			150		136,681
Hudson’s Bay Co., Initial Term Loan, 4.75%, 9/30/22			581		582,037
					974,011
Multi-Utilities — 0.0%
Power Borrower LLC, Initial Term Loan (Second Lien), 8.25%, 11/06/20			45		44,775
Oil, Gas & Consumable Fuels — 0.9%
Bronco Midstream Funding LLC, Term Loan, 5.00%, 8/17/20			717		667,139
California Resources Corp., Loan, 11.38%, 12/31/21			375		393,517
Chesapeake Energy Corp., Class A Loan, 8.50%, 8/23/21			590		618,945
CITGO Holding, Inc., Term Loan, 9.50%, 5/12/18			364		368,118
MEG Energy Corp., New Term Loan, 3.75%, 3/31/20			751		699,335
Southcross Energy Partners LP, Initial Term Loan, 5.25%, 8/04/21			34		27,130
Southcross Holdings Borrower LP, Tranche B Term Loan, 3.50%-5.50%, 4/13/23			31		25,708
Ultra Resources, Inc., Revolving Credit, 4.75%, 10/06/16			174		162,255
Veresen Midstream LP, Tranche B-1 Term Loan, 5.25%, 3/31/22			445		440,606
					3,402,753
Personal Products — 0.1%
NBTY, Inc., Dollar Term B Loan, 5.00%, 5/05/23			294		295,404
Revlon Consumer Products Corp., Initial Term B Loan, 4.25%, 9/07/23			175		175,238
					470,642
Pharmaceuticals — 1.2%
Akorn, Inc., Loan, 5.25%, 4/16/21			306		309,135
Capsugel Holdings U.S., Inc., New Dollar Term Loan, 4.00%, 7/31/21			901		905,344
Catalent Pharma Solutions, Inc. (FKA Cardinal Health 409, Inc.), Dollar Term Loan, 4.25%, 5/20/21			734		737,983
Endo Luxembourg Finance Co. I S.à r.l., 2015 Incremental Term B Loan, 3.75%, 9/26/22			486		484,383
Prestige Brands, Inc., Term B-3 Loan, 3.50%, 9/03/21			292		293,915
RPI Finance Trust, Term B-4 Term Loan, 3.59%, 11/09/20			705		706,985
Valeant Pharmaceuticals International, Inc.:
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19			145		144,811
Series D-2 Tranche B Term Loan, 5.00%, 2/13/19			136		135,852
Series E-1 Tranche B Term Loan, 5.25%, 8/05/20			581		581,671

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 29

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Pharmaceuticals (continued)
Series F-1 Tranche B Term Loan, 5.50%, 4/01/22	USD		231	$	232,060
					4,532,139
Professional Services — 0.7%
DTI Holdco, Inc., Term Loan, 5.25%, 9/23/23			345		341,836
Employbridge LLC (FKA Koosharem LLC), Term Loan, 7.50%, 5/15/20			166		142,317
EWT Holdings III Corp. (FKA WTG Holdings III Corp.), Term Loan (First Lien), 4.75%, 1/15/21			376		375,535
Redtop Acquisitions Ltd.:
Initial Dollar Term Loan (First Lien), 4.50%, 12/03/20			283		281,690
Initial Dollar Term Loan (Second Lien), 8.25%, 6/03/21			73		72,028
Sterling Midco Holdings, Inc. (FKA Sterling Holdings Ultimate Parent, Inc.), Initial Term Loan (First Lien), 5.75%, 6/20/22			282		280,953
Trans Union LLC, 2016 Incremental Term B-2 Commitment, 3.59%, 4/09/21			1,072		1,074,732
					2,569,091
Real Estate Management & Development — 0.5%
CityCenter Holdings LLC, Term B Loan, 4.25%, 10/16/20			403		405,884
DTZ U.S. Borrower LLC (DTZ AUS Holdco PTY Ltd.) (AKA Cushman & Wakefield), 2015-1 Additional Term Loan (First Lien), 4.25%, 11/04/21			415		415,590
Realogy Group LLC (FKA Realogy Corp.), New 2022 Term Loan, 3.75%, 7/20/22			1,054		1,065,610
					1,887,084
Road & Rail — 0.1%
SIRVA Worldwide, Inc., Loan, 7.50%, 3/27/19			281		278,613
Semiconductors & Semiconductor Equipment — 0.8%
Avago Technologies Cayman Holdings Ltd., Term B-3 Loan, 3.52%, 2/01/23			1,458		1,475,088
Cavium, Inc., Initial Term B Loan, 3.75%, 8/16/22			60		60,600
Microsemi Corp., Closing Date Term B Loan, 3.75%, 1/15/23			265		267,880
NXP BV (NXP Funding LLC), Tranche F Loan, 3.41%, 12/07/20			439		440,482
On Semiconductor Corp., Closing Date Term Loan, 5.25%, 3/31/23			430		431,767
Versum Materials, Inc., Term Loan, 2.50%, 9/21/23			195		195,813
					2,871,630
Software — 2.0%
Applied Systems, Inc.:
Initial Term Loan (First Lien), 4.00%, 1/25/21			411		411,763
Initial Term Loan (Second Lien), 7.50%, 1/24/22			99		99,588
BMC Software Finance, Inc., Initial U.S. Term Loan, 5.00%, 9/10/20			460		442,679
Infor (U.S.), Inc. (FKA Lawson Software, Inc.), Tranche B-5 Term Loan, 3.75%, 6/03/20			917		911,258
Informatica Corp., Dollar Term Loan, 4.50%, 8/05/22			1,028		999,315
Kronos, Inc.:
Incremental Term Loan (First Lien), 4.50%, 10/30/19			296		296,920

Floating Rate Loan Interests (b)		Par   (000)		Value
Software (continued)
Initial Term Loan (Second Lien), 9.75%, 4/30/20	USD		419	$	425,896
LANDesk Group, Inc., Term Loan, 4.50%, 9/16/22			230		231,437
Mitchell International, Inc.:
Initial Loan (Second Lien), 8.50%, 10/11/21			275		268,125
Initial Term Loan, 4.50%, 10/13/20			416		415,661
RP Crown Parent LLC, Term Loan B, 3.50%, 9/22/23			372		372,423
Sophia LP, Closing Date Term Loan, 4.75%, 9/30/22			536		535,707
SS&C Technologies, Inc., Term B-1 Loan, 4.00%, 7/08/22			961		967,684
TIBCO Software, Inc., Term Loan, 5.50%, 12/04/20			256		252,022
VF Holding Corp., Initial Term Loan (First Lien), 4.75%, 6/30/23			590		591,752
					7,222,230
Specialty Retail — 0.9%
Coinstar, Inc., Term Loan, 4.25%, 9/26/23			223		223,797
Harbor Freight Tools USA, Inc., Initial Loan (2016), 4.00%, 8/18/23			565		567,508
Michaels Stores, Inc., Incremental 2014 Term Loan, 4.00%, 1/28/20			723		725,350
National Vision, Inc., Initial Term Loan (First Lien), 4.00%, 3/12/21			823		812,972
Neiman Marcus Group, Inc., Other Term Loan, 4.25%, 10/25/20			245		224,756
Party City Holdings, Inc. (Party City Corp.), Term Loan, 4.25%-4.49%, 8/19/22			557		558,693
PetCo Animal Supplies, Inc., Tranche B-2 Term Loan, 5.00%, 1/26/23			223		224,819
					3,337,895
Trading Companies & Distributors — 0.9%
American Builders & Contractors Supply Co., Inc.:
Restatement Effective Date Term Loan, 2.75%, 9/23/23			379		380,165
Term B Loan, 3.50%, 4/16/20			271		271,138
Beacon Roofing Supply, Inc., Initial Term Loan, 3.50%, 10/01/22			391		391,734
GYP Holdings III Corp., New Incremental First Lien Term Loan, 4.50%, 4/01/21			540		537,709
HD Supply, Inc., Incremental Term Loan, 3.75%, 8/13/21			880		880,649
MRC Global (U.S.), Inc. (FKA McJunkin Red Man Corp.), Term Loan, 5.00%, 11/08/19			95		92,513
Nexeo Solutions LLC, Initial Term Loan, 5.25%, 6/09/23			175		175,327
Solenis International LP (Solenis Holdings 3 LLC) (AKA Ashland Water Technologies), Initial Term Loan (Second Lien), 7.75%, 7/31/22			540		526,500
					3,255,735
Wireless Telecommunication Services — 0.2%
SBA Senior Finance II LLC, Incremental Tranche B-1 Term Loan 3.34%, 3/24/21			387		387,926

See Notes to Financial Statements.

30 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Floating Rate Loan Interests (b)		Par   (000)		Value
Wireless Telecommunication Services (continued)
T-Mobile USA, Inc., Senior Lien Term Loan, 3.50%, 11/09/22	USD		292	$	294,220
					682,146
Total Floating Rate Loan Interests — 36.2%					133,556,208
Foreign Agency Obligations
British Virgin Islands — 0.3%
Bluestar Finance Holdings Ltd.:
3.13%, 9/30/19			500		501,022
3.50%, 9/30/21			500		500,297
					1,001,319
China — 0.3%
CDBI Treasure I Ltd., 2.25%, 8/02/21			300		300,926
Minmetals Bounteous Finance BVI Ltd., 4.20%, 7/27/26			650		667,806
					968,732
India — 0.1%
Greenko Investment Co., 4.88%, 8/16/23			250		244,570
Mexico — 0.2%
Petroleos Mexicanos, 4.63%, 9/21/23 (a)			795		796,113
United States — 0.0%
Union National Bank PJSC, 2.75%, 10/05/21			200		198,944
Total Foreign Agency Obligations — 0.9%					3,209,678
Foreign Government Obligations
Mexico — 0.2%
United Mexican States, 4.35%, 1/15/47			600		589,500
Oman — 0.1%
Sultanate of Oman, 3.63%, 6/15/21			350		353,763
Total Foreign Government Obligations — 0.3%					943,263
Investment Companies		Shares
iShares J.P. Morgan USD Emerging Markets Bond ETF (k)			30,000		3,516,300
New Millennium Holdco, Inc. (a)			3,880		1,940
Total Investment Companies — 1.0%					3,518,240
Non-Agency Mortgage-Backed Securities		Par   (000)
Collateralized Mortgage Obligations — 0.2%
Deephaven Residential Mortgage Trust, Series 2016-1A, Class A1, 4.00%, 7/25/46 (a)	USD		925		924,855
Commercial Mortgage-Backed Securities — 2.1%
Banc of America Merrill Lynch Commercial Mortgage Securities Trust, Series 2016-ISQ, Class E, 3.73%, 8/14/34 (a)(b)			1,000		902,500
BXHTL Mortgage Trust, Series 2015-JWRZ, Class GL1, 3.38%, 5/15/17 (a)(b)			1,000		984,955
CFCRE Commercial Mortgage Trust, Series 2016-C3, Class D, 3.05%, 1/10/48 (a)(b)			590		415,942

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Commercial Mortgage Pass-Through Certificates, Series 2015-CR25, Class D, 3.95%, 8/10/48 (b)	USD		600	$	461,242
Deutsche Bank JPMorgan Mortgage Trust, Series 2016-C3, Class D, 3.64%, 9/10/49 (a)(b)			530		404,088
Hilton USA Trust, Series 2013-HLT, Class EFX, 5.61%, 11/05/30 (a)(b)			327		327,505
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2015-CSMO, Class E, 4.46%, 1/15/32 (a)(b)			750		747,772
Series 2015-LSP, Class D, 4.51%, 9/15/28 (a)(b)			640		639,640
Series 2015-LSP, Class E, 6.11%, 9/15/28 (a)(b)			477		476,461
Series 2015-C23, Class D, 4.27%, 6/15/25 (a)(b)			1,000		813,292
Series 2015-C25, Class D, 3.07%, 10/15/48			1,000		726,724
Wells Fargo Commercial Mortgage Trust, Series 2016-NXS5, Class D, 5.05%, 1/15/59 (b)			750		665,809
Interest Only Commercial Mortgage-Backed Securities — 0.1%
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2016-JP3, Class XC, 0.75%, 8/15/49 (b)			8,700		411,945
Total Non-Agency Mortgage-Backed Securities — 2.4%					8,902,730
Preferred Securities
Capital Trusts (b)(i)
Banks — 3.2%
Banco Bilbao Vizcaya Argentaria SA, 7.00%	EUR		400		417,922
Banco Popular Espanol SA, 11.50%			200		231,411
Banco Santander SA, 6.25%			300		301,621
BNP Paribas SA, 7.63% (a)	USD		1,250		1,286,603
Cooperatieve Rabobank UA, 6.63%	EUR		200		236,218
HSBC Holdings PLC, 6.88%			1,000		1,040,000
Industrial & Commercial Bank of China Asia Ltd., 4.25%	USD		450		448,309
Intesa Sanpaolo SpA, 7.00%	EUR		200		207,821
JPMorgan Chase & Co., Series V, 5.00%	USD		2,000		1,972,000
Royal Bank of Scotland Group PLC, 8.63%			645		631,294
Societe Generale SA, 7.38% (a)			200		196,000
Standard Chartered PLC, 7.50%			450		449,663
State Bank of India, 5.50%			400		396,944
U.S. Bancorp, 5.13%			1,500		1,579,875
Wells Fargo & Co., Series S, 5.90%			2,000		2,072,500
Woori Bank, 4.50%			250		249,655
					11,717,836
Capital Markets — 1.5%
Bank of New York Mellon Corp., 4.50%			2,000		1,960,000
Huarong Finance II Co. Ltd., 2.88%			400		394,608
State Street Corp., Series F, 5.25%			2,500		2,631,250
UBS Group AG, 7.00%			400		422,000
					5,407,858
Wireless Telecommunication Services — 0.1%
Orange SA, 5.00%	EUR		300		365,332

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 31

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

Capital Trusts (b)(i)		Par   (000)		Value
Wireless Telecommunication Services (continued)
Telefonica Europe BV, 4.20%	USD		200	$	230,850
					596,182
Total Capital Trusts — 4.8%					17,721,876
Preferred Stocks		Shares
Wireless Telecommunication Services — 0.0%
CF-B L2 (D), LLC (Acquired 4/08/15-12/15/15, cost $53,170) (d)(e)			53,536		44,034
Total Preferred Stocks — 0.0%					44,034
Total Preferred Securities — 4.8%					17,765,910

U.S. Treasury Obligations — 1.1%	Par       (000)			Value
U.S. Treasury Bonds, 2.25%, 8/15/46			USD      4,000	$	3,927,500
Total Long-Term Investments (Cost — $345,470,483) — 93.8%					345,740,081
Short-Term Securities		Shares
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (k)(l)			14,191,891		14,191,891
Total Short-Term Securities (Cost — $14,191,891) — 3.9%					14,191,891
Options Purchased
(Cost — $276,660) — 0.1%					226,258
Total Investments (Cost — $359,939,034) — 97.8%					360,158,230
Other Assets Less Liabilities — 2.2%					8,268,847
Net Assets — 100.0%				$	368,427,077

      Notes to Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

(c) Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

(d) Restricted security as to resale, excluding 144A securities. As of period end, the Fund held restricted securities with a current value of $44,627 and an original cost of $53,763, which was less than 0.05% of its net assets.

(e) Non-income producing security.

(f) Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.

(g) Convertible security.

(h) Issuer filed for bankruptcy and/or is in default.

(i) Perpetual security with no stated maturity date.

(j) Zero-coupon bond.

(k) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Shares Purchased		Shares Sold			Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		24,806,596		—		(24,806,596	)1		—		—		$65,201		$675
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		14,191,8912		—			14,191,891		$14,191,891		9,717		—
iShares J.P. Morgan USD Emerging Markets Bond ETF		—		30,000		—			30,000		3,516,300		—		—
Total											$17,708,191		$74,918		$675

¹  Represents net shares sold.

²  Represents net shares purchased.

(l) Current yield as of period end.

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

See Notes to Financial Statements.

32 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)	Issue	Expiration	Notional Value			Unrealized Appreciation
(4)	U.S. Treasury Bonds (30 Year)	December 2016		USD	672,625		$  7,975
43	U.S. Treasury Notes (10 Year)	December 2016		USD	5,638,375		6,663
(19)	U.S. Ultra Treasury Bonds	December 2016		USD	3,493,625		60,383

Total $75,021

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
USD	304,245	GBP	232,000	Royal Bank of Scotland PLC	10/05/16		$  3,508
EUR	17,000	USD	19,083	Barclays Bank PLC	10/19/16		31
EUR	15,000	USD	16,761	Citibank N.A.	10/19/16		105
EUR	10,000	USD	11,201	UBS AG	10/19/16		43
USD	1,234,069	EUR	1,100,000	Barclays Bank PLC	10/19/16		(2,744	)
USD	213,592	EUR	190,000	Citibank N.A.	10/19/16		(40	)
USD	4,328,886	EUR	3,870,000	Citibank N.A.	10/19/16		(22,448	)
USD	11,215	EUR	10,000	Deutsche Bank AG	10/19/16		(28	)
USD	11,223	EUR	10,000	JPMorgan Chase Bank N.A.	10/19/16		(21	)
USD	178,582	EUR	160,000	JPMorgan Chase Bank N.A.	10/19/16		(1,318	)
USD	595,491	GBP	455,000	Deutsche Bank AG	10/19/16		5,506
USD	301,071	GBP	232,000	Nomura International PLC	11/03/16		153

Total $(17,253 ) 

OTC Options Purchased
Description	Put/ Call	Counterparty	Expiration Date	Strike Price		Notional Amount (000)		Value
USD Currency	Put	Barclays Bank PLC	12/23/16	JPY	98.00	USD	18,000		$226,258

Centrally Cleared Credit Default Swaps — Buy Protection
Index	Pay Fixed Rate		Expiration    Date		Notional Amount (000)			Unrealized Depreciation
iTraxx Europe Crossover Series 26 Version 1		5.00%		12/20/21		EUR	100		$(534	)

Centrally Cleared Credit Default Swaps — Sell Protection
Index	Receive Fixed Rate	Expiration Date		Credit Rating1		Notional Amount (000)2			Unrealized Appreciation
CDX.NA.HY Series 27 Version 1	5.00%		12/20/21		B+		USD	837		$3,667

¹  Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 33

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

OTC Credit Default Swaps — Buy Protection
Issuer	Pay Fixed Rate			Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums     Received			Unrealized Depreciation
Kingdom of Thailand		1.00	%		Barclays Bank PLC		6/20/21		USD	500		$(4,097	)		$   (646	)		$(3,451	)
Kingdom of Thailand		1.00	%		Citibank N.A.		6/20/21		USD	140		(1,146	)		(236	)		(910	)
Kingdom of Thailand		1.00	%		JPMorgan Chase Bank N.A.		6/20/21		USD	180		(1,475	)		(142	)		(1,333	)
Kingdom of Thailand		1.00	%		JPMorgan Chase Bank N.A.		6/20/21		USD	180		(1,475	)		(61	)		(1,414	)
Total												$(8,193	)		$(1,085	)		$(7,108	)

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity      Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—		—		—		$75,021		—	$	75,021
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—		$    9,346		—		—		9,346
Options purchased	Investments at value — unaffiliated2		—		—		—		226,258		—		—		226,258
Swaps — centrally cleared	Net unrealized appreciation1		—		$3,667		—		—		—		—		3,667
Total			—		$3,667		—		$235,604		$75,021		—	$	314,292
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		$26,599		—		—	$	26,599
Swaps — centrally cleared	Net unrealized depreciation1		—		$   534		—		—		—		—		534
	Unrealized depreciation on OTC swaps;
Swaps — OTC	Swap premiums received		—		8,193		—		—		—		—		8,193
Total			—		$8,727		—		$26,599		—		—	$	35,326

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts		—		—		—		—		$(573,251)		—	$	(573,251	)
Forward foreign currency exchange contracts		—		—		—		$  225,851		—		—		225,851
Swaps		—		$885,300		—		—		—		—		885,300
Total		—		$885,300		—		$  225,851		$(573,251)		—	$	537,900
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—		—		—		$   75,021		—	$	75,021
Forward foreign currency exchange contracts		—		—		—		$(109,283)		—		—		(109,283	)
Options purchased1		—		—		—		(50,402)		—		—		(50,402	)
Swaps		—		$(3,975)		—		—		—		—		(3,975	)
Total		—		$(3,975)		—		$(159,685)		$   75,021		—	$	(88,639	)

¹  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

34 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,409,594
Average notional value of contracts — short	$	1,041,563
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	4,105,397
Average amounts sold — in USD	$	64,019
Options:
Average value of option contracts purchased	$	56,565
Credit default swaps:
Average notional value — buy protection	$	278,084
Average notional value — sell protection	$	3,326,750

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts		$    46,844		$	18,141
Forward foreign currency exchange contracts		9,346			26,599
Options		226,258	1		—
Swaps — Centrally cleared		—			500
Swaps — OTC2		—			8,193
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$282,448		$	53,433
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(46,844	)		(18,641)
Total derivative assets and liabilities subject to an MNA		$235,604		$	34,792

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums received in the Statements of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash          Collateral         Received		Cash         Collateral          Received		Net Amount of Derivative Assets2
Barclays Bank PLC	$	226,289	$	(6,841	)		—		—	$	219,448
Citibank N.A.		105		(105	)		—		—		—
Deutsche Bank AG		5,506		(28	)		—		—		5,478
Nomura International PLC		153		—			—		—		153
Royal Bank of Scotland PLC		3,508		—			—		—		3,508
UBS AG		43		—			—		—		43
Total	$	235,604	$	(6,974)			—		—	$	228,630
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Barclays Bank PLC	$	6,841	$	(6,841	)		—		—		—
Citibank N.A.		23,634		(105	)		—		—	$	23,529
Deutsche Bank AG		28		(28	)		—		—		—
JPMorgan Chase Bank N.A.		4,289		—			—		—		4,289
Total	$	34,792	$	(6,974	)		—		—	$	27,818

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

³  Net amount represents the net amount payable due to the counterparty in the event of default.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 35

Schedule of Investments (continued) BlackRock Credit Strategies Income Fund

     Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements. The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
	Level 1			Level 2				Level 3			Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities			—		$	21,422,394			$	13,769,950		$	35,192,344
Common Stocks			—			38,362				12,501			50,863
Corporate Bonds			—			138,673,345				—			138,673,345
Floating Rate Loan Interests			—			126,506,615				7,049,593			133,556,208
Foreign Agency Obligations			—			3,209,678				—			3,209,678
Foreign Government Obligations			—			943,263				—			943,263
Investment Companies		$	3,516,300			1,940				—			3,518,240
Non-Agency Mortgage-Backed Securities			—			7,075,375				1,827,355			8,902,730
Preferred Securities			—			17,721,876				—			17,721,876
U.S. Treasury Obligations			—			3,927,500				—			3,927,500
Short-Term Securities			14,191,891			—				—			14,191,891
Options Purchased:
Foreign currency exchange contracts			—			226,258				—			226,258
Unfunded Floating Rate Loan Interests1			—			658				—			658
Subtotal		$	17,708,191		$	319,747,264			$	22,659,399		$	359,888,596
Investments Valued at NAV2:													44,034
Total Investments												$	360,158,888
Derivative Financial Instruments3
Assets:
Credit contracts			—		$	3,667				—		$	3,667
Foreign currency exchange contracts			—			9,346				—			9,346
Interest rate contracts		$	75,021			—				—			75,021
Liabilities:
Credit contracts			—			(7,642	)			—			(7,642	)
Foreign currency exchange contracts			—			(26,599	)			—			(26,599	)
Total		$	75,021		$	(21,228	)			—		$	53,793
1     Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment. 2     As of September 30, 2016, certain of the Fund’s investments were fair valued using NAV per share or its equivalent as no quoted market value is available and have been excluded from the fair value hierarchy. 3     Derivative financial instruments are swaps and forward foreign currency exchange contracts. Swaps and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2				Level 3			Total
Assets:
Cash		$	1,522,147			—				—		$	1,522,147
Foreign currency at value			270,607			—				—			270,607
Cash pledged:
Futures contracts			68,000			—				—			68,000
Centrally cleared swaps			52,000			—				—			52,000
Total		$	1,912,754			—				—		$	1,912,754
During the year ended September 30, 2016, there were no transfers between Level 1 and Level 2.

See Notes to Financial Statements.

36 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (concluded) BlackRock Credit Strategies Income Fund

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:
	Asset-Backed Securities			Common     Stocks		Floating Rate Loan Interests			Non-Agency Mortgage-Backed Securities			Preferred     Securities1			Total
Assets:
Opening Balance, as of September 30, 2015	$	358,380			—	$	8,231,484			—		$	1,696,067		$	10,285,931
Transfers into Level 32		—			—		8,114,018			—			—			8,114,018
Transfers out of Level 3		—			—		(2,752,955	)		—			—			(2,752,955	)
Accrued discounts/premiums		169			—		8,234		$	1,421			—			9,824
Net realized gain (loss)		(5,201	)		—		(72,549	)		138			(174,245	)		(251,857	)
Net change in unrealized appreciation (depreciation)3,4		(7,156	)	$	8,521		124,010			1,129			93,630			220,134
Purchases		13,855,295			3,980		826,879			1,899,059			—			16,585,213
Sales		(431,537	)		—		(7,429,528	)		(74,392	)		(1,615,452	)		(9,550,909	)
Closing Balance, as of September 30, 2016	$	13,769,950		$	12,501	$	7,049,593		$	1,827,355			—		$	22,659,399
Net change in unrealized appreciation (depreciation) on investments still held at September 30, 20164	$	(8,574	)	$	8,521	$	67,423		$	1,129			—		$	68,499

¹  The opening balance of Preferred Securities has been restated to exclude certain investments in the amount of $47,115 that were fair valued using NAV per share or its equivalent as no quoted market value is available that have been excluded from the fair value hierarchy.

²  As of September 30, 2015, the Fund used observable inputs in determining the value of certain investments. As of September 30, 2016, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 2 to Level 3 in the disclosure hierarchy.

³  Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

⁴  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at September 30, 2016 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 37

Schedule of Investments September 30, 2016	BlackRock GNMA Portfolio
	(Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par  (000)		Value
Collateralized Mortgage Obligations — 7.9%
Fannie Mae, Series 1996-48, Class Z, 7.00%, 11/25/26		USD        446	$	494,893
Ginnie Mae:
Series 2002-45, Class PG, 6.00%, 3/17/32		868		893,438
Series 2009-122, Class PY, 6.00%, 12/20/39		1,367		1,546,684
Series 2009-31, Class PT, 4.10%, 5/20/39 (a)		509		540,382
Series 2011-71, Class GF, 0.73%, 8/16/31 (a)		8,524		8,528,964
Series 2014-107, Class WX, 6.81%, 7/20/39 (a)		2,530		2,999,662
Series 2015-103, Class B, 6.90%, 1/20/40 (a)		11,261		13,416,103
Series 2015-187, Class C, 5.24%, 2/20/41 (a)		17,401		19,740,253
Series 2015-55, Class A, 5.39%, 3/16/36 (a)		16,335		18,662,787
				66,823,166
Interest Only Collateralized Mortgage Obligations — 0.0%
Ginnie Mae:
Series 2015-103, Class CI, 4.00%, 7/20/45		1,239		96,927
Series 2015-152, Class PI, 4.00%, 10/20/45		489		40,092
Series 2015-176, Class IO, 4.00%, 11/20/45		106		8,273
Series 2016-58, Class PI, 4.00%, 10/20/45		782		59,606
Series 2016-82, Class IM, 4.00%, 2/01/46		197		15,076
Series 2016-82, Class WI, 4.00%, 5/20/46		294		24,887
				244,861
Interest Only Commercial Mortgage-Backed Securities — 0.4%
Freddie Mac:
Series K049, Class X1, 0.74%, 7/25/25 (a)		28,860		1,278,660
Series K721, Class X1, 0.46%, 8/25/22 (a)		74,541		1,292,243
Series KC01, Class X1, 0.85%, 12/25/22 (a)		10,977		345,128
Ginnie Mae, Series 2016-110, Class IO, 1.07%, 5/16/58 (a)		5,420		463,176
				3,379,207
Mortgage-Backed Securities — 131.1%
Fannie Mae Mortgage-Backed Securities:
3.00%, 7/01/35-10/01/46 (b)		62,937		65,825,678
3.28%, 2/01/41		29		29,157
3.40%, 4/01/41		179		182,838
3.50%, 10/01/31-3/01/46 (b)		100,715		106,447,695
4.00%, 7/01/43-10/01/46 (b)		6,317		6,875,324
4.50%, 10/01/46 (b)		27,545		30,165,425
5.00%, 1/01/21-7/01/35		3,261		3,650,505
5.50%, 12/01/32-4/01/35		323		366,349
6.50%, 9/01/28-8/01/35		3,956		4,571,847
8.50%, 1/20/18		54		54,631

U.S. Government Sponsored Agency Securities	Par  (000)			Value
Mortgage-Backed Securities (continued)
Freddie Mac Mortgage-Backed Securities:
2.77%, 10/01/45 (a)		USD    1,969		$	2,034,875
3.00%, 6/01/35-10/01/46 (b)		2,686			2,817,097
3.50%, 9/01/20-9/01/26		488			516,258
4.00%, 4/01/19-5/01/26		782			814,714
5.00%, 5/01/35-12/01/38		203			225,573
7.50%, 2/01/27-3/01/27		3			2,682
9.00%, 12/01/19		—	(c)		44
Ginnie Mae Mortgage-Backed Securities:
2.50%, 10/15/46 (b)		9,380			9,534,989
3.00%, 5/15/42-10/15/46 (b)		140,726			147,424,348
3.50%, 4/15/41-10/15/46 (b)		308,262			328,021,409
4.00%, 7/15/42-10/15/46 (b)		145,051			155,582,690
4.50%, 12/15/34-9/20/44		84,615			92,768,101
5.00%, 9/15/28-4/20/42		64,353			72,083,406
5.30%, 12/15/36-4/15/37		604			679,292
5.50%, 3/15/32-12/15/34		15,253			17,441,162
5.64%, 2/15/37-6/15/37		3,573			4,083,382
5.80%, 11/15/36-3/15/37		3,481			3,973,609
6.00%, 3/20/28-1/15/39		21,250			24,469,329
6.50%, 10/15/16-10/15/45		19,781			23,066,524
7.00%, 3/20/24-5/20/27		51			56,764
7.50%, 4/20/23-10/20/25		5			5,436
8.00%, 3/15/17-5/15/30		135			144,525
8.50%, 1/15/17-2/15/25		38			39,129
9.00%, 12/15/16-10/15/21		29			30,243
9.50%, 10/15/16-9/15/22		44			46,073
10.00%, 1/15/17-6/15/18		1			701
					1,104,031,804
Total U.S. Government Sponsored Agency Securities — 139.4%					1,174,479,038
U.S. Treasury Obligations — 1.1%
U.S. Treasury Inflation Indexed Notes, 0.38%, 7/15/25 (d)		8,829			9,117,814
Total Long-Term Investments (Cost — $1,167,937,436) — 140.5%					1,183,596,852
Short-Term Securities	Shares
Money Market Funds — 5.0%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (e)(f)		41,932,918			41,932,918
Total Short-Term Securities (Cost — $41,932,918) — 5.0%					41,932,918
Options Purchased
(Cost — $255,603) — 0.0%					155,050
Total Investments Before TBA Sale Commitments
(Cost — $1,210,125,957) — 145.5%					1,225,684,820

See Notes to Financial Statements.

38 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock GNMA Portfolio

TBA Sale Commitments (b)		Par   (000)		Value
Fannie Mae Mortgage-Backed Securities:
3.00%, 10/01/46	USD		62,717	$	(65,183,685	)
3.50%, 10/01/46			92,904		(98,028,231	)
4.00%, 10/01/46			28		(30,072	)
4.50%, 10/01/46			27,545		(30,165,425	)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 10/15/46			12,800		(13,409,000	)
3.50%, 10/15/46			17,000		(18,069,335	)
4.50%, 10/15/46			400		(431,553	)
Total TBA Sale Commitments (Proceeds — $224,720,431) — (26.7)%					(225,317,301	)

	Value
Total Investments Net of TBA Sale Commitments — 118.8%	$	1,000,367,519
Liabilities in Excess of Other Assets — (18.8)%		(158,144,472	)
Net Assets — 100.0%	$	842,223,047

      Notes to Schedule of Investments

(a) Variable rate security. Rate as of period end.

(b) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Barclays Capital, Inc.	$	(29,686,039	)		$     8,396
Citigroup Global Markets, Inc.	$	74,845,909			$ 149,597
Credit Suisse Securities (USA) LLC	$	20,844,915			$   93,631
Deutsche Bank Securities, Inc.		—			$          72
Goldman Sachs & Co.	$	44,708,204			$ 147,855
J.P. Morgan Securities LLC	$	(28,843,357	)		$(107,613	)
Jefferies LLC	$	40,628,097			$   30,011
Merrill Lynch, Pierce, Fenner & Smith, Inc.	$	2,090,928			$  (53,923	)
Morgan Stanley & Co. LLC	$	(13,659,393	)		$    (8,469	)
Nomura Securities International, Inc.	$	48,876,647			$   65,077
RBC Capital Markets, LLC	$	(12,871,894	)		$  (18,659	)
Wells Fargo Securities, LLC	$	10,637,263			$    (4,720	)

(c) Amount is less than $500.

(d) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(e) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Net Activity			Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		5,606,618		(5,606,618	)		—		—		$  91,916		$322
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		41,932,918			41,932,918		$41,932,918		8,192		—
									$41,932,918		$100,108		$322

(f) Current yield as of period end.

Reverse Repurchase Agreements
Counterparty	Interest Rate	Trade Date	Maturity Date1	Face Value	Face Value Including Accrued Interest	Type of Non-Cash Underlying Collateral	Remaining Contractual Maturity of  the Agreements
BNP Paribas Securities Corp.	0.41%	5/03/16	Open	$6,244,875	$6,255,686	U.S. Treasury Obligations	Open/Demand1

¹  Certain agreements have no stated maturity and can be terminated by either party at any time.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 39

Schedule of Investments (continued) BlackRock GNMA Portfolio

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)	Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
29	U.S. Treasury Bonds (30 Year)	December 2016		USD                  4,876,531		$  (45,545	)
(10)	U.S. Treasury Notes (2 Year)	December 2016		USD                  2,184,688		(2,997	)
(590)	U.S. Treasury Notes (5 Year)	December 2016		USD                71,694,219		(192,966	)
21	U.S. Treasury Notes (10 Year)	December 2016		USD                  2,753,625		(3,637	)
(13)	Euro Dollar	March 2017		USD                  3,219,288		(28,743	)
(15)	Euro Dollar	June 2017		USD                  3,713,063		(38,125	)
(27)	Euro Dollar	September 2017		USD                  6,681,150		(51,749	)
8	Euro Dollar	March 2018		USD                   1,978,300		20,185
Total						$(343,577	)

OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

5-Year Interest Rate Swap

Citibank N.A.

Put

1.35%

Pay

3-month LIBOR

1/09/17

USD

16,700

$

65,342

10-Year Interest Rate Swap

Citibank N.A.

Put

1.70%

Pay

3-month LIBOR

2/03/17

USD

10,640

89,708

Total

$

155,050

OTC Total Return Swaps
Reference Entity	Floating Rate		Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR1		Credit Suisse International		1/12/45		USD	439		$(3,984	)		$   170			$(4,154	)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR1		Credit Suisse International		1/12/45		USD	422		(3,829	)		1,498			(5,327	)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR2		Credit Suisse International		1/12/45		USD	431		3,907			(541	)		4,448
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month  LIBOR2		Credit Suisse International		1/12/45		USD	431		3,906			1,305			2,601
Total											—			$2,432			$(2,432	)

¹  Fund pays the floating rate and receives the total return of the reference entity.

²  Fund pays the total return of the reference entity and receives the floating rate.

See Notes to Financial Statements.

40 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock GNMA Portfolio

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—		—		—		$  20,185		—		$  20,185
Options purchased	Investments at value — unaffiliated2		—		—		—		—		155,050		—		155,050
Swaps — OTC	Unrealized appreciation on OTC swaps; Swap premiums paid		—		—		—		—		10,022		—		10,022
Total			—		—		—		—		$185,257		—		$185,257
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—		—		—		$363,762		—		$363,762
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received		—		—		—		—		10,022		—		10,022
Total			—		—		—		—		$373,784		—		$373,784

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts			Other Contracts		Total
Futures contracts		—		—		—		—		$(3,006,294	)		—	$	(3,006,294	)
Options purchased1		—		—		—		—		172,344			—		172,344
Swaps		—		—		—		—		(439,749	)		—		(439,749	)
Total		—		—		—		—		$(3,273,699	)		—	$	(3,273,699	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—		—		—		$    696,605			—	$	696,605
Options purchased2		—		—		—		—		(100,553	)		—		(100,553	)
Swaps		—		—		—		—		(339,384	)		—		(339,384	)
Total		—		—		—		—		$    256,668			—	$	256,668

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	34,192,708
Average notional value of contracts — short	$	165,139,921
Options:
Average notional value of swaption contracts purchased	$	6,835,000
Interest rate swaps:
Average notional value — pays fixed rate	$	6,845,000
Total return swaps:
Average notional value	$	896,000

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 41

Schedule of Investments (continued) BlackRock GNMA Portfolio

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts		$ 126,941			$ 74,906
Options		155,050	1		—
Swaps — OTC2		10,022			10,022
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$ 292,013			$ 84,928
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(126,941	)		(74,906	)
Total derivative assets and liabilities subject to an MNA		$ 165,072			$ 10,022

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Citibank N.A	$	155,050		—		—	—	$	155,050
Credit Suisse International		10,022	$	(10,022	)	—	—		—
Total	$	165,072	$	(10,022	)	—	—	$	155,050
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities
Credit Suisse International	$	10,022	$	(10,022	)	—	—		—

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy.

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
U.S. Government Sponsored Agency Securities		—		$	1,174,463,962		$	15,076	$	1,174,479,038
U.S. Treasury Obligations		—			9,117,814			—		9,117,814
Short-Term Securities	$	41,932,918			—			—		41,932,918
Options Purchased:
Interest rate contracts		—			155,050			—		155,050
Liabilities:
Investments:
TBA Sale Commitments		—			(225,317,301	)		—		(225,317,301	)
Total	$	41,932,918		$	958,419,525		$	15,076	$	1,000,367,519
Derivative Financial Instruments1
Assets:
Interest rate contracts	$	20,185		$	7,049			—	$	27,234
Liabilities:
Interest rate contracts		(363,762	)		(9,481	)		—		(373,243	)
Total	$	(343,577	)	$	(2,432	)		—	$	(346,009	)

¹  Derivative financial instruments are swaps and futures contracts. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument.

See Notes to Financial Statements.

42 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (concluded) BlackRock GNMA Portfolio

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	499,061		—			—	$	499,061
Cash pledged for Futures contracts		367,310		—			—		367,310
Liabilities:
Reverse repurchase agreements		—	$	(6,255,686	)		—		(6,255,686	)
Cash received:
Collateral — reverse repurchase agreements		—		(77,000	)		—		(77,000	)
Collateral — TBA commitments		—		(76,000	)		—		(76,000	)
Total	$	866,371	$	(6,408,686	)		—	$	(5,542,315	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 43

Consolidated Schedule of Investments September 30, 2016	BlackRock Inflation Protected Bond Portfolio
	(Percentages shown are based on Net Assets)

Foreign Government Obligations		Par  (000)		Value
Greece — 0.0%
Hellenic Republic, 0.00%, 10/15/42 (a)	EUR		4,550	$	12,266
Italy — 1.4%
Buoni Poliennali Del Tesoro Inflation Linked Bond:
2.60%, 9/15/23			2,452		3,279,446
2.35%, 9/15/24			14,415		18,984,076
1.25%, 9/15/32			5,141		6,313,710
2.55%, 9/15/41			4,157		6,295,562
					34,872,794
Japan — 2.5%
Government of Japan Inflation Linked Bond:
0.10%, 9/10/24	JPY		3,960,299		41,083,218
0.10%, 3/10/25			1,533,984		15,935,997
0.10%, 3/10/26			487,429		5,077,414
					62,096,629
New Zealand — 1.0%
New Zealand Government Bonds:
3.00%, 9/20/30	NZD		29,070		25,402,357
2.50%, 9/20/35			945		784,962
					26,187,319
Total Foreign Government Obligations — 4.9%					123,169,008
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations — 0.6%
GSMPS Mortgage Loan Trust, Series 2005-RP2, Class 1AF, 0.87%, 3/25/35 (a)(b)	USD		9,425		8,112,823
Luminent Mortgage Trust, Series 2007-2, Class 1A2, 0.80%, 5/25/37 (a)			9,510		7,502,727
					15,615,550
Commercial Mortgage-Backed Securities — 0.4%
GS Mortgage Securities Trust, Series 2007-GG10, Class A4, 5.99%, 8/10/45 (a)			10,440		10,596,671
Total Non-Agency Mortgage-Backed Securities — 1.0%					26,212,221
U.S. Government Sponsored Agency Securities
Mortgage-Backed Securities — 0.0%
Fannie Mae Mortgage-Backed Securities, 2.86%, 6/01/34 (a)			72		76,375

U.S. Treasury Obligations		Par  (000)		Value
U.S. Treasury Inflation Indexed Bonds:
2.38%, 1/15/25-1/15/27	USD		191,646	$	231,213,564
2.00%, 1/15/26			68,508		80,463,262
1.75%, 1/15/28			97,954		114,650,395
3.63%, 4/15/28			76,288		105,332,901
2.50%, 1/15/29			80,679		102,415,618
3.88%, 4/15/29			75,507		108,795,669
3.38%, 4/15/32			9,123		13,386,331
2.13%, 2/15/40-2/15/41			111,849		149,628,794
0.75%, 2/15/42-2/15/45			69,829		71,949,824
0.63%, 2/15/43			45,340		45,459,757
1.38%, 2/15/44			56,796		67,369,824
1.00%, 2/15/46 (c)			14,138		15,628,416
U.S. Treasury Inflation Indexed Notes:
0.13%, 4/15/17-7/15/26 (c)			921,986		936,708,363
2.63%, 7/15/17			822		847,496
1.63%, 1/15/18			712		734,115
1.38%, 7/15/18-1/15/20			68,581		72,253,238
1.25%, 7/15/20			69,488		74,245,102
1.13%, 1/15/21			118,761		126,388,628
0.63%, 7/15/21-1/15/26			173,485		182,113,212
0.25%, 1/15/25			64,292		65,481,352
Total U.S. Treasury Obligations — 101.0%					2,565,065,861
Total Long-Term Investments (Cost — $2,525,520,047) — 106.9%					2,714,523,465
Short-Term Securities		Shares
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (d)(e)			18,480,276		18,480,276
Total Short-Term Securities (Cost — $18,480,276) — 0.7%					18,480,276
Options Purchased
(Cost — $16,490,015) — 0.5%					11,978,691
Total Investments Before Options Written (Cost — $2,560,490,338)—108.1%					2,744,982,432
Options Written
(Premiums Received — $9,370,695) — (0.2)%					(5,282,200	)
Total Investments Net of Options Written — 107.9%					2,739,700,232
Liabilities in Excess of Other Assets — (7.9)%					(201,238,269	)
Net Assets — 100.0%				$	2,538,461,963

See Notes to Financial Statements.

44 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

      Notes to Schedule of Investments

(a) Variable rate security. Rate as of period end.

(b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(c) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(d) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Net Activity			Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		1,894,157		(1,894,157	)		—		—		$56,198		$903
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		18,480,276			18,480,276		$18,480,276		6,432		—
Total									$18,480,276		$62,630		$903

(e) Current yield as of period end.

Reverse Repurchase Agreements

Counterparty

Interest Rate

Trade Date

Maturity Date1

Face Value

Face Value     Including     Accrued     Interest

Type of  Non-Cash Underlying Collateral

Remaining Contractual Maturity of  the Agreements

RBC Capital Markets, LLC

0.56%

7/07/16

Open

$  42,400,000

$  42,458,041

U.S. Treasury Obligations

Open/Demand1

Deutsche Bank Securities, Inc.

0.37%

8/08/16

Open

15,750,000

15,759,065

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.52%

8/17/16

Open

72,800,000

72,849,423

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.56%

9/1/16

Open

64,732,500

64,764,722

U.S. Treasury Obligations

Open/Demand1

Deutsche Bank Securities, Inc.

0.52%

9/6/16

Open

10,537,500

10,541,610

U.S. Treasury Obligations

Open/Demand1

Total

$206,220,000

$206,372,861

¹  Certain agreements have no stated maturity and can be terminated by either party at any time.

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)	Issue	Expiration	Notional Value			Unrealized Appreciation (Depreciation)
(545)	Euro-Bobl	December 2016		USD	80,869,309		$(282,164	)
(292)	Euro-BTP Italian Government Bond	December 2016		USD	46,936,362		101,397
30	Euro-Bund	December 2016		USD	5,584,201		89,277
15	Euro-Buxl	December 2016		USD	3,238,297		29,981
(46)	Japanese Government Bonds (10 Year)	December 2016		USD	69,105,468		(261,880	)
(90)	Long Gilt British	December 2016		USD	15,194,036		36,082
(612)	U.S. Treasury Bonds (30 Year)	December 2016		USD	102,911,625		(353,735	)
(1,774)	U.S. Treasury Notes (2 Year)	December 2016		USD	387,563,563		(122,009	)
2,127	U.S. Treasury Notes (5 Year)	December 2016		USD	258,463,734		660,415
1,076	U.S. Treasury Notes (10 Year)	December 2016		USD	141,090,500		(56,382	)
(34)	U.S. Ultra Treasury Bonds	December 2016		USD	6,251,750		107,462
(727)	U.S. Ultra Treasury Bonds (10 Year)	December 2016		USD	104,801,594		(208,475	)
1,050	Euro Dollar	December 2017		USD	259,704,375		(264,190	)
1,600	Euro Dollar	September 2018		USD	395,400,000		(102,576	)
(1,050)	Euro Dollar	December 2018		USD	259,363,125		274,693
Total							$(352,104	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 45

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
EUR	11,500,000		USD	12,950,838	Morgan Stanley & Co. International PLC		10/05/16		$     (29,163	)
EUR	49,264,000		USD	55,501,366	Northern Trust Corp.		10/05/16		(147,157	)
USD	371,400		EUR	330,000	BNP Paribas S.A.		10/05/16		604
USD	112,671,374		EUR	101,002,000	Royal Bank of Scotland PLC		10/05/16		(816,888	)
USD	27,548,771		JPY	2,841,091,000	Barclays Bank PLC		10/05/16		(474,463	)
USD	95,142		JPY	9,660,000	Citibank N.A.		10/05/16		(140	)
USD	2,064,425		JPY	207,998,000	Citibank N.A.		10/05/16		12,827
USD	136,047		JPY	13,814,000	Commonwealth Bank of Australia		10/05/16		(208	)
USD	119,190		JPY	11,961,000	Morgan Stanley & Co. International PLC		10/05/16		1,212
USD	16,357		JPY	1,647,000	Royal Bank of Canada		10/05/16		111
USD	45,892		JPY	4,600,000	Royal Bank of Canada		10/05/16		520
USD	62,091		JPY	6,246,000	Royal Bank of Canada		10/05/16		483
USD	132,714		JPY	13,340,000	Royal Bank of Canada		10/05/16		1,135
USD	3,417,027		JPY	352,588,000	Royal Bank of Canada		10/05/16		(60,741	)
USD	27,712,202		JPY	2,841,091,000	UBS AG		10/05/16		(311,032	)
USD	20,821,219		NZD	28,783,000	Commonwealth Bank of Australia		10/05/16		(132,713	)
USD	4,970,481		NZD	6,674,000	Royal Bank of Scotland PLC		10/05/16		111,830
USD	32,351,576		EUR	28,821,000	Royal Bank of Scotland PLC		11/03/16		(76,758	)
USD	25,596,497		NZD	35,270,000	Commonwealth Bank of Australia		11/03/16		(48,538	)
USD	30,986,111		JPY	3,147,188,000	Barclays Bank PLC		11/04/16		(95,644	)
USD	72,778		JPY	7,360,000	Morgan Stanley & Co. International PLC		11/04/16		90
USD	31,123,761		JPY	3,147,188,000	UBS AG		11/04/16		42,006
Total									$(2,022,627	)

Inflation Rate Caps Purchased

Reference Entity

Fund Pays

Fund Receives

Counterparty

Expiration Date

Notional Amount (000)

Value

Premiums Paid

Unrealized Depreciation

U.S. CPI Urban Consumers NAS (CPURNSA)

Upfront premium and payment at expiration

Maximum of CPURNSA for November 2016 divided by CPURNSA for November 2015 minus 2.00% or $0

Deutsche Bank AG

11/06/16

USD

88,220

$  9

$  7,376

$  (7,367

)

U.S. CPI Urban Consumers NAS (CPURNSA)

Upfront premium and payment at expiration

Maximum of CPURNSA for November 2016 divided by CPURNSA for November 2015 minus 2.00% or $0

Deutsche Bank AG

11/10/16

USD

35,125

3

4,011

(4,008

)

Total

$12

$11,387

$(11,375

)

See Notes to Financial Statements.

46 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

Inflation Rate Caps Written

Reference Entity

Fund Pays

Fund Receives

Counterparty

Expiration Date

Notional Amount (000)

Value

Premiums Received

Unrealized Appreciation

Eurostat Eurozone HICP Ex Tobacco Unrevised Series NSA (HICPx)

Maximum of HICPx for January 2022 divided by HIPCx for January 2012 minus 2.50% or $0

Upfront premium and payment at expiration

Deutsche Bank AG

4/26/22

EUR

14,495

$

(3,542

)

$

(1,014,650

)

$1,011,108

Exchange-Traded Options Purchased
Description	Put/ Call		Expiration Date		Strike Price			Contracts		Value
U.S. Treasury Notes (10 Year)		Put		11/25/16		USD	128.50		1,848		$317,625

OTC Options Purchased

Description

Put/ Call

Counterparty

Expiration Date

Strike Price

Notional Amount (000)

Value

USD Currency

Call

Citibank N.A.

10/20/16

JPY

103.00

USD

75,130

$

259,236

USD Currency

Call

Barclays Bank PLC

11/03/16

MXN

18.29

USD

52,070

3,087,090

USD Currency

Call

Barclays Bank PLC

11/03/16

MXN

19.87

USD

52,070

574,348

USD Currency

Call

Barclays Bank PLC

11/03/16

CAD

1.32

USD

52,070

500,830

USD Currency

Call

Barclays Bank PLC

11/03/16

CAD

1.42

USD

52,070

5,571

EUR Currency

Put

BNP Paribas S.A.

11/03/16

USD

1.09

EUR

45,855

52,706

EUR Currency

Put

BNP Paribas S.A.

11/03/16

USD

1.02

EUR

45,855

88

GBP Currency

Put

HSBC Bank PLC

12/23/16

USD

1.26

GBP

19,550

176,346

CHF Currency

Put

UBS AG

2/14/17

NOK

8.00

CHF

25,210

192,434

CHF Currency

Put

UBS AG

2/17/17

NOK

8.20

CHF

25,210

407,302

Total

$

5,255,951

OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

30-Year Interest Rate Swap

Deutsche Bank AG

Call

2.68%

Receive

3-month LIBOR

1/12/21

USD

15,400

$

3,733,490

30-Year Interest Rate Swap

Barclays Bank PLC

Put

4.00%

Pay

3-month LIBOR

11/21/17

USD

16,600

15,997

30-Year Interest Rate Swap

Deutsche Bank AG

Put

2.68%

Pay

3-month LIBOR

1/12/21

USD

15,400

1,050,322

20-Year Interest Rate Swap

Deutsche Bank AG

Put

2.50%

Pay

6-month EURIBOR

6/08/22

EUR

43,500

1,605,306

Total

$

6,405,115

OTC Options Written

Description

Put/ Call

Counterparty

Expiration Date

Strike Price

Notional Amount (000)

Value

USD Currency

Call

Citibank N.A.

10/20/16

JPY

104.50

USD

75,130

$

(83,717

)

USD Currency

Call

Barclays Bank PLC

11/03/16

CAD

1.37

USD

104,140

(154,919

)

USD Currency

Call

Barclays Bank PLC

11/03/16

MXN

19.00

USD

104,140

(3,251,303

)

GBP Currency

Call

HSBC Bank PLC

12/23/16

USD

1.35

GBP

19,550

(159,475

)

EUR Currency

Put

BNP Paribas S.A.

11/03/16

USD

1.06

EUR

91,710

(9,447

)

Total

$

(3,658,861

)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 47

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

OTC Interest Rate Swaptions Written

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

2-Year Interest Rate Swap

Deutsche Bank AG

Call

0.90%

Pay

3-month LIBOR

6/07/18

USD

219,600

$

(867,905

)

5-Year Interest Rate Swap

Deutsche Bank AG

Put

2.10%

Receive

3-month LIBOR

1/12/17

USD

124,200

(17,904

)

2-Year Interest Rate Swap

Deutsche Bank AG

Put

1.90%

Receive

3-month LIBOR

6/07/18

USD

219,600

(485,364

)

20-Year Interest Rate Swap

Deutsche Bank AG

Put

4.50%

Receive

6-month EURIBOR

6/08/22

EUR

43,500

(252,166

)

Total

$

(1,623,339

)

Centrally Cleared Interest Rate Swaps
Fixed Rate	Floating Rate		Effective Date		Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
1.02%1		3-month LIBOR		1/05/172		9/30/18		USD	257,535		$ (56,736	)
0.78%3		1-day Overnight Fed Funds Effective Rate		1/05/172		2/28/21		USD	29,420		(2,642	)
1.13%3		3-month LIBOR		1/05/172		2/28/21		USD	102,640		138,810
1.31%3		3-month LIBOR		12/30/162		8/15/23		USD	36,895		4,794
1.72%3		3-month LIBOR		N/A		2/15/36		USD	15,403		44,183
1.80%3		3-month LIBOR		N/A		8/19/46		USD	9,167		(35,742	)
1.73%3		3-month LIBOR		N/A		8/31/46		USD	10,300		155,085
0.91%3		6-month GBP LIBOR		N/A		9/06/46		GBP	3,915		164,883
1.76%1		3-month LIBOR		N/A		9/06/46		USD	5,085		(44,020	)
Total											$368,615

¹  Fund pays the floating rate and receives the fixed rate.

²  Forward swap.

³  Fund pays the fixed rate and receives the floating rate.

OTC Interest Rate Swaps
Fixed Rate	Floating Rate		Counterparty		Effective Date		Expiration Date		Notional Amount (000)			Value			Premiums Paid (Received)		Unrealized Appreciation (Depreciation)
1.63%1		U.S. CPI Urban Consumers NAS (CPURNSA)		Barclays Bank PLC		9/13/16		9/13/17		USD	48,849	$	(106,888	)		—		$(106,888	)
1.59%2		U.S. CPI Urban Consumers NAS (CPURNSA)		Barclays Bank PLC		9/13/16		9/13/18		USD	48,849		176,301			—		176,301
3.11%1		GBP — UKRPI		Barclays Bank PLC		9/15/16		9/15/24		GBP	16,000		(160,213	)		—		(160,213	)
1.90%2		U.S. CPI Urban Consumers NAS (CPURNSA)		Credit Suisse International		9/06/16		9/06/46		USD	7,280		125,172			—		125,172
3.17%1		GBP — UKRPI		Royal Bank of Scotland PLC		9/15/16		9/15/46		GBP	3,325		(370,020	)		—		(370,020	)
Total												$	(335,648	)		—		$(335,648	)

¹  Fund pays the floating rate and receives the fixed rate.

²  Fund pays the fixed rate and receives the floating rate.

See Notes to Financial Statements.

48 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

OTC Total Return Swaps
Reference Entity	Fixed Rate/ Floating Rate	Counterparty	Expiration Date	Notional Amount (000)			Value	Premiums Paid	Unrealized Depreciation
Change in Return of the Consumer Price Index for All Urban Consumers	3-month LIBOR plus 0.68%1	Deutsche Bank AG	2/15/41		USD	15,000	$(1,655,605)	$153,177	$(1,808,782)

¹  Fund pays the total return of the reference entity and receives the floating rate.

      Transactions in Options Written for the Year Ended September 30, 2016

	Calls
				Notional (000)
	Contracts			AUD			CHF			EUR			GBP			NZD			USD			Premiums Received
Outstanding options, beginning of year		1,797			40,795			30,885			96,000			—			47,185			482,771		$	10,726,226
Options written		4,911			205,535			—			276,430			109,515			123,475			1,074,805			13,024,951
Options exercised		—			—			—			(50,800	)		—			(40,360	)		(377,765	)		(3,776,776	)
Options expired		(4,125	)		(111,245	)		(30,885	)		(100,850	)		(33,145	)		(130,300	)		(341,765	)		(5,786,609	)
Options closed		(2,583	)		(135,085	)		—			(220,780	)		(56,820	)		—			(335,036	)		(9,820,077	)
Outstanding options, end of year		—			—			—			—			19,550			—			503,010		$	4,367,715

	Puts
				Notional (000)
	Contracts			AUD			CAD			EUR			GBP			JPY			NZD			USD			Premiums Received
Outstanding options, beginning of year		72			83,050			—			73,390			—			—			47,185			519,606		$	16,274,786
Options written		9,719			110,420			360,970			348,170			134,465			168			83,115			699,440			15,426,914
Options exercised		—			—			—			(103,545	)		(18,940	)		—			—			(248,925	)		(4,955,037	)
Options expired		(8,303	)		(159,130	)		(136,285	)		(117,265	)		(28,410	)		(168	)		(130,300	)		(177,315	)		(6,743,559	)
Options closed		(1,488	)		(34,340	)		(224,685	)		(65,540	)		(87,115	)		—			—			(449,006	)		(15,000,124	)
Outstanding options, end of year		—			—			—			135,210			—			—			—			343,800		$	5,002,980

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1	—	—	—		—	$	1,299,307		—	$	1,299,307
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—	—		$   170,818		—		—		170,818
Inflation rate caps	Unrealized appreciation, premiums paid	—	—	—		—		—	$	1,022,495		1,022,495
Options purchased	Investments at value — unaffiliated2	—	—	—		5,255,951		6,722,740		—		11,978,691
Swaps — centrally cleared	Net unrealized appreciation1	—	—	—		—		507,755		—		507,755
Swaps — OTC	Unrealized appreciation on OTC swaps; Swap premiums paid	—	—	—		—		301,473		153,177		454,650
Total		—	—	—		$5,426,769	$	8,831,275	$	1,175,672	$	15,433,716

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Consolidated Schedule of Investments.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 49

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

Liabilities — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized depreciation1		—		—		—		—	$	1,651,411		—	$	1,651,411
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—		$2,193,445		—		—		2,193,445
Inflation rate caps	Unrealized depreciation, premiums received		—		—		—		—		—	$	1,026,025		1,026,025
Options written	Options written at value		—		—		—		3,658,861		1,623,339		—		5,282,200
Swaps — centrally cleared	Net unrealized depreciation1		—		—		—		—		139,140		—		139,140
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received		—		—		—		—		637,121		1,808,782		2,445,903
Total			—		—		—		$5,852,306	$	4,051,011	$	2,834,807	$	12,738,124

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Futures contracts		—		—		—			—			$	(15,785,153	)			—			$	(15,785,153	)
Forward foreign currency exchange contracts		—		—		—		$	(5,241,796	)			—				—				(5,241,796	)
Options purchased1		—		—		—			(13,099,544	)			(15,883,265	)		$	(67,710	)			(29,050,519	)
Options written		—		—		—			10,287,135				10,250,553				—				20,537,688
Swaps		—		—		—			—				(7,047,971	)			(204,930	)			(7,252,901	)
Total		—		—		—		$	(8,054,205	)		$	(28,465,836	)		$	(272,640	)		$	(36,792,681	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—		—			—			$	1,890,110				—			$	1,890,110
Forward foreign currency exchange contracts		—		—		—		$	(6,995,189	)			—				—				(6,995,189	)
Inflation rate caps and floors		—		—		—			—				—			$	76,558				76,558
Options purchased2		—		—		—			1,074,345				2,045,318				—				3,119,663
Options written		—		—		—			(1,209,164	)			(2,227,163	)			—				(3,436,327	)
Swaps		—		—		—			—				1,079,949				(4,277,301	)			(3,197,352	)
Total		—		—		—		$	(7,130,008	)		$	2,788,214			$	(4,200,743	)		$	(8,542,537	)

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	606,802,729
Average notional value of contracts — short	$	898,167,003
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	661,693,967
Average amounts sold — in USD	$	229,014,930
Options:
Average value of option contracts purchased	$	6,425,472
Average value of option contracts written	$	4,245,813
Average notional value of swaption contracts purchased	$	218,726,983
Average notional value of swaption contracts written	$	561,447,233
Average value of inflation rate caps purchased	$	24,509
Average value of inflation rate caps written	$	7,717
Interest rate swaps:
Average notional value — pays fixed rate	$	178,800,986
Average notional value — receives fixed rate	$	118,510,877
Total return swaps:
Average notional value	$	83,053,132

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

50 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock Inflation Protected Bond Portfolio

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts		$  1,808,639		$	1,130,929
Forward foreign currency exchange contracts		170,818			2,193,445
Inflation rate caps1		1,022,495			1,026,025
Options		11,978,691	2		5,282,200
Swaps — Centrally cleared		405,038			—
Swaps — OTC3		454,650			2,445,903
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$15,840,331		$	12,078,502
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(2,531,302	)		(1,130,929	)
Total derivative assets and liabilities subject to an MNA		$13,309,029		$	10,947,573

¹  Includes unrealized appreciation (depreciation) and premiums paid/received on inflation rate caps in the Statements of Assets and Liabilities.

²  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Consolidated Schedule of Investments.

³  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid in the Statements of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received2			Net Amount of Derivative Assets3
Barclays Bank PLC	$	4,360,137	$	(4,243,430	)	—		—		$	116,707
BNP Paribas S.A.		53,398		(9,447	)	—		—			43,951
Citibank N.A.		272,063		(83,857	)	—		—			188,206
Credit Suisse International		125,172		—		—		—			125,172
Deutsche Bank AG		7,564,790		(4,458,146	)	—	$	(3,050,000	)		56,644
HSBC Bank PLC		176,346		(159,475	)	—		—			16,871
Morgan Stanley & Co. International PLC		1,302		(1,302	)	—		—			—
Royal Bank of Canada		2,249		(2,249	)	—		—			—
Royal Bank of Scotland PLC		111,830		(111,830	)	—		—			—
UBS AG		641,742		(311,032	)	—		—			330,710
Total	$	13,309,029	$	(9,380,768	)	—	$	(3,050,000	)	$	878,261
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged			Net Amount of Derivative Liabilities4,5
Barclays Bank PLC	$	4,243,430	$	(4,243,430	)	—		—			—
BNP Paribas S.A.		9,447		(9,447	)	—		—			—
Citibank N.A.		83,857		(83,857	)	—		—			—
Commonwealth Bank of Australia		181,459		—		—		—		$	181,459
Deutsche Bank AG		4,458,146		(4,458,146	)	—		—			—
HSBC Bank PLC		159,475		(159,475	)	—		—			—
Morgan Stanley & Co. International PLC		29,163		(1,302	)	—		—			27,861
Northern Trust Corp.		147,157		—		—		—			147,157
Royal Bank of Canada		60,741		(2,249	)	—		—			58,492
Royal Bank of Scotland PLC		1,263,666		(111,830	)	—		—			1,151,836
UBS AG		311,032		(311,032	)	—		—			—
Total	$	10,947,573	$	(9,380,768	)	—		—		$	1,566,805

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

³  Net amount represents the net amount receivable from the counterparty in the event of default.

⁴  Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities.

⁵  Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 51

Consolidated Schedule of Investments (concluded) BlackRock Inflation Protected Bond Portfolio

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3	Total
Assets:
Investments:
Long-Term Investments:
Foreign Government Obligations		—		$	123,169,008		—	$	123,169,008
Non-Agency Mortgage-Backed Securities		—			26,212,221		—		26,212,221
U.S. Government Sponsored Agency Securities		—			76,375		—		76,375
U.S. Treasury Obligations		—			2,565,065,861		—		2,565,065,861
Short-Term Securities	$	18,480,276			—		—		18,480,276
Options Purchased:
Foreign currency exchange contracts		—			5,255,951		—		5,255,951
Interest rate contracts		317,625			6,405,115		—		6,722,740
Total	$	18,797,901		$	2,726,184,531		—	$	2,744,982,432
Derivative Financial Instruments1
Assets:
Foreign currency exchange contracts		—		$	170,818		—	$	170,818
Interest rate contracts	$	1,299,307			809,228		—		2,108,535
Other contracts		—			1,011,108		—		1,011,108
Liabilities:
Foreign currency exchange contracts		—			(5,852,306	)	—		(5,852,306	)
Interest rate contracts		(1,651,411	)		(2,399,600	)	—		(4,051,011	)
Other contracts		—			(1,820,157	)	—		(1,820,157	)
Total	$	(352,104	)	$	(8,080,909	)	—	$	(8,433,013	)
1    Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2			Level 3	Total
Assets:
Cash	$	94,000			—		—	$	94,000
Foreign currency at value		14,715,291			—		—		14,715,291
Cash pledged:
Futures contracts		5,943,820			—		—		5,943,820
Centrally cleared swaps		2,232,400			—		—		2,232,400
Liabilities:
Reverse repurchase agreements		—		$	(206,372,861	)	—		(206,372,861	)
Cash received:
Collateral — reverse repurchase agreements		—			(1,142,000	)	—		(1,142,000	)
Collateral — OTC derivatives		—			(3,050,000	)	—		(3,050,000	)
Total	$	22,985,511		$	(210,564,861	)	—	$	(187,579,350	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

52 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock Investment Grade Bond Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities		Par   (000)		Value
Scholar Funding Trust, Series 2011-A, Class A, 1.64%, 10/28/43 (a)(b)	USD		213	$	204,142
SLM Private Credit Student Loan Trust, Series 2004-B, Class A2, 1.05%, 6/15/21 (b)			60		59,493
Total Asset-Backed Securities — 0.3%					263,635
Corporate Bonds
Aerospace & Defense — 1.1%
L-3 Communications Corp.:
3.95%, 11/15/16			2		2,007
1.50%, 5/28/17			159		159,120
Lockheed Martin Corp.:
3.10%, 1/15/23			25		26,364
3.55%, 1/15/26			35		37,821
4.07%, 12/15/42			225		241,027
4.70%, 5/15/46			25		29,703
Northrop Grumman Corp., 3.50%, 3/15/21			275		293,992
United Technologies Corp., 4.50%, 6/01/42			305		353,257
					1,143,291
Air Freight & Logistics — 0.2%
FedEx Corp.:
3.25%, 4/01/26			65		68,551
4.10%, 2/01/45			80		82,958
4.55%, 4/01/46			90		99,970
					251,479
Airlines — 1.5%
Air Canada Pass-Through Trust, Series 2015-1, Class A, 3.60%, 9/15/28 (a)			240		248,775
American Airlines Pass-Through Trust, Series 2013-1, Class A, 4.00%, 1/15/27			340		361,458
Doric Nimrod Air Alpha Pass-Through Trust, Series 2013-1, Class A, 5.25%, 5/30/25 (a)			271		285,604
Turkish Airlines Pass-Through Trust, Series 2015-1, Class A, 4.20%, 9/15/28 (a)			140		134,554
United Airlines Pass-Through Trust:
Series 2013-1, Class B, 5.38%, 2/15/23			184		191,285
Series 2014-1, Class B, 4.75%, 10/11/23			159		162,194
Virgin Australia Trust, Series 2013-1B, 6.00%, 10/23/20 (a)			97		98,760
					1,482,630
Auto Components — 0.2%
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
3.50%, 3/15/17			50		50,060
4.88%, 3/15/19			137		137,685
					187,745
Automobiles — 0.7%
BMW U.S. Capital LLC, 2.00%, 4/11/21 (a)			220		222,460
General Motors Co., 3.50%, 10/02/18			416		428,834
					651,294
Banks — 9.1%
Bank of America Corp.:
5.42%, 3/15/17			500		508,627
6.00%, 9/01/17			970		1,008,815
3.95%, 4/21/25			225		232,920
4.45%, 3/03/26			750		804,905
4.75%, 4/21/45			100		106,747

Corporate Bonds		Par   (000)		Value
Banks (continued)
Barclays PLC:
4.38%, 9/11/24	USD		275	$	278,111
5.20%, 5/12/26			225		231,738
Citigroup, Inc.:
1.85%, 11/24/17			250		250,780
2.50%, 7/29/19			575		586,701
Cooperatieve Rabobank UA, 4.63%, 12/01/23			313		338,010
HSBC Bank USA N.A., 6.00%, 8/09/17			250		259,471
ING Bank NV:
1.80%, 3/16/18 (a)			255		255,778
2.05%, 8/17/18 (a)			200		201,462
Intesa Sanpaolo SpA, 5.71%, 1/15/26 (a)			200		188,454
JPMorgan Chase & Co.:
6.13%, 6/27/17			600		620,208
1.63%, 5/15/18			425		425,886
2.30%, 8/15/21			170		170,370
5.63%, 8/16/43			250		301,299
4.95%, 6/01/45			230		257,632
Lloyds Bank PLC, 2.00%, 8/17/18			240		241,050
Royal Bank of Scotland Group PLC:
6.00%, 12/19/23			270		281,399
4.80%, 4/05/26			250		257,107
Santander Bank N.A., 2.00%, 1/12/18			250		250,031
Santander Holdings USA, Inc., 2.28%, 11/24/17 (b)			225		226,991
Santander UK PLC, 5.00%, 11/07/23 (a)			200		208,431
U.S. Bancorp, 3.10%, 4/27/26			95		98,134
Wells Fargo & Co., 4.90%, 11/17/45			175		192,677
Wells Fargo Bank N.A., 1.65%, 1/22/18			250		250,725
					9,034,459
Beverages — 1.3%
Anheuser-Busch InBev Finance, Inc.:
3.65%, 2/01/26			575		617,550
4.70%, 2/01/36			110		126,475
4.90%, 2/01/46			260		309,343
Molson Coors Brewing Co.:
2.10%, 7/15/21			85		85,782
3.00%, 7/15/26			65		65,450
4.20%, 7/15/46			50		52,097
					1,256,697
Biotechnology — 2.0%
AbbVie, Inc.:
2.85%, 5/14/23			125		126,900
4.40%, 11/06/42			240		249,731
4.70%, 5/15/45			272		292,884
Amgen, Inc.:
5.85%, 6/01/17			375		386,100
4.40%, 5/01/45			25		26,261
4.66%, 6/15/51 (a)			238		254,374
Biogen, Inc., 3.63%, 9/15/22			160		171,375
Gilead Sciences, Inc.:
4.50%, 2/01/45			6		6,407
4.75%, 3/01/46			115		128,518
4.15%, 3/01/47			365		373,063
					2,015,613
Capital Markets — 3.7%
Credit Suisse AG:
6.00%, 2/15/18			225		236,762
1.70%, 4/27/18			650		650,496

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 53

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

Corporate Bonds		Par   (000)		Value
Capital Markets (continued)
Goldman Sachs Group, Inc.:
2.38%, 1/22/18	USD		375	$	379,145
2.63%, 4/25/21			45		45,695
4.25%, 10/21/25			50		52,620
6.75%, 10/01/37			100		127,331
5.15%, 5/22/45			155		169,030
Morgan Stanley:
5.55%, 4/27/17			480		491,080
6.25%, 8/28/17			225		234,351
1.88%, 1/05/18			295		296,205
2.20%, 12/07/18			115		116,203
3.88%, 1/27/26			225		238,878
UBS Group Funding Jersey Ltd.:
3.00%, 4/15/21 (a)			340		349,202
2.65%, 2/01/22 (a)			300		299,442
					3,686,440
Chemicals — 1.2%
Air Liquide Finance SA, 2.25%, 9/27/23 (a)			200		200,722
CF Industries, Inc., 5.38%, 3/15/44			175		172,782
Eastman Chemical Co., 3.80%, 3/15/25			375		396,951
LYB International Finance BV, 4.88%, 3/15/44			100		108,028
LyondellBasell Industries NV, 5.00%, 4/15/19			300		321,985
					1,200,468
Communications Equipment — 0.7%
Cisco Systems, Inc.:
2.20%, 2/28/21			175		179,057
2.50%, 9/20/26			350		354,085
Harris Corp., 2.00%, 4/27/18			137		137,779
					670,921
Consumer Finance — 3.7%
Ally Financial, Inc.:
3.25%, 2/13/18			175		176,750
8.00%, 11/01/31			114		140,790
Capital One N.A.:
1.65%, 2/05/18			250		250,293
2.35%, 8/17/18			255		258,103
2.40%, 9/05/19			250		253,954
Discover Bank, 3.10%, 6/04/20			257		264,386
Ford Motor Credit Co. LLC:
1.68%, 9/08/17			225		225,163
2.94%, 1/08/19			380		389,194
2.02%, 5/03/19			240		240,468
General Motors Financial Co., Inc.:
2.40%, 4/10/18			200		201,444
2.24%, 5/09/19 (b)			225		224,419
3.45%, 4/10/22			114		115,631
Synchrony Financial, 2.19%, 11/09/17 (b)			675		679,838
Toyota Motor Credit Corp., 1.20%, 4/06/18			250		250,073
					3,670,506
Diversified Financial Services — 0.9%
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, 4.25%, 7/01/20			400		415,000
Berkshire Hathaway, Inc.:
2.20%, 3/15/21			25		25,716
2.75%, 3/15/23			125		129,898
General Electric Capital Corp., 5.88%, 1/14/38			125		167,411
WEA Finance LLC/Westfield UK & Europe Finance PLC, 2.70%, 9/17/19 (a)			200		205,043
					943,068

Corporate Bonds		Par   (000)		Value
Diversified Telecommunication Services — 1.7%
AT&T Inc.:
2.45%, 6/30/20	USD		90	$	91,663
4.50%, 5/15/35			225		236,405
5.15%, 3/15/42			200		217,010
5.65%, 2/15/47			175		206,254
Verizon Communications, Inc.:
3.65%, 9/14/18			325		339,217
4.27%, 1/15/36			300		312,571
3.85%, 11/01/42			198		188,460
4.67%, 3/15/55			129		135,699
					1,727,279
Electric Utilities — 4.8%
American Transmission Systems, Inc., 5.25%, 1/15/22 (a)			100		114,890
Duke Energy Carolinas LLC, 6.10%, 6/01/37			249		328,181
Duke Energy Corp.:
3.95%, 10/15/23			175		191,430
2.65%, 9/01/26			95		93,220
Duke Energy Progress, Inc., 4.15%, 12/01/44			80		87,554
Emera U.S. Finance LP:
2.15%, 6/15/19 (a)			45		45,492
4.75%, 6/15/46 (a)			195		209,283
Entergy Corp., 4.00%, 7/15/22			325		352,552
Entergy Louisiana LLC, 4.05%, 9/01/23			200		220,747
Exelon Corp.:
2.85%, 6/15/20			65		67,398
3.40%, 4/15/26			355		369,492
Niagara Mohawk Power Corp., 4.88%, 8/15/19 (a)			249		271,130
Ohio Power Co., Series D, 6.60%, 3/01/33			229		298,644
Oncor Electric Delivery Co. LLC:
5.00%, 9/30/17			200		207,315
7.25%, 1/15/33			30		43,320
7.50%, 9/01/38			100		155,367
PacifiCorp, 3.35%, 7/01/25			240		258,386
Puget Energy, Inc.:
6.00%, 9/01/21			175		202,265
5.63%, 7/15/22			275		316,472
Southern Co.:
2.95%, 7/01/23			435		449,445
3.25%, 7/01/26			235		243,400
Toledo Edison Co.:
7.25%, 5/01/20			54		61,281
6.15%, 5/15/37			40		49,832
Trans-Allegheny Interstate Line Co., 3.85%, 6/01/25 (a)			90		95,956
					4,733,052
Equity Real Estate Investment Trusts (REITs) — 1.6%
American Tower Corp.:
4.50%, 1/15/18			604		626,448
5.90%, 11/01/21			146		170,300
Crown Castle International Corp.:
3.40%, 2/15/21			422		441,642
5.25%, 1/15/23			275		311,393
					1,549,783
Food & Staples Retailing — 1.0%
CVS Health Corp., 5.13%, 7/20/45			233		285,109
CVS Pass-Through Trust, 8.35%, 7/10/31 (a)			167		223,466

See Notes to Financial Statements.

54 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

Corporate Bonds		Par   (000)		Value
Food & Staples Retailing (continued)
Walgreens Boots Alliance, Inc.:
2.60%, 6/01/21	USD		70	$	71,636
3.80%, 11/18/24			255		273,725
3.45%, 6/01/26			100		103,812
4.80%, 11/18/44			30		33,071
					990,819
Food Products — 0.6%
Kraft Heinz Foods Co.:
3.00%, 6/01/26			345		347,752
4.38%, 6/01/46			255		269,797
					617,549
Health Care Equipment & Supplies — 1.0%
Boston Scientific Corp., 2.85%, 5/15/20			70		72,144
Medtronic, Inc.:
4.38%, 3/15/35			305		345,620
4.63%, 3/15/45			370		434,746
St. Jude Medical, Inc.:
3.88%, 9/15/25			40		42,633
4.75%, 4/15/43			23		24,204
Stryker Corp., 3.50%, 3/15/26			55		58,264
					977,611
Health Care Providers & Services — 2.5%
Acadia Healthcare Co., Inc., 5.63%, 2/15/23			200		203,000
Aetna, Inc.:
1.70%, 6/07/18			175		175,558
1.90%, 6/07/19			120		121,101
2.40%, 6/15/21			80		80,926
2.80%, 6/15/23			740		755,643
Anthem, Inc.:
4.65%, 1/15/43			175		190,917
5.10%, 1/15/44			50		57,994
4.65%, 8/15/44			100		109,078
HCA, Inc., 3.75%, 3/15/19			350		361,813
UnitedHealth Group, Inc.:
2.88%, 3/15/23			50		52,156
3.10%, 3/15/26			60		62,686
4.38%, 3/15/42			65		72,467
4.25%, 3/15/43			85		93,752
4.75%, 7/15/45			155		185,874
					2,522,965
Hotels, Restaurants & Leisure — 0.2%
McDonald’s Corp.:
4.70%, 12/09/35			125		141,569
4.88%, 12/09/45			25		29,014
					170,583
Household Durables — 0.3%
Newell Brands, Inc.:
3.85%, 4/01/23			155		164,992
4.20%, 4/01/26			85		92,574
5.50%, 4/01/46			50		60,655
					318,221
Independent Power and Renewable Electricity Producers — 0.1%
Exelon Generation Co. LLC, 5.60%, 6/15/42			134		139,918
Insurance — 1.4%
Allstate Corp., 5.75%, 8/15/53 (b)			325		348,969
American International Group, Inc.:
3.30%, 3/01/21			110		115,412
3.90%, 4/01/26			380		402,018

Corporate Bonds		Par   (000)		Value
Insurance (continued)
Marsh & McLennan Cos., Inc.:
3.30%, 3/14/23	USD		40	$	41,927
3.75%, 3/14/26			200		216,178
Teachers Insurance & Annuity Association of America, 6.85%, 12/16/39 (a)			163		221,601
					1,346,105
Internet & Direct Marketing Retail — 0.3%
Amazon.com, Inc., 3.80%, 12/05/24			284		314,792
IT Services — 1.3%
Fidelity National Information Services, Inc.:
3.63%, 10/15/20			325		344,718
5.00%, 10/15/25			500		570,182
Total System Services, Inc., 3.80%, 4/01/21			95		100,810
Visa, Inc.:
2.80%, 12/14/22			115		120,558
3.15%, 12/14/25			155		163,731
					1,299,999
Life Sciences Tools & Services — 0.6%
Thermo Fisher Scientific, Inc.:
2.40%, 2/01/19			500		508,333
3.00%, 4/15/23			60		61,447
					569,780
Media — 3.8%
21st Century Fox America, Inc., 6.40%, 12/15/35			150		192,283
Charter Communications Operating LLC/Charter Communications Operating Capital:
3.58%, 7/23/20 (a)			485		506,921
4.46%, 7/23/22 (a)			210		226,603
4.91%, 7/23/25 (a)			820		904,505
6.38%, 10/23/35 (a)			34		40,045
6.48%, 10/23/45 (a)			126		152,375
6.83%, 10/23/55 (a)			37		44,483
Comcast Corp.:
3.20%, 7/15/36			170		166,277
6.95%, 8/15/37			99		144,333
4.60%, 8/15/45			125		144,369
Cox Communications, Inc., 6.95%, 6/01/38 (a)			211		239,678
Discovery Communications LLC:
3.25%, 4/01/23			310		313,873
4.88%, 4/01/43			100		95,167
Interpublic Group of Cos., Inc., 2.25%, 11/15/17			175		175,755
NBCUniversal Media LLC, 4.45%, 1/15/43			130		146,187
Sky PLC, 3.75%, 9/16/24 (a)			200		211,458
Time Warner Cable LLC, 4.50%, 9/15/42			37		35,308
					3,739,620
Metals & Mining — 0.3%
Rio Tinto Finance USA Ltd.:
9.00%, 5/01/19			121		142,950
7.13%, 7/15/28			100		133,401
Southern Copper Corp., 5.88%, 4/23/45			50		49,741
					326,092
Multi-Utilities — 0.8%
Berkshire Hathaway Energy Co., 5.95%, 5/15/37			300		388,579
CMS Energy Corp., 3.00%, 5/15/26			45		45,753
Dominion Gas Holdings LLC, 4.60%, 12/15/44			125		134,615

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 55

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

Corporate Bonds		Par   (000)		Value
Multi-Utilities (continued)
Dominion Resources, Inc., 2.96%, 7/01/19 (c)	USD		110	$	112,905
Pacific Gas & Electric Co., 4.75%, 2/15/44			75		89,505
					771,357
Oil, Gas & Consumable Fuels — 6.9%
Anadarko Petroleum Corp.:
5.55%, 3/15/26			180		203,407
6.60%, 3/15/46			250		304,189
ConocoPhillips Co.:
2.88%, 11/15/21			217		222,944
3.35%, 11/15/24			28		28,667
4.95%, 3/15/26			280		315,607
Continental Resources, Inc., 5.00%, 9/15/22			100		99,750
Devon Energy Corp., 3.25%, 5/15/22			168		166,799
El Paso Natural Gas Co. LLC, 8.63%, 1/15/22			420		518,911
Encana Corp., 6.50%, 5/15/19			200		215,978
Energy Transfer Partners LP:
9.00%, 4/15/19			150		171,277
6.50%, 2/01/42			100		104,308
Enterprise Products Operating LLC:
6.45%, 9/01/40			106		128,169
4.90%, 5/15/46			300		315,305
Kinder Morgan Energy Partners LP:
6.00%, 2/01/17			300		304,337
6.50%, 4/01/20			304		341,296
6.38%, 3/01/41			257		277,717
Kinder Morgan, Inc., 2.00%, 12/01/17			25		25,014
Marathon Petroleum Corp.:
2.70%, 12/14/18			200		204,316
4.75%, 9/15/44			134		119,973
Noble Energy, Inc., 5.25%, 11/15/43			150		152,685
Phillips 66, 4.88%, 11/15/44			60		66,653
Pioneer Natural Resources Co., 3.45%, 1/15/21			60		62,392
Plains All American Pipeline LP/PAA Finance Corp.:
2.60%, 12/15/19			200		201,543
4.65%, 10/15/25			150		155,379
4.90%, 2/15/45			125		114,537
Regency Energy Partners LP/Regency Energy Finance Corp., 5.00%, 10/01/22			240		253,307
Sabine Pass Liquefaction LLC:
5.75%, 5/15/24			155		166,819
5.63%, 3/01/25			120		129,000
Sabine Pass LNG LP, 7.50%, 11/30/16			200		201,500
Tennessee Gas Pipeline Co. LLC, 7.00%, 10/15/28			9		10,786
TransCanada PipeLines Ltd., 7.63%, 1/15/39			50		74,025
TransCanada Trust, 5.88%, 8/15/76 (b)			85		89,930
Valero Energy Corp.:
3.40%, 9/15/26			175		173,834
6.63%, 6/15/37			110		128,889
Western Gas Partners LP, 2.60%, 8/15/18			425		425,318
Williams Partners LP, 5.10%, 9/15/45			260		253,662
Williams Partners LP/Williams Partners Finance Corp., 7.25%, 2/01/17			100		101,828
					6,830,051
Pharmaceuticals — 4.7%
Actavis Funding SCS:
2.35%, 3/12/18			225		227,320
3.45%, 3/15/22			415		435,683
4.55%, 3/15/35			115		122,153
4.85%, 6/15/44			260		285,988
4.75%, 3/15/45			28		30,616

Corporate Bonds		Par   (000)		Value
Pharmaceuticals (continued)
Forest Laboratories LLC, 4.38%, 2/01/19 (a)	USD		410	$	431,903
Johnson & Johnson:
2.05%, 3/01/23			70		71,407
2.45%, 3/01/26			120		123,323
3.55%, 3/01/36			125		138,683
Mylan NV:
2.50%, 6/07/19 (a)			52		52,462
5.25%, 6/15/46 (a)			100		105,321
Mylan, Inc., 2.60%, 6/24/18			375		380,312
Pfizer, Inc., 5.20%, 8/12/20			175		198,131
Shire Acquisitions Investments Ireland DAC:
2.40%, 9/23/21			430		430,541
2.88%, 9/23/23			490		492,373
Teva Pharmaceutical Finance Netherlands III BV:
2.20%, 7/21/21			170		169,359
2.80%, 7/21/23			80		80,205
3.15%, 10/01/26			234		235,082
Valeant Pharmaceuticals International, Inc., 6.75%, 8/15/18 (a)			214		215,070
Zoetis, Inc., 1.88%, 2/01/18			425		426,340
					4,652,272
Road & Rail — 0.3%
Burlington Northern Santa Fe LLC:
4.90%, 4/01/44			75		90,912
4.15%, 4/01/45			40		44,054
Penske Truck Leasing Co. LP/PTL Finance Corp., 3.38%, 3/15/18 (a)			196		200,907
					335,873
Semiconductors & Semiconductor Equipment — 0.6%
KLA-Tencor Corp., 4.65%, 11/01/24			24		26,374
Lam Research Corp.:
3.45%, 6/15/23			113		115,584
3.90%, 6/15/26			118		122,866
NVIDIA Corp.:
2.20%, 9/16/21			170		170,518
3.20%, 9/16/26			195		196,535
					631,877
Software — 3.2%
Microsoft Corp.:
1.55%, 8/08/21			350		348,570
2.00%, 8/08/23			295		294,606
2.40%, 8/08/26			430		430,364
3.50%, 11/15/42			175		171,540
3.75%, 2/12/45			53		53,792
4.45%, 11/03/45			220		250,119
3.70%, 8/08/46			200		202,437
Oracle Corp.:
2.40%, 9/15/23			575		579,611
2.65%, 7/15/26			500		500,091
4.00%, 7/15/46			359		370,959
					3,202,089
Specialty Retail — 0.3%
QVC, Inc., 4.38%, 3/15/23			291		291,779
Technology Hardware, Storage & Peripherals — 2.5%
Apple Inc.:
1.09%, 5/06/19 (b)			200		200,729
2.25%, 2/23/21			400		410,320
2.85%, 2/23/23			380		400,030
3.25%, 2/23/26			275		292,300
2.45%, 8/04/26			330		330,323

See Notes to Financial Statements.

56 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

Corporate Bonds		Par   (000)		Value
Technology Hardware, Storage & Peripherals (continued)
4.38%, 5/13/45	USD		150	$	165,510
3.85%, 8/04/46			255		260,804
Diamond 1 Finance Corp./Diamond 2 Finance Corp., 8.35%, 7/15/46 (a)			340		407,099
					2,467,115
Tobacco — 1.6%
Altria Group, Inc.:
4.75%, 5/05/21			150		169,554
2.63%, 9/16/26			55		55,609
5.38%, 1/31/44			168		211,517
Imperial Tobacco Finance PLC, 2.05%, 2/11/18 (a)			300		301,794
Philip Morris International, Inc., 4.50%, 3/20/42			325		366,733
Reynolds American, Inc.:
4.00%, 6/12/22			85		92,340
4.85%, 9/15/23			60		68,679
7.00%, 8/04/41			173		221,641
5.85%, 8/15/45			100		130,011
					1,617,878
Trading Companies & Distributors — 0.2%
Air Lease Corp., 3.38%, 6/01/21			185		191,908
Wireless Telecommunication Services — 1.5%
Alltel Corp., 7.88%, 7/01/32			314		429,179
Crown Castle Towers LLC, 6.11%, 1/15/40 (a)			604		669,383
Sprint Communications, Inc., 9.00%, 11/15/18 (a)			175		193,156
Vodafone Group PLC:
2.50%, 9/26/22			125		125,723
4.38%, 2/19/43			64		64,111
					1,481,552
Total Corporate Bonds — 70.4%					70,012,530
Foreign Agency Obligations
China — 0.4%
CNOOC Finance 2015 Australia Property Ltd., 2.63%, 5/05/20			350		356,652
Mexico — 1.1%
Petroleos Mexicanos:
3.50%, 7/18/18			462		472,626
6.38%, 2/04/21 (a)			143		155,884
4.63%, 9/21/23 (a)			300		300,420
6.50%, 6/02/41			214		208,115
					1,137,045
Total Foreign Agency Obligations — 1.5%					1,493,697
Foreign Government Obligations
Colombia — 0.2%
Republic of Colombia, 5.63%, 2/26/44			200		231,500
Indonesia — 0.3%
Republic of Indonesia, 4.75%, 1/08/26 (a)			300		335,070

Foreign Government Obligations		Par   (000)		Value
Mexico — 0.5%
United Mexican States:
4.75%, 3/08/44	USD		99	$	102,589
5.55%, 1/21/45			50		57,937
5.75%, 10/12/10			294		310,905
					471,431
Paraguay — 0.2%
Republic of Paraguay, 5.00%, 4/15/26 (a)			200		216,500
Peru — 0.1%
Republic of Peru, 5.63%, 11/18/50			37		48,933
Poland — 0.2%
Republic of Poland, 3.25%, 4/06/26			180		190,584
Uruguay — 0.3%
Republic of Uruguay:
4.38%, 10/27/27			195		209,869
5.10%, 6/18/50			75		77,813
					287,682
Total Foreign Government Obligations — 1.8%					1,781,700
Non-Agency Mortgage-Backed Securities
Commercial Mortgage-Backed Securities — 0.1%
Morgan Stanley Capital I Trust, Series 2007-HQ11, Class A1A, 5.42%, 2/12/44 (b)			81		81,346
Preferred Securities
Capital Trusts
Banks — 1.7%
Bank of America Corp.:
Series AA, 6.10% (b)(d)			255		265,837
Series DD, 6.30% (b)(d)			55		59,744
Series K, 8.00% (b)(d)			55		56,100
BNP Paribas SA, 7.63% (a)(b)(d)			225		231,588
Citigroup, Inc., Series P, 5.95% (b)(d)			132		134,653
JPMorgan Chase & Co., Series S, 6.75% (b)			375		413,906
Societe Generale SA, 7.38% (a)(b)(d)			200		196,000
Wells Fargo & Co., 7.98% (b)(d)			300		313,530
					1,671,358
Capital Markets — 0.3%
Goldman Sachs Group, Inc., Series M, 5.38% (b)(d)			135		135,671
State Street Capital Trust IV, 1.85%, 6/15/37 (b)			200		172,000
					307,671
Industrial Conglomerates — 0.5%
General Electric Co., Series D, 5.00% (b)(d)			473		503,012
Insurance — 0.0%
Reinsurance Group of America, Inc., 3.52%, 12/15/65 (b)			27		20,790

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 57

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

Capital Trusts		Par   (000)		Value
Media — 0.9%
NBCUniversal Enterprise, Inc., 5.25% (a)(d)	USD		853	$	910,577
Oil, Gas & Consumable Fuels — 0.1%
TransCanada Trust, 5.63%, 5/20/75 (b)			98		99,225
Total Capital Trusts — 3.5%					3,512,633
Preferred Stocks		Shares
Banks — 0.6%
Citigroup, Inc., 6.88% (d)			7,880		227,023
Wells Fargo & Co., 5.85% (d)			14,541		388,972
					615,995
Capital Markets — 0.6%
Goldman Sachs Group, Inc., 5.50% (d)			10,233		274,347
State Street Corp., 5.90% (d)			9,095		252,750
					527,097
Total Preferred Stocks — 1.2%					1,143,092
Total Preferred Securities — 4.7%					4,655,725
Taxable Municipal Bonds		Par   (000)
Dallas/Fort Worth International Airport RB, Series A, 5.00%, 11/01/43	USD		75		83,131
Metropolitan Washington Airports Authority Dulles Toll Road Revenue RB, 5.00%, 10/01/53			35		39,544
Miami-Dade County Educational Facilities Authority RB, 5.07%, 4/01/50			90		107,966
New Jersey Economic Development Authority RB, 5.38%, 1/01/43			125		144,347
New Jersey Transportation Trust Fund Authority RB, Series AA, 5.00%, 6/15/33			200		218,746
State of California GO, 7.55%, 4/01/39			250		399,287
Total Taxable Municipal Bonds — 1.0%					993,021

U.S. Government Sponsored Agency Securities		Par   (000)		Value
Agency Obligations — 0.3%
Fannie Mae, 1.88%, 9/24/26	USD		285	$	283,571
Collateralized Mortgage Obligations — 0.4%
Freddie Mac, Series 3859, Class JB, 5.00%, 5/15/41			337		377,509
Mortgage-Backed Securities — 0.2%
Fannie Mae Mortgage-Backed Securities:
2.67%, 2/01/35 (b)			126		132,554
2.77%, 1/01/35 (b)			26		27,580
7.00%, 1/01/31			1		1,148
Freddie Mac Mortgage-Backed Securities, 7.00%, 12/01/29-4/01/32			3		4,241
Ginnie Mae Mortgage-Backed Securities:
2.13%, 5/20/34 (b)			31		32,554
5.50%, 4/15/33-8/15/33			8		9,120
7.00%, 9/15/31-5/15/32			8		9,155
					216,352
Total U.S. Government Sponsored Agency Securities — 0.9%					877,432
Total Long-Term Investments (Cost — $76,638,023) — 80.7%					80,159,086
Short-Term Securities
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (e)(f)			7,580,531		7,580,531
Total Short-Term Securities (Cost — $7,580,531) — 7.6%					7,580,531
Options Purchased
(Cost — $77,815) — 0.0%					22,513
Total Investments Before Options Written (Cost — $84,296,369) — 88.3%					87,762,130
Options Written
(Premiums Received — $18,314) — (0.0)%					(15,040	)
Total Investments Net of Options Written — 88.3%					87,747,090
Other Assets Less Liabilities — 11.7%					11,654,984
Net Assets — 100.0%				$	99,402,074

      Notes to Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

(c) Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

(d) Perpetual security with no stated maturity date.

(e) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Net Activity			Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		1,454,585		(1,454,585	)		—		—		$16,352		$130
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		7,580,531			7,580,531		$7,580,531		1,838		—
									$7,580,531		$18,190		$130

(f) Current yield as of period end.

See Notes to Financial Statements.

58 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long	Issue	Expiration	Notional Value			Unrealized    Appreciation  (Depreciation)
16	U.S. Treasury Bonds (30 Year)	December 2016		USD	2,690,500		$	(18,244	)
31	U.S. Treasury Notes (2 Year)	December 2016		USD	6,772,531			(37	)
48	U.S. Treasury Notes (5 Year)	December 2016		USD	5,832,750			19,096
18	U.S. Treasury Notes (10 Year)	December 2016		USD	2,360,250			1,188
21	U.S. Ultra  Treasury Bonds	December 2016		USD	3,861,375			(10,561	)
Total							$	(8,558	)

      OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

30-Year Interest Rate Swap

Citibank N.A.

Put

2.75%

Pay

3-month LIBOR

12/01/16

USD

2,500

$

179

30-Year Interest Rate Swap

Bank of America N.A.

Put

2.20%

Pay

3-month LIBOR

1/13/17

USD

590

4,931

30-Year Interest Rate Swap

Bank of America N.A.

Put

2.85%

Pay

3-month LIBOR

1/13/17

USD

6,400

2,824

10-Year Interest Rate Swap

Citibank N.A.

Put

1.75%

Pay

3-month LIBOR

2/23/17

USD

1,750

14,579

Total

$

22,513

      OTC Interest Rate Swaptions Written

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

2-Year Interest Rate Swap

Bank of America N.A.

Call

0.70%

Pay

3-month LIBOR

3/15/18

USD

1,500

$

(3,448

)

2-Year Interest Rate Swap

Bank of America N.A.

Call

0.80%

Pay

3-month LIBOR

3/19/18

USD

1,500

(4,341

)

2-Year Interest Rate Swap

Bank of America N.A.

Put

1.70%

Receive

3-month LIBOR

3/15/18

USD

1,500

(3,598

)

2-Year Interest Rate Swap

Bank of America N.A.

Put

1.70%

Receive

3-month LIBOR

3/19/18

USD

1,500

(3,653

)

Total

$

(15,040

)

      Centrally Cleared Credit Default Swaps — Sell Protection

Index	Receive Fixed Rate	Expiration Date	Credit Rating1	Notional Amount (000)2			Unrealized Appreciation
CDX.NA.HY Series 27 Version 1	5.00%	12/20/21	B+		USD	2,300		$10,257

¹  Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 59

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

      Centrally Cleared Interest Rate Swaps

Fixed Rate	Floating Rate	Effective Date	Expiration Date	Notional Amount (000)			Unrealized    Appreciation  (Depreciation)
2.38%1	3-month LIBOR	N/A	5/14/25		USD	240		$	(20,822	)
2.27%1	3-month LIBOR	N/A	5/26/25		USD	140			(11,127	)
1.77%1	3-month LIBOR	N/A	9/12/46		USD	70			344
Total								$	(31,605	)

¹  Fund pays the fixed rate and receives the floating rate.

      OTC Credit Default Swaps — Buy Protection

Issuer	Pay Fixed Rate			Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid			Unrealized Depreciation
Cigna Corp.		1.00	%		Citibank N.A.		9/20/17		USD	675		$    (6,434	)		$     (298	)		$    (6,136	)
General Dynamics Corp.		1.00	%		Credit Suisse International		9/20/17		USD	955		(9,114	)		(4,564	)		(4,550	)
Lockheed Martin Corp.		1.00	%		Credit Suisse International		9/20/17		USD	955		(9,035	)		(1,575	)		(7,460	)
Northrop Grumman Corp.		1.00	%		Credit Suisse International		9/20/17		USD	805		(7,784	)		(3,538	)		(4,246	)
Raytheon Co.		1.00	%		Credit Suisse International		9/20/17		USD	805		(7,740	)		(3,770	)		(3,970	)
Cardinal Health, Inc.		1.00	%		Barclays Bank PLC		12/20/18		USD	2,000		(41,806	)		(26,236	)		(15,570	)
International Business Machines Corp.		1.00	%		Citibank N.A.		12/20/18		USD	2,000		(37,746	)		(26,236	)		(11,510	)
Microsoft Corp.		1.00	%		Credit Suisse International		12/20/18		USD	2,000		(39,960	)		(25,337	)		(14,623	)
Citigroup, Inc.		1.00	%		Deutsche Bank AG		3/20/19		USD	800		(9,989	)		(1,642	)		(8,347	)
Pitney Bowes, Inc.		1.00	%		Credit Suisse International		3/20/19		USD	750		(7,927	)		3,316			(11,243	)
Halliburton Co.		1.00	%		Morgan Stanley Capital Services LLC		6/20/21		USD	400		(1,909	)		20			(1,929	)
Lowes Corp.		1.00	%		Citibank N.A.		6/20/21		USD	400		(12,706	)		(11,114	)		(1,592	)
Newmont Mining Corp.		1.00	%		Barclays Bank PLC		6/20/21		USD	120		(643	)		1,330			(1,973	)
Newmont Mining Corp.		1.00	%		Citibank N.A.		6/20/21		USD	480		(2,572	)		7,434			(10,006	)
Prudential Financial, Inc.		1.00	%		Citibank N.A.		6/20/21		USD	80		102			1,092			(990	)
Prudential Financial, Inc.		1.00	%		Citibank N.A.		6/20/21		USD	45		57			695			(638	)
Prudential Financial, Inc.		1.00	%		JPMorgan Chase Bank N.A.		6/20/21		USD	750		951			9,009			(8,058	)
Time Warner, Inc.		1.00	%		JPMorgan Chase Bank N.A.		6/20/21		USD	225		(4,709	)		(2,720	)		(1,989	)
Western Union Co.		1.00	%		JPMorgan Chase Bank N.A.		12/20/21		USD	500		(2,336	)		2,506			(4,842	)
Total												$(201,300	)		$(81,628	)		$(119,672	)

      OTC Credit Default Swaps — Sell Protection

Issuer	Receive Fixed Rate		Counterparty		Expiration Date		Credit Rating1		Notional Amount (000)2			Value			Premiums Paid (Received)			Unrealized Appreciation
				Credit Suisse
Comcast Corp.		1.00%		International		9/20/17		A-		USD	975		$    9,167			$      792			$  8,375
WellPoint, Inc.		1.00%		Citibank N.A.		9/20/17		Not Rated		USD	675		5,854			(1,250	)		7,104
Bank of America Corp.		1.00%		Deutsche Bank AG		3/20/19		BBB+		USD	800		10,015			2,961			7,054
				Morgan Stanley Capital
American Tower Corp.		1.00%		Services LLC		6/20/21		BBB-		USD	475		(10,790	)		(18,391	)		7,601
Total													$  14,246			$(15,888	)		$30,134

¹  Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

60 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

      Transactions in Options Written for the Year Ended September 30, 2016

	Calls				Puts
	Notional (000)					Notional (000)
	USD	Premiums Received			Contracts	USD	Premiums Received
Outstanding options, beginning of year	—		—		156	—	$	48,747
Options written	17,120	$	105,003		—	34,120		126,299
Options expired	—		—		(156)	—		(48,747	)
Options closed	(14,120)		(95,109	)	—	(31,120)		(117,879	)
Outstanding options, end of year	3,000	$	9,894		—	3,000	$	8,420

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity   Contracts	Credit Contracts		Equity Contracts	Foreign Currency Exchange Contracts	Interest Rate Contracts		Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—		—	—	—		$20,284	—	$	20,284
Options purchased	Investments at value — unaffiliated2	—		—	—	—		22,513	—		22,513
Swaps — centrally cleared	Net unrealized appreciation1	—		$  10,257	—	—		344	—		10,601
Swaps — OTC	Unrealized appreciation on OTC swaps; Swap premiums paid	—		59,289	—	—		—	—		59,289
Total		—		$  69,546	—	—		$43,141	—	$	112,687
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—		—	—	—		$28,842	—	$	28,842
Options written	Options written at value	—		—	—	—		15,040	—		15,040
Swaps — centrally cleared	Net unrealized depreciation1	—		—	—	—		31,949	—		31,949
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received	—		$246,343	—	—		—	—		246,343
Total		—		$246,343	—	—		$75,831	—	$	322,174

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity       Contracts	Credit Contracts			Equity Contracts	Foreign Currency Exchange Contracts	Interest Rate Contracts			Other Contracts	Total
Futures contracts	—		—		—	—		$ 710,609		—	$	710,609
Options purchased1	—		$(50,150	)	—	—		(176,165	)	—		(226,315	)
Options written	—		20,230		—	—		80,584		—		100,814
Swaps	—		27,291		—	—		(311,507	)	—		(284,216	)
Total	—		$  (2,629	)	—	—		$ 303,521		—	$	300,892
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—		—		—	—		$(108,521	)	—	$	(108,521	)
Options purchased2	—		—		—	—		60,997		—		60,997
Options written	—		—		—	—		(44,498	)	—		(44,498	)
Swaps	—		$    (730	)	—	—		56,500		—		55,770
Total	—		$    (730	)	—	—		$  (35,522	)	—	$	(36,252	)

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 61

Schedule of Investments (continued) BlackRock Investment Grade Bond Portfolio

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	23,133,437
Average notional value of contracts — short	$	4,638,181
Options:
Average notional value of swaption contracts purchased	$	12,810,000
Average notional value of swaption contracts written	$	14,310,000
Credit default swaps:
Average notional value — buy protection	$	16,471,500
Average notional value — sell protection	$	4,144,000
Interest rate swaps:
Average notional value — pays fixed rate	$	7,257,500

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts		$  3,461			$  54,554
Options		22,513	1		15,040
Swaps — Centrally cleared		6,478			—
Swaps — OTC2		59,289			246,343
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$91,741			$315,937
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(9,939	)		(54,554	)
Total derivative assets and liabilities subject to an MNA		$81,802			$261,383

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.	$	7,755	$	(7,755	)	—	—		—
Barclays Bank PLC		1,330		(1,330	)	—	—		—
Citibank N.A.		31,083		(31,083	)	—	—		—
Credit Suisse International		12,483		(12,483	)	—	—		—
Deutsche Bank AG		10,015		(9,989	)	—	—	$	26
JPMorgan Chase Bank N.A.		11,515		(11,515	)	—	—		—
Morgan Stanley Capital Services LLC		7,621		(7,621	)	—	—		—
Total	$	81,802	$	(81,776	)	—	—	$	26
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.	$	15,040	$	(7,755	)	—	—	$	7,285
Barclays Bank PLC		43,779		(1,330	)	—	—		42,449
Citibank N.A.		69,770		(31,083	)	—	—		38,687
Credit Suisse International		84,876		(12,483	)	—	—		72,393
Deutsche Bank AG		9,989		(9,989	)	—	—		—
JPMorgan Chase Bank N.A.		17,609		(11,515	)	—	—		6,094
Morgan Stanley Capital Services LLC		20,320		(7,621	)	—	—		12,699
Total	$	261,383	$	(81,776	)	—	—	$	179,607

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

³  Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statement of Assets and Liabilities.

See Notes to Financial Statements.

62 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (concluded) BlackRock Investment Grade Bond Portfolio

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy.

	Level 1				Level 2				Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities			—			$	263,635			—		$	263,635
Corporate Bonds			—				70,012,530			—			70,012,530
Foreign Agency Obligations			—				1,493,697			—			1,493,697
Foreign Government Obligations			—				1,781,700			—			1,781,700
Non-Agency Mortgage-Backed Securities			—				81,346			—			81,346
Preferred Securities		$	1,143,092				3,512,633			—			4,655,725
Taxable Municipal Bonds			—				993,021			—			993,021
U.S. Government Sponsored Agency Securities			—				877,432			—			877,432
Short-Term Securities			7,580,531				—			—			7,580,531
Options Purchased:
Interest rate contracts			—				22,513			—			22,513
Total		$	8,723,623			$	79,038,507			—		$	87,762,130
Derivative Financial Instruments1
Assets:
Credit contracts			—			$	40,391			—		$	40,391
Interest rate contracts		$	20,284				344			—			20,628
Liabilities:
Credit contracts			—				(119,672	)		—			(119,672	)
Interest rate contracts			(28,842	)			(46,989	)		—			(75,831	)
Total		$	(8,558	)		$	(125,926	)		—		$	(134,484	)
1    Derivative financial instruments are swaps, futures contracts and options written. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets are categorized within the disclosure hierarchy as follows:
	Level 1				Level 2				Level 3		Total
Assets:
Cash pledged:
Futures contracts		$	127,390				—			—		$	127,390
Centrally cleared swaps			188,190				—			—			188,190
Total		$	315,580				—			—		$	315,580

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 63

Schedule of Investments September 30, 2016	BlackRock U.S. Government Bond Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities		Par   (000)		Value
Arbor Realty Commercial Real Estate Notes Ltd., Series 2016-FL1A, Class A, 2.20%, 9/15/26 (a)(b)	USD		1,840	$	1,840,000
Cedar Funding III CLO Ltd., Series 2014-3A, Class A1, 2.34%, 5/20/26 (a)(b)			4,500		4,505,400
CIFC Funding Ltd.:
Series 2014-5A, Class A1, 2.26%, 1/17/27 (a)(b)			3,300		3,301,963
Series 2015-3A, Class A, 2.11%, 10/19/27 (a)(b)			1,650		1,646,387
Dryden XXVIII Senior Loan Fund, Series 2013-28A, Class A1L, 1.92%, 8/15/25 (a)(b)			5,800		5,746,577
Fannie Mae REMIC Trust, Series 1996-W1, Class AL, 7.25%, 3/25/26 (b)			9		10,156
Invitation Homes Trust:
Series 2014-SFR1, Class A, 1.51%, 6/17/31 (a)(b)			976		973,686
Series 2014-SFR3, Class A, 1.71%, 12/17/31 (a)(b)			908		908,316
OCP CLO Ltd., Series 2012-2A, Class A2, 2.29%, 11/22/23 (a)(b)			5,080		5,079,717
OHA Credit Partners VIII Ltd., Series 2013-8A, Class A, 1.82%, 4/20/25 (a)(b)			4,500		4,482,182
Progress Residential Trust:
Series 2015-SFR1, Class A, 1.93%, 2/17/32 (a)(b)			4,193		4,209,721
Series 2015-SFR2, Class A, 2.74%, 6/12/32 (a)			2,187		2,215,754
Series 2016-SFR1, Class A, 1.98%, 9/17/33 (a)(b)			4,410		4,457,925
SMB Private Education Loan Trust, Series 2015-C, Class A3, 2.46%, 8/16/32 (a)(b)			1,400		1,452,298
Tricon American Homes Trust, Series 2015-SFR1, Class A, 1.78%, 5/17/32 (a)(b)			1,792		1,788,451
Venture XVIII CLO Ltd., Series 2014-18A, Class A, 2.13%, 10/15/26 (a)(b)			3,300		3,296,979
Washington Mill CLO Ltd., Series 2014-1A, Class A1, 2.20%, 4/20/26 (a)(b)			4,100		4,101,230
Total Asset-Backed Securities — 6.6%					50,016,742
Corporate Bonds
Banks — 3.3%
Bank of Nova Scotia, 1.75%, 3/22/17 (a)			5,601		5,618,923
Toronto-Dominion Bank, 1.50%, 3/13/17 (a)			19,399		19,438,710
Total Corporate Bonds — 3.3%					25,057,633
Foreign Agency Obligations — 0.0%
Mexico — 0.0%
Petroleos Mexicanos, 4.63%, 9/21/23 (a)			85		85,119
Foreign Government Obligations — 0.5%
Germany — 0.5%
Deutsche Bundesrepublik Inflation Linked Bonds, 0.10%, 4/15/26	EUR		3,075		3,891,467

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities — 2.4%
Banc of America Commercial Mortgage Trust, Series 2007-1, Class A4, 5.45%, 1/15/49	USD		2,841	$	2,852,382
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 2.02%, 7/05/33 (a)(b)			6,500		6,480,696
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class AFL1, 1.81%, 12/15/34 (a)(b)			9,116		9,138,353
					18,471,431
Interest Only Commercial Mortgage-Backed Securities — 2.1%
CFCRE Commercial Mortgage Trust, Series 2016-C4, Class XA, 1.94%, 5/10/58 (b)			7,678		943,762
Commercial Mortgage Pass-Through Certificates:
Series 2014-CR14, Class XA, 0.99%, 2/10/47 (b)			12,197		435,054
Series 2015-CR22, Class XA, 1.16%, 3/10/48 (b)			21,175		1,217,981
Series 2015-CR24, Class XA, 1.03%, 8/10/48 (b)			11,269		655,447
Series 2015-CR25, Class XA, 1.12%, 8/10/48 (b)			21,235		1,353,311
Series 2015-LC21, Class XA, 1.02%, 7/10/48 (b)			69,262		3,298,914
Commercial Mortgage Trust, Series 2015-DC1, Class XA, 1.32%, 2/10/48 (b)			31,908		2,097,333
Core Industrial Trust:
Series 2015-CALW, Class XA, 0.94%, 2/10/34 (a)(b)			34,974		1,369,473
Series 2015-TEXW, Class XA, 0.90%, 2/10/34 (a)(b)			29,200		1,092,229
Series 2015-WEST, Class XA, 1.08%, 2/10/37 (a)(b)			14,700		982,513
FREMF Mortgage Trust, Series 2015-K718, Class X2A, 0.10%, 2/25/22 (a)(b)			209,146		918,821
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2016-C29, Class XA, 1.82%, 5/15/49 (b)			4,788		536,590
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.44%, 5/25/36 (a)(b)			263		2,163
Wells Fargo Commercial Mortgage Trust, Series 2015-C30, Class XA, 1.17%, 9/15/58 (b)			9,405		623,499
					15,527,090
Total Non-Agency Mortgage-Backed Securities — 4.5%					33,998,521
Project Loans — 0.0%
Federal Housing Authority, USGI Project, Series 56, 7.46%, 1/01/23			22		21,035
U.S. Government Sponsored Agency Securities
Agency Obligations — 0.7%
Federal Home Loan Bank, 4.00%, 4/10/28			4,100		4,825,790
Small Business Administration Participation Certificates:
Series 1996-20J, 7.20%, 10/01/16			12		12,156
Series 1998-20J, Class 1, 5.50%, 10/01/18			89		91,939
					4,929,885

See Notes to Financial Statements.

64 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

U.S. Government Sponsored Agency Securities		Par   (000)		Value
Collateralized Mortgage Obligations — 4.0%
Fannie Mae:
Series 2002-T6, Class A1, 3.31%, 2/25/32	USD		27	$	27,279
Series 2014-27, Class VC, 4.00%, 5/25/31			3,236		3,564,848
Series 2016-40, Class MF, 1.03%, 7/25/46 (b)			7,769		7,762,472
Series 2016-49, Class EF, 0.93%, 8/25/46 (b)			6,537		6,530,004
Series 2016-49, Class MF, 1.08%, 8/25/46 (b)			9,154		9,139,289
Ginnie Mae, Series 2014-107, Class WX, 6.81%, 7/20/39 (b)			2,461		2,917,633
					29,941,525
Interest Only Collateralized Mortgage Obligations — 0.0%
Ginnie Mae:
Series 2015-103, Class CI, 4.00%, 7/20/45			1,177		92,081
Series 2015-152, Class PI, 4.00%, 10/20/45			445		36,503
Series 2015-176, Class IO, 4.00%, 11/20/45			106		8,273
Series 2016-58, Class PI, 4.00%, 10/20/45			691		52,611
Series 2016-82, Class IM, 4.00%, 2/01/46			197		15,076
Series 2016-82, Class WI, 4.00%, 5/20/46			294		24,887
					229,431
Interest Only Commercial Mortgage-Backed Securities — 0.2%
Freddie Mac:
Series K043, Class X1, 0.68%, 12/25/24 (b)			28,183		1,094,771
Series K718, Class X1, 0.77%, 1/25/22 (b)			3,758		108,129
Ginnie Mae:
Series 2005-9, Class IO, 0.55%, 1/16/45 (b)			8,944		176,530
Series 2005-50, Class IO, 0.45%, 6/16/45 (b)			2,822		17,626
Series 2006-30, Class IO, 2.16%, 5/16/46 (b)			2,261		156,438
					1,553,494
Mortgage-Backed Securities — 79.5%
Fannie Mae Mortgage-Backed Securities:
2.50%, 4/01/30-10/01/31 (c)			5,894		6,112,941
3.00%, 5/01/29-10/01/46 (c)			70,636		73,819,648
3.16%, 12/01/40 (b)			709		744,663
3.50%, 11/01/28-10/01/46 (c)			78,423		83,241,303
3.54%, 9/01/41 (b)			752		793,893
4.00%, 1/01/25-10/01/46 (c)			110,733		119,409,848
4.50%, 2/01/25-10/01/46 (c)			31,386		34,468,308
5.00%, 11/01/32-10/01/46 (c)			10,207		11,429,071
5.50%, 2/01/35-4/01/41			6,344		7,208,950
6.00%, 5/01/33-10/01/46 (c)			8,505		9,801,238
6.50%, 5/01/40			1,448		1,669,842
Freddie Mac Mortgage-Backed Securities:
2.50%, 3/01/30-10/01/31 (c)			6,235		6,466,659
2.77%, 10/01/45 (b)			1,969		2,034,875
2.91%, 6/01/42 (b)			631		653,488
3.00%, 1/01/30-10/01/46 (c)			17,292		18,066,374
3.50%, 10/01/31-10/01/46 (c)			92,422		97,657,419

U.S. Government Sponsored Agency Securities		Par   (000)			Value
Mortgage-Backed Securities (continued)
4.00%, 8/01/40-10/01/46 (c)	USD		19,513		$	21,008,805
4.50%, 2/01/39-10/01/46 (c)			7,254			7,953,713
5.00%, 7/01/35-10/01/46 (c)			8,322			9,262,028
5.50%, 6/01/41			2,288			2,587,133
Ginnie Mae Mortgage-Backed Securities:
3.00%, 10/15/46 (c)			11,034			11,558,083
3.50%, 12/20/41-10/15/46 (c)			35,675			37,988,196
4.00%, 9/20/40-10/15/46 (c)			15,614			16,756,356
4.50%, 12/20/39-10/15/46 (c)			13,988			15,383,422
5.00%, 12/15/38-7/20/41			5,278			5,877,118
7.00%, 6/15/23-3/15/24			— (d	)		145
						601,953,519
Total U.S. Government Sponsored Agency Securities — 84.4%						638,607,854
U.S. Treasury Obligations
U.S. Treasury Bonds:
3.00%, 11/15/45 (e)			16,547			18,880,392
2.50%, 2/15/46-5/15/46 (e)			23,431			24,234,030
U.S. Treasury Inflation Indexed Notes:
0.13%, 4/15/21-7/15/26			20,352			20,736,226
0.63%, 1/15/26			8,232			8,657,717
U.S. Treasury Notes:
0.75%, 2/28/18-7/15/19 (e)			145,562			145,340,691
0.88%, 3/31/18 (e)			30,583			30,645,114
1.00%, 3/15/19 (e)			37,393			37,536,140
1.38%, 5/31/21-6/30/23 (e)			24,725			24,749,770
1.13%, 6/30/21-8/31/21 (e)			100,094			99,977,351
1.63%, 4/30/23-2/15/26 (e)			22,607			22,899,505
1.25%, 7/31/23			19,000			18,801,089
2.00%, 8/15/25			11,721			12,129,407
2.25%, 11/15/25			8,803			9,292,667
1.50%, 8/15/26			1,080			1,069,495
Total U.S. Treasury Obligations — 62.8%						474,949,594
Total Long-Term Investments (Cost — $1,218,225,131) — 162.1%					$	1,226,627,965
Short-Term Securities
Certificates of Deposit
Domestic — 0.3%
Wells Fargo Bank N.A., 1.34%, 9/22/17 (b)			1,930			1,929,826
Yankee — 1.5%(f)
Bank of Tokyo-Mitsubishi UFJ Ltd., New York, 1.43%, 8/17/17 (b)			1,930			1,933,260
Cooperatieve Rabobank UA, New York, 1.31%, 8/16/17 (b)			1,930			1,931,079
Credit Industriel et Commercial, New York, 1.41%, 8/16/17 (b)			1,930			1,932,783
Credit Suisse AG, New York, 1.58%, 8/16/17 (b)			950			951,381
Credit Suisse AG, New York, 1.61%, 8/24/17 (b)			960			961,275
Skandinaviska Enskilda Banken AB, New York, 1.29%, 8/17/17 (b)			1,930			1,930,722

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 65

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Certificates of Deposit		Par   (000)		Value
Yankee (continued)
Sumitomo Mitsui Banking Corp., New York, 1.43%, 8/18/17 (b)	USD		1,005	$	1,005,276
UBS AG, Stamford, 1.53%, 9/01/17			1,010		1,010,132
					11,655,908
Total Certificates of Deposit — 1.8%					13,585,734
Commercial Paper (g)
BNP Paribas SA, (New York Branch), 1.53%, 8/17/17 (b)			990		990,971
BPCE SA, 1.49%, 8/14/17			1,940		1,915,323
Mizuho Corporate Bank, (New York Branch), 1.37%, 8/16/17			1,910		1,886,079
Nordea Bank AB, 1.21%, 3/09/17			970		965,659
Norinchukin Bank, (New York Branch), 1.20%, 2/22/17 (b)			990		990,482
Sumitomo Mitsui Trust Bank Ltd., (New York Branch), 1.53%, 8/16/17 (b)			1,930		1,931,158
Svenska Handelsbanken AB, (New York Branch), 1.20%, 2/27/17 (b)			1,000		1,000,472
Swedbank AB, (New York Branch), 1.38%, 8/18/17 (b)			990		991,245
Total Commercial Paper — 1.4%					10,671,389
		Shares
Money Market Funds — 2.1%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (h)(i)			16,296,656		16,296,656
Total Short-Term Securities (Cost — $40,538,900) — 5.3%					40,553,779
Options Purchased
(Cost — $827,814) — 0.1%					569,088
Total Investments Before TBA Sale Commitments and Options Written (Cost — $1,259,591,845) — 167.5%					1,267,750,832

TBA Sale Commitments (c)		Par   (000)		Value
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/31	USD		5,834	$	(6,042,592	)
3.00%, 10/01/31-10/01/46			40,350		(41,976,135	)
3.50%, 10/01/31-10/01/46			32,755		(34,548,851	)
4.00%, 10/01/31-10/01/46			60,644		(65,000,165	)
4.50%, 10/01/31-10/01/46			29,855		(32,658,061	)
5.00%, 10/01/46			2,072		(2,300,994	)
5.50%, 10/01/46			2,144		(2,416,020	)
6.00%, 10/01/46			5,020		(5,752,501	)
Freddie Mac Mortgage-Backed Securities:
2.50%, 10/01/31			428		(443,381	)
3.00%, 10/01/46			10,300		(10,703,148	)
3.50%, 10/01/46			89,900		(94,796,441	)
4.00%, 10/01/46			6,540		(7,015,044	)
4.50%, 10/01/46			1,733		(1,897,466	)
5.00%, 10/01/46			5,250		(5,815,334	)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 10/15/46			8,000		(8,380,625	)
3.50%, 10/15/46			4,261		(4,529,163	)
4.00%, 10/15/46			453		(485,400	)
4.50%, 10/15/46			6,500		(7,176,252	)
Total TBA Sale Commitments (Proceeds — $331,470,130) — (43.8)%					(331,937,573	)
Options Written
(Premiums Received — $845,872) — (0.1)%					(466,982	)
Total Investments Net of TBA Sale Commitments and Options Written — 123.6%					935,346,277
Liabilities in Excess of Other Assets — (23.6)%					(178,535,877	)
Net Assets — 100.0%				$	756,810,400

      Notes to Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

See Notes to Financial Statements.

66 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

(c) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Barclays Capital, Inc.	$	(33,371,223	)		$(106,992	)
BNP Paribas Securities Corp.	$	2,320,202			$     1,583
Citigroup Global Markets, Inc.	$	(8,702,193	)		$     4,704
Credit Suisse Securities (USA) LLC	$	(5,418,104	)		$   36,579
Goldman Sachs & Co.	$	21,431,090			$   69,087
J.P. Morgan Securities LLC	$	(40,948,213	)		$  (80,122	)
Jefferies LLC	$	6,794,990			$     6,592
Merrill Lynch, Pierce, Fenner & Smith, Inc.	$	(4,139,233	)		$     9,431
Morgan Stanley & Co. LLC	$	2,399,905			$    (2,957	)
Nomura Securities International, Inc.	$	6,667,919			$     5,705
RBC Capital Markets, LLC	$	(15,508,144	)		$  (47,545	)
Wells Fargo Securities, LLC	$	(1,385,374	)		$  (18,776	)

(d) Amount is less than $500.

(e) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(f) Issuer is a U.S. branch of a foreign domiciled bank.

(g) Rates are discount rates or a range of discount rates at the time of purchase.

(h) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Net Activity			Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		6,093,315		(6,093,315	)		—		—		$19,673		$269
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		16,296,656			16,296,656		$16,296,656		1,330		—
									$16,296,656		$21,003		$269

(i) Current yield as of period end.

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

Counterparty

Interest Rate

Trade Date

Maturity Date1

Face     Value

Face Value     Including     Accrued     Interest

Type of  Non-Cash Underlying Collateral

Remaining Contractual Maturity of  the Agreements

Nomura Securities International, Inc.

0.35%

5/26/16

Open

$  19,900,000

$

19,925,151

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.53%

8/08/16

Open

19,153,153

19,168,943

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.53%

8/08/16

Open

20,139,900

20,156,504

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.44%

9/19/16

Open

30,961,250

30,966,548

U.S. Treasury Obligations

Open/Demand1

Credit Agricole Corporate and Investment Bank S.A.

0.44%

9/19/16

Open

18,928,750

18,931,989

U.S. Treasury Obligations

Open/Demand1

Amherst Pierpont Securities LLC

1.05%

9/30/16

10/03/16

11,731,268

11,732,294

U.S. Treasury Obligations

Overnight

Barclays Capital, Inc.

1.15%

9/30/16

10/03/16

44,406,839

44,411,095

U.S. Treasury Obligations

Overnight

Deutsche Bank Securities, Inc.

0.30%

9/30/16

10/03/16

26,867,000

26,867,672

U.S. Treasury Obligations

Overnight

Deutsche Bank Securities, Inc.

1.40%

9/30/16

10/03/16

37,626,706

37,631,096

U.S. Treasury Obligations

Overnight

J.P. Morgan Securities LLC

0.15%

9/30/16

10/03/16

4,010,006

4,010,056

U.S. Treasury Obligations

Overnight

Merrill Lynch, Pierce, Fenner & Smith, Inc.

0.89%

9/30/16

10/03/16

24,444,960

24,446,773

U.S. Treasury Obligations

Overnight

Total

$258,169,832

$

258,248,121

¹  Certain agreements have no stated maturity and can be terminated by either party at any time.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 67

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Contracts Long (Short)	Issue	Expiration	Notional Value			Unrealized    Appreciation  (Depreciation)
(23)	Euro-Bund	December 2016		USD	4,281,221		$	(29,219	)
(27)	Long Gilt British	December 2016		USD	4,558,211			4,603
104	U.S. Treasury Bonds (30 Year)	December 2016		USD	17,488,250			(109,343	)
(500)	U.S. Treasury Notes (2 Year)	December 2016		USD	109,234,375			(7,957	)
(18)	U.S. Treasury Notes (5 Year)	December 2016		USD	2,187,281			(5,895	)
182	U.S. Treasury Notes (10 Year)	December 2016		USD	23,864,750			(26,746	)
32	U.S. Ultra Treasury Bonds	December 2016		USD	5,884,000			(97,797	)
(11)	Euro Dollar	December 2017		USD	2,720,713			(152	)
Total							$	(272,506	)

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
COP	162,085,000	USD	55,000	Credit Suisse International		10/03/16	$	1,180
COP	162,141,650	USD	55,000	Credit Suisse International		10/03/16		1,200
USD	110,000	COP	327,229,100	Credit Suisse International		10/03/16		(3,420	)
BRL	353,210	USD	110,000	Bank of America N.A.		10/04/16		(1,520	)
BRL	324,750	USD	100,000	Goldman Sachs International		10/04/16		(261	)
BRL	362,687	USD	111,850	Goldman Sachs International		10/04/16		(460	)
BRL	582,066	USD	180,000	Goldman Sachs International		10/04/16		(1,232	)
BRL	2,139,873	USD	659,923	Goldman Sachs International		10/04/16		(2,712	)
BRL	367,455	USD	110,000	Royal Bank of Scotland PLC		10/04/16		2,855
CAD	491,141	USD	380,000	Barclays Bank PLC		10/04/16		(5,629	)
CAD	491,240	USD	380,000	Barclays Bank PLC		10/04/16		(5,553	)
EUR	238,721	USD	270,000	Citibank N.A.		10/04/16		(1,780	)
EUR	433,135	USD	490,000	Citibank N.A.		10/04/16		(3,342	)
GBP	286,944	USD	380,000	Barclays Bank PLC		10/04/16		(8,048	)
GBP	286,954	USD	380,000	JPMorgan Chase Bank N.A.		10/04/16		(8,035	)
HUF	210,789,268	USD	760,000	Citibank N.A.		10/04/16		8,785
JPY	38,113,198	USD	380,000	Barclays Bank PLC		10/04/16		(4,085	)
JPY	38,116,610	USD	380,000	Barclays Bank PLC		10/04/16		(4,051	)
MXN	359,480	USD	18,333	Bank of America N.A.		10/04/16		197
MXN	2,166,340	USD	110,000	Bank of America N.A.		10/04/16		1,672
MXN	357,728	USD	18,333	Citibank N.A.		10/04/16		107
MXN	357,766	USD	18,333	Citibank N.A.		10/04/16		109
MXN	359,808	USD	18,333	Citibank N.A.		10/04/16		214
MXN	2,123,323	USD	110,000	JPMorgan Chase Bank N.A.		10/04/16		(545	)
MXN	357,992	USD	18,333	UBS AG		10/04/16		121
MXN	359,850	USD	18,333	UBS AG		10/04/16		217
RUB	48,526,000	USD	760,000	JPMorgan Chase Bank N.A.		10/04/16		12,006
SEK	3,184,244	USD	380,000	Goldman Sachs International		10/04/16		(8,748	)
SEK	3,185,226	USD	380,000	Morgan Stanley & Co. International PLC		10/04/16		(8,633	)
TRY	2,246,712	USD	760,000	Goldman Sachs International		10/04/16		(11,970	)
USD	110,000	BRL	357,665	Goldman Sachs International		10/04/16		152
USD	110,000	BRL	365,255	Goldman Sachs International		10/04/16		(2,179	)

See Notes to Financial Statements.

68 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	140,000	BRL	458,150	Goldman Sachs International		10/04/16	$	(710	)
USD	151,850	BRL	504,447	Goldman Sachs International		10/04/16		(3,079	)
USD	183,000	BRL	594,201	Goldman Sachs International		10/04/16		505
USD	426,923	BRL	1,382,377	Royal Bank of Scotland PLC		10/04/16		2,359
USD	150,000	BRL	506,250	UBS AG		10/04/16		(5,483	)
USD	760,000	CAD	981,768	Goldman Sachs International		10/04/16		11,650
USD	760,000	EUR	677,936	Credit Suisse International		10/04/16		(1,709	)
USD	760,000	GBP	587,329	Deutsche Bank AG		10/04/16		(1,327	)
USD	760,000	HUF	207,187,400	Goldman Sachs International		10/04/16		4,352
USD	760,000	JPY	76,717,060	Goldman Sachs International		10/04/16		3,330
USD	5,000	MXN	97,372	Citibank N.A.		10/04/16		(19	)
USD	110,000	MXN	2,165,715	Citibank N.A.		10/04/16		(1,640	)
USD	380,000	RUB	25,034,400	BNP Paribas S.A.		10/04/16		(18,275	)
USD	380,000	RUB	25,059,100	Morgan Stanley & Co. International PLC		10/04/16		(18,668	)
USD	760,000	SEK	6,504,426	Barclays Bank PLC		10/04/16		1,646
USD	380,000	TRY	1,131,732	BNP Paribas S.A.		10/04/16		3,196
USD	380,000	TRY	1,131,550	Deutsche Bank AG		10/04/16		3,257
USD	380,000	ZAR	5,423,341	Bank of America N.A.		10/04/16		(14,904	)
USD	380,000	ZAR	5,420,614	Credit Suisse International		10/04/16		(14,705	)
ZAR	10,399,129	USD	760,000	Barclays Bank PLC		10/04/16		(2,781	)
BRL	2,452,140	USD	760,000	Royal Bank of Scotland PLC		10/05/16		(7,105	)
COP	786,645,000	USD	270,000	BNP Paribas S.A.		10/05/16		2,548
COP	639,100,000	USD	220,000	Royal Bank of Scotland PLC		10/05/16		1,428
COP	784,350,000	USD	270,000	Royal Bank of Scotland PLC		10/05/16		1,752
USD	380,000	BRL	1,239,940	Credit Suisse International		10/05/16		(706	)
USD	380,000	BRL	1,240,320	Deutsche Bank AG		10/05/16		(823	)
USD	490,000	COP	1,449,910,000	Royal Bank of Scotland PLC		10/05/16		(12,348	)
USD	270,000	COP	799,335,000	Standard Chartered Bank		10/05/16		(6,944	)
USD	3,560,791	EUR	3,192,000	Royal Bank of Scotland PLC		10/05/16		(25,816	)
USD	102,900	JPY	10,612,000	Barclays Bank PLC		10/05/16		(1,772	)
USD	103,510	JPY	10,612,000	UBS AG		10/05/16		(1,162	)
RUB	7,246,800	USD	110,000	Deutsche Bank AG		10/06/16		5,233
USD	110,000	RUB	7,189,600	BNP Paribas S.A.		10/06/16		(4,324	)
RUB	34,048,880	USD	520,446	BNP Paribas S.A.		10/11/16		20,309
RUB	20,540,320	USD	320,000	JPMorgan Chase Bank N.A.		10/11/16		6,215
USD	176,446	RUB	11,578,388	Deutsche Bank AG		10/11/16		(7,439	)
TWD	3,449,600	USD	110,000	Bank of America N.A.		10/12/16		87
TWD	6,850,800	USD	220,000	BNP Paribas S.A.		10/12/16		(1,370	)
USD	110,000	TWD	3,447,400	Morgan Stanley & Co. International PLC		10/12/16		(17	)
INR	22,004,400	USD	330,000	Royal Bank of Scotland PLC		10/13/16		(282	)
TWD	3,485,900	USD	110,000	HSBC Bank USA N.A.		10/13/16		1,249
USD	110,000	TWD	3,482,600	HSBC Bank USA N.A.		10/13/16		(1,144	)
USD	2,000	CLP	1,322,000	Royal Bank of Scotland PLC		10/17/16		(7	)
USD	161,000	CLP	108,916,500	State Street Bank and Trust Co.		10/17/16		(4,376	)
USD	124,000	COP	368,900,000	Royal Bank of Scotland PLC		10/18/16		(3,477	)
USD	158,629	GBP	120,000	Morgan Stanley & Co. International PLC		10/19/16		3,028
KRW	140,058,000	USD	124,000	Morgan Stanley & Co. International PLC		10/20/16		3,150
RUB	6,714,192	USD	103,200	Deutsche Bank AG		10/20/16		3,197
USD	124,000	KRW	139,190,000	JPMorgan Chase Bank N.A.		10/20/16		(2,362	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 69

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
TWD	64,196	USD	2,051	Royal Bank of Scotland PLC		10/21/16	$	(2	)
USD	171,051	TWD	5,417,767	Morgan Stanley & Co. International PLC		10/21/16		(1,890	)
MYR	737,100	USD	180,000	JPMorgan Chase Bank N.A.		10/24/16		(2,012	)
MYR	4,137	USD	1,000	Royal Bank of Scotland PLC		10/24/16		(1	)
JPY	17,963,938	USD	178,000	Royal Bank of Scotland PLC		10/26/16		(653	)
USD	55,000	ZAR	752,736	Goldman Sachs International		10/26/16		426
USD	55,000	ZAR	752,251	Morgan Stanley & Co. International PLC		10/26/16		461
RUB	7,062,000	USD	110,000	BNP Paribas S.A.		10/27/16		1,717
KRW	15,393,761	USD	13,918	UBS AG		10/28/16		56
KRW	35,934,383	USD	32,482	UBS AG		10/28/16		139
USD	46,400	KRW	51,156,000	Standard Chartered Bank		10/28/16		(39	)
BRL	16,566	USD	5,077	Royal Bank of Scotland PLC		11/03/16		(34	)
BRL	1,393,733	USD	426,923	Royal Bank of Scotland PLC		11/03/16		(2,628	)
USD	3,589,755	EUR	3,198,000	Royal Bank of Scotland PLC		11/03/16		(8,517	)
MXN	4,192,930	USD	215,000	Royal Bank of Scotland PLC		11/04/16		345
CNH	501,605	USD	75,000	BNP Paribas S.A.		11/07/16		(37	)
CNH	501,547	USD	75,000	Goldman Sachs International		11/07/16		(46	)
CNH	501,573	USD	75,000	Goldman Sachs International		11/07/16		(42	)
CNH	580,388	USD	86,800	Goldman Sachs International		11/07/16		(63	)
CNH	1,541,276	USD	232,000	Goldman Sachs International		11/07/16		(1,662	)
CNH	501,695	USD	75,000	Royal Bank of Canada		11/07/16		(24	)
USD	967,000	CNH	6,383,747	Deutsche Bank AG		11/07/16		12,973
USD	3,800	CNH	25,404	Morgan Stanley & Co. International PLC		11/07/16		3
USD	2,522,000	SAR	9,618,908	BNP Paribas S.A.		11/23/16		(38,331	)
USD	1,887,000	SAR	7,171,544	Citibank N.A.		11/23/16		(21,899	)
USD	2,560,000	SAR	9,758,720	Citibank N.A.		11/23/16		(37,546	)
USD	23,233,695	JPY	2,350,000,000	HSBC Bank PLC		12/12/16		(16,719	)
BRL	308,880	USD	90,000	BNP Paribas S.A.		12/21/16		2,671
BRL	178,060	USD	54,000	Goldman Sachs International		12/21/16		(578	)
BRL	116,644	USD	34,000	JPMorgan Chase Bank N.A.		12/21/16		996
BRL	60,507	USD	18,000	Nomura International PLC		12/21/16		153
BRL	238,572	USD	72,000	Royal Bank of Scotland PLC		12/21/16		(423	)
CAD	118,998	USD	90,000	BNP Paribas S.A.		12/21/16		758
CAD	46,960	USD	36,000	Royal Bank of Scotland PLC		12/21/16		(184	)
EUR	57,000	RUB	4,252,200	BNP Paribas S.A.		12/21/16		(2,036	)
EUR	95,760	RUB	7,202,732	Deutsche Bank AG		12/21/16		(4,342	)
EUR	39,600	SEK	377,182	Citibank N.A.		12/21/16		502
EUR	900	SEK	8,594	Standard Chartered Bank		12/21/16		9
EUR	81,000	USD	90,987	BNP Paribas S.A.		12/21/16		362
EUR	14,400	USD	16,254	Royal Bank of Scotland PLC		12/21/16		(14	)
EUR	165,600	USD	186,954	Royal Bank of Scotland PLC		12/21/16		(197	)
EUR	18,000	USD	20,149	Standard Chartered Bank		12/21/16		151
GBP	126,000	USD	163,107	HSBC Bank PLC		12/21/16		502
GBP	46,800	USD	61,881	JPMorgan Chase Bank N.A.		12/21/16		(1,112	)
GBP	130,000	USD	169,450	Royal Bank of Scotland PLC		12/21/16		(647	)
JPY	7,285,536	USD	72,000	BNP Paribas S.A.		12/21/16		121
JPY	4,496,713	USD	44,100	HSBC Bank PLC		12/21/16		414
JPY	379,744,735	USD	3,790,000	Nomura International PLC		12/21/16		(30,818	)
JPY	2,754,429	USD	27,000	Northern Trust Corp.		12/21/16		267

See Notes to Financial Statements.

70 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
KRW	79,596,000	USD	72,000	BNP Paribas S.A.		12/21/16	$	239
KRW	79,603,200	USD	72,000	Citibank N.A.		12/21/16		246
KRW	40,667,810	USD	37,000	HSBC Bank PLC		12/21/16		(91	)
KRW	79,606,800	USD	72,000	HSBC Bank PLC		12/21/16		249
KRW	80,481,600	USD	72,000	HSBC Bank PLC		12/21/16		1,043
KRW	204,692,256	USD	181,800	JPMorgan Chase Bank N.A.		12/21/16		3,974
MXN	1,102,942	USD	57,600	UBS AG		12/21/16		(1,241	)
NOK	449,231	USD	54,000	BNP Paribas S.A.		12/21/16		2,205
NOK	1,091,960	USD	133,200	BNP Paribas S.A.		12/21/16		3,419
NOK	385,570	USD	46,800	Morgan Stanley & Co. International PLC		12/21/16		1,440
NOK	298,746	USD	36,000	Royal Bank of Scotland PLC		12/21/16		1,377
NZD	63,900	USD	46,391	Royal Bank of Scotland PLC		12/21/16		(11	)
NZD	180,000	USD	130,245	Westpac Banking Corp.		12/21/16		401
RUB	853,414	EUR	11,400	JPMorgan Chase Bank N.A.		12/21/16		453
SEK	34,196	EUR	3,600	Goldman Sachs International		12/21/16		(57	)
USD	27,115	AUD	36,000	Goldman Sachs International		12/21/16		(385	)
USD	42,955	AUD	57,600	Goldman Sachs International		12/21/16		(1,045	)
USD	137,588	AUD	180,000	Goldman Sachs International		12/21/16		85
USD	55,217	AUD	72,000	Royal Bank of Scotland PLC		12/21/16		216
USD	90,000	BRL	294,957	BNP Paribas S.A.		12/21/16		1,506
USD	90,000	BRL	296,163	Royal Bank of Scotland PLC		12/21/16		1,145
USD	43,200	CAD	56,923	Goldman Sachs International		12/21/16		(214	)
USD	108,000	CAD	142,489	Royal Bank of Scotland PLC		12/21/16		(675	)
USD	40,651	EUR	36,000	BNP Paribas S.A.		12/21/16		51
USD	50,776	EUR	45,000	BNP Paribas S.A.		12/21/16		26
USD	80,795	EUR	72,000	Royal Bank of Scotland PLC		12/21/16		(404	)
USD	138,227	EUR	122,400	UBS AG		12/21/16		188
USD	172,028	GBP	130,000	Bank of America N.A.		12/21/16		3,225
USD	183,733	GBP	138,600	Bank of America N.A.		12/21/16		3,763
USD	47,140	GBP	36,000	Citibank N.A.		12/21/16		395
USD	46,961	GBP	36,000	HSBC Bank PLC		12/21/16		215
USD	140,627	GBP	108,000	HSBC Bank PLC		12/21/16		391
USD	70,668	GBP	54,000	JPMorgan Chase Bank N.A.		12/21/16		549
USD	3,600	JPY	364,419	Barclays Bank PLC		12/21/16		(7	)
USD	46,800	KRW	51,049,440	BNP Paribas S.A.		12/21/16		469
USD	46,400	KRW	52,346,160	Deutsche Bank AG		12/21/16		(1,108	)
USD	126,000	KRW	138,360,600	HSBC Bank PLC		12/21/16		427
USD	93,600	KRW	102,068,928	Standard Chartered Bank		12/21/16		965
USD	36,000	MXN	711,432	Citibank N.A.		12/21/16		(353	)
USD	48,600	MXN	942,131	JPMorgan Chase Bank N.A.		12/21/16		458
USD	61,200	MXN	1,132,353	Royal Bank of Scotland PLC		12/21/16		3,338
USD	144,000	NOK	1,168,718	Citibank N.A.		12/21/16		(2,222	)
USD	180,000	NOK	1,460,543	Citibank N.A.		12/21/16		(2,733	)
USD	2,676	NZD	3,600	Credit Suisse International		12/21/16		63
USD	105,318	NZD	144,000	Westpac Banking Corp.		12/21/16		801
USD	72,000	ZAR	1,025,982	BNP Paribas S.A.		12/21/16		(1,556	)
USD	90,000	ZAR	1,301,265	BNP Paribas S.A.		12/21/16		(3,292	)
USD	72,000	ZAR	1,002,401	Goldman Sachs International		12/21/16		135
USD	42,300	ZAR	616,071	JPMorgan Chase Bank N.A.		12/21/16		(1,868	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 71

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized    Appreciation  (Depreciation)
ZAR	1,016,064		USD	72,000	BNP Paribas S.A.		12/21/16		$	845
ZAR	1,331,460		USD	90,000	HSBC Bank PLC		12/21/16			5,457
ZAR	638,054		USD	43,200	UBS AG		12/21/16			2,544
INR	12,895,300		USD	190,000	UBS AG		12/23/16			921
Total									$	(263,179	)

      Exchange-Traded Options Purchased

Description	Put/ Call		Expiration Date			Strike Price		Contracts		Value
U.S. Treasury Notes (10 Year) Future		Put		10/21/16	USD		131.00		257	$	116,453
Euro Dollar Futures		Put		12/16/16	USD		98.50		1,132		205,175
Total										$	321,628

      OTC Options Purchased

Description

Put/ Call

Counterparty

Expiration Date

Strike Price

Notional Amount (000)

Value

USD Currency

Call

Goldman Sachs International

10/07/16

TWD

31.00

USD

220

$

2,616

USD Currency

Call

Goldman Sachs International

10/27/16

MXN

19.15

USD

320

7,682

USD Currency

Call

Goldman Sachs International

11/14/16

MXN

19.00

USD

230

8,537

USD Currency

Call

BNP Paribas S.A.

11/23/16

TWD

32.00

USD

220

886

USD Currency

Call

Deutsche Bank AG

11/23/16

MXN

19.90

USD

210

4,425

Morgan Stanley & Co.

USD Currency

Put

International PLC

10/18/16

MXN

19.30

USD

210

2,948

Morgan Stanley & Co.

USD Currency

Put

International PLC

11/10/16

INR

67.80

USD

350

5,820

Morgan Stanley & Co.

USD Currency

Put

International PLC

11/23/16

BRL

3.30

USD

180

5,039

USD Currency

Put

Deutsche Bank AG

12/01/16

INR

67.50

USD

210

2,723

Total

$

40,676

      Exchange-Traded Options Written

Description	Put/ Call	Expiration Date	Strike Price			Contracts	Value
Euro Dollar Futures	Put	12/16/16		USD	98.00	1,132	$	(21,225	)

      OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

30-Year Interest Rate Swap

Bank of America N.A.

Put

2.05%

Pay

3-month LIBOR

11/18/16

USD

11,256

$

55,902

5-Year Interest Rate Swap

Citibank N.A.

Put

1.35%

Pay

3-month LIBOR

1/09/17

USD

16,000

62,603

10-Year Interest Rate Swap

Citibank N.A.

Put

1.70%

Pay

3-month LIBOR

2/03/17

USD

10,200

85,998

Total

$

204,503

See Notes to Financial Statements.

72 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

      OTC Interest Rate Swaptions Written

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

10-Year Interest Rate Swap

Deutsche Bank AG

Call

1.50%

Pay

3-month LIBOR

2/09/18

USD

2,100

$

(59,741

)

2-Year Interest Rate Swap

Deutsche Bank AG

Call

0.90%

Pay

3-month LIBOR

4/05/18

USD

21,000

(76,246

)

2-Year Interest Rate Swap

Deutsche Bank AG

Call

0.80%

Pay

3-month LIBOR

4/12/18

USD

49,220

(147,907

)

10-Year Interest Rate Swap

Deutsche Bank AG

Put

2.50%

Receive

3-month LIBOR

2/09/18

USD

2,100

(16,425

)

2-Year Interest Rate Swap

Deutsche Bank AG

Put

1.90%

Receive

3-month LIBOR

4/05/18

USD

21,000

(37,474

)

2-Year Interest Rate Swap

Deutsche Bank AG

Put

1.80%

Receive

3-month LIBOR

4/12/18

USD

49,220

(107,964

)

Total

$

(445,757

)

      OTC Barrier Options Purchased

Description

Put/ Call

Type of Option

Counterparty

Expiration Date

Strike Price

Barrier Price

Notional Amount (000)

Value

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

CAD

1.43

CAD

1.43

USD

20

$

1,360

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

MXN

23.00

MXN

23.00

USD

13

921

Total

$

2,281

      OTC Credit Default Swaps — Buy Protection

Issuer	Pay Fixed Rate			Counterparty		Expiration Date		Notional Amount (000)			Value		Premiums   Paid		Unrealized Appreciation (Depreciation)
Federation of Malaysia		1.00	%		Barclays Bank PLC		12/20/21		USD	247		$  2,465		$  2,797		$   (332	)
Republic of Colombia		1.00	%		Barclays Bank PLC		12/20/21		USD	104		3,610		4,021		(411	)
Republic of Colombia		1.00	%		Barclays Bank PLC		12/20/21		USD	103		3,575		4,079		(504	)
Republic of Colombia		1.00	%		Citibank N.A.		12/20/21		USD	88		3,054		3,485		(431	)
					Morgan Stanley Capital
Republic of Colombia		1.00	%		Services LLC		12/20/21		USD	106		3,679		3,882		(203	)
Republic of the Philippines		1.00	%		Bank of America N.A.		12/20/21		USD	2,678		19,974		23,874		(3,900	)
United Mexican States		1.00	%		Barclays Bank PLC		12/20/21		USD	78		2,641		2,777		(136	)
United Mexican States		1.00	%		Barclays Bank PLC		12/20/21		USD	47		1,592		1,707		(115	)
United Mexican States		1.00	%		Citibank N.A.		12/20/21		USD	47		1,592		1,751		(159	)
					Morgan Stanley Capital
United Mexican States		1.00	%		Services LLC		12/20/21		USD	112		3,792		3,811		(19	)
					Morgan Stanley Capital
United Mexican States		1.00	%		Services LLC		12/20/21		USD	111		3,758		3,750		8
Total												$49,732		$55,934		$(6,202	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 73

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

Centrally Cleared Interest Rate Swaps
Fixed Rate	Floating Rate	Effective Date	Expiration Date	Notional Amount (000)			Unrealized    Appreciation  (Depreciation)
1.26%1	3-month  LIBOR	N/A	1/12/17		USD	43,005		$	(104,062	)
1.02%2	3-month LIBOR	1/05/173	9/30/18		USD	111,523			(24,013	)
1.37%1	3-month LIBOR	10/05/163	11/30/20		USD	26,130			(253,330	)
1.31%1	3-month LIBOR	12/30/163	8/15/23		USD	15,040			2,029
2.13%2	3-month LIBOR	N/A	8/25/25		USD	130			8,166
1.75%1	3-month LIBOR	12/30/163	2/15/36		USD	5,863			(15,776	)
2.38%1	3-month LIBOR	N/A	4/24/45		USD	1,225			(185,066	)
2.39%1	3-month LIBOR	N/A	4/24/45		USD	1,220			(187,455	)
2.83%2	3-month LIBOR	N/A	7/10/45		USD	2,350			601,396
Total								$	(158,111	)

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

³  Forward swap.

OTC Interest Rate Swaps
Fixed Rate	Floating Rate		Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized    Appreciation  (Depreciation)
13.13%1		1-day BZDIOVER		Bank of America N.A.		7/03/17		BRL	1,630		$    (626	)		—			$    (626	)
12.93%1		1-day BZDIOVER		Citibank N.A.		7/03/17		BRL	3,258		(276	)		—			(276	)
13.11%1		1-day BZDIOVER		Citibank N.A.		7/03/17		BRL	1,956		(665	)		—			(665	)
12.85%1		1-day BZDIOVER		JPMorgan Chase Bank N.A.		7/03/17		BRL	120		4			—			4
11.50%2		1-day BZDIOVER		Bank of America N.A.		1/02/19		BRL	8,538		(1,556	)		—			(1,556	)
12.03%2		1-day BZDIOVER		Bank of America N.A.		1/02/19		BRL	1,368		3,511			—			3,511
12.02%2		1-day BZDIOVER		Bank of America N.A.		1/02/19		BRL	1,330		3,326			—			3,326
11.68%2		1-day BZDIOVER		Bank of America N.A.		1/02/20		BRL	1,373		2,600			—			2,600
11.65%2		1-day BZDIOVER		Citibank N.A.		1/02/20		BRL	1,100		1,778			—			1,778
11.93%2		1-day BZDIOVER		JPMorgan Chase Bank N.A.		1/02/20		BRL	1,069		4,585			—			4,585
11.88%2		1-day BZDIOVER		JPMorgan Chase Bank N.A.		1/02/20		BRL	1,051		4,026			—			4,026
11.38%2		1-day BZDIOVER		JPMorgan Chase Bank N.A.		1/02/20		BRL	78		(28	)		—			(28	)
6.32%2		28-day MXIBTIIE		Goldman Sachs International		8/06/25		MXN	5,716		(144	)		$(25	)		(119	)
6.31%1		28-day MXIBTIIE		Deutsche Bank AG		8/11/25		MXN	7,502		649			34			615
Total											$17,184			$    9			$17,175

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

OTC Total Return — Volatility Swaps
Reference Entity	Volatility Strike Price		Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid		Unrealized   Depreciation
EUR Currency		9.20%1		JPMorgan Chase Bank N.A.		10/13/16		EUR	5,490		$(20,488	)		—		$(20,488	)
EUR Currency		9.00%1		BNP Paribas S.A.		12/13/16		EUR	5,636		(16,385	)		$1,411		(17,796	)
EUR Currency		9.15%1		BNP Paribas S.A.		12/13/16		EUR	5,561		(19,606	)		—		(19,606	)
EUR Currency		9.08%1		Goldman Sachs International		12/13/16		EUR	5,564		(17,896	)		—		(17,896	)
Total											$(74,375	)		$1,411		$(75,786	)

¹  At expiration, the Fund receives the difference between the realized volatility and predefined variance strike price multiplied by the notional amount.

See Notes to Financial Statements.

74 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

OTC Total Return Swaps
Reference Entity	Floating Rate		Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized    Appreciation  (Depreciation)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR1		Credit Suisse International		1/12/45		USD	415		$(3,765	)		$   161			$(3,926	)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR1		Credit Suisse International		1/12/45		USD	398		(3,611	)		1,412			(5,023	)
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR2		Credit Suisse International		1/12/45		USD	407		3,688			(511	)		4,199
Return on Markit IOS 3.50%, 30-year, fixed rate Fannie Mae		1-month LIBOR2		Credit Suisse International		1/12/45		USD	407		3,688			1,232			2,456
Total											—			$2,294			$(2,294	)

¹  Fund receives the total return of the reference entity and pays the floating rate.

²  Fund pays the total return of the reference entity and receives the floating rate.

      Transactions in Options Written for the Year Ended September 30, 2016

	Calls				Puts
		Notional (000)				Notional (000)
	Contracts	USD	Premiums         Received		Contracts	USD	Premiums Received
Outstanding options, beginning of year	—	18,700	$	406,724	—	24,600	$	681,585
Options written	623	82,780		971,417	1,945	217,811		1,217,280
Options exercised	—	(10,000)		(61,334)	—	—		—
Options expired	(109)	—		(21,219)	(701)	—		(54,994	)
Options closed	(514)	(19,160)		(864,005)	(112)	(170,091)		(1,429,582	)
Outstanding options, end of year	—	72,320	$	431,583	1,132	72,320	$	414,289

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 75

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity   Contracts	Credit Contracts		Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—		—	—		—	$	4,603	—	$	4,603
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—		—	—		$173,556		—	—		173,556
Options purchased	Investments at value — unaffiliated2	—		—	—		42,957		526,131	—		569,088
Swaps — centrally cleared	Net unrealized appreciation1	—		—	—		—		611,591	—		611,591
Swaps — OTC	Unrealized appreciation on OTC swaps; Swap premiums paid	—		$55,942	—		—		31,350	—		87,292
Total		—		$55,942	—		$216,513	$	1,173,675	—	$	1,446,130

Liabilities — Derivative Financial Instruments		Commodity   Contracts	Credit Contracts		Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts	Total
Futures contracts	Net unrealized depreciation1	—		—	—		—		$   277,109	—		$   277,109
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—		—	—		$436,735		—	—		436,735
Options written	Options written at value	—		—	—		—		466,982	—		466,982
Swaps — centrally cleared	Net unrealized depreciation1	—		—	—		—		769,702	—		769,702
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received	—		$6,210	—		—		88,541	—		94,751
Total		—		$6,210	—		$436,735		$1,602,334	—		$2,045,279

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity       Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts	Total
Futures contracts		—		—		—		—	$	(2,498,507)	—	$	(2,498,507	)
Forward foreign currency exchange contracts		—		—		—		$  (30,224)		—	—		(30,224	)
Options purchased1		—		—		—		(9,569)		(551,892)	—		(561,461	)
Options written		—		—		—		—		309,717	—		309,717
Swaps		—		$ 1,341		—		—		(821,182)	—		(819,841	)
Total		—		$ 1,341		—		$  (39,793)	$	(3,561,864)	—	$	(3,600,316	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		—		—		—		—	$	921,577	—	$	921,577
Forward foreign currency exchange contracts		—		—		—		$(455,411)		—	—		(455,411	)
Options purchased2		—		—		—		13,593		(193,623)	—		(180,030	)
Options written		—		—		—		—		674,950	—		674,950
Swaps		—		$(6,202)		—		—		(286,408)	—		(292,610	)
Total		—		$(6,202)		—		$(441,818)	$	1,116,496	—	$	668,476

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

76 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

         Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	79,501,097
Average notional value of contracts — short	$	207,545,270
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	39,615,434
Average amounts sold — in USD	$	19,008,097
Options:
Average value of option contracts purchased	$	236,558
Average value of option contracts written	$	64,760
Average notional value of swaption contracts purchased	$	13,540,250
Average notional value of swaption contracts written	$	82,575,000
Credit default swaps:
Average notional value — buy protection	$	930,250
Interest rate swaps:
Average notional value — pays fixed rate	$	107,878,645
Average notional value — receives fixed rate	$	34,709,885
Total return swaps:
Average notional value	$	7,094,947

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

         Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) are as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	19,998		$	262,211
Forward foreign currency exchange contracts		173,556			436,735
Options		569,088	1		466,982
Swaps — Centrally cleared		45,407			—
Swaps — OTC2		87,292			94,751
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	895,341		$	1,260,679
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(387,033	)		(283,436	)
Total derivative assets and liabilities subject to an MNA	$	508,308		$	977,243

¹ Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedules of Investments.

² Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 77

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available   for Offset1			Non-cash Collateral Received	Cash Collateral Received			Net Amount of Derivative Assets2
Bank of America N.A.	$	98,157	$	(22,506)		—		—		$	75,651
Barclays Bank PLC		17,027		(17,027)		—		—			—
BNP Paribas S.A.		42,739		(42,739)		—		—			—
Citibank N.A.		165,973		(73,065)		—		—			92,908
Credit Suisse International		11,903		(11,903)		—		—			—
Deutsche Bank AG		32457		(32,457)		—		—			—
Goldman Sachs International		39470		(39,470)		—		—			—
HSBC Bank PLC		8698		(8,698)		—		—			—
HSBC Bank USA N.A.		1249		(1,144)		—		—			105
JPMorgan Chase Bank N.A.		33266		(33,266)		—		—			—
Morgan Stanley & Co. International PLC		24170		(24,170)		—		—			—
Morgan Stanley Capital Services LLC		11451		(222)		—		—			11,229
Nomura International PLC		153		(153)		—		—			—
Northern Trust Corp.		267		—		—		—			267
Royal Bank of Scotland PLC		14,815		(14,815)		—		—			—
Standard Chartered Bank		1,125		(1,125)		—		—			—
UBS AG		4,186		(4,186)		—		—			—
Westpac Banking Corp.		1,202		—		—		—			1,202
Total	$	508,308	$	(326,946)		—		—		$	181,362
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available   for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged3			Net Amount of Derivative Liabilities4
Bank of America N.A.	$	22,506	$	(22,506	)	—		—			—
Barclays Bank PLC		33,424		(17,027	)	—		—		$	16,397
BNP Paribas S.A.		106,623		(42,739	)	—		—			63,884
Citibank N.A.		73,065		(73,065	)	—		—			—
Credit Suisse International		30,000		(11,903	)	—		—			18,097
Deutsche Bank AG		460,796		(32,457	)	—	$	(428,339	)		—
Goldman Sachs International		53,483		(39,470	)	—		—			14,013
HSBC Bank PLC		16,810		(8,698	)	—		—			8,112
HSBC Bank USA N.A.		1,144		(1,144	)	—		—			—
JPMorgan Chase Bank N.A.		36450		(33,266	)	—		—			3,184
Morgan Stanley & Co. International PLC		29208		(24,170	)	—		—			5,038
Morgan Stanley Capital Services LLC		222		(222	)	—		—			—
Nomura International PLC		30818		(153	)	—		—			30,665
Royal Bank of Canada		24		—		—		—			24
Royal Bank of Scotland PLC		63,425		(14,815	)	—		—			48,610
Standard Chartered Bank		6,983		(1,125	)	—		—			5,858
State Street Bank and Trust Co.		4,376		—		—		—			4,376
UBS AG		7,886		(4,186	)	—		(3,700	)		—
Total	$	977,243	$	(326,946	)	—	$	(432,039	)	$	218,258

 ¹ The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

 ² Net amount represents the net amount receivable from the counterparty in the event of default.

 ³ Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

 ⁴ Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statement of Assets and Liabilities.

See Notes to Financial Statements.

78 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock U.S. Government Bond Portfolio

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy.

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	42,429,125		$	7,587,617	$	50,016,742
Corporate Bonds		—			25,057,633			—		25,057,633
Foreign Agency Obligations		—			85,119			—		85,119
Foreign Government Obligations		—			3,891,467			—		3,891,467
Non-Agency Mortgage-Backed Securities		—			33,998,521			—		33,998,521
Project Loans		—			—			21,035		21,035
U.S. Government Sponsored Agency Securities		—			638,592,778			15,076		638,607,854
U.S. Treasury Obligations		—			474,949,594			—		474,949,594
Short-Term Securities:
Certificates of Deposit		—			13,585,734			—		13,585,734
Commercial Paper		—			10,671,389			—		10,671,389
Money Market Funds	$	16,296,656			—			—		16,296,656
Options Purchased:
Foreign currency exchange contracts		—			42,957			—		42,957
Interest rate contracts		321,628			204,503			—		526,131
Liabilities:
Investments:
TBA Sale Commitments		—			(331,937,573	)		—		(331,937,573	)
Total	$	16,618,284		$	911,571,247		$	7,623,728	$	935,813,259
Derivative Financial Instruments1
Assets:
Credit contracts		—		$	8			—	$	8
Foreign currency exchange contracts		—			173,556			—		173,556
Interest rate contracts	$	4,603			638,691			—		643,294
Liabilities:
Credit contracts		—			(6,210	)		—		(6,210	)
Foreign currency exchange contracts		—			(436,735	)		—		(436,735	)
Interest rate contracts		(298,334	)		(1,303,464	)		—		(1,601,798	)
Total	$	(293,731	)	$	(934,154	)		—	$	(1,227,885	)

¹  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 79

Schedule of Investments (concluded) BlackRock U.S. Government Bond Portfolio

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
	Level 1		Level 2			Level 3	Total
Assets:
Foreign currency at value	$	24,091,909		—		—	$	24,091,909
Cash pledged:
Collateral — OTC derivatives		740,000		—		—		740,000
Futures contracts		462,650		—		—		462,650
Centrally cleared swaps		766,560		—		—		766,560
Liabilities:
Bank overdraft		—	$	(90,929	)	—		(90,929	)
Reverse repurchase agreements		—		(258,248,121	)	—		(258,248,121	)
Cash received as collateral for reverse repurchase agreements		—		(447,000	)	—		(447,000	)
Total	$	26,061,119	$	(258,786,050	)	—	$	(232,724,931	)

During the year ended September 30, 2016, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset-Backed Securities			Non-Agency Mortgage-Backed Securities			Project Loans			U.S. Government Sponsored Agency Securities			Total
Assets:
Opening Balance, as of September 30, 2015	$	13,024,300		$	1,413,438		$	25,281			—		$	14,463,019
Transfers out of Level 31		(8,932,500	)		(1,413,438	)		—			—			(10,345,938	)
Accrued discounts/premiums		414			—			(46	)		—			368
Net realized gain (loss)		—			—			(48	)		—			(48	)
Net change in unrealized appreciation (depreciation)2,3		11,178			—			(369	)	$	(2,373	)		8,436
Purchases		3,484,225			—			—			17,449			3,501,674
Sales		—			—			(3,783	)		—			(3,783	)
Closing Balance, as of September 30, 2016	$	7,587,617			—		$	21,035		$	15,076		$	7,623,728
Net change in unrealized appreciation (depreciation) on investments still held at September 30, 20163	$	11,178			—		$	(369	)	$	(2,373	)	$	8,436

¹  As of September 30, 2015, the Fund used significant unobservable inputs in determining the value of certain investments. As of September 30, 2016, the Fund used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

²  Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

³  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at September 30, 2016 is generally due to investments no longer held or categorized as Level 3 at period end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

80 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Assets and Liabilities

September 30, 2016	BlackRock Credit Strategies Income Fund			BlackRock GNMA Portfolio			BlackRock Inflation Protected Bond Portfolio1			BlackRock Investment Grade Bond Portfolio			BlackRock U.S. Government Bond Portfolio
Assets
Investments at value — unaffiliated2	$	342,450,039		$	1,183,751,902			$2,726,502,156		$	80,181,599			$1,251,454,176
Investments at value — affiliated3		17,708,191			41,932,918			18,480,276			7,580,531			16,296,656
Cash		1,522,147			499,061			94,000			—			—
Cash pledged:
Collateral — OTC derivatives		—			—			—			—			740,000
Futures contracts		68,000			367,310			5,943,820			127,390			462,650
Centrally cleared swaps		52,000			—			2,232,400			188,190			766,560
Foreign currency at value4		270,607			—			14,715,291			—			24,091,909
Receivables:
Investments sold		18,288,705			—			3,377,319			10,998,738			6,376,170
Options written		—			—			158,079			—			—
TBA sale commitments		—			224,720,431			—			—			331,470,130
Capital shares sold		9,983,111			5,354,697			4,429,450			88,115			1,573,773
Dividends — affiliated		5,540			5,623			3,443			1,228			1,293
Interest		2,951,513			2,542,788			6,770,949			694,639			2,692,168
From the Manager		73,949			55,702			326,037			3,287			63,258
Principal paydown		—			59,007			—			—			88,435
Variation margin on futures contracts		46,844			126,941			1,808,639			3,461			19,998
Variation margin on centrally cleared swaps		—			—			405,038			6,478			45,407
Inflation rate caps premiums paid		—			—			11,387			—			—
Swap premiums paid		—			2,973			153,177			29,155			60,184
Unrealized appreciation on:
Forward foreign currency exchange contracts		9,346			—			170,818			—			173,556
OTC swaps		—			7,049			301,473			30,134			27,108
Inflation rate caps		—			—			1,011,108			—			—
Unfunded floating rate loan interests		658			—			—			—			—
Prepaid expenses		21,476			56,847			63,307			19,514			50,788
Other assets		—			—			2,029			18,702			27,619
Total assets		393,452,126			1,459,483,249			2,786,960,196			99,971,161			1,636,481,838
Liabilities
Bank overdraft		—			—			—			—			90,929
Cash received:
Collateral — reverse repurchase agreements		—			77,000			1,142,000			—			447,000
Collateral — OTC derivatives		—			—			3,050,000			—			—
Collateral — TBA commitments		—			76,000			—			—			—
Options written at value5		—			—			5,282,200			15,040			466,982
TBA sale commitments at value6		—			225,317,301			—			—			331,937,573
Payables:
Investments purchased		21,806,305			381,990,314			15,921,672			30,083			281,329,211
Swaps		—			—			—			4,362			25,422
Reverse repurchase agreements		—			6,255,686			206,372,861			—			258,248,121
Capital shares redeemed		2,613,274			2,047,920			7,783,612			34,330			4,793,170
Income dividends		171,291			554,581			17,947			40,734			503,592
Investment advisory fees		92,605			273,608			522,614			11,336			275,131
Officer’s and Trustees’ fees		5,460			7,832			16,801			4,373			7,895
Other accrued expenses		221,957			335,129			1,197,345			118,415			525,796
Other affiliates		12,223			105,301			144,635			3,743			41,245
Service and distribution fees		48,501			134,602			250,244			5,774			185,674
Variation margin on futures contracts		18,141			74,906			1,130,929			54,554			262,211
Variation margin on centrally cleared swaps		500			—			—			—			—
Inflation rate caps premiums received		—			—			1,014,650			—			—
Swap premiums received		1,085			541			—			126,671			536
Unrealized depreciation on:
Forward foreign currency exchange contracts		26,599			—			2,193,445			—			436,735
OTC swaps		7,108			9,481			2,445,903			119,672			94,215
Inflation rate caps		—			—			11,375			—			—
Total liabilities		25,025,049			617,260,202			248,498,233			569,087			879,671,438
Net Assets	$	368,427,077		$	842,223,047			$2,538,461,963		$	99,402,074			$   756,810,400
Net Assets Consist of
Paid-in capital	$	374,023,988		$	874,847,370			$2,491,877,093		$	96,718,534			$   786,143,928
Undistributed (distributions in excess of) net investment income		532,089			(552,151	)		(31,282,246	)		262,464			(476,532	)
Accumulated net realized loss		(6,404,090	)		(46,688,156	)		(107,455,891	)		(947,062	)		(36,133,334	)
Net unrealized appreciation (depreciation)		275,090			14,615,984			185,323,007			3,368,138			7,276,338
Net Assets	$	368,427,077		$	842,223,047			$2,538,461,963		$	99,402,074			$   756,810,400
1      Consolidated Statement of Assets and Liabilities.
2     Investments at cost — unaffiliated	$	342,281,396		$	1,168,193,039			$2,542,010,062		$	76,715,838			$1,243,295,189
3     Investments at cost — affiliated	$	17,657,638		$	41,932,918			$     18,480,276		$	7,580,531			$     16,296,656
4     Foreign currency at cost	$	271,810			—			$     14,739,870			—			$     24,157,850
5     Premiums received		—			—			$       9,370,695		$	18,314			$          845,872
6     Proceeds from TBA sale commitments		—		$	224,720,431			—			—			$   331,470,130

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 81

Statements of Assets and Liabilities (concluded)

September 30, 2016	BlackRock Credit Strategies Income Fund		BlackRock GNMA Portfolio		BlackRock Inflation Protected Bond Portfolio1		BlackRock Investment Grade Bond Portfolio		BlackRock U.S. Government Bond Portfolio
Net Asset Value
Institutional
Net assets	$	218,737,757	$	457,729,580		$1,584,438,557	$	15,100,119	$	156,864,555
Shares outstanding2		21,577,918		46,302,715		145,512,105		1,495,697		14,577,668
Net asset value	$	10.14	$	9.89		$              10.89	$	10.10	$	10.76
Service
Net assets		—	$	12,129,407		$     44,564,778		—	$	4,452,468
Shares outstanding2		—		1,228,915		4,139,051		—		414,014
Net asset value		—	$	9.87		$              10.77		—	$	10.75
Investor A
Net assets	$	120,166,752	$	256,577,207		$   358,181,894	$	29,957,473	$	463,530,463
Shares outstanding2		11,858,216		25,845,780		33,625,515		2,967,090		42,977,353
Net asset value	$	10.13	$	9.93		$              10.65	$	10.10	$	10.79
Investor B1
Net assets		—		—		—		—	$	140,943
Shares outstanding2		—		—		—		—		13,116
Net asset value		—		—		—		—	$	10.75
Investor C
Net assets	$	29,321,409	$	96,577,721		$   197,741,148		—	$	51,545,309
Shares outstanding2		2,892,126		9,772,293		19,079,573		—		4,785,613
Net asset value	$	10.14	$	9.88		$              10.36		—	$	10.77
Investor C1
Net assets		—		—		—		—	$	54,029,257
Shares outstanding2		—		—		—		—		5,017,812
Net asset value		—		—		—		—	$	10.77
Class K
Net assets	$	201,159	$	19,209,132		$   353,535,586	$	54,344,482		—
Shares outstanding2		19,841		1,949,709		33,002,499		5,370,906		—
Net asset value	$	10.14	$	9.85		$              10.71	$	10.12		—
Class R
Net assets		—		—		—		—	$	26,247,405
Shares outstanding2		—		—		—		—		2,433,919
Net asset value		—		—		—		—	$	10.78

¹  Consolidated Statement of Assets and Liabilities.

²  Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.

82 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Operations

Year Ended September 30, 2016	BlackRock Credit Strategies Income Fund			BlackRock GNMA Portfolio			BlackRock Inflation Protected Bond Portfolio1			BlackRock Investment Grade Bond Portfolio			BlackRock U.S. Government Bond Portfolio
Investment Income
Interest	$	17,632,716		$	19,540,520		$	38,757,208	2	$	2,875,582		$	19,219,478
Dividends — unaffiliated		—			—			—			62,294			—
Dividends — affiliated		74,918			100,108			62,630			18,190			21,003
Total income		17,707,634			19,640,628			38,819,838			2,956,066			19,240,481
Expenses
Investment advisory		1,781,252			3,216,813			7,721,959			305,339			3,921,173
Service and distribution — class specific		549,146			1,613,180			3,303,305			60,323			2,324,315
Transfer agent — class specific		325,976			879,228			3,745,048			49,914			1,396,435
Administration		151,406			334,181			1,015,245			37,077			326,194
Administration — class specific		71,253			160,763			530,646			17,439			156,935
Custodian		20,784			92,228			141,600			13,731			141,102
Registration		90,674			109,318			111,271			51,748			134,278
Professional		158,278			125,251			184,032			108,386			141,298
Accounting services		78,070			159,409			410,151			24,268			156,214
Printing		50,633			73,068			203,630			30,090			73,514
Officers and Trustees		24,677			31,652			58,996			20,665			31,331
Offering		10,234			—			—			—			—
Miscellaneous		147,370			29,350			129,275			16,032			53,238
Recoupment of past waived fees — class specific		6			389			112			—			1,091
Total expenses excluding interest expense		3,459,759			6,824,830			17,555,270			735,012			8,857,118
Interest expense3		—			142,641			1,725,445			—			868,488
Total expenses		3,459,759			6,967,471			19,280,715			735,012			9,725,606
Less:
Fees waived by the Manager		(153,627	)		(56,407	)		(1,486,579	)		(214,688	)		(580,442	)
Administration fees waived — class specific		(70,807	)		(99,527	)		(505,848	)		(17,196	)		(147,705	)
Transfer agent fees waived — class specific		(2,145	)		(21,210	)		(5,336	)		(579	)		(34,019	)
Transfer agent fees reimbursed — class specific		(252,126	)		(300,929	)		(984,254	)		(12,238	)		(393,141	)
Total expenses after fees waived and reimbursed		2,981,054			6,489,398			16,298,698			490,311			8,570,299
Net investment income		14,726,580			13,151,230			22,521,140			2,465,755			10,670,182
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(3,933,932	)		12,800,843			(57,065,879	)		301,433			13,404,261
Capital gain distributions received from affiliated underlying funds		675			322			903			130			269
Options written		—			—			20,537,688			100,814			309,717
Futures contracts		(573,251	)		(3,006,294	)		(15,785,153	)		710,609			(2,498,507	)
Swaps		885,300			(439,749	)		(7,252,901	)		(284,216	)		(819,841	)
Foreign currency transactions		211,280			—			(5,311,897	)		(199	)		439,701
		(3,409,928	)		9,355,122			(64,877,239	)		828,571			10,835,600
Net change in unrealized appreciation (depreciation) on:
Investments		9,125,687			2,861,379			198,044,901			3,615,112			3,659,304
Options written		—			—			(3,436,327	)		(44,498	)		674,950
Futures contracts		75,021			696,605			1,890,110			(108,521	)		921,577
Inflation rate caps and floors		—			—			76,558			—			—
Swaps		(3,975	)		(339,384	)		(3,197,352	)		55,770			(292,610	)
Unfunded floating rate loan interests		875			—			—			—			—
Foreign currency translations		(107,506	)		—			(6,673,514	)		(14	)		(509,536	)
		9,090,102			3,218,600			186,704,376			3,517,849			4,453,685
Net realized and unrealized gain		5,680,174			12,573,722			121,827,137			4,346,420			15,289,285
Net Increase in Net Assets Resulting from Operations	$	20,406,754		$	25,724,952		$	144,348,277		$	6,812,175		$	25,959,467

¹  Consolidated Statement of Operations.

²  Includes net inflationary and deflationary adjustments. See Note 4 of the Notes to Financial Statements.

³  See Note 4 of the Notes to Financial Statements for details of borrowings.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 83

Statements of Changes in Net Assets

	BlackRock Credit Strategies Income Fund						BlackRock GNMA Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	14,726,580		$	10,962,975		$	13,151,230		$	9,290,174
Net realized gain (loss)		(3,409,928	)		(1,822,595	)		9,355,122			1,671,794
Net change in unrealized appreciation (depreciation)		9,090,102			(7,839,545	)		3,218,600			5,292,154
Net increase in net assets resulting from operations		20,406,754			1,300,835			25,724,952			16,254,122
Distributions to Shareholders1
From net investment income:
Institutional		(9,452,445	)		(6,831,208	)		(12,506,628	)		(10,037,829	)
Service		—			—			(584,376	)		(923,948	)
Investor A		(4,900,568	)		(3,863,741	)		(5,602,714	)		(3,307,380	)
Investor B		—			—			—			(8,580	)
Investor C		(879,281	)		(759,617	)		(1,748,141	)		(1,416,372	)
Class K		(1,455	)		—			(502,155	)		(294,781	)
From net realized gain:
Institutional		—			(162,248	)		—			—
Investor A		—			(113,453	)		—			—
Investor C		—			(29,719	)		—			—
From return of capital:
Institutional		—			—			(129,074	)		(143,892	)
Service		—			—			(5,725	)		(13,245	)
Investor A		—			—			(60,903	)		(47,411	)
Investor B		—			—			—			(123	)
Investor C		—			—			(17,496	)		(20,303	)
Class K		—			—			(5,332	)		(4,226	)
Decrease in net assets resulting from distributions to shareholders		(15,233,749	)		(11,759,986	)		(21,162,544	)		(16,218,090	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		18,744,713			124,065,239			84,651,012			25,992,928
Net Assets
Total increase in net assets		23,917,718			113,606,088			89,213,420			26,028,960
Beginning of year		344,509,359			230,903,271			753,009,627			726,980,667
End of year	$	368,427,077		$	344,509,359		$	842,223,047		$	753,009,627
Undistributed (distributions in excess of) net investment income, end of year	$	532,089		$	530,078		$	(552,151	)	$	(783,392	)

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

84 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Changes in Net Assets (continued)

	BlackRock Inflation  Protected Bond Portfolio						BlackRock Investment Grade Bond Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	20161			2015			2016			2015
Operations
Net investment income	$	22,521,140		$	13,715,231		$	2,465,755		$	2,271,918
Net realized gain (loss)		(64,877,239	)		(1,600,946	)		828,571			771,333
Net change in unrealized appreciation (depreciation)		186,704,376			(97,435,209	)		3,517,849			(2,631,735	)
Net increase (decrease) in net assets resulting from operations		144,348,277			(85,320,924	)		6,812,175			411,516
Distributions to Shareholders2
From net investment income:
Institutional		(31,554,712	)		(15,091,546	)		(317,004	)		(266,946	)
Service		(764,479	)		(544,814	)		—			—
Investor A		(8,774,978	)		(6,650,675	)		(598,103	)		(415,837	)
Investor B		—			(10,717	)		—			—
Investor C		(4,229,178	)		(3,398,886	)		—			—
Class K		(6,519,767	)		(4,308,103	)		(1,474,218	)		(1,482,528	)
From return of capital:
Institutional Class		(16,680,675	)		—			—			—
Service Class		(419,821	)		—			—			—
Investor A Class		(3,603,689	)		—			—			—
Investor C Class		(1,637,519	)		—			—			—
Class K		(4,086,995	)		—			—			—
Decrease in net assets resulting from distributions to shareholders		(78,271,813	)		(30,004,741	)		(2,389,325	)		(2,165,311	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(411,554,423	)		449,825,314			15,452,106			3,095,907
Net Assets
Total increase (decrease) in net assets		(345,477,959	)		334,499,649			19,874,956			1,342,112
Beginning of year		2,883,939,922			2,549,440,273			79,527,118			78,185,006
End of year	$	2,538,461,963		$	2,883,939,922		$	99,402,074		$	79,527,118
Undistributed (distributions in excess of) net investment income, end of year	$	(31,282,246	)	$	36,682,552		$	262,464		$	249,598

¹  Consolidated Statement of Changes in Net Assets.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 85

Statements of Changes in Net Assets (concluded)

	BlackRock U.S. Government Bond Portfolio
	Year Ended September 30,
Increase (Decrease) in Net Assets:	2016			2015
Operations
Net investment income	$	10,670,182		$	11,279,739
Net realized gain		10,835,600			4,535,451
Net change in unrealized appreciation (depreciation)		4,453,685			4,597,807
Net increase in net assets resulting from operations		25,959,467			20,412,997
Distributions to Shareholders1
From net investment income:
Institutional		(3,956,253	)		(3,471,914	)
Service		(88,461	)		(81,582	)
Investor A		(10,418,053	)		(10,439,057	)
Investor B		—			(6,313	)
Investor B1		(3,402	)		(21,361	)
Investor C		(687,889	)		(638,843	)
Investor C1		(950,943	)		(1,080,088	)
Class R		(448,691	)		(388,362	)
Decrease in net assets resulting from distributions to shareholders		(16,553,692	)		(16,127,520	)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(66,847,914	)		(32,793,152	)
Net Assets
Total decrease in net assets		(57,442,139	)		(28,507,675	)
Beginning of year		814,252,539			842,760,214
End of year	$	756,810,400		$	814,252,539
Undistributed (distributions in excess of) net investment income, end of year	$	(476,532	)	$	1,736,377

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

86 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Cash Flows

Year Ended September 30, 2016	BlackRock Inflation Protected Bond Portfolio1			BlackRock U.S. Government Bond Portfolio
Cash Provided by Operating Activities
Net Increase in net assets resulting from operations	$	144,348,277		$	25,959,467
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
Purchases of long-term investments		(1,341,297,462	)		(9,577,289,205	)
Proceeds from sales of long-term investments		2,103,384,546			9,820,503,855
Net purchases of short-term securities		(16,586,119	)		(34,445,585	)
Treasury inflation-protected securities (TIPS) inflation adjustment		27,929,560			—
Amortization of premium and accretion of discount on investments and other fees		12,923,622			2,365,909
Net realized gain (loss) on investments and options written		36,527,288			(13,714,247	)
Net unrealized gain (loss) on investments, options written, foreign currency translations, swaps, inflation rate caps		(183,220,452	)		(3,804,080	)
Premiums received from options written		28,451,865			2,188,697
Premiums paid on closing options written		(17,015,227	)		(2,060,083	)
(Increase) Decrease in Assets:
Cash Pledged:
Collateral — OTC derivatives		5,760,000			360,000
Futures contracts		(1,853,000	)		1,196,000
Centrally cleared swaps		(1,667,790	)		(277,800	)
Receivables:
Dividends — affiliated		249			(647	)
Options written		(158,079	)		—
Interest		2,628,013			486,615
Principal paydown		—			(79,538	)
From the Manager		(300,672	)		27,264
Variation margin on futures contracts		(1,034,123	)		129,224
Variation margin on centrally cleared swaps		(396,315	)		(45,407	)
Swap and inflation rate caps premiums paid		56,323			(45,223	)
Prepaid expenses		(10,736	)		2,138
Other assets		(1,561	)		18,818
Increase (Decrease) in Liabilities:
Cash received:
Collateral — reverse repurchase agreements		1,142,000			447,000
Collateral — OTC derivatives		3,050,000			—
Payables:
Investment advisory fees		(326,485	)		(46,879	)
Service and distribution fees		(59,856	)		(19,711	)
Officers’ and Trustees’ fees		1,199			819
Other accrued expenses		(282,281	)		23,289
Other affiliates		(11,312	)		(24,749	)
Variation margin on futures contracts		1,027,852			242,778
Variation margin on centrally cleared swaps		—			(3,596	)
Swap and inflation rate caps premiums received		—			(5,549	)
Swaps		—			25,422
Net cash provided by operating activities		803,009,324			222,114,996
Cash Used for Financing Activities
Net borrowing of reverse repurchase agreements		(441,833,975	)		(114,628,768	)
Proceeds from issuance of capital shares		931,429,176			222,243,093
Payments on redemption of capital shares		(1,421,103,841	)		(301,512,060	)
Cash distributions paid to shareholders		(2,915,141	)		(3,238,349	)
Decrease in bank overdrafts		(551,354	)		(989,706	)
Net cash used for financing activities		(934,975,135	)		(198,125,790	)
Cash Impact from Foreign Exchange Fluctuations
Cash impact from foreign exchange fluctuations		178,217			(63,903	)
Cash and Foreign Currency
Net increase (decrease) in cash and foreign currency at value		(131,787,594	)		23,925,303
Cash and foreign currency at value at beginning of year		146,596,885			166,606
Cash and foreign currency at value at end of year	$	14,809,291		$	24,091,909
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest expense	$	1,740,329		$	815,891
Non-Cash Financing Activities
Capital shares issued in reinvestment of distributions paid to shareholders	$	75,379,146		$	13,530,586

¹ Consolidated Statement of Cash Flows.

A Statement of Cash Flows is presented when the Fund had a significant amount of borrowing during the period, based on the average borrowing outstanding in relation to total assets.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 87

Financial Highlights BlackRock Credit Strategies Income Fund

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.31		$	10.30		$	10.54		$	10.20
Net investment income1		0.43			0.42			0.47			0.48			0.38
Net realized and unrealized gain (loss)		0.16			(0.28	)		0.02			0.11	2		0.48	2
Net increase from investment operations		0.59			0.14			0.49			0.59			0.86
Distributions:3
From net investment income		(0.44	)		(0.45	)		(0.45	)		(0.47	)		(0.34	)
From net realized gain		—			(0.01	)		(0.03	)		(0.36	)		(0.18	)
Total distributions		(0.44	)		(0.46	)		(0.48	)		(0.83	)		(0.52	)
Net asset value, end of year	$	10.14		$	9.99		$	10.31		$	10.30		$	10.54
Total Return4
Based on net asset value		6.09	%		1.36	%		4.86	%		5.81	%		8.74	%
Ratios to Average Net Assets
Total expenses5		0.80	%6		0.80	%		0.88	%		1.05	%		1.47	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.68	%		0.70	%		0.70	%		0.70	%		0.85	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense5		0.68	%		0.70	%		0.70	%		0.70	%		0.70	%
Net investment income5		4.28	%		4.13	%		4.49	%		4.57	%		3.69	%
Supplemental Data
Net assets, end of year (000)	$	218,738		$	211,705		$	122,035		$	25,225		$	21,879
Portfolio turnover rate7		101	%		65	%		65	%		156	%		507	%

¹  Based on average shares outstanding.

²  Includes redemption fees, which are less than $0.005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.02	%		N/A		N/A

⁶  Includes recoupment of past waived fees with no financial impact to the expense ratios.

⁷  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		—		316	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—		—		—		—		1,086	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—		—		—		—		748	%

See Notes to Financial Statements.

88 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Credit Strategies Income Fund

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.31		$	10.30		$	10.53		$	10.20
Net investment income1		0.40			0.40			0.44			0.43			0.35
Net realized and unrealized gain (loss)		0.16			(0.28	)		0.02			0.15	2		0.48	2
Net increase from investment operations		0.56			0.12			0.46			0.58			0.83
Distributions:3
From net investment income		(0.42	)		(0.43	)		(0.42	)		(0.45	)		(0.32	)
From net realized gain		—			(0.01	)		(0.03	)		(0.36	)		(0.18	)
Total distributions		(0.42	)		(0.44	)		(0.45	)		(0.81	)		(0.50	)
Net asset value, end of year	$	10.13		$	9.99		$	10.31		$	10.30		$	10.53
Total Return4
Based on net asset value		5.72	%		1.12	%		4.60	%		5.63	%		8.37	%
Ratios to Average Net Assets
Total expenses5		1.10	%		1.10	%		1.13	%		1.16	%6		1.76	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.93	%		0.95	%		0.95	%		0.95	%		1.10	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense5		0.93	%		0.95	%		0.95	%		0.95	%		0.95	%
Net investment income5		4.04	%		3.90	%		4.22	%		4.13	%		3.42	%
Supplemental Data
Net assets, end of year (000)	$	120,167		$	108,127		$	87,100		$	90,484		$	22,199
Portfolio turnover rate7		101	%		65	%		65	%		156	%		507	%

¹  Based on average shares outstanding.

²  Includes redemption fees, which are less than $0.005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.02	%		N/A		N/A

⁶  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratio would have been 1.15%.

⁷  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		—		316	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—		—		—		—		1,086	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—		—		—		—		748	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 89

Financial Highlights (continued) BlackRock Credit Strategies Income Fund

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.99		$	10.31		$	10.30		$	10.54		$	10.20
Net investment income1		0.33			0.32			0.36			0.37			0.27
Net realized and unrealized gain (loss)		0.16			(0.28	)		0.03			0.12	2		0.49	2
Net increase from investment operations		0.49			0.04			0.39			0.49			0.76
Distributions:3
From net investment income		(0.34	)		(0.35	)		(0.35	)		(0.37	)		(0.24	)
From net realized gain		—			(0.01	)		(0.03	)		(0.36	)		(0.18	)
Total distributions		(0.34	)		(0.36	)		(0.38	)		(0.73	)		(0.42	)
Net asset value, end of year	$	10.14		$	9.99		$	10.31		$	10.30		$	10.54
Total Return4
Based on net asset value		5.04	%		0.36	%		3.82	%		4.75	%		7.67	%
Ratios to Average Net Assets
Total expenses5		1.82	%		1.83	%		1.90	%		2.03	%6		2.51	%
Total expenses after fees waived, reimbursed and paid indirectly5		1.68	%		1.70	%		1.70	%		1.70	%		1.85	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense5		1.68	%		1.70	%		1.70	%		1.70	%		1.70	%
Net investment income5		3.28	%		3.15	%		3.49	%		3.55	%		2.65	%
Supplemental Data
Net assets, end of year (000)	$	29,321		$	24,678		$	21,768		$	17,277		$	14,841
Portfolio turnover rate7		101	%		65	%		65	%		156	%		507	%

¹  Based on average shares outstanding.

²  Includes redemption fees, which are less than $0.005 per share.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.02	%		N/A		N/A

⁶  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁷  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013		2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		—		316	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—		—		—		—		1,086	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—		—		—		—		748	%

See Notes to Financial Statements.

90 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (concluded) BlackRock Credit Strategies Income Fund

	Class K
	Period August 1, 20161 to September 30, 2016
Per Share Operating Performance
Net asset value, beginning of period	$10.08
Net investment income2	0.07
Net realized and unrealized gain	0.06
Net increase from investment operations	0.13
Distributions from net investment income3	(0.07)
Net asset value, end of period	$10.14
Total Return4
Based on net asset value	1.32%5
Ratios to Average Net Assets
Total expenses6,7	0.76%
Total expenses after fees waived, reimbursed and paid indirectly6,7	0.57%
Net investment income6,7	4.36%
Supplemental Data
Net assets, end of period (000)	$    201
Portfolio turnover rate	101%8

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Period August 1, 20161 to September 30, 2016
Investments in underlying funds		0.01	%

⁷  Annualized.

⁸  Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 91

Financial Highlights BlackRock GNMA Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.83		$	9.83		$	9.73		$	10.49		$	10.47
Net investment income1		0.19			0.15			0.15			0.12			0.23
Net realized and unrealized gain (loss)		0.15			0.09			0.20			(0.30	)		0.32
Net increase (decrease) from investment operations		0.34			0.24			0.35			(0.18	)		0.55
Distributions:2
From net investment income		(0.28	)		(0.24	)		(0.24	)		(0.38	)		(0.41	)
From net realized gain		—			—			—			(0.20	)		(0.12	)
From return of capital		(0.00	)3		(0.00	)3		(0.01	)		—			—
Total distributions		(0.28	)		(0.24	)		(0.25	)		(0.58	)		(0.53	)
Net asset value, end of year	$	9.89		$	9.83		$	9.83		$	9.73		$	10.49
Total Return4
Based on net asset value		3.54	%		2.45	%		3.64	%		(1.79	)%		5.45	%
Ratios to Average Net Assets
Total expenses5		0.66	%		0.82	%		0.83	%		0.84	%		0.82	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.57	%		0.55	%		0.55	%		0.58	%		0.57	%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense5		0.55	%		0.55	%		0.55	%		0.55	%		0.55	%
Net investment income5		1.88	%		1.49	%		1.57	%		1.24	%		2.25	%
Supplemental Data
Net assets, end of year (000)	$	457,730		$	420,167		$	390,925		$	428,182		$	622,556
Portfolio turnover rate6		1,139	%		1,164	%		1,258	%		1,405	%		741	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.03	%		0.04	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		502	%		429	%		401	%		480	%		247	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,580	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			719	%

See Notes to Financial Statements.

92 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock GNMA Portfolio

	Service
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.82		$	9.82		$	9.71		$	10.48		$	10.45
Net investment income1		0.16			0.11			0.12			0.08			0.20
Net realized and unrealized gain (loss)		0.14			0.09			0.21			(0.31	)		0.32
Net increase (decrease) from investment operations		0.30			0.20			0.33			(0.23	)		0.52
Distributions:2
From net investment income		(0.25	)		(0.20	)		(0.21	)		(0.34	)		(0.37	)
From net realized gain		—			—			—			(0.20	)		(0.12	)
From return of capital		(0.00	)3		(0.00	)3		(0.01	)		—			—
Total distributions		(0.25	)		(0.20	)		(0.22	)		(0.54	)		(0.49	)
Net asset value, end of year	$	9.87		$	9.82		$	9.82		$	9.71		$	10.48
Total Return4
Based on net asset value		3.08	%		2.09	%		3.39	%		(2.23	)%		5.19	%
Ratios to Average Net Assets
Total expenses5		0.98	%6		1.16	%		1.13	%6		1.17	%6		1.11	%6
Total expenses after fees waived, reimbursed and paid indirectly5		0.92	%		0.90	%		0.90	%		0.93	%		0.92	%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense5		0.90	%		0.90	%		0.90	%		0.90	%		0.90	%
Net investment income5		1.60	%		1.15	%		1.21	%		0.75	%		1.88	%
Supplemental Data
Net assets, end of year (000)	$	12,129		$	28,828		$	52,272		$	51,353		$	79,211
Portfolio turnover rate7		1,139	%		1,164	%		1,258	%		1,405	%		741	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.03	%		0.04	%		N/A		N/A

⁶  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁷  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		502	%		429	%		401	%		480	%		247	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,580	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			719	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 93

Financial Highlights (continued) BlackRock GNMA Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.87		$	9.87		$	9.77		$	10.54		$	10.51
Net investment income1		0.15			0.11			0.12			0.09			0.20
Net realized and unrealized gain (loss)		0.16			0.09			0.20			(0.32	)		0.32
Net increase (decrease) from investment operations		0.31			0.20			0.32			(0.23	)		0.52
Distributions:2
From net investment income		(0.25	)		(0.20	)		(0.21	)		(0.34	)		(0.37	)
From net realized gain		—			—			—			(0.20	)		(0.12	)
From return of capital		(0.00	)3		(0.00	)3		(0.01	)		—			—
Total distributions		(0.25	)		(0.20	)		(0.22	)		(0.54	)		(0.49	)
Net asset value, end of year	$	9.93		$	9.87		$	9.87		$	9.77		$	10.54
Total Return4
Based on net asset value		3.19	%		2.08	%		3.26	%		(2.21	)%		5.18	%
Ratios to Average Net Assets
Total expenses5		0.92	%		1.07	%		1.09	%		1.09	%		1.06	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.91	%		0.91	%		0.92	%		0.93	%		0.91	%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense5		0.89	%		0.91	%		0.92	%		0.90	%		0.90	%
Net investment income5		1.51	%		1.14	%		1.24	%		0.85	%		1.90	%
Supplemental Data
Net assets, end of year (000)	$	256,577		$	186,427		$	159,325		$	310,492		$	457,537
Portfolio turnover rate6		1,139	%		1,164	%		1,258	%		1,405	%		741	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.03	%		0.04	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		502	%		429	%		401	%		480	%		247	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,580	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			719	%

See Notes to Financial Statements.

94 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock GNMA Portfolio

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.83		$	9.83		$	9.72		$	10.49		$	10.46
Net investment income1		0.08			0.04			0.05			0.01			0.12
Net realized and unrealized gain (loss)		0.14			0.09			0.20			(0.32	)		0.32
Net increase (decrease) from investment operations		0.22			0.13			0.25			(0.31	)		0.44
Distributions:2
From net investment income		(0.17	)		(0.13	)		(0.13	)		(0.26	)		(0.29	)
From net realized gain		—			—			—			(0.20	)		(0.12	)
From return of capital		(0.00	)3		(0.00	)3		(0.01	)		—			—
Total distributions		(0.17	)		(0.13	)		(0.14	)		(0.46	)		(0.41	)
Net asset value, end of year	$	9.88		$	9.83		$	9.83		$	9.72		$	10.49
Total Return4
Based on net asset value		2.31	%		1.32	%		2.61	%		(2.99	)%		4.39	%
Ratios to Average Net Assets
Total expenses5		1.68	%		1.82	%		1.83	%		1.86	%		1.82	%
Total expenses after fees waived, reimbursed and paid indirectly5		1.67	%		1.66	%		1.66	%		1.71	%		1.67	%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense5		1.65	%		1.66	%		1.66	%		1.68	%		1.66	%
Net investment income5		0.79	%		0.40	%		0.50	%		0.10	%		1.16	%
Supplemental Data
Net assets, end of year (000)	$	96,578		$	100,335		$	119,398		$	181,926		$	311,721
Portfolio turnover rate6		1,139	%		1,164	%		1,258	%		1,405	%		741	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.03	%		0.04	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		502	%		429	%		401	%		480	%		247	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,580	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			719	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 95

Financial Highlights (concluded) BlackRock GNMA Portfolio

	Class K
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.80		$	9.79		$	9.69		$	10.47		$	10.44
Net investment income1		0.19			0.15			0.15			0.15			0.23
Net realized and unrealized gain (loss)		0.15			0.10			0.20			(0.35	)		0.33
Net increase (decrease) from investment operations		0.34			0.25			0.35			(0.20	)		0.56
Distributions:2
From net investment income		(0.29	)		(0.24	)		(0.24	)		(0.38	)		(0.41	)
From net realized gain		—			—			—			(0.20	)		(0.12	)
From return of capital		(0.00	)3		(0.00	)3		(0.01	)		—			—
Total distributions		(0.29	)		(0.24	)		(0.25	)		(0.58	)		(0.53	)
Net asset value, end of year	$	9.85		$	9.80		$	9.79		$	9.69		$	10.47
Total Return4
Based on net asset value		3.47	%		2.58	%		3.67	%		(1.97	)%		5.59	%
Ratios to Average Net Assets
Total expenses5		0.56	%		0.70	%		0.79	%		0.81	%		0.74	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.54	%		0.52	%		0.52	%		0.55	%		0.54	%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense5		0.52	%		0.52	%		0.52	%		0.52	%		0.52	%
Net investment income5		1.90	%		1.49	%		1.58	%		1.49	%		2.18	%
Supplemental Data
Net assets, end of year (000)	$	19,209		$	17,253		$	3,780		$	3,114		$	13,349
Portfolio turnover rate6		1,139	%		1,164	%		1,258	%		1,405	%		741	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Amount is greater than $(0.005) per share.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.03	%		0.04	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		502	%		429	%		401	%		480	%		247	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,580	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			719	%

See Notes to Financial Statements.

96 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights BlackRock Inflation Protected Bond Portfolio

	Institutional
	Year Ended September 30,
	20161			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.58		$	10.94		$	11.23		$	12.23		$	11.49
Net investment income2		0.11			0.11			0.23			0.24			0.18
Net realized and unrealized gain (loss)		0.51			(0.34	)		(0.10	)		(0.87	)		0.82
Net increase (decrease) from investment operations		0.62			(0.23	)		0.13			(0.63	)		1.00
Distributions:3
From net investment income		(0.20	)		(0.13	)		(0.27	)		(0.17	)		(0.21	)
From net realized gain		—			—			(0.15	)		(0.20	)		(0.05	)
From return of capital		(0.11	)		—			—			—			—
Total distributions		(0.31	)		(0.13	)		(0.42	)		(0.37	)		(0.26	)
Net asset value, end of year	$	10.89		$	10.58		$	10.94		$	11.23		$	12.23
Total Return4
Based on net asset value		5.97	%		(2.16	)%		1.19	%		(5.35	)%		8.76	%
Ratios to Average Net Assets
Total expenses5		0.60	%		0.62	%		0.64	%		0.60	%		0.56	%
Total expenses after fees waived, reimbursed and paid indirectly		0.48	%		0.47	%		0.46	%		0.44	%		0.43	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.42	%		0.44	%		0.44	%		0.44	%		0.43	%
Net investment income		0.99	%		0.99	%		2.08	%		2.04	%		1.49	%
Supplemental Data
Net assets, end of year (000)	$	1,584,439		$	1,758,366		$	1,187,477		$	1,190,917		$	1,937,316
Portfolio turnover rate		45	%		61	%		66	%		86	%		120	%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratios were as follows:

	Year Ended September 30,
	2016		2015			2014			2013			2012
Expense ratios		N/A		0.61	%		0.63	%		0.59	%		0.55	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 97

Financial Highlights (continued) BlackRock Inflation Protected Bond Portfolio

	Service
	Year Ended September 30,
	20161			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.49		$	10.88		$	11.18		$	12.20		$	11.49
Net investment income (loss)2		0.08			(0.01	)		0.20			0.21			0.15
Net realized and unrealized gain (loss)		0.50			(0.26	)		(0.10	)		(0.88	)		0.80
Net increase (decrease) from investment operations		0.58			(0.27	)		0.10			(0.67	)		0.95
Distributions:3
From net investment income		(0.19	)		(0.12	)		(0.25	)		(0.15	)		(0.19	)
From net realized gain		—			—			(0.15	)		(0.20	)		(0.05	)
From return of capital		(0.11	)		—			—			—			—
Total distributions		(0.30	)		(0.12	)		(0.40	)		(0.35	)		(0.24	)
Net asset value, end of year	$	10.77		$	10.49		$	10.88		$	11.18		$	12.20
Total Return4
Based on net asset value		5.66	%		(2.47	)%		0.93	%		(5.64	)%		8.38	%
Ratios to Average Net Assets
Total expenses5		0.86	%		0.93	%		0.93	%		0.89	%		0.86	%
Total expenses after fees waived, reimbursed and paid indirectly		0.78	%		0.78	%		0.77	%		0.75	%		0.73	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.71	%		0.75	%		0.75	%		0.75	%		0.73	%
Net investment income (loss)		0.73	%		(0.08	)%		1.82	%		1.76	%		1.23	%
Supplemental Data
Net assets, end of year (000)	$	44,565		$	41,926		$	44,373		$	58,842		$	88,555
Portfolio turnover rate		45	%		61	%		66	%		86	%		120	%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratios were as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Expense ratios		0.86	%		0.91	%		0.92	%		0.88	%		N/A

See Notes to Financial Statements.

98 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Inflation Protected Bond Portfolio

	Investor A
	Year Ended September 30,
	20161			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.38		$	10.77		$	11.07		$	12.09		$	11.39
Net investment income (loss)2		0.05			(0.02	)		0.16			0.21			0.13
Net realized and unrealized gain (loss)		0.52			(0.25	)		(0.06	)		(0.88	)		0.81
Net increase (decrease) from investment operations		0.57			(0.27	)		0.10			(0.67	)		0.94
Distributions:3
From net investment income		(0.21	)		(0.12	)		(0.25	)		(0.15	)		(0.19	)
From net realized gain		—			—			(0.15	)		(0.20	)		(0.05	)
From return of capital		(0.09	)		—			—			—			—
Total distributions		(0.30	)		(0.12	)		(0.40	)		(0.35	)		(0.24	)
Net asset value, end of year	$	10.65		$	10.38		$	10.77		$	11.07		$	12.09
Total Return4
Based on net asset value		5.59	%		(2.49	)%		0.95	%		(5.70	)%		8.33	%
Ratios to Average Net Assets
Total expenses5		0.96	%		0.97	%		1.06	%		0.99	%		0.95	%
Total expenses after fees waived, reimbursed and paid indirectly		0.83	%		0.79	%		0.78	%		0.76	%		0.76	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.76	%		0.76	%		0.76	%		0.76	%		0.76	%
Net investment income (loss)		0.45	%		(0.14	)%		1.45	%		1.78	%		1.12	%
Supplemental Data
Net assets, end of year (000)	$	358,182		$	476,282		$	651,951		$	1,344,080		$	2,089,999
Portfolio turnover rate		45	%		61	%		66	%		86	%		120	%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratios were as follows:

	Year Ended September 30,
	2016		2015			2014			2013		2012
Expense ratios		N/A		0.95	%		1.02	%		N/A		N/A

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 99

Financial Highlights (continued) BlackRock Inflation Protected Bond Portfolio

	Investor C
	Year Ended September 30,
	20161			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.16		$	10.62		$	10.95		$	12.01		$	11.36
Net investment income (loss)2		(0.02	)		(0.09	)		0.11			0.12			0.06
Net realized and unrealized gain (loss)		0.50			(0.25	)		(0.09	)		(0.86	)		0.80
Net increase (decrease) from investment operations		0.48			(0.34	)		0.02			(0.74	)		0.86
Distributions:3
From net investment income		(0.20	)		(0.12	)		(0.20	)		(0.12	)		(0.16	)
From net realized gain		—			—			(0.15	)		(0.20	)		(0.05	)
From return of capital		(0.08	)		—			—			—			—
Total distributions		(0.28	)		(0.12	)		(0.35	)		(0.32	)		(0.21	)
Net asset value, end of year	$	10.36		$	10.16		$	10.62		$	10.95		$	12.01
Total Return4
Based on net asset value		4.83	%		(3.22	)%		0.24	%		(6.31	)%		7.62	%
Ratios to Average Net Assets
Total expenses		1.60	%		1.65	%5		1.64	%		1.59	%		1.57	%
Total expenses after fees waived, reimbursed and paid indirectly		1.53	%		1.51	%		1.49	%		1.47	%		1.45	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.47	%		1.48	%		1.47	%		1.47	%		1.44	%
Net investment income (loss)		(0.15	)%		(0.86	)%		0.98	%		1.06	%		0.50	%
Supplemental Data
Net assets, end of year (000)	$	197,741		$	243,707		$	317,089		$	464,790		$	788,158
Portfolio turnover rate		45	%		61	%		66	%		86	%		120	%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees for the year ended September 30, 2015, there was no financial impact to the expense ratio.

See Notes to Financial Statements.

100 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (concluded) BlackRock Inflation Protected Bond Portfolio

	Class K
	Year Ended September 30,
	20161			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.41		$	10.75		$	11.02		$	12.00		$	11.27
Net investment income2		0.14			0.05			0.24			0.24			0.19
Net realized and unrealized gain (loss)		0.47			(0.26	)		(0.09	)		(0.85	)		0.80
Net increase (decrease) from investment operations		0.61			(0.21	)		0.15			(0.61	)		0.99
Distributions:3
From net investment income		(0.19	)		(0.13	)		(0.27	)		(0.17	)		(0.21	)
From net realized gain		—			—			(0.15	)		(0.20	)		(0.05	)
From return of capital		(0.12	)		—			—			—			—
Total distributions		(0.31	)		(0.13	)		(0.42	)		(0.37	)		(0.26	)
Net asset value, end of year	$	10.71		$	10.41		$	10.75		$	11.02		$	12.00
Total Return4
Based on net asset value		5.98	%		(2.01	)%		1.42	%		(5.27	)%		8.86	%
Ratios to Average Net Assets
Total expenses		0.47	%		0.52	%5		0.51	%		0.48	%		0.47	%
Total expenses after fees waived, reimbursed and paid indirectly		0.39	%		0.35	%		0.34	%		0.33	%		0.32	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.32	%		0.32	%		0.32	%		0.32	%		0.32	%
Net investment income		1.29	%		0.47	%		2.20	%		2.09	%		1.64	%
Supplemental Data
Net assets, end of year (000)	$	353,536		$	363,660		$	347,282		$	446,214		$	455,027
Portfolio turnover rate		45	%		61	%		66	%		86	%		120	%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, assumes the reinvestment of distributions.

⁵  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees for the year ended September 30, 2015, there was no financial impact to the expense ratio.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 101

Financial Highlights BlackRock Investment Grade Bond Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.61		$	9.81		$	10.12		$	12.18		$	11.66
Net investment income1		0.28			0.29			0.34			0.38			0.43
Net realized and unrealized gain (loss)		0.48			(0.21	)		0.40			(1.09	)		1.04
Net increase (decrease) from investment operations		0.76			0.08			0.74			(0.71	)		1.47
Distributions:2
From net investment income		(0.27	)		(0.28	)		(0.33	)		(0.38	)		(0.42	)
From net realized gain		—			—			(0.72	)		(0.97	)		(0.53	)
Total distributions		(0.27	)		(0.28	)		(1.05	)		(1.35	)		(0.95	)
Net asset value, end of year	$	10.10		$	9.61		$	9.81		$	10.12		$	12.18
Total Return3
Based on net asset value		8.06	%		0.75	%		7.75	%		(6.59	)%		13.43	%
Ratios to Average Net Assets
Total expenses4,5		0.84	%		0.99	%		0.92	%		0.86	%		0.83	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.52	%		0.55	%		0.57	%		0.55	%		0.55	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense5		0.52	%		0.55	%		0.55	%		0.55	%		0.55	%
Net investment income5		2.85	%		2.92	%		3.50	%		3.48	%		3.71	%
Supplemental Data
Net assets, end of year (000)	$	15,100		$	8,135		$	5,755		$	63,569		$	61,711
Portfolio turnover rate6		67	%		74	%		70	%		119	%		86	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratios were as follows:

	Year Ended September 30,
	2016		2015			2014		2013		2012
Expense ratios		N/A		0.98	%		—		—		N/A

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.01	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		105	%		84	%

See Notes to Financial Statements.

102 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Investment Grade Bond Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.61		$	9.81		$	10.14		$	12.20		$	11.68
Net investment income1		0.25			0.25			0.32			0.35			0.39
Net realized and unrealized gain (loss)		0.48			(0.21	)		0.37			(1.10	)		1.05
Net increase (decrease) from investment operations		0.73			0.04			0.69			(0.75	)		1.44
Distributions:2
From net investment income		(0.24	)		(0.24	)		(0.30	)		(0.34	)		(0.39	)
From net realized gain		—			—			(0.72	)		(0.97	)		(0.53	)
Total distributions		(0.24	)		(0.24	)		(1.02	)		(1.31	)		(0.92	)
Net asset value, end of year	$	10.10		$	9.61		$	9.81		$	10.14		$	12.20
Total Return3
Based on net asset value		7.74	%		0.40	%		7.20	%		(6.89	)%		13.07	%
Ratios to Average Net Assets
Total expenses4,5		1.11	%		1.31	%		1.29	%		1.16	%		1.07	%
Total expenses after fees waived, reimbursed and paid indirectly5		0.82	%		0.90	%		0.92	%		0.89	%		0.85	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense5		0.82	%		0.90	%		0.90	%		0.89	%		0.85	%
Net investment income5		2.56	%		2.55	%		3.19	%		3.14	%		3.33	%
Supplemental Data
Net assets, end of year (000)	$	29,957		$	21,251		$	8,854		$	18,391		$	25,195
Portfolio turnover rate6		67	%		74	%		70	%		119	%		86	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees, the ratios were as follows:

	Year Ended September 30,
	2016		2015			2014			2013			2012
Expense ratios		N/A		1.30	%		1.26	%		1.15	%		—

⁵  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.01	%		N/A		N/A

⁶  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		105	%		84	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 103

Financial Highlights (concluded) BlackRock Investment Grade Bond Portfolio

	Class K
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.63		$	9.83		$	10.14		$	12.21		$	11.68
Net investment income1		0.29			0.30			0.35			0.40			0.45
Net realized and unrealized gain (loss)		0.48			(0.22	)		0.39			(1.11	)		1.05
Net increase (decrease) from investment operations		0.77			0.08			0.74			(0.71	)		1.50
Distributions:2
From net investment income		(0.28	)		(0.28	)		(0.33	)		(0.39	)		(0.44	)
From net realized gain		—			—			(0.72	)		(0.97	)		(0.53	)
Total distributions		(0.28	)		(0.28	)		(1.05	)		(1.36	)		(0.97	)
Net asset value, end of year	$	10.12		$	9.63		$	9.83		$	10.14		$	12.21
Total Return3
Based on net asset value		8.12	%		0.83	%		7.83	%		(6.56	)%		13.61	%
Ratios to Average Net Assets
Total expenses4		0.72	%		0.89	%		0.89	%		0.70	%		0.69	%
Total expenses after fees waived, reimbursed and paid indirectly4		0.45	%		0.45	%		0.47	%		0.45	%		0.45	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense4		0.45	%		0.45	%		0.45	%		0.45	%		0.45	%
Net investment income4		2.95	%		3.04	%		3.58	%		3.60	%		3.83	%
Supplemental Data
Net assets, end of year (000)	$	54,344		$	50,141		$	63,576		$	66,535		$	195,167
Portfolio turnover rate5		67	%		74	%		70	%		119	%		86	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013		2012
Investments in underlying funds		0.01	%		0.01	%		0.01	%		N/A		N/A

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016		2015		2014		2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		—		—		—		105	%		84	%

See Notes to Financial Statements.

104 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights BlackRock U.S. Government Bond Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.64		$	10.59		$	10.52		$	10.94		$	10.94
Net investment income1		0.18			0.18			0.19			0.12			0.17
Net realized and unrealized gain (loss)		0.20			0.12			0.16			(0.32	)		0.19
Net increase (decrease) from investment operations		0.38			0.30			0.35			(0.20	)		0.36
Distributions:2
From net investment income		(0.26	)		(0.25	)		(0.28	)		(0.22	)		(0.19	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.26	)		(0.25	)		(0.28	)		(0.22	)		(0.36	)
Net asset value, end of year	$	10.76		$	10.64		$	10.59		$	10.52		$	10.94
Total Return3
Based on net asset value		3.67	%		2.80	%		3.37	%		(1.84	)%		3.51	%
Ratios to Average Net Assets
Total expenses		0.92	%		0.92	%		0.90	%		0.84	%		0.83	%
Total expenses after fees waived, reimbursed and paid indirectly		0.73	%		0.65	%		0.64	%		0.64	%		0.62	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.62	%		0.62	%		0.62	%		0.62	%		0.62	%
Net investment income		1.70	%		1.71	%		1.78	%		1.14	%		1.54	%
Supplemental Data
Net assets, end of year (000)	$	156,865		$	152,632		$	154,168		$	150,202		$	171,180
Portfolio turnover rate4		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 105

Financial Highlights (continued) BlackRock U.S. Government Bond Portfolio

	Service
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.63		$	10.58		$	10.51		$	10.93		$	10.93
Net investment income1		0.16			0.16			0.17			0.10			0.14
Net realized and unrealized gain (loss)		0.20			0.11			0.16			(0.32	)		0.20
Net increase (decrease) from investment operations		0.36			0.27			0.33			(0.22	)		0.34
Distributions:2
From net investment income		(0.24	)		(0.22	)		(0.26	)		(0.20	)		(0.17	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.24	)		(0.22	)		(0.26	)		(0.20	)		(0.34	)
Net asset value, end of year	$	10.75		$	10.63		$	10.58		$	10.51		$	10.93
Total Return3
Based on net asset value		3.47	%		2.61	%		3.18	%		(2.03	)%		3.22	%
Ratios to Average Net Assets
Total expenses		1.21	%		1.14	%		1.12	%		1.12	%		1.07	%4
Total expenses after fees waived, reimbursed and paid indirectly		0.92	%		0.84	%		0.83	%		0.83	%		0.81	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.81	%		0.81	%		0.81	%		0.81	%		0.81	%
Net investment income		1.51	%		1.53	%		1.59	%		0.96	%		1.34	%
Supplemental Data
Net assets, end of year (000)	$	4,452		$	3,575		$	3,873		$	3,777		$	5,021
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees with no financial impact to the expense ratio.

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

106 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock U.S. Government Bond Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.66		$	10.61		$	10.54		$	10.97		$	10.96
Net investment income1		0.15			0.15			0.16			0.10			0.13
Net realized and unrealized gain (loss)		0.21			0.12			0.16			(0.34	)		0.21
Net increase (decrease) from investment operations		0.36			0.27			0.32			(0.24	)		0.34
Distributions:2
From net investment income		(0.23	)		(0.22	)		(0.25	)		(0.19	)		(0.16	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.23	)		(0.22	)		(0.25	)		(0.19	)		(0.33	)
Net asset value, end of year	$	10.79		$	10.66		$	10.61		$	10.54		$	10.97
Total Return3
Based on net asset value		3.42	%		2.52	%		3.08	%		(2.20	)%		3.15	%
Ratios to Average Net Assets
Total expenses		1.19	%4		1.10	%		1.10	%		1.07	%		1.05	%
Total expenses after fees waived, reimbursed and paid indirectly		1.06	%		0.94	%		0.92	%		0.92	%		0.96	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.95	%		0.90	%		0.90	%		0.90	%		0.96	%
Net investment income		1.40	%		1.43	%		1.50	%		0.89	%		1.20	%
Supplemental Data
Net assets, end of year (000)	$	463,530		$	517,485		$	520,869		$	602,786		$	742,413
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees with no financial impact to the expense ratio.

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 107

Financial Highlights (continued) BlackRock U.S. Government Bond Portfolio

	Investor B1
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.62		$	10.58		$	10.51		$	10.93		$	10.93
Net investment income1		0.10			0.10			0.10			0.06			0.08
Net realized and unrealized gain (loss)		0.21			0.10			0.16			(0.35	)		0.20
Net increase (decrease) from investment operations		0.31			0.20			0.26			(0.29	)		0.28
Distributions:2
From net investment income		(0.18	)		(0.16	)		(0.19	)		(0.13	)		(0.11	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.18	)		(0.16	)		(0.19	)		(0.13	)		(0.28	)
Net asset value, end of year	$	10.75		$	10.62		$	10.58		$	10.51		$	10.93
Total Return3
Based on net asset value		2.91	%		1.88	%		2.53	%		(2.66	)%		2.69	%
Ratios to Average Net Assets
Total expenses4		1.65	%		2.00	%		2.13	%		1.97	%		1.78	%
Total expenses after fees waived, reimbursed and paid indirectly		1.55	%		1.48	%		1.48	%		1.47	%		1.45	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.45	%		1.45	%		1.45	%		1.45	%		1.45	%
Net investment income		0.94	%		0.92	%		0.96	%		0.53	%		0.70	%
Supplemental Data
Net assets, end of year (000)	$	141		$	240		$	2,169		$	4,632		$	17,793
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees as follows:

	Year Ended September 30,
	2016			2015		2014			2013			2012
Expense ratios		1.40	%		—		2.12	%		1.96	%		1.76	%

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

108 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock U.S. Government Bond Portfolio

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.65		$	10.60		$	10.53		$	10.95		$	10.95
Net investment income1		0.07			0.07			0.07			0.01			0.04
Net realized and unrealized gain (loss)		0.20			0.11			0.16			(0.33	)		0.20
Net increase (decrease) from investment operations		0.27			0.18			0.23			(0.32	)		0.24
Distributions:2
From net investment income		(0.15	)		(0.13	)		(0.16	)		(0.10	)		(0.07	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.15	)		(0.13	)		(0.16	)		(0.10	)		(0.24	)
Net asset value, end of year	$	10.77		$	10.65		$	10.60		$	10.53		$	10.95
Total Return3
Based on net asset value		2.53	%		1.68	%		2.25	%		(2.91	)%		2.23	%
Ratios to Average Net Assets
Total expenses4		1.97	%		1.91	%		1.92	%		1.89	%		1.87	%
Total expenses after fees waived, reimbursed and paid indirectly		1.83	%		1.75	%		1.74	%		1.74	%		1.78	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.72	%		1.72	%		1.72	%		1.72	%		1.78	%
Net investment income		0.62	%		0.62	%		0.69	%		0.09	%		0.38	%
Supplemental Data
Net assets, end of year (000)	$	51,545		$	49,408		$	54,894		$	69,749		$	101,144
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees as follows:

	Year Ended September 30,
	2016		2015		2014			2013		2012
Expense ratios		N/A		N/A		1.91	%		—		—

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 109

Financial Highlights (continued) BlackRock U.S. Government Bond Portfolio

	Investor C1
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.64		$	10.60		$	10.53		$	10.95		$	10.95
Net investment income1		0.09			0.09			0.09			0.03			0.07
Net realized and unrealized gain (loss)		0.21			0.10			0.16			(0.33	)		0.20
Net increase (decrease) from investment operations		0.30			0.19			0.25			(0.30	)		0.27
Distributions:2
From net investment income		(0.17	)		(0.15	)		(0.18	)		(0.12	)		(0.10	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.17	)		(0.15	)		(0.18	)		(0.12	)		(0.27	)
Net asset value, end of year	$	10.77		$	10.64		$	10.60		$	10.53		$	10.95
Total Return3
Based on net asset value		2.82	%		1.78	%		2.44	%		(2.73	)%		2.49	%
Ratios to Average Net Assets
Total expenses4		1.83	%		1.74	%		1.75	%		1.75	%		1.77	%
Total expenses after fees waived, reimbursed and paid indirectly		1.64	%		1.56	%		1.55	%		1.55	%		1.53	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.53	%		1.53	%		1.53	%		1.53	%		1.53	%
Net investment income		0.83	%		0.81	%		0.87	%		0.26	%		0.63	%
Supplemental Data
Net assets, end of year (000)	$	54,029		$	68,972		$	81,936		$	93,384		$	118,369
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees as follows:

	Year Ended September 30,
	2016		2015		2014		2013		2012
Expense ratios		—		N/A		—		—		1.76	%

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

110 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (concluded) BlackRock U.S. Government Bond Portfolio

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	10.66		$	10.61		$	10.54		$	10.96		$	10.97
Net investment income1		0.12			0.12			0.13			0.06			0.10
Net realized and unrealized gain (loss)		0.20			0.11			0.16			(0.32	)		0.19
Net increase (decrease) from investment operations		0.32			0.23			0.29			(0.26	)		0.29
Distributions:2
From net investment income		(0.20	)		(0.18	)		(0.22	)		(0.16	)		(0.13	)
From net realized gain		—			—			—			—			(0.17	)
Total distributions		(0.20	)		(0.18	)		(0.22	)		(0.16	)		(0.30	)
Net asset value, end of year	$	10.78		$	10.66		$	10.61		$	10.54		$	10.96
Total Return3
Based on net asset value		3.06	%		2.20	%		2.76	%		(2.41	)%		2.74	%
Ratios to Average Net Assets
Total expenses4		1.49	%		1.41	%		1.42	%		1.42	%		1.41	%
Total expenses after fees waived, reimbursed and paid indirectly		1.32	%		1.24	%		1.23	%		1.23	%		1.21	%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.21	%		1.21	%		1.21	%		1.21	%		1.21	%
Net investment income		1.12	%		1.13	%		1.19	%		0.58	%		0.95	%
Supplemental Data
Net assets, end of year (000)	$	26,247		$	21,940		$	23,967		$	26,378		$	36,167
Portfolio turnover rate5		929	%		1,090	%		948	%		1,532	%		790	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived fees. Excluding the recoupment of past waived fees as follows:

	Year Ended September 30,
	2016		2015		2014		2013			2012
Expense ratios		N/A		N/A		N/A		1.41	%		1.38	%

⁵  Includes mortgage dollar roll transactions. Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding mortgage dollar roll transactions)		619	%		741	%		618	%		926	%		474	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,934	%
Portfolio turnover rate including TBA Sale Commitments and excluding mortgage dollar rolls		—			—			—			—			1,240	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 111

Notes to Financial Statements

1. Organization:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. The following are referred to herein collectively as the “Funds” or individually, a “Fund”:

Fund Name	Herein referred to as	Diversification Classification
BlackRock Credit Strategies Income Fund (formerly known as BlackRock Secured Credit Portfolio)	Credit Strategies Income	Diversified
BlackRock GNMA Bond Portfolio	GNMA	Diversified
BlackRock Inflation Protected Bond Portfolio	Inflation Protected Bond	Non-diversified
BlackRock Investment Grade Bond Portfolio	Investment Grade Bond	Diversified
BlackRock U.S. Government Bond Portfolio	U.S. Government Bond	Diversified

Each Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to shareholder servicing and distribution of such shares. Institutional, Service and Class K Shares are sold only to certain eligible investors. Class R Shares are available only to certain employer-sponsored retirement plans. Investor A and Investor C Shares are generally available through financial intermediaries. Investor B1 and C1 Shares are only available for dividend and capital gain reinvestment by existing shareholders, and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B1 shareholders may vote on material changes to the Investor A distribution and service plan).

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Service, Class K and Class R Shares	No	No	None
Investor A Shares	Yes	No1	None
Investor B1 Shares	No	Yes	To Investor A Shares after 10 years
Investor C Shares	No	Yes	None
Investor C1 Shares	No	No2	None

¹  Investor A Shares may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase.

²  A CDSC of 1.00% is assessed on certain redemptions of Investor C1 Shares made within one year after purchase. The CDSC does not apply to redemptions by certain employer-sponsored retirement plans or to redemptions of shares acquired through reinvestment of dividends and capital gains by existing shareholders.

The Funds, together with certain other registered investment companies advised by the BlackRock Advisor, LLC (“Manager”) or its affiliates, are included in a complex of open-end funds referred to as the Equity-Bond Complex.

Basis of Consolidation: The accompanying consolidated financial statements of Inflation Protected Bond include the account of BlackRock Cayman Inflation Protected Bond Portfolio, Ltd. (the “Subsidiary”), which is a wholly-owned subsidiary of Inflation Protected Bond and primarily invests in commodity-related instruments and other derivatives. The Subsidiary enables Inflation Protected Bond to hold these commodity-related instruments and satisfy regulated investment company tax requirements. Inflation Protected Bond may invest up to 25% of its total assets in the Subsidiary. The accompanying Consolidated Schedule of Investments and consolidated financial statements of Inflation Protected Bond include the positions and accounts, respectively, of its Subsidiary. Intercompany accounts and transactions, if any, have been eliminated. During the year ended September 30, 2016, there were no transactions in the Subsidiary. The Subsidiary is subject to the same investment policies and restrictions that apply to Inflation Protected Bond, except that the Subsidiary may invest without limitation in commodity-related instruments. As of September 30, 2016, the Subsidiary has no holdings.

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Foreign Currency: Each Fund’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

112 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Each Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., dollar rolls, TBA sale commitments, futures contracts, forward foreign currency exchange contracts, options written and swaps) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of distributions is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, as measured on a tax basis, constitutes a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. However, certain Funds have capital loss carryforwards from pre-2012 tax years that offset realized net capital gains but do not offset current earnings and profits. Consequently, if distributions in any tax year are less than each Fund’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant. See Note 8, Income Tax Information, for the tax character of each Fund’s distributions paid during the year.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset Inflation Protected Bond’s ordinary income and/or capital gains for that year.

Offering Costs: Offering costs are amortized over a 12-month period beginning with the commencement of operations.

Recent Accounting Standards: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate NAV per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of September 30, 2016, certain investments of Credit Strategies Income were valued using NAV per share or its equivalent as no quoted market value is available and have been excluded from the fair value hierarchy.

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on its relative net assets or other appropriate methods.

The Funds have an arrangement with their custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Funds may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 113

Notes to Financial Statements (continued)

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Funds may hold or transact in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Funds’ net assets. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

• Investments in open-end U.S. mutual funds are valued at NAV each business day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

• Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

• To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

• The market value of the Fund’s investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open.

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If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately-held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation methodologies that are used by third party pricing services include the market approach, income approach and the cost approach, using one or a combination of, but not limited to, the following inputs.

	Standard Inputs Generally Considered By Third Party Pricing Services
Market approach	(i)	recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers;
	(ii)	recapitalizations and other transactions across the capital structure; and
	(iii)	market multiples of comparable issuers.
Income approach	(i)	future cash flows discounted to present and adjusted as appropriate for liquidity, credit and/or market risks;
	(ii)	quoted prices for similar investments or assets in active markets; and
	(iii)	other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach	(i)	audited or unaudited financial statements, investor communications and financial or operational metrics issued by the
		Private Company;
	(ii)	changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company;
	(iii)	relevant news and other public sources; and
	(iv)	known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

For investments in series of preferred stock that often contain rights and preferences that differ from other series of preferred stock and common stock issued by a private company, fair value is allocated among the various classes of preferred and common stock. The allocation of equity value may utilize an option pricing model “OPM”, a probability weighted expected return model “PWERM”, or a hybrid approach which combines the use of the OPM, the PWERM and/or other allocation methodologies.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date a Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation methodologies are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access

• Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

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The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 Investments include equity or debt issued by privately-held companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation methodologies may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of September 30, 2016, certain of Credit Strategies Income’s investments were valued using NAV per share (or its equivalent) as a practical expedient for fair value and have been excluded from the fair value hierarchy.

4. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a Fund may subsequently have to reinvest the proceeds at lower interest rates. If a Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted

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upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a Fund’s initial investment in the IOs may not fully recoup.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds, are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of the these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stock: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result to proceeds from the sale to not be readily available for a Fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a Fund to the extent that it invests in floating rate debt securities. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant

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changes) can be expected to cause some fluctuations in the NAV of the Funds to the extent they invest in floating rate loan interest. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a Fund’s investment policies.

When a Fund purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a Fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A Fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A Fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a Fund having a contractual relationship only with the lender, not with the borrower. A Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a Fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A Fund’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a Fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a Fund having a direct contractual relationship with the borrower, and a Fund may enforce compliance by the borrower with the terms of the loan agreement.

In connection with floating rate loan interests, certain Funds may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, Credit Strategies Income earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statements of Assets and Liabilities and Statements of Operations. As of period end, Credit Strategies Income had the following unfunded floating rate loan interests:

Borrower	Par	Commitment Amount	Value	Unrealized Appreciation
Allied Universal Holdco LLC (FKA USAGM Holdco LLC)	$58,190	$57,623	$58,281	$658

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Fund may be required to pay more at settlement than the security is worth. In addition, a Fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a Fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a Fund mitigate their counterparty risk, TBA commitments may be entered into by a Fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a Fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a Fund and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash

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received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a Fund, if any, is noted in the Schedules of Investments. Typically, a Fund is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a Fund is not fully collateralized, contractually or otherwise, a Fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: Certain Funds may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a Fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a Fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a Fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A Fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a Fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A Fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a Fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a Fund would still be required to pay the full repurchase price. Further, a Fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a Fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a Fund to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to a Fund.

For the year ended September 30, 2016, the average amount of reverse repurchase agreements and the daily weighted average interest rate for the Funds were as follows:

	Average Borrowings		Daily Weighted Average Interest Rate
GNMA	$	31,322,345	0.43%
Inflation Protected Bond	$	424,563,630	0.42%
U.S. Government Bond	$	270,999,217	0.30%

Reverse repurchase transactions are entered into by a Fund under Master Repurchase Agreements (each, an “MRA”), which permit a Fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a Fund. With reverse repurchase transactions, typically a Fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a Fund receives or posts securities as collateral with a market value in excess of the repurchase price to be paid or received by a Fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a Fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

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As of period end, the following tables are a summary of the Funds’ open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

	Reverse Repurchase Agreements		Fair Value of Non-cash Collateral Pledged Including Accrued Interest1			Cash Collateral Received1		Net Amount2
BlackRock GNMA Portfolio
Counterparty
BNP Paribas Securities Corp.		$    6,255,686		$    (6,332,686	)		$     77,000		—
Inflation Protected Bond
Counterparty
Credit Agricole Corporate and Investment Bank S.A.		$137,614,145		$(138,722,230	)		$1,142,000		$  33,915
Deutsche Bank Securities, Inc.		26,300,675		(26,300,675	)		—		—
RBC Capital Markets, LLC		42,458,041		(42,458,041	)		—		—
Total		$206,372,861		$(207,480,946	)		$1,142,000		$  33,915
U.S. Government Bond
Counterparty
Amherst Pierpont Securities LLC		$  11,732,294		$  (11,574,239	)		—		$158,055
Barclays Capital, Inc.		44,411,095		(44,351,281	)		—		59,814
Credit Agricole Corporate and Investment Bank S.A.		89,223,984		(89,327,031	)		$   447,000		343,953
Deutsche Bank Securities, Inc.		64,498,768		(64,382,374	)		—		116,394
J.P. Morgan Securities LLC		4,010,056		(4,006,936	)		—		3,120
Merrill Lynch, Pierce, Fenner & Smith, Inc.		24,446,773		(24,396,472	)		—		50,301
Nomura Securities International, Inc.		19,925,151		(19,925,151	)		—		—
Total		$258,248,121		$(257,963,484	)		$   447,000		$731,637

¹  Net collateral with a value of $6,320,994 for GNMA, $206,432,109 for Inflation Protected Bond and $257,573,026 for U.S. Government Bond has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

²  Net amount represents the net payable due to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a Fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a Fund’s obligation to repurchase the securities.

5. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g. inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Certain Funds invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value of the contract at the time it was

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opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Certain Funds enter into forward foreign currency exchange contracts to gain or reduce exposure, to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Funds write a call option, such option is typically “covered,” meaning that they hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

• Swaptions — Certain Funds purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Funds’ holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

• Foreign Currency options — Certain Funds purchase and write foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

• Barrier options — Certain Funds may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

The Funds may invest in various types of barrier options, including down-and-out options, down-and-in options, double no-touch options, one-touch options and up-and-out options. Down-and-out options expire worthless to the purchaser if the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Down-and-in options expire worthless to the purchaser unless the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Double no-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument reaches or surpasses predetermined barrier price levels prior to the expiration date. Up-and-out options expire worthless if the price of the underlying instrument increases beyond a predetermined barrier price level prior to the expiration date.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that they may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 121

Notes to Financial Statements (continued)

Swaps: Certain Funds enter into swap contracts to manage exposure to issuers, markets and securities. Such contracts are agreements between the Funds and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statements of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Funds’ counterparty on the swap agreement becomes the CCP. The Funds are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.

• Credit default swaps — Certain Funds enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk).

The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Funds will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps — Certain Funds enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed income) with another market (e.g., equity) (equity risk, commodity risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Funds receive payment from or make a payment to the counterparty.

• Interest rate swaps — Certain Funds enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

• Currency swaps — Certain Funds enter into currency swaps to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

122 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Currency swaps are interest rate swaps in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Currency swaps may also involve an exchange of notional amounts at the start, during and/or at expiration of the contract, either at the current spot rate or another specified rate.

• Forward swaps — Certain Funds enter into forward interest rate swaps and forward total return swaps. In a forward swap, each Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

• Inflation rate caps and floors — Inflation Protected Bond enters into inflation rate caps and floors to gain or reduce exposure to inflation rates (other risk). Caps are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that inflation indexes exceed a specified rate, or “cap”. Floors are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that inflation indexes fall below a specified rate, or “floor”. The maximum potential amount of future payments that the Fund would be required to make under an inflation rate cap would be the notional amount times the percentage increase in inflation rates determined by the difference between the inflation index current value and the value at the time the cap was entered into.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements. The result would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Funds. Any additional required collateral is delivered to/pledged by the Funds on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Funds from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the Funds have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 123

Notes to Financial Statements (continued)

For such services, each Fund pays the Manager a monthly fee, which is determined by calculating a percentage of each Fund’s average daily net assets, based on the following annual rates:

Average Daily Net Assets	Credit Strategies Income			GNMA			Inflation Protected Bond			Investment Grade Bond			U.S. Government Bond
First $1 Billion		0.500	%		0.400	%		0.300	%		0.350	%		0.500	%
$1 Billion - $2 Billion		0.450	%		0.390	%		0.290	%		0.340	%		0.450	%
$2 Billion - $3 Billion		0.425	%		0.380	%		0.280	%		0.330	%		0.425	%
Greater than $3 Billion		0.400	%		0.370	%		0.270	%		0.320	%		0.400	%

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, Inflation Protected Bond pays the Manager based on the Fund’s net assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage, which includes the assets of the Taxable Subsidiary.

The Manager, with respect to Credit Strategies Income, entered into separate sub-advisory agreements with BlackRock International Limited (“BIL”) and BlackRock (Singapore) Limited (“BSL”), each an affiliate of the Manager. The Manager pays BIL and BSL, for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by Credit Strategies Income to the Manager.

Service and Distribution Fees: The Trust, on behalf of the Funds, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of each Fund as follows:

	Service			Investor A			Investor B1			Investor C			Investor C1			Class R
Service Fee		0.25	%		0.25	%		0.25	%		0.25	%		0.25	%		0.25	%
Distribution Fee		—			—			0.50	%		0.75	%		0.55	%		0.25	%

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Funds. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to the shareholders.

For the year ended September 30, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each Fund:

	Service			Investor A			Investor B1			Investor C			Investor C1			Class R			Total
Credit Strategies Income			—		$	292,817			—		$	256,329			—			—		$	549,146
GNMA		$	57,911		$	560,640			—		$	994,629			—			—		$	1,613,180
Inflation Protected		$	106,313		$	1,072,363			—		$	2,124,629			—			—		$	3,303,305
Investment Grade Bond			—		$	60,323			—			—			—			—		$	60,323
U.S. Government Bond		$	9,886		$	1,207,500		$	1,136		$	511,021		$	473,160		$	121,612		$	2,324,315

Administration: The Trust, on behalf of the Funds, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The administration fee, which is shown as administration in the Statements of Operations, is paid at the annual rates below.

Average Daily Net Assets	Administration Fee
First $500 Million		0.0425	%
$500 Million - $1 Billion		0.0400	%
$1 Billion - $2 Billion		0.0375	%
$2 Billion - $4 Billion		0.0350	%
$4 Billion - $13 Billion		0.0325	%
Greater than $13 Billion		0.0300	%

In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statements of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.

124 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

For the year ended September 30, 2016, the following table shows the class specific administration fees borne directly by each share class of each Fund:

	Institutional			Service			Investor A			Investor B1			Investor C			Investor C1			Class K			Class R			Total
Credit Strategies Income		$	42,695			—		$	23,425			—		$	5,126			—		$	7			—		$	71,253
GNMA		$	87,871		$	4,656		$	44,851			—		$	19,893			—		$	3,492			—		$	160,763
Inflation Protected Bond		$	320,736		$	8,505		$	85,789			—		$	42,492			—		$	73,124			—		$	530,646
Investment Grade Bond		$	2,285			—		$	4,826			—			—			—		$	10,328			—		$	17,439
U.S. Government Bond		$	32,592		$	791		$	96,600		$	39		$	10,220		$	11,829			—		$	4,864		$	156,935

The Manager may have, at its discretion, voluntarily waived all or any portion of its administration fees for a Fund or a share class, which are included in administration fees waived — class specific in the Statements of Operations.

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended September 30, 2016, the Funds paid the following amounts to affiliates of BlackRock in return for these services, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional			Service			Investor A	Total
GNMA		$	3,659		$	855	$853		$	5,367
Inflation Protected Bond		$	5,942		$	194	$310		$	6,446
U.S. Government Bond		$	22,933		$	1,085	$836		$	24,854

The Manager maintains a call center, that is responsible for providing certain shareholder services to the Funds. Shareholder services include responding to inquiries and processing subscriptions and redemptions based upon instructions from shareholders. For the year ended September 30, 2016, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional			Service			Investor A			Investor C			Investor C1			Class K			Total
Credit Strategies Income		$	678			—		$	1,059		$	423			—			—		$	2,160
GNMA		$	21,052			—		$	4,414		$	2,494			—		$	84		$	28,044
Inflation Protected Bond			—			—		$	3,313		$	3,197			—		$	793		$	7,303
Investment Grade Bond			—			—		$	703			—			—			—		$	703
U.S. Government Bond		$	914		$	16		$	34,014		$	1,240		$	387			—		$	36,571

For the year ended September 30, 2016, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

	Institutional			Service			Investor A			Investor B1			Investor C			Investor C1			Class K			Class R			Total
Credit Strategies Income		$	154,701			—		$	145,407			—		$	25,868			—			—			—		$	325,976
GNMA		$	469,658		$	38,059		$	249,180			—		$	121,478			—		$	853			—		$	879,228
Inflation Protected Bond		$	2,292,362		$	61,952		$	1,074,209			—		$	297,871			—		$	18,654			—		$	3,745,048
Investment Grade Bond		$	14,833			—		$	34,850			—			—		$	231			—			—		$	49,914
U.S. Government Bond		$	252,636		$	7,508		$	820,097		$	118		$	104,015		$	158,407			—		$	53,654		$	1,396,435

Other Fees: For the year ended September 30, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

Credit Strategies Income	$	7,701
GNMA	$	14,668
Inflation Protected Bond	$	15,586
Investment Grade Bond	$	5,596
U.S. Government Bond	$	6,914

For the year ended September 30, 2016, affiliates received CDSCs as follows:

	Investor A			Investor C
Credit Strategies Income		$	15,746		$	5,677
GNMA		$	1,454		$	10,011
Inflation Protected Bond		$	797		$	8,434
Investment Grade Bond		$	1,700			—
U.S. Government Bond		$	9		$	4,392

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to each Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses,

BLACKROCK FUNDS II SEPTEMBER 30, 2016 125

Notes to Financial Statements (continued)

and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

	Credit Strategies Income	GNMA			Inflation Protected Bond			Investment Grade Bond			U.S. Government Bond
Institutional	0.63%		0.55	%		0.42	%		0.52	%		0.62	%
Service	N/A		0.90	%		0.71	%		N/A			0.81	%
Investor A	0.88%		0.92	%		0.76	%		0.82	%		0.95	%
Investor B1	N/A		N/A			N/A			N/A			1.45	%
Investor C	1.63%		1.67	%		1.48	%		N/A			1.72	%
Investor C1	N/A		N/A			N/A			N/A			1.53	%
Class K	0.58%		0.52	%		0.32	%		0.45	%		0.52	%1
Class R	N/A		1.17	%1		1.01	%1		1.09	%1		1.21	%

¹  There were no shares outstanding as of September 30, 2016.

Prior to July 1, 2016, the expense limitations as a percentage of average daily net assets for Credit Strategies Income were as follows:

Institutional	0.70%
Investor A	0.95%
Investor C	1.70%

For GNMA, Inflation Protected Bond, Investment Grade Bond and U.S. Government Bond, the Manager has agreed not to reduce or discontinue these contractual expense limitations prior to February 1, 2017, unless approved by the Board, including a majority of the Independent Trustees, who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Trustees”) or by a vote of a majority of the outstanding voting securities of the Funds. For Credit Strategies Income, the Manager has agreed not to reduce or discontinue this contractual waiver and/or reimbursement prior to February 1, 2018, unless approved by the Board, including a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended September 30, 2016, the amounts included in fees waived by the Manager were as follows:

Credit Strategies Income	$	135,902
GNMA	$	36,757
Inflation Protected Bond	$	1,467,735
Investment Grade Bond	$	210,787
U.S. Government Bond	$	575,174

With respect to the Funds, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. These amounts are included in fees waived by the Manager in the Statements of Operations. For the year ended September 30, 2016, the amounts waived were as follows:

Credit Strategies Income	$	17,008
GNMA	$	19,650
Inflation Protected Bond	$	18,844
Investment Grade Bond	$	3,901
U.S. Government Bond	$	5,268

Effective September 1, 2016, the Manager has voluntarily agreed to waive the investment advisory fee with respect to any portion of each Fund’s assets estimated to be attributable to investments in other equity and fixed-income exchange-traded funds managed by the Manager or its affiliates. The voluntarily waiver may be reduced or discontinued at any time without notice. As of the year ended September 30, 2016, Credit Strategies Income has incurred $717, which is included in the Fees waived by the Manager in the Statements of Operations.

These amounts waived and/or reimbursed are included in fees waived by the Manager, and shown as administration fees waived — class specific, transfer agent fees waived — class specific, transfer agent fees reimbursed — class specific, respectively, in the Statements of Operations. For the year ended September 30, 2016, class specific expense waivers and /or reimbursements are as follows:

Administration Fees Waived	Institutional			Service			Investor A			Investor B1		Investor C			Investor C1			Class K			Class R			Total
Credit Strategies Income		$	42,293			—		$	23,425		—		$	5,083			—		$	6			—		$	70,807
GNMA		$	86,898		$	3,588		$	4,081		—		$	1,923			—		$	3,037			—		$	99,527
Inflation Protected Bond		$	316,175		$	5,654		$	85,790		—		$	25,105			—		$	73,124			—		$	505,848
Investment Grade Bond		$	2,285			—		$	4,613		—			—			—		$	10,298			—		$	17,196
U.S. Government Bond		$	32,592		$	791		$	88,740		$5		$	9,768		$	10,945			—		$	4,864		$	147,705

126 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Transfer Agent Fees Waived	Institutional		Service		Investor A			Investor C			Investor C1		Class K		Class R		Total
Credit Strategies Income		$     667		—		$	1,059		$	419		—		—		—		$	2,145
GNMA		$20,858		—		$	305			—		—		$  47		—		$	21,210
Inflation Protected Bond		—		—		$	3,252		$	1,291		—		$793		—		$	5,336
Investment Grade Bond		—		—		$	554			—		—		$  25		—		$	579
U.S. Government Bond		$     914		$16		$	31,599		$	1,129		$361		—		—		$	34,019

Transfer Agent Fees Reimbursed	Institutional			Service			Investor A			Investor B1		Investor C			Investor C1			Class K			Class R			Total
Credit Strategies Income		$	111,485			—		$	121,218		—		$	19,423			—			—			—		$	252,126
GNMA		$	290,718		$	8,682		$	1,217		—			—			—		$	312			—		$	300,929
Inflation Protected Bond		$	699,828		$	5,441		$	258,527		—		$	2,680			—		$	17,778			—		$	984,254
Investment Grade Bond		$	6,719			—		$	5,364		—			—			—		$	155			—		$	12,238
U.S. Government Bond		$	154,921		$	7,488		$	131,824		$42		$	21,945		$	59,632			—		$	17,289		$	393,141

With respect to the contractual expense caps, if during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the expense cap for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• Each Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year.

• The Manager or an affiliate continues to serve as a Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense cap for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense cap for that share class.

For the year ended September 30, 2016, the Manager recouped the following fund level and class specific waivers and/or reimbursements previously recorded by the Funds:

	Institutional		Service		Investor A		Investor B1		Investor C1		Total
Credit Strategies		$6		—		—		—		—		$	6
GNMA		—		$389		—		—		—		$	389
Inflation Protected Bond		—		$112		—		—		—		$	112
U.S. Government Bond		—		—		$47		$488		$556		$	1,091

On September 30, 2016, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring September 30,
	2017			2018
Credit Strategies Income
Fund Level		$	46,517		$	135,902
Institutional		$	129,977		$	154,445
Investor A		$	124,098		$	145,702
Investor C		$	24,242		$	24,925
Class K			—		$	6
GNMA
Fund Level		$	1,093,003		$	36,757
Institutional		$	471,274		$	398,474
Service		$	45,773		$	12,270
Investor A			—		$	5,603
Investor C			—		$	1,923
Class K		$	3,184		$	3,396
Inflation Protected Bond
Fund Level		$	3,801,292		$	1,467,735
Institutional		$	207,925		$	1,016,003
Service		$	4,997		$	11,095

BLACKROCK FUNDS II SEPTEMBER 30, 2016 127

Notes to Financial Statements (continued)

	Expiring September 30,
	2017			2018
Investor A		$	242,267		$	347,569
Investor C			—		$	29,076
Class K		$	106,159		$	91,695
Investment Grade Bond
Fund Level		$	303,469		$	210,787
Institutional		$	4,606		$	9,004
Investor A		$	3,676		$	10,531
Class K		$	22,773		$	10,478
U.S. Government Bond
Fund Level		$	650,484		$	575,175
Institutional		$	276,107		$	188,427
Service		$	8,371		$	8,295
Investor A		$	460,286		$	252,163
Investor B1		$	5,850		$	47
Investor C		$	43,126		$	32,842
Investor C1		$	77,262		$	70,938
Class R		$	20,714		$	22,153

The following fund level and class specific waivers and/or reimbursements previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2016:

	Credit Strategies Income			GNMA			Inflation Protected Bond			Investment Grade Bond			U.S. Government Bond
Fund Level		$	192,855		$	1,219,703		$	4,178,218		$	313,662		$	675,533
Institutional		$	34,683		$	265,336		$	443,833		$	7,689		$	264,450
Service			—		$	32,032			—			—		$	7,823
Investor A		$	82,814			—		$	684,798			—			—
Investor B1			—			—			—			—		$	17,030
Investor C		$	18,491			—			—			—		$	10,083
Investor C1			—			—			—			—		$	106,506
Class K			—		$	3,524		$	118,613		$	32,787			—
Class R			—			—			—			—		$	25,448

Officers and Trustees: Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer, which is included in Officer and Trustees in the Statements of Operations.

Other Transactions: The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended September 30, 2016, the sale transactions which resulted in net realized gains with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Sales			Realized Gain
Investment Grade Bond		$	69,001		$	7,166

7. Purchases and Sales:

For the year ended September 30, 2016, purchases and sales of investments, including mortgage dollar rolls and excluding short-term securities, were as follows:

Purchases
	Credit       Strategies       Income		GNMA		Inflation Protected Bond		Investment Grade Bond		U.S.     Government     Bond
Non-U.S. Government Securities		$342,933,099		$11,222,809,291		$   190,533,742		$40,221,038		$7,100,486,684
U.S. Government Securities		3,949,383		10,730,891		1,158,636,216		14,402,066		2,327,831,059
Total Purchases		$346,882,482		$11,233,540,182		$1,349,169,958		$54,623,104		$9,428,317,743

128 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Sales
	Credit       Strategies        Income		GNMA		Inflation Protected Bond			Investment Grade Bond			U.S.     Government     Bond
Non-U.S. Government Securities
(includes paydowns)		$342,024,313		$11,564,470,423		$	407,095,576		$	28,297,877		$	7,645,714,208
U.S. Government Securities		—		26,840,994			1,726,147,874			26,023,747			2,415,246,438
Total Sales		$342,024,313		$11,591,311,417		$	2,133,243,450		$	54,321,624		$	10,060,960,646

For the year ended September 30, 2016, purchases and sales related to mortgage dollar rolls were as follows:    

	GNMA		U.S. Government Bond
Purchases		$6,281,625,487		$3,144,797,553
Sales		$6,284,362,095		$3,144,011,780

8. Income Tax Information:

It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended September 30, 2016. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of September 30, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or NAVs per share. As of period end, the following permanent differences attributable to net operating losses, foreign currency transactions, non-deductible expenses, classification of investments, net paydown losses and the accounting for swap agreements were reclassified to the following accounts:

	Credit  Strategies  Income			GNMA				Inflation Protected Bond				Investment Grade Bond			U.S. Government Bond
Paid in-capital		$  (10,234	)			—			$	(27,775	)		—				—
Undistributed (distributions in excess of) net investment income		$ 509,180			$	8,024,025			$	(38,642,824	)		$(63,564	)		$	3,670,601
Accumulated net realized loss		$(498,946	)		$	(8,024,025	)		$	38,670,599			$ 63,564			$	(3,670,601	)

The tax character of distributions paid was as follows:

	Credit     Strategies     Income		GNMA			Inflation Protected Bond			Investment Grade Bond			U.S. Government Bond
Ordinary income
9/30/2016		$15,233,749		$	20,944,014		$	51,843,114		$	2,389,325		$	16,553,692
9/30/2015		11,637,472			15,988,890			30,004,741			2,165,311			16,127,520
Long-term capital gains
9/30/2015		122,514			—			—			—			—
Tax return of capital
9/30/2016		—			218,530			26,428,699			—			—
9/30/2015		—			229,200			—			—			—
Total
9/30/2016		$15,233,749		$	21,162,544		$	78,271,813		$	2,389,325		$	16,553,692
9/30/2015		$11,759,986		$	16,218,090		$	30,004,741		$	2,165,311		$	16,127,520

BLACKROCK FUNDS II SEPTEMBER 30, 2016 129

Notes to Financial Statements (continued)

As of period end, the tax components of accumulated net earnings (losses) were as follows:

	Credit   Strategies   Income			GNMA			Inflation Protected Bond			Investment Grade Bond			U.S. Government Bond
Undistributed ordinary income		$    553,960			—			—			$   249,737				—
Capital loss carryforwards		(6,145,420	)		$(46,654,079	)		$(108,097,791	)		(810,091	)		$	(36,098,478	)
Net unrealized gains (losses)1		(5,451	)		14,029,756			176,214,458			3,243,894				6,764,950
Qualified late-year losses2		—			—			(21,531,797	)		—				—
Total		$(5,596,911	)		$(32,624,323	)		$   46,584,870			$2,683,540			$	(29,333,528	)

¹ The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales and straddles, the accrual of income on securities in default, amortization methods for premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency exchange contracts, the classification of investments, and the accounting for swap agreements.

² The Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

As of September 30, 2016, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires September 30,	Credit   Strategies   Income		GNMA		Inflation Protected Bond		Investment Grade Bond		U.S. Government Bond
No expiration date3		$6,145,420		$46,654,079		$108,097,791		$810,091		$32,654,870
2018		—		—		—		—		3,443,608
Total		$6,145,420		$46,654,079		$108,097,791		$810,091		$36,098,478

³  Must be utilized prior to losses subject to expiration.

During the year ended September 30, 2016, the Funds listed below utilized the following amounts of their respective capital loss carryforward:

	GNMA	Investment Grade Bond	U.S. Government Bond
Amount utilized	$2,041,542	$879,902	$8,044,311

As of September 30, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	Credit     Strategies     Income			GNMA				Inflation Protected Bond				Investment Grade Bond				U.S. Government     Bond
Tax cost		$360,138,342			$	1,210,503,612			$	2,561,463,939			$	84,304,461			$	1,260,050,594
Gross unrealized appreciation		$    5,215,547			$	15,780,638			$	194,940,000			$	3,664,011			$	12,792,761
Gross unrealized depreciation		(5,195,659	)			(599,430	)			(11,421,507	)			(206,342	)			(5,092,523	)
Net unrealized appreciation		$         19,888			$	15,181,208			$	183,518,493			$	3,457,669			$	7,700,238

9. Bank Borrowings:

BlackRock Funds II, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Funds may borrow to fund shareholder redemptions. Of the aggregate $2.1 billion commitment amount, $500 million is specifically designated to the Fund and Credit Strategies Income in the aggregate. The remaining $1.6 billion commitment is available to all Participating Funds, but the Fund and Credit Strategies Income can borrow up to an additional $350 million in the aggregate of the remaining aggregate commitment, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended September 30, 2016, the Funds did not borrow under the credit agreement.

130 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

10. Principal Risks:

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Fund’s ability to buy or sell bonds. As a result, a Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, certain Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers of securities owned by the Funds. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

Each Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below each Fund portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that they believe the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price a Fund could receive upon the sale of any particular portfolio investment may differ from a Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by a Fund, and a Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Fund.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 131

Notes to Financial Statements (continued)

For OTC options purchased, each Fund bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Funds should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform. The Funds may be exposed to counterparty credit risk with respect to options written to the extent the Funds deposit collateral with its counterparty to a written option.

With exchange-traded options purchased, futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Concentration Risk: Certain Funds invest a significant portion of their assets in fixed income securities and/or use derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

Certain Funds invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedules of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

11. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended September 30, 2016						Year Ended September 30, 2015
Credit Strategies Income	Shares			Amount			Shares			Amount
Institutional
Shares sold		18,635,920			$ 185,102,381			15,572,762			$159,532,079
Shares issued in reinvestment of distributions		904,920			8,992,583			651,180			6,656,348
Shares redeemed		(19,149,739	)		(189,933,007	)		(6,873,127	)		(70,277,510	)
Net increase		391,101			$     4,161,957			9,350,815			$  95,910,917
Investor A
Shares sold		8,143,011			$ 80,833,769			8,117,896			$ 83,186,007
Shares issued in reinvestment of distributions		464,442			4,619,475			379,037			3,875,257
Shares redeemed		(7,572,990	)		(75,349,579	)		(6,123,186	)		(62,578,526	)
Net increase		1,034,463			$ 10,103,665			2,373,747			$ 24,482,738

132 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
Credit Strategies Income (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		1,188,206			$11,855,063			769,788			$ 7,887,865
Shares issued in reinvestment of distributions		78,974			785,908			66,750			682,831
Shares redeemed		(844,454	)		(8,361,880	)		(478,201	)		(4,899,112	)
Net increase		422,726			$  4,279,091			358,337			$ 3,671,584
	Period August 1, 20161 to September 30, 2016
	Shares			Amount
Class K
Shares sold		19,841			$     200,000
Shares redeemed		—			—
Net increase		19,841			$     200,000
Total Net Increase		1,868,131			$18,744,713			12,082,899			$124,065,239
1    Commencement of operations.
	Year Ended September 30, 2016
GNMA	Shares			Amount
Institutional
Shares sold		25,735,507			$ 253,521,823			16,071,035			$ 159,033,386
Shares issued in reinvestment of distributions		918,421			9,056,821			653,423			6,460,304
Shares redeemed		(23,090,818	)		(227,578,069	)		(13,761,520	)		(136,131,100	)
Net increase		3,563,110			$   35,000,575			2,962,938			$   29,362,590
Service
Shares sold		428,317			$   4,214,059			1,422,633			$ 14,072,862
Shares issued in reinvestment of distributions		59,916			589,491			94,690			936,300
Shares redeemed		(2,195,454	)		(21,625,669	)		(3,905,993	)		(38,557,998	)
Net decrease		(1,707,221	)		$(16,822,119	)		(2,388,670	)		$(23,548,836	)
Investor A
Shares received from conversion1		—			—			20,176			$      198,530
Shares sold and automatic conversion of shares		11,928,771			$118,104,703			7,160,226			70,929,049
Shares issued in reinvestment of distributions		548,692			5,433,571			318,182			3,158,967
Shares redeemed		(5,514,768	)		(54,616,212	)		(4,758,751	)		(47,252,807	)
Net increase		6,962,695			$  68,922,062			2,739,833			$ 27,033,739
Investor B
Shares sold								1,493			$      14,778
Shares issued in reinvestment of distributions								672			6,678
Shares converted1								(20,223	)		(198,530	)
Shares redeemed and automatic conversion of shares								(112,132	)		(1,105,662	)
Net decrease								(130,190	)		$(1,282,736	)

BLACKROCK FUNDS II SEPTEMBER 30, 2016 133

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
GNMA (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		1,938,423			$ 19,068,875			1,392,861			$ 13,783,947
Shares issued in reinvestment of distributions		157,369			1,550,495			126,970			1,255,021
Shares redeemed		(2,532,386	)		(24,940,186	)		(3,463,284	)		(34,221,166	)
Net decrease		(436,594	)		$  (4,320,816	)		(1,943,453	)		$(19,182,198	)
Class K
Shares sold		646,334			$  6,352,020			1,758,370			$17,380,538
Shares issued in reinvestment of distributions		51,392			504,877			30,377			298,977
Shares redeemed		(508,811	)		(4,985,587	)		(413,959	)		(4,069,146	)
Net increase		188,915			$  1,871,310			1,374,788			$13,610,369
Total Net Increase		8,570,905			$84,651,012			2,615,246			$25,992,928
Inflation Protected Bond
Institutional
Shares sold		57,168,582			$ 608,020,732			115,567,065			$1,269,056,986
Shares issued in reinvestment of distributions		4,417,045			46,271,648			1,330,731			14,354,567
Shares redeemed		(82,227,538	)		(867,626,434	)		(59,267,326	)		(641,308,840	)
Net increase (decrease)		(20,641,911	)		$(213,334,054	)		57,630,470			$   642,102,713
Service
Shares sold		1,129,639			$ 11,870,812			2,057,275			$ 22,251,486
Shares issued in reinvestment of distributions		113,749			1,180,128			50,609			542,894
Shares redeemed		(1,101,144	)		(11,580,240	)		(2,190,635	)		(23,606,906	)
Net increase (decrease)		142,244			$   1,470,700			(82,751	)		$     (812,526	)
Investor A
Shares received from conversion1		—			—			17,959			$        189,828
Shares sold and automatic conversion of shares		11,572,106			$ 120,291,187			14,457,845			154,578,169
Shares issued in reinvestment of distributions		1,181,856			12,095,376			612,896			6,508,144
Shares redeemed		(24,992,485	)		(260,804,679	)		(29,759,137	)		(318,069,185	)
Net decrease		(12,238,523	)		$(128,418,116	)		(14,670,437	)		$(156,793,044	)
Investor B
Shares sold								1,940			$      20,600
Shares issued in reinvestment of distributions								881			9,145
Shares converted1								(18,484	)		(189,828	)
Shares redeemed and automatic conversion of shares								(104,802	)		(1,088,822	)
Net decrease								(120,465	)		$(1,248,905	)
Investor C
Shares sold		1,808,178			$ 18,369,550			2,043,789			$ 21,513,684
Shares issued in reinvestment of distributions		538,716			5,373,996			300,357			3,137,999
Shares redeemed		(7,243,517	)		(73,526,999	)		(8,237,842	)		(86,356,085	)
Net decrease		(4,896,623	)		$(49,783,453	)		(5,893,696	)		$(61,704,402	)

134 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
Inflation Protected Bond (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		16,606,026			$ 173,979,769			12,168,047			$ 130,076,683
Shares issued in reinvestment of distributions		1,013,292			10,457,998			398,886			4,230,981
Shares redeemed		(19,567,140	)		(205,927,267	)		(9,935,156	)		(106,026,186	)
Net increase (decrease)		(1,947,822	)		$  (21,489,500	)		2,631,777			$   28,281,478
Total Net Increase (Decrease)		(39,582,635	)		$(411,554,423	)		39,494,898			$ 449,825,314
Investment Grade Bond
Institutional
Shares sold		1,072,427			$10,491,032			1,181,127			$11,700,330
Shares issued in reinvestment of distributions		30,963			304,483			26,139			256,244
Shares redeemed		(454,312	)		(4,431,555	)		(947,528	)		(9,300,113	)
Net increase		649,078			$  6,363,960			259,738			$  2,656,461
Investor A
Shares sold		1,364,502			$13,388,087			2,227,491			$21,994,357
Shares issued in reinvestment of distributions		59,415			583,550			41,955			410,693
Shares redeemed		(668,344	)		(6,502,087	)		(960,471	)		(9,395,712	)
Net increase		755,573			$  7,469,550			1,308,975			$13,009,338
Class K
Shares sold		72,008			$     711,411			1,231			$        12,124
Shares issued in reinvestment of distributions		106,072			1,042,293			106,202			1,044,649
Shares redeemed		(13,816	)		(135,108	)		(1,369,550	)		(13,626,665	)
Net increase (decrease)		164,264			$  1,618,596			(1,262,117	)		$(12,569,892	)
Total Net Increase		1,568,915			$15,452,106			306,596			$   3,095,907
U.S. Government Bond
Institutional
Shares sold		8,603,656			$ 91,736,857			4,827,384			$ 51,459,205
Shares issued in reinvestment of distributions		266,981			2,840,324			221,568			2,366,531
Shares redeemed		(8,642,825	)		(92,357,260	)		(5,257,641	)		(56,033,201	)
Net increase (decrease)		227,812			$   2,219,921			(208,689	)		$  (2,207,465	)
Service
Shares sold		104,239			$1,111,394			21,930			$ 233,901
Shares issued in reinvestment of distributions		8,053			85,563			7,372			78,714
Shares redeemed		(34,560	)		(367,030	)		(58,945	)		(626,609	)
Net increase (decrease)		77,732			$   829,927			(29,643	)		$(313,994	)
Investor A
Shares received from conversion1		—			—			10,570			$        111,726
Shares sold and automatic conversion of shares		8,737,448			$   92,954,898			16,806,943			179,240,222
Shares issued in reinvestment of distributions		821,245			8,742,043			806,656			8,638,159
Shares redeemed		(15,124,986	)		(161,411,332	)		(18,157,447	)		(194,176,265	)
Net decrease		(5,566,293	)		$  (59,714,391	)		(533,278	)		$    (6,186,158	)

BLACKROCK FUNDS II SEPTEMBER 30, 2016 135

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
U.S. Government Bond (concluded)	Shares			Amount			Shares			Amount
Investor B
Shares sold								1,542			$   16,451
Shares issued in reinvestment of distributions								490			5,227
Shares converted1								(10,623	)		(111,726	)
Shares redeemed and automatic conversion of shares								(75,194	)		(798,618	)
Net decrease								(83,785	)		$(888,666	)
Investor B1
Shares sold		—			$            7			7,833			$       83,819
Shares issued in reinvestment of distributions		234			2,470			1,749			18,705
Shares redeemed		(9,731	)		(103,763	)		(192,102	)		(2,048,377	)
Net decrease		(9,497	)		$(101,286	)		(182,520	)		$(1,945,853	)
Investor C
Shares sold		2,000,747			$ 21,242,525			1,614,024			$ 17,208,495
Shares issued in reinvestment of distributions		55,467			588,612			51,006			545,305
Shares redeemed		(1,911,512	)		(20,358,198	)		(2,202,891	)		(23,496,242	)
Net increase (decrease)		144,702			$   1,472,939			(537,861	)		$  (5,742,442	)
Investor C1
Shares sold		482,215			$   5,133,471			640,994			$   6,841,496
Shares issued in reinvestment of distributions		77,660			823,470			88,640			947,551
Shares redeemed		(2,022,447	)		(21,506,093	)		(1,981,810	)		(21,150,183	)
Net decrease		(1,462,572	)		$(15,549,152	)		(1,252,176	)		$(13,361,136	)
Class R
Shares sold		1,014,162			$ 10,815,015			716,157			$   7,650,712
Shares issued in reinvestment of distributions		42,093			448,104			36,228			387,945
Shares redeemed		(680,716	)		(7,268,991	)		(952,523	)		(10,186,095	)
Net increase (decrease)		375,539			$   3,994,128			(200,138	)		$  (2,147,438	)
Total Net Decrease		(6,212,577	)		$(66,847,914	)		(3,028,090	)		$(32,793,152	)

¹  On the close of business on June 23, 2015, Investor B Shares converted to Investor A Shares for GNMA, Inflation Protected Bond and U.S. Government Bond.

At September 30, 2016, 19,841 Class K Shares of Credit Strategies Income Fund were owned by BlackRock HoldCo 2, Inc., an affiliate of the Fund.

136 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (concluded)

12. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

Effective October 1, 2016, Investment Grade Bond Portfolio made the following changes:

	Prior	Current
Name	BlackRock Investment Grade Bond Portfolio	BlackRock Managed Income Fund
Investment Objective	Maximize total return, consistent with income generation and prudent investment management.	Maximize current income with consideration for risk-managed total return.
Investment Strategies	Under normal circumstances, the Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade bonds and investments that are the economic equivalent of investment grade bonds.	The Fund may invest up to 100% of its assets in fixed-income securities and up to 30% of its assets in equity securities.
Benchmark(s)	Bloomberg Barclays U.S. Credit Index.	Bloomberg Barclays U.S. Aggregate Bond Index and a customized reference benchmark comprising the Bloomberg Barclays U.S. Aggregate Bond Index (70%) and the S&P 500 Index (30%).
Fiscal Year End	September 30	December 31

BlackRock Managed Income Fund paid a long-term capital gain distribution of $0.091532 per share on November 4, 2016 to shareholders.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 137

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of BlackRock Funds II and Shareholders of BlackRock Credit Strategies Income Fund (formerly BlackRock Secured Credit Portfolio), BlackRock GNMA Portfolio, BlackRock Inflation Protected Bond Portfolio, BlackRock Investment Grade Bond Portfolio and BlackRock U.S. Government Bond Portfolio:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Credit Strategies Income Fund (formerly BlackRock Secured Credit Portfolio), BlackRock GNMA Portfolio, BlackRock Inflation Protected Bond Portfolio, BlackRock Investment Grade Bond Portfolio and BlackRock U.S. Government Bond Portfolio (collectively the “Funds”), each a series of BlackRock Funds II, as of September 30, 2016, and the related statements of operations and cash flows for BlackRock Inflation Protected Bond Portfolio and BlackRock U.S. Government Bond Portfolio for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2016, by correspondence with the custodian, brokers and agent banks; where replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Credit Strategies Income Fund, BlackRock GNMA Portfolio, BlackRock Inflation Protected Bond Portfolio, BlackRock Investment Grade Bond Portfolio and BlackRock U.S. Government Bond Portfolio, each of BlackRock Funds II as of September 30, 2016, the results of their operations and cash flows for BlackRock Inflation Protected Bond Portfolio and BlackRock U.S. Government Bond Portfolio for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 23, 2016

Important Tax Information (Unaudited)

During the fiscal year ended September 30, 2016, the following information is provided with respect to the ordinary income distributions paid:

	Payable Dates	Credit   Strategies   Income		GNMA		Inflation Protected Bond		Investment Grade Bond		U.S. Government Bond
Interest-Related Dividends and Qualified Short-Term Capital	October 2015 - December 2015		80.30%		100.00%		48.04%		75.68%		74.75%
Gains for Non-U.S. Residents1	January 2016 - September 2016		84.84%		99.66%		—		80.33%		97.75%
Qualified Dividend Income for Individuals2	October 2015		—		—		—		11.08%		—
	November 2015		—		—		—		24.14%		—
	December 2015		—		—		—		26.23%		—
	January 2016 - September 2016		—		—		—		5.41%		—
Dividends Qualifying for the Dividend Received Deduction for Corporations2	October 2015		—		—		—		11.08%		—
	November 2015		—		—		—		24.14%		—
	December 2015		—		—		—		26.23%		—
	January 2016 - September 2016		—		—		—		5.41%		—
Federal Obligation Interest3			—		0.47%		91.66%		10.42%		24.74%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

²  The Funds hereby designate the percentage indicated above or the maximum allowable by law.

³  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

138 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds II (the “Trust”) met in person on April 12, 2016 (the “April Meeting”) and May 10-11, 2016 (the “May Meeting”) to consider the approval of the investment advisory agreement (the “Advisory Agreement” or the “Agreement”) between the Trust, on behalf of BlackRock GNMA Portfolio (the “GNMA Portfolio”), BlackRock Inflation Protected Bond Portfolio (the “Inflation Protected Bond Portfolio”), BlackRock Investment Grade Bond Portfolio (the “Investment Grade Bond Portfolio”), BlackRock Credit Strategies Income Fund (the “Credit Strategies Income Fund”) and BlackRock U.S. Government Bond Portfolio (the “U.S. Government Bond Portfolio”) (each, a “Fund,” and collectively, the “Funds”), and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), each Fund’s investment advisor.

Activities and Composition of the Board

On the date of the May Meeting, the Board consisted of thirteen individuals, ten of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). One of the Board Members is a non-management interested Board Member by virtue of his former positions with BlackRock, Inc. and its affiliates. The Board Members are responsible for the oversight of the operations of each Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreement

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, the Board assessed, among other things, the nature, extent and quality of the services provided to the Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; administrative and shareholder services; the oversight of fund service providers; marketing; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmark, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Fund for services; (c) Fund operating expenses and how BlackRock allocates expenses to the Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Fund’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) the Fund’s compliance with its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, exchange-traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Fund; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreement

The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreement. The Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) on Fund fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of each Fund as compared with a peer group of funds as determined by Broadridge¹; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients,

¹  Funds are ranked by Broadridge in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 139

Disclosure of Investment Advisory Agreement (continued)

sub-advised mutual funds, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock; and (g) sales and redemption data regarding each Fund’s shares.

At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May Meeting.

At the May Meeting, the Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) each Fund’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance metrics as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with each Fund; and (g) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates, securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds, a relevant benchmark, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing each Fund’s performance and each Fund’s investment objective(s), strategies and outlook.

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, the Board considered the quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to each Fund by third parties) and officers and other personnel as are necessary for the operations of each Fund. In particular, BlackRock and its affiliates provide each Fund with administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) preparing periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers; (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 such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing other administrative functions necessary for the operation of each Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Broadridge data that was prepared by BlackRock. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to other funds in its applicable Broadridge category. The Board was provided with a description of the methodology used by Broadridge to select peer funds and periodically meets with Broadridge representatives to review its methodology. The Board was provided with information on the composition of the Broadridge performance universes and expense universes. The Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

140 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Investment Advisory Agreement (continued)

In evaluating performance, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Board recognized that it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

The Board noted that for the one-, three- and five-year periods reported, the GNMA Portfolio ranked in the second, second, and first quartiles against its Broadridge Performance Universe.

The Board noted that for the one-, three- and five-year periods reported, the Inflation Protected Bond Portfolio ranked in the third, third and second quartiles, respectively, against its Broadridge Performance Universe. The Board and BlackRock reviewed and discussed the reasons for the Inflation Protected Bond Portfolio’s underperformance during one- and three-year periods.

The Board and BlackRock discussed BlackRock’s strategy for improving the Inflation Protected Bond Portfolio’s investment performance. Discussions covered topics such as: investment risks undertaken by the Fund; performance attribution; the Inflation Protected Bond Portfolio’s investment personnel; and the resources appropriate to support the Fund’s investment processes.

The Board noted that for the one-, three- and five-year periods reported, the Investment Grade Bond Portfolio ranked in the second, fourth and first quartiles, respectively, against its Broadridge Performance Universe.

The Board noted that for the one-, three- and five-year periods reported, the Credit Strategies Income Fund ranked in the second, first and first quartiles, respectively, against its Broadridge Performance Universe. The Board noted that effective July 1, 2016, the BlackRock Secured Credit Portfolio was expected to undergo a change in its investment strategy as well as changes within the portfolio management team, and in that connection would change its name from BlackRock Secured Credit Portfolio to BlackRock Credit Strategies Income Fund.

The Board noted that for the one-, three- and five-year periods reported, the U.S. Government Bond Portfolio ranked in the second, first and first quartiles, respectively, against its Broadridge Performance Universe.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Broadridge category. 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. The Board also compared each Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Broadridge category. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered 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 received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed BlackRock’s profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2015 compared to available aggregate profitability data provided for the prior two years. The Board reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund level is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs of managing the Funds, to each Fund. The Board may receive and review information from independent third parties as part of its annual evaluation. 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 Agreement and to continue to provide the high quality of services that

BLACKROCK FUNDS II SEPTEMBER 30, 2016 141

Disclosure of Investment Advisory Agreement (continued)

is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing each Fund 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 and institutional account product channels, as applicable.

The Board noted that the GNMA Portfolio’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers. The Board also noted that the GNMA Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board noted that BlackRock proposed, and the Board agreed to, a contractual adjustment to reduce specified levels within the breakpoint schedules. This adjustment was implemented on October 1, 2015. The Board further noted that BlackRock has contractually agreed to a cap on the GNMA Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis, as applicable. The contractual expense cap reduction was implemented on October 1, 2015.

The Board noted that the Inflation Protected Bond Portfolio’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and second quartiles, respectively, relative to the Fund’s Expense Peers. The Board also noted that the Inflation Protected Bond Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board noted that BlackRock proposed, and the Board agreed to, a contractual adjustment to reduce specified levels within the breakpoint schedules. This adjustment was implemented on October 1, 2015. The Board further noted that BlackRock has contractually agreed to a cap on the Inflation Protected Bond Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis, as applicable. The contractual expense cap reduction was implemented on October 1, 2015.

The Board noted that the Investment Grade Bond Portfolio’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board also noted that the Investment Grade Bond Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board noted that BlackRock proposed, and the Board agreed to, a contractual adjustment to reduce specified levels within the breakpoint schedules. This adjustment was implemented on October 1, 2015. The Board further noted that BlackRock has contractually agreed to a cap on the Investment Grade Bond Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis, as applicable. The contractual expense cap reduction was implemented on October 1, 2015.

The Board noted that the Credit Strategies Income Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board also noted that the Credit Strategies Income Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to a cap on the Credit Strategies Income Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis.

The Board noted that the U.S. Government Bond Portfolio’s contractual management fee rate ranked in the fourth quartile, and that the actual management fee rate and total expense ratio ranked in the third and second quartiles, respectively, relative to the Fund’s Expense Peers. The Board also noted that the U.S. Government Bond Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to a cap on the U.S. Government Bond Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. In addition, the Board noted that BlackRock had voluntarily agreed to a cap to further limit the U.S. Government Bond Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis, as applicable. The voluntary expense cap was implemented on June 1, 2012, and subsequently converted to a contractual cap. After discussions between the Board, including Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of the contractual cap, at the same levels, with the exception of one share class, where the contractual cap increased on September 1, 2015.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps, as applicable. The Board also considered the extent to which each Fund benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable each Fund to more fully participate in these economies of scale. The Board considered each Fund’s asset levels and whether the current fee schedule was appropriate. In its consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

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 their respective relationships with each Fund, both tangible and intangible,

142 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Investment Advisory Agreement (concluded)

such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and 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 each Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in affiliated ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that a Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 143

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served2,3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees
Robert M. Hernandez 1944	Chair of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, RTI International Metals, Inc. from 1990 to 2015; Director, TE Connectivity (electronics) from 2006 to 2012.	28 RICs consisting of 98 Portfolios	Chubb Limited (insurance company); Eastman Chemical Company
Fred G. Weiss 1941	Vice Chair of the Board and Trustee	Since 2007	Managing Director, FGW Consultancy LLC (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000.	28 RICs consisting of 98 Portfolios	Allergan, plc (pharmaceuticals)
James H. Bodurtha 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting and investing firm) from 1996 to 2013 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980; Director, ICI Mutual since 2010.	28 RICs consisting of 98 Portfolios	None
Bruce R. Bond 1946	Trustee	Since 2007	Trustee, and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	28 RICs consisting of 98 Portfolios	None
Donald W. Burton 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The Burton Partnership (QP), LP (an investment partnership) since 2000; Managing General Partner, The South Atlantic Venture Funds from 1983 to 2012; Director, IDology, Inc. (technology solutions) since 2006; Director, Knology, Inc. (telecommunications) from 1996 to 2012; Director, Capital Southwest (financial) from 2006 to 2012; Director, Besito (restaurant) since 2013; Director, PDQ South Texas (restaurant) since 2013; Director, ITC/Talon (data) since 2015.	28 RICs consisting of 98 Portfolios	None
Honorable Stuart E. Eizenstat 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca-Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide, LLC (risk management) from 2007 to 2012; Member of the International Advisory Board GML Ltd. (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) from 2004 to 2009.	28 RICs consisting of 98 Portfolios	Alcatel-Lucent (telecommunications); Global Specialty Metallurgical; UPS Corporation (delivery service)
John F. O’Brien 1943	Trustee	Since 2007	Trustee, Woods Hole Oceanographic Institute since 2003 and Chairman thereof from 2009 to 2015; Co-Founder and Managing Director, Board Leaders LLC (director education) since 2005.	28 RICs consisting of 98 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)

144 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served2,3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees (concluded)
Donald C. Opatrny 1952	Trustee	Since 2015	Trustee, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; Member of the Board and Investment Committee, University School since 2007; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; President and Trustee, the Center for the Arts, Jackson Hole since 2011; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014.	28 RICs consisting of 98 Portfolios	None
Roberta Cooper Ramo 1942	Trustee	Since 2007	Shareholder and Attorney, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Director, ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; Vice President, Santa Fe Opera (non-profit) since 2011; Chair, Think New Mexico (non-profit) since 2013; Chairman of the Board, Cooper’s Inc. (retail) from 1999 to 2011.	28 RICs consisting of 98 Portfolios	None
David H. Walsh 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation from 2008 to 2012; Director, The American Museum of Fly Fishing since 1997.	28 RICs consisting of 98 Portfolios	None

BLACKROCK FUNDS II SEPTEMBER 30, 2016 145

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Interested Trustees4
Robert Fairbairn 1965	Trustee	Since 2015	Senior Managing Director of BlackRock, Inc. since 2010; Global Head of BlackRock’s Retail and iShares® businesses since 2012; Member of BlackRock’s Global Executive and Global Operating Committees; Head of BlackRock’s Global Client Group from 2009 to 2012; Chairman of BlackRock’s international businesses from 2007 to 2010.	28 RICs consisting of 98 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2007	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	28 RICs consisting of 98 Portfolios	None
Henry R. Keizer 1956	Trustee	Since 2016	Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, Montpelier Re Holdings, Ltd. (publicly held property and casual reinsurance) from 2013 to 2015; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) in 2004 to 2005 and 2010 to 2012; Director, KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010.	28 RICs consisting of 98 Portfolios	Hertz Global Holdings (car rental); WABCO (commercial vehicle safety systems)
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 315 Portfolios	None
	1    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. The Board has unanimously approved extending the mandatory retirement age for Messrs. Walsh and Weiss until January 31, 2017, which the Board believes to be in the best interests of shareholders of the Trust. Interested Trustees serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or statute, or until December 31 of the year in which they turn 72.
	3    Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Honorable Stuart E. Eizenstat, 2001; Robert M. Hernandez, 1996; John F. O’Brien, 2005; Roberta Cooper Ramo, 1999; David H. Walsh, 2003; and Fred G. Weiss, 1998.
	4    Messrs. Fairbairn and Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Perlowski is also a board member of the BlackRock Closed-End Complex and the BlackRock Equity-Liquidity Complex. Mr. Gabbay may be deemed an “interested person” of the Trust based on his former positions with BlackRock, Inc. and its affiliates. Mr. Keizer may be deemed an “interested person” of the Trust based on his former directorship at another company which is not an affiliate of BlackRock, Inc. It is anticipated that Mr. Keizer will become an Independent Trustee effective January 31, 2017. Messrs. Gabbay and Keizer do not currently serve as officers or employees of BlackRock, Inc. or its affiliates or own any securities of BlackRock, Inc. or The PNC Financial Services Group, Inc. Each of Messrs. Gabbay and Keizer is a non-management Interested Trustee.

146 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
	2    Officers of the Trust serve at the pleasure of the Board.
	Further information about the Trust’s Officers and Trustees is available in the Fund’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

On June 2, 2016, the Board appointed Henry R. Keizer as a Trustee of the Trust, effective July 28, 2016.

On September 26, 2016, the Board appointed Lena G. Goldberg as a Trustee of the Trust, effective November 4, 2016.

Investment Adviser and Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Sub-Advisers1 BlackRock International Limited Edinburgh, EH3 8BL United Kingdom BlackRock (Singapore) Limited 079912 Singapore	Custodian The Bank of New York Mellon New York, NY 10286	Distributor BlackRock Investments, LLC New York, NY 10022
Accounting Agent and Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Legal Counsel Willkie Farr & Gallagher LLP New York, NY 10019	Independent Registered Public Accounting Firm Deloitte & Touche LLP Philadelphia, PA 19103	Address of the Trust 100 Bellevue Parkway Wilmington, DE 19809

¹  For Credit Strategies Income.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 147

Additional Information

      General Information

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

      Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.

148 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Additional Information (concluded)

      BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 149

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless preceded or accompanied by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Taxable5-9/16-AR

SEPTEMBER 30, 2016        

  ANNUAL REPORT BLACKROCK^®

BlackRock Funds II

▶   BlackRock Core Bond Portfolio

▶   BlackRock High Yield Bond Portfolio

▶   BlackRock Low Duration Bond Portfolio

Not FDIC Insured ◾ May Lose Value ◾ No Bank Guarantee

Table of Contents

	Page
The Markets in Review	3
Annual Report:
Fund Summaries	4
About Fund Performance	10
Disclosure of Expenses	11
The Benefits and Risks of Leveraging	11
Derivative Financial Instruments	11
Financial Statements:
Schedules of Investments	12
Statements of Assets and Liabilities	93
Statements of Operations	96
Statements of Changes in Net Assets	97
Financial Highlights	99
Notes to Financial Statements	123
Report of Independent Registered Public Accounting Firm	148
Important Tax Information	148
Disclosure of Investment Advisory Agreement	149
Officers and Trustees	153
Additional Information	157

    Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports and prospectuses by enrolling in the electronic delivery program. Electronic copies of shareholder reports and prospectuses are also available on BlackRock’s website.   TO ENROLL IN ELECTRONIC DELIVERY:   Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:   Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.   Shareholders Who Hold Accounts Directly with BlackRock:   1. Access the BlackRock website at blackrock.com   2. Select “Access Your Account”   3. Next, select “eDelivery” in the “Related Resources” box and follow the sign-up     instructions

2 BLACKROCK FUNDS II SEPTEMBER 30, 2016

The Markets in Review

Dear Shareholder,

Most asset classes produced strong returns over the past year, particularly risk assets such as equities and high yield bonds. Central bank policy decisions continued to provide support to financial markets, while changing economic outlooks and geopolitical risks have been major drivers of investor sentiment.

The Federal Reserve (the “Fed”) has long been in the spotlight, particularly leading up to the decision to end its near-zero interest rate policy at the end of 2015, and after, as investors remained focused on the anticipated pace of future rate hikes. With the European Central Bank and the Bank of Japan having moved into stimulus mode, the divergence in global monetary policies drove heightened market volatility heading into 2016 and caused the U.S. dollar to strengthen considerably. The year had a rough start as the strong dollar challenged U.S. companies that generate revenues overseas, and pressured emerging market currencies and commodities prices. Low and volatile oil prices and signs of slowing growth in China were also meaningful factors behind the decline in risk assets early in the year. However, as the first quarter wore on, these pressures abated and a more tempered outlook for U.S. rate hikes helped financial markets rebound.

Volatility spiked in late June when the United Kingdom shocked investors with its vote to leave the European Union. Uncertainty around how the British exit might affect the global economy and political landscape drove investors to high-quality assets, pushing already low global yields to even lower levels. However, risk assets recovered swiftly in July as economic data suggested that the consequences had thus far been contained to the United Kingdom.

With a number of factors holding global interest rates down — central bank accommodation, an aging population, and weak productivity growth — assets offering decent yield have become increasingly scarce. As a result, income-seeking investors have stretched into riskier assets despite high valuations in many sectors. History implies that high valuations and low growth results in lower returns for risk assets. Still, perceived safe havens have their own risks, and investors are wise to carefully assess risk and potential reward.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to adjust accordingly as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.40	%		15.43	%
U.S. small cap equities (Russell 2000® Index)		13.18			15.47
International equities (MSCI Europe, Australasia, Far East Index)		4.88			6.52
Emerging market equities (MSCI Emerging Markets Index)		9.75			16.78
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.17			0.27
U.S. Treasury securities (BofA Merrill Lynch 10- Year U.S. Treasury Index)		2.25			5.59
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		2.68			5.19
Tax-exempt municipal bonds (S&P Municipal Bond Index)		2.53			5.84
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		11.38			12.74
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Fund Summary as of September 30, 2016 BlackRock Core Bond Portfolio

      Investment Objective

BlackRock Core Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund underperformed the benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.

What factors influenced performance?

• During the period, the main detractors from performance were the Fund’s active currency positioning and macro overlay strategies.

• The principal positive contributors to performance were the Fund’s allocations to high quality securitized assets, agency mortgage-backed securities (“MBS”) and U.S. investment grade credit. Within securitized assets, overweight positions to high quality commercial mortgage-backed securities (“CMBS”) and collateralized loan obligations (“CLOs”) added to performance as these segments were supported by low supply and strong demand. In addition, risk assets overall were supported by accommodative monetary policy conditions during the second half of the period. The Fund’s underweight in agency MBS to begin 2016, and a preference for higher coupon conventional MBS toward the second half of the period aided performance. Within investment grade credit, the Fund’s overweight in financials and underweight in industrials based on relative valuation to begin the period contributed to returns, as financials were buoyed by market expectations for a Fed rate hike.

Describe recent portfolio activity.

• As the Fund navigated a period of increased cross-asset volatility driven by monetary policy uncertainty and concerns surrounding global growth, the Fund maintained a defensive stance and a preference for yield-oriented investments. Through the end of 2015, the Fund was underweight U.S. duration (sensitivity to interest rate movements) with the expectation that interest rates would move higher. As rate hike

expectations were pushed back, the Fund kept a neutral duration versus the benchmark based on a defensive view regarding the absolute level of U.S. interest rates. In terms of non-government spread sectors, after having started the period with an overweight allocation to financials and an underweight to industrials, the Fund moved to an overweight investment grade credit allocation based on demand for yield as well as supply/demand within the sector. The Fund maintained an underweight allocation to agency MBS in early 2016 on concerns surrounding reduced demand. However, toward the second half of the period, the Fund moved to an overweight in agency MBS as a source of high quality yield. The Fund also sought to reduce exposure to securitized assets as the period began, on the expectation of heightened market volatility. As risk aversion in January and early February caused spreads to widen across securitized assets, the Fund increased its allocations across high quality CMBS and CLOs. In its active currency positioning, the Fund maintained a modestly long U.S. dollar position throughout the period.

Describe portfolio positioning at period end.

• At period end, as the performance of traditional risk-free assets and risk assets became increasingly more correlated, the Fund retained its preference for yield-oriented investments. Additionally, the Fund had increased its underweight in U.S. duration. As spreads between lower and higher quality credits have compressed since early 2016, the Fund’s preferred exposure remained in U.S. investment grade credit and securitized assets based on relative value versus competing spread assets. Additionally, the Fund was positioned with a preference for Treasury inflation protected securities versus nominal U.S. Treasuries at either end of the yield curve.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of              Total Investments1
U.S. Government Sponsored Agency Securities	33%
U.S. Treasury Obligations	31
Corporate Bonds	24
Asset-Backed Securities	5
Non-Agency Mortgage-Backed Securities	4
Foreign Government Obligations	2
Taxable Municipal Bonds	1

Credit Quality Allocation2	Percent of              Total Investments1
AAA/Aaa3	70%
AA/Aa	5
A	11
BBB/Baa	13
N/R	1

¹  Total investments exclude short-term securities and options purchased.

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed not-rated U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

4 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock Core Bond Portfolio

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   The Fund normally invests at least 80% of its assets in bonds and maintains an average portfolio duration that is within ±20% of the duration of the Bloomberg Barclays U.S. Aggregate Bond Index (the benchmark).   ³   A widely recognized unmanaged market-weighted index, comprised of investment-grade corporate bonds rated BBB or better, mortgages and U.S. Treasury and U.S. Government agency issues with at least one year to maturity.

Performance Summary for the Period Ended September 30, 2016
										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		1.94	%		1.83	%		2.51	%		4.78	%		N/A			3.85	%		N/A			4.38	%		N/A
Service		1.60			1.58			2.23			4.32			N/A			3.50			N/A			4.08			N/A
Investor A		1.54			1.45			2.23			4.32			0.14	%		3.48			2.64	%		4.05			3.63	%
Investor C		0.86			0.84			1.85			3.55			2.55			2.73			2.73			3.24			3.24
Class K		1.99			1.95			2.53			4.83			N/A			3.93			N/A			4.49			N/A
Class R		1.35			1.29			2.20			4.16			N/A			3.23			N/A			3.77			N/A
Bloomberg Barclays U.S. Aggregate Bond Index		—			—			2.68			5.19			N/A			3.08			N/A			4.79			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example
	Actual												Hypothetical7
							Including Interest Expense			Excluding Interest Expense						Including Interest Expense						Excluding Interest Expense
	Beginning Account Value April 1, 2016			Ending Account Value September 30, 2016			Expenses Paid During the Period5			Expenses Paid During the Period6			Beginning Account Value April 1, 2016			Ending Account Value September 30, 2016			Expenses Paid During the Period5			Ending Account Value September 30, 2016			Expenses Paid During the Period6
Institutional		$	1,000.00		$	1,025.10		$	2.69		$	2.28		$	1,000.00		$	1,022.41		$	2.69		$	1,022.81		$	2.28
Service		$	1,000.00		$	1,022.30		$	4.41		$	4.00		$	1,000.00		$	1,020.71		$	4.41		$	1,021.11		$	4.00
Investor A		$	1,000.00		$	1,022.30		$	4.41		$	4.00		$	1,000.00		$	1,020.71		$	4.41		$	1,021.11		$	4.00
Investor C		$	1,000.00		$	1,018.50		$	8.20		$	7.79		$	1,000.00		$	1,016.95		$	8.19		$	1,017.35		$	7.79
Class K		$	1,000.00		$	1,025.30		$	2.44		$	2.03		$	1,000.00		$	1,022.66		$	2.43		$	1,023.06		$	2.03
Class R		$	1,000.00		$	1,022.00		$	5.68		$	5.27		$	1,000.00		$	1,019.45		$	5.67		$	1,019.85		$	5.27

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.53% for Institutional, 0.87% for Service, 0.87% for Investor A, 1.62% for Investor C, 0.48% for Class K and 1.12% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.45% for Institutional, 0.79% for Service, 0.79% for Investor A, 1.54% for Investor C, 0.40% for Class K and 1.04% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 5

Fund Summary as of September 30, 2016 BlackRock High Yield Bond Portfolio

      Investment Objective

BlackRock High Yield Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund underperformed its benchmark, the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index.

What factors influenced performance?

• During the period, the largest detractors from relative results included security selection within the metals & mining sector, in particular an underweight to steel manufacturer ArcelorMittal. Selection also detracted within the wireless sector, where an overweight to Ligado Networks LLC underperformed, and the electric sector, where an overweight to Texas Competitive Electric Holdings Co. was the biggest laggard.

• The largest contributors to performance included security selection within banking, highlighted by an overweight to Ally Financial, Inc. Selection was also positive within cable & satellite, where an overweight to CSC Holdings LLC led performance, and finance, where an overweight to American Capital Ltd. added value.

• The Fund held derivatives in the form of liquid products such as credit default swaps and total return swaps. The Fund’s allocations to these instruments made a positive contribution to performance, as they enabled the Fund to quickly and efficiently trade into cash bonds as opportunities arose. In addition, the Fund held a small position in equity futures as a strategy to manage risk, which was pared down over the course of the period but nevertheless detracted from performance as the S&P 500 Index rallied over the period.

Describe recent portfolio activity.

• The Fund made significant shifts in its overall stance over the course of the period, as the market shifted from a risk-off tone in early 2016 to

a more positive mode beginning around mid-February. From a sector standpoint, the Fund increased its exposure to names within metals & mining, packaging and oil field services throughout the period. While the Fund has maintained a material underweight to the oil field services sector, it opportunistically added to higher quality “fallen angel” issuers there. The Fund also reduced its exposures within the electric, pharmaceuticals and banking sectors. In order to add risk quickly and efficiently, the Fund continued to utilize liquid products (high yield ETFs, credit default swaps, and total return swaps). The Fund then employed the liquidity provided by these instruments to purchase high yield bonds as opportunities arose.

Describe portfolio positioning at period end.

• As of period end, the Fund held an underweight in BB-rated high yield bonds, an overweight to B-rated credits, and a neutral position versus the benchmark in terms of CCC and below exposure. The Fund remained underweight within the distressed part of the credit spectrum, focusing instead on select CCC issues with improving credit positions and/or attractive yields. In addition to credit, the Fund favored positions in equity and equity-like (preferred and convertible) instruments to enhance the Fund’s total return profile; the investment adviser will tactically implement strategies to mitigate this risk when markets warrant. The Fund also maintained a strategic allocation to bank loans, which have little duration risk and, as senior secured instruments, provide an effective substitute for the Fund’s BB corporate bond underweight. At the portfolio level, the Fund maintained a slightly short profile with respect to duration (and corresponding interest rate sensitivity) relative to the benchmark.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition	Percent of              Total Investments1
Corporate Bonds	81%
Floating Rate Loan Interests	8
Preferred Securities	3
Common Stocks	3
Asset-Backed Securities	3
Investment Companies	2

Credit Quality Allocation2	Percent of              Total Investments1
A	1%
BBB/Baa	6
BB/Ba	37
B	43
CCC/Caa	6
N/R	7

¹  Total investments exclude short-term securities and options purchased.

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

6 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock High Yield Bond Portfolio

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   The Fund invests primarily in non-investment grade bonds with maturities of ten years or less. The Fund normally invests at least 80% of its assets in high yield bonds.   ³   An unmanaged index comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1, at least one year to maturity, and no issuer represents more than 2 percent of the index.

Performance Summary for the Period Ended September 30, 2016
										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		5.45	%		5.44	%		9.55	%		9.21	%		N/A			8.34	%		N/A			7.45	%		N/A
Service		5.16			5.16			9.53			9.04			N/A			8.03			N/A			7.11			N/A
Investor A		5.05			5.05			9.36			8.86			4.50	%		8.00			7.13	%		7.10			6.66	%
Investor B		4.24			4.24			9.03			7.95			3.45			7.10			6.79			6.53			6.53
Investor B1		4.57			4.57			9.08			8.28			4.28			7.44			7.13			6.58			6.58
Investor C		4.36			4.35			8.95			8.04			7.04			7.17			7.17			6.30			6.30
Investor C1		4.53			4.52			9.05			8.23			N/A			7.37			N/A			6.51			N/A
Class K		5.49			5.46			9.57			9.44			N/A			8.44			N/A			7.54			N/A
Class R		4.79			4.79			9.18			8.51			N/A			7.65			N/A			6.80			N/A
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index		—			—			11.38			12.74			N/A			8.34			N/A			7.80			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example
	Actual				Hypothetical7
			Including Interest Expense and Fees	Excluding Interest Expense and Fees		Including Interest Expense and Fees		Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Expenses Paid During the Period6	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Ending Account Value September 30, 2016	Expenses Paid During the Period6
Institutional	$1,000.00	$1,095.50	$3.20	$3.10	$1,000.00	$1,022.01	$3.09	$1,022.11	$2.99
Service	$1,000.00	$1,095.30	$4.67	$4.62	$1,000.00	$1,020.61	$4.51	$1,020.66	$4.46
Investor A	$1,000.00	$1,093.60	$4.88	$4.83	$1,000.00	$1,020.41	$4.71	$1,020.46	$4.66
Investor B	$1,000.00	$1,090.30	$9.75	$9.64	$1,000.00	$1,015.74	$9.40	$1,015.84	$9.30
Investor B1	$1,000.00	$1,090.80	$7.70	$7.65	$1,000.00	$1,017.70	$7.44	$1,017.75	$7.38
Investor C	$1,000.00	$1,089.50	$8.85	$8.75	$1,000.00	$1,016.60	$8.54	$1,016.70	$8.44
Investor C1	$1,000.00	$1,090.50	$7.91	$7.81	$1,000.00	$1,017.50	$7.64	$1,017.60	$7.54
Class K	$1,000.00	$1,095.70	$2.84	$2.78	$1,000.00	$1,022.36	$2.74	$1,022.41	$2.69
Class R	$1,000.00	$1,091.80	$6.66	$6.61	$1,000.00	$1,018.70	$6.43	$1,018.75	$6.38

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.61% for Institutional, 0.89% for Service, 0.93% for Investor A, 1.86% for Investor B, 1.47% for Investor B1, 1.69% for Investor C, 1.51% for Investor C1, 0.54% for Class K and 1.27% for Class R), multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period shown). The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.59% for Institutional, 0.88% for Service, 0.92% for Investor A, 1.84% for Investor B, 1.46% for Investor B1, 1.67% for Investor C, 1.49% for Investor C1, 0.53% for Class K and 1.26% for Class R), multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 7

Fund Summary as of September 30, 2016 BlackRock Low Duration Bond Portfolio

      Investment Objective

BlackRock Low Duration Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

      Portfolio Management Commentary

How did the Fund perform?

• For the 12-month period ended September 30, 2016, the Fund’s Institutional, Investor A1 and Class K Shares outperformed the benchmark, the BofA Merrill Lynch 1-3 Year U.S. Corporate & Government Index, while Service and Investor A Shares performed in line. The Fund’s remaining share classes underperformed the benchmark for the same period.

What factors influenced performance?

• During the period, the principal contributor to performance was the Fund’s allocation to spread products, as investors’ global search for yield provided support for tighter yield spreads. Within spread products, holdings in asset-backed securities (“ABS”) represented the main contributor, and positions in commercial mortgage backed securities (“CMBS”) and agency mortgages were additive as well. The Fund’s allocation to investment grade and high yield corporates also contributed to returns.

• The largest detractor from performance was the Fund’s underweight to U.S. Treasuries, as well as an underweight within sovereign, supranational (multinational foreign government obligations) and agency debt.

• The Fund held derivatives as part of managing its duration and foreign exchange hedging strategies. During the period, the use of derivatives, including financial futures, swaps and foreign exchange strategies, had negative impact on Fund returns.

Describe recent portfolio activity.

• At the start of the reporting period, the Fund’s holdings within ABS and CMBS were reduced due to liquidity concerns and to moderate the portfolio’s credit risk exposure, as market volatility returned ahead of the first interest rate hike from the Fed in more than nine years. The Fund also maintained a relatively low duration (and corresponding sensitivity to interest rates), which helped in a rising rate environment.

• Entering 2016, the Fund adopted a more conservative posture on concerns over China’s economic slowdown, the decreasing efficacy of central bank monetary policies, the effect of the December 2015 federal funds rate hike, and the U.K. vote to leave the European Union (“Brexit.”) This shift helped the Fund’s performance during the higher volatility environment seen through the middle of February 2016. As the Brexit referendum drew closer, the Fund’s exposure to U.S. Treasuries was gradually increased on expectations of additional volatility.

• Following the Brexit vote, the Fund began to reduce its underweight to corporate credit and add exposure to securitized assets. The Fund also moved to a slight overweight in high yield and continued to favor structured credit, particularly ABS as the sector continues to be supported by the strengthening in consumer balance sheets. Toward the end of the period, the Fund’s duration was lengthened to take advantage of a “risk-on” tone in the market, adding to relative performance.

Describe portfolio positioning at period end.

• The Fund ended the period with a long duration relative to the benchmark. The Fund also maintained its overweight to securitized assets and had exposure to agency callable securities and collateralized mortgage obligations. Within ABS, the Fund favored credit card loans, private student debt and consumer loans. Within CMBS, the Fund emphasized high quality single-asset-single-borrower deals. More recently, the Fund added a small position in non-agency residential mortgage-backed securities. In corporate credit, the Fund had a slight overweight in both investment grade and high yield corporate issues.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

      Portfolio Information

Portfolio Composition Percent of    
Total Investments¹    

Corporate Bonds	28	%
Asset-Backed Securities	25
U.S. Government Sponsored Agency Securities	15
Non-Agency Mortgage-Backed Securities	14
U.S. Treasury Obligations	14
Foreign Agency Obligations	2
Investment Companies	1
Foreign Government Obligations	1

Credit Quality Allocation² Percent of    
Total Investments¹    

AAA/Aaa3	64	%
AA/Aa	4
A	9
BBB/Baa	16
BB/Ba	4
B	1
N/R	2

¹  Total investments exclude short-term securities and options purchased.

²  For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or Moody’s if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

³  The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuers. Using this approach, the investment adviser has deemed not-rated U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.

8 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock Low Duration Bond Portfolio

      Total Return Based on a $10,000 Investment

¹   Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge.   ²   The Fund invests primarily in investment grade bonds and maintains an average portfolio duration that is between 0-3 years.   ³   An unmanaged index comprised of investment grade corporate bonds and U.S. Government Agency and U.S. Treasury securities with maturities ranging from one to three years.

Performance Summary for the Period Ended September 30, 2016
										Average Annual Total Returns4
										1 Year						5 Years						10 Years
	Standardized 30-Day Yields			Unsubsidized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		1.50	%		1.48	%		1.27	%		1.63	%		N/A			2.36	%		N/A			2.88	%		N/A
Service		1.17			1.16			0.99			1.29			N/A			1.98			N/A			2.53			N/A
Investor A		1.14			1.13			0.99			1.29			(0.99	)%		1.98			1.52	%		2.52			2.28	%
Investor A1		1.34			1.33			1.09			1.48			N/A			2.16			N/A			2.69			N/A
Investor C		0.44			0.41			0.62			0.55			(0.45	)		1.26			1.26			1.77			1.77
Investor C2		1.02			1.02			0.92			1.14			N/A			1.83			N/A			2.37			N/A
Investor C3		0.47			0.47			0.63			0.57			N/A			1.23			N/A			1.73			N/A
Class K		1.56			1.54			1.19			1.69			N/A			2.40			N/A			2.92			N/A
Class R		0.92			0.47			0.86			1.04			N/A			1.63			N/A			2.07			N/A
BofA Merrill Lynch 1-3 Year U.S. Corporate &        Government Index		—			—			0.69			1.32			N/A			1.11			N/A			2.59			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example
	Actual				Hypothetical7
			Including Interest Expense	Excluding Interest Expense		Including Interest Expense		Excluding Interest Expense
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Expenses Paid During the Period6	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period5	Ending Account Value September 30, 2016	Expenses Paid During the Period6
Institutional	$1,000.00	$1,012.70	$2.37	$2.27	$1,000.00	$1,022.71	$2.38	$1,022.81	$2.28
Service	$1,000.00	$1,009.90	$4.08	$3.98	$1,000.00	$1,021.01	$4.10	$1,021.11	$4.00
Investor A	$1,000.00	$1,009.90	$4.08	$3.98	$1,000.00	$1,021.01	$4.10	$1,021.11	$4.00
Investor A1	$1,000.00	$1,010.90	$3.13	$3.02	$1,000.00	$1,021.96	$3.14	$1,022.06	$3.04
Investor C	$1,000.00	$1,006.20	$7.80	$7.69	$1,000.00	$1,017.30	$7.84	$1,017.40	$7.74
Investor C2	$1,000.00	$1,009.20	$4.84	$4.73	$1,000.00	$1,020.26	$4.86	$1,020.36	$4.76
Investor C3	$1,000.00	$1,006.30	$7.64	$7.54	$1,000.00	$1,017.45	$7.69	$1,017.55	$7.59
Class K	$1,000.00	$1,011.90	$2.12	$2.02	$1,000.00	$1,022.96	$2.13	$1,023.06	$2.03
Class R	$1,000.00	$1,008.60	$5.34	$5.24	$1,000.00	$1,019.75	$5.37	$1,019.85	$5.27

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.47% for Institutional, 0.81% for Service, 0.81% for Investor A, 0.62% for Investor A1, 1.55% for Investor C, 0.96% for Investor C2, 1.52% for Investor C3, 0.42% for Class K and 1.06% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.45% for Institutional, 0.79% for Service, 0.79% for Investor A, 0.60% for Investor A1, 1.53% for Investor C, 0.94% for Investor C2, 1.50% for Investor C3, 0.40% for Class K and 1.04% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 9

About Fund Performance

• Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

• Service Shares are not subject to any sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to certain eligible investors.

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% for all Funds included in this report, except for BlackRock Low Duration Bond Portfolio (“Low Duration Bond”), which is subject to an initial sales charge of 2.25%. These shares are subject to a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries. On the close of business on June 23, 2015, all issued and outstanding Investor B3 Shares of Low Duration Bond were converted into Investor A Shares with the same relative aggregated net asset value (“NAV”).

• Investor A1 Shares (available only in Low Duration Bond) are subject to a maximum initial sales charge (front-end load) of 1.00% and a service fee of 0.10% per year (but no distribution fee). The maximum initial sales charge does not apply to current shareholders of Investor A1 Shares of the Fund. Prior to October 2, 2006, Low Duration Bond’s Investor A1 Shares performance results are those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor A1 Share fees.

• Investor B Shares (available only in BlackRock High Yield Bond Portfolio (“High Yield Bond”)) are subject to a maximum CDSC of 4.50% declining to 0% after six years. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately seven years. (There is no initial sales charge for automatic share conversions). All returns for periods greater than seven years reflect this conversion.

• Investor B1 Shares (available only in High Yield Bond) are subject to a maximum CDSC of 4.00% declining to 0% after six years and a distribution fee of 0.50% per year and a service fee of 0.25% per year. Investor B1 Shares automatically convert to Investor A Shares after approximately ten years. (There is no initial sales charge for automatic share conversions.) Prior to October 2, 2006, High Yield Bond’s Investor B1 Shares performance results are those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor B1 Share fees.

• Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries.

• Investor C1, Investor C2 and Investor C3 Shares (Investor C1 Shares available only in High Yield Bond; Investor C2 and Investor C3 Shares available only in Low Duration Bond) are subject to a 1.00% CDSC if redeemed within one year of purchase. However, the CDSC does not apply to redemptions by certain employer-sponsored retirement plans or

to redemptions of shares acquired through reinvestment of dividends and capital gains by existing shareholders. In addition, these shares are subject to a distribution fee of 0.55%, 0.30% and 0.65% per year, respectively, and a service fee of 0.25%, 0.10% and 0.25% per year, respectively. Prior to October 2, 2006, High Yield Bond’s Investor C1 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor C1 Share fees. Prior to October 2, 2006, Low Duration Bond’s Investor C2 Shares performance results were those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor C2 Share fees. Prior to July 18, 2011, Low Duration Bond’s Investor C3 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor C3 Share fees.

• Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans. Prior to October 2, 2006, High Yield Bond’s and Core Bond’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees. Prior to July 18, 2011, Low Duration Bond’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees.

Investor B Shares are available only through exchanges and dividend reinvestments by existing shareholders, and for purchase by certain employer-sponsored retirement plans.

Investor A1, Investor B1, Investor C1, Investor C2 and Investor C3 Shares of their respective Funds are only available for dividend and capital gain reinvestment by existing shareholders, and for purchase by certain employer-sponsored retirement plans.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at NAV on the ex-dividend/payable dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Manager”), each Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Funds’ expenses. Without such waiver and/or reimbursement, the Funds’ performance would have been lower. The Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 6 of the Notes to Financial Statements for additional information on waivers and/or reimbursements. The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.

10 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on April 1, 2016 and held through September 30, 2016) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

The Benefits and Risks of Leveraging

The Funds may utilize leverage to seek to enhance returns and NAV. However, these objectives cannot be achieved in all interest rate environments.

The Funds may utilize leverage by entering into reverse repurchase agreements. In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by each Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is distributed to the Funds’ shareholders, and the value of these portfolio holdings is reflected in the Funds’ per share NAV. However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other ongoing costs of leverage exceed a Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage.

Furthermore, the value of each Fund’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can also influence the value of portfolio investments. As a result, changes in interest rates can influence each Fund’s NAV positively or negatively in addition to the impact on each Fund’s performance from leverage. Changes in the direction of interest rates are difficult to predict accurately, and there is no assurance that a Fund’s leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Fund’s NAV and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV of a Fund’s shares than if the Fund were not leveraged. In addition, each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of the leverage instruments, which may cause the Funds to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund incurs expenses in connection with the use of leverage, all of which are borne by the Funds’ shareholders and may reduce income.

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the

transaction or illiquidity of the instrument. The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 11

Schedule of Investments September 30, 2016	BlackRock Core Bond Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities		Par   (000)		Value
ACAS CLO Ltd.:
Series 2012-1A, Class BR, 3.18%, 9/20/23 (a)(b)	USD		1,640	$	1,639,995
Series 2015-2A, Class B, 2.99%, 10/28/27 (a)(b)			1,500		1,504,214
Adirondack Park CLO Ltd., Series 2013-1A, Class B, 2.68%, 4/15/24 (a)(b)			320		319,981
ALM V Ltd., Series 2012-5A, Class A2R, 2.83%, 10/18/27 (a)(b)			1,000		995,130
ALM VII R Ltd., Series 2013-7RA, Class A2, 2.56%, 4/24/24 (a)(b)			1,398		1,395,962
ALM VII R-2 Ltd., Series 2013-7R2A, Class A2, 2.56%, 4/24/24 (a)(b)			605		604,129
ALM XII Ltd., Series 2015-12A, Class B, 3.93%, 4/16/27  (a)(b)			500		501,390
ALM XIV Ltd., Series 2014-14A, Class A1, 2.17%, 7/28/26 (a)(b)			4,240		4,242,120
American Homes 4 Rent, Series 2014-SFR1, Class A, 1.51%, 6/17/31 (a)(b)			322		320,693
AMMC CLO 18 Ltd., Series 2016-18A, Class AL1, 2.24%, 5/26/28 (a)(b)			1,770		1,770,000
AMMC CLO IX Ltd.:
Series 2011-9A, Class B1R, 3.18%, 1/15/22 (a)(b)			3,070		3,074,605
Series 2011-9A, Class CR, 4.28%, 1/15/22 (a)(b)			900		907,526
Anchorage Capital CLO Ltd.:
Series 2013-1A, Class A1, 1.86%, 7/13/25 (a)(b)			670		667,186
Series 2013-1A, Class A2A, 2.42%, 7/13/25 (a)(b)			440		435,499
Apidos CLO IX, Series 2012-9AR, Class BR, 2.53%, 7/15/23 (a)(b)			1,415		1,407,469
Apidos CLO XI:
Series 2012-11A, Class A, 2.07%, 1/17/23 (a)(b)			1,530		1,529,175
Series 2012-11A, Class C, 3.78%, 1/17/23 (a)(b)			1,160		1,160,258
Apidos CLO XII, Series 2013-12A, Class A, 1.78%, 4/15/25 (a)(b)			7,024		6,968,510
Apidos CLO XV, Series 2013-15A, Class A1, 2.05%, 10/20/25 (a)(b)			500		498,739
Apidos CLO XVI, Series 2013-16A, Class A1, 2.14%, 1/19/25 (a)(b)			950		950,622
Apidos CLO XVIII, Series 2014-18A, Class A1, 2.11%, 7/22/26 (a)(b)			370		369,173
Arbor Realty Commercial Real Estate Notes Ltd., Series 2016-FL1A, Class A, 2.20%, 9/15/26 (a)(b)			1,300		1,300,000

Asset-Backed Securities		Par   (000)		Value
ARES IIIR/IVR CLO Ltd., Series 2007-3RA, Class A2, 0.90%, 4/16/21 (a)(b)	USD		1,011	$	1,003,273
Atlas Senior Loan Fund IV Ltd., Series 2013-2A, Class A1L, 2.32%, 2/17/26 (a)(b)			2,330		2,330,000
Atlas Senior Loan Fund Ltd., Series 2012-1A, Class A3LR, 3.26%, 8/15/24 (a)(b)			330		330,000
B2R Mortgage Trust:
Series 2015-1, Class A1, 2.52%, 5/15/48 (a)			426		426,445
Series 2015-2, Class A, 3.34%, 11/15/48 (a)			1,038		1,065,286
Babson CLO Ltd.:
Series 2012-1A, Class A2, 2.68%, 4/15/22 (a)(b)			500		500,537
Series 2012-1A, Class B, 3.18%, 4/15/22 (a)(b)			500		500,573
Series 2013-IA, Class A, 1.80%, 4/20/25 (a)(b)			1,790		1,783,287
Battalion CLO IV Ltd., Series 2013-4A, Class A1, 2.10%, 10/22/25 (a)(b)			3,965		3,956,839
Benefit Street Partners CLO II Ltd., Series 2013-IIA, Class A1, 1.88%, 7/15/24 (a)(b)			1,850		1,841,346
Benefit Street Partners CLO Ltd., Series 2012-IA, Class A2R, 2.93%, 10/15/25 (a)(b)			2,550		2,567,595
BlueMountain CLO II Ltd., Series 2006-2A, Class B, 1.28%, 7/15/18 (a)(b)			500		489,300
BlueMountain CLO Ltd.:
Series 2012-1A, Class C, 3.95%, 7/20/23 (a)(b)			250		250,950
Series 2012-2A, Class B1, 2.87%, 11/20/24 (a)(b)			3,100		3,099,285
Series 2013-2A, Class A, 1.90%, 1/22/25 (a)(b)			360		358,753
Series 2013-4A, Class A, 2.18%, 4/15/25 (a)(b)			2,510		2,510,000
Series 2014-2A, Class A, 2.15%, 7/20/26 (a)(b)			280		280,202
Canyon Capital CLO Ltd., Series 2006-1A, Class A1, 0.90%, 12/15/20 (a)(b)			426		419,685
Carlyle Global Market Strategies CLO Ltd.:
Series 2012-2A, Class B1R, 2.80%, 7/20/23 (a)(b)			510		509,987
Series 2012-4A, Class A, 2.09%, 1/20/25 (a)(b)			5,830		5,829,850

Portfolio Abbreviations
ABS	Asset-Backed Security	EURIBOR	Euro Interbank Offered Rate	OTC	Over-the-counter
AKA	Also Known As	FKA	Formerly Known As	PIK	Payment-in-kind
AUD	Australian Dollar	GBP	British Pound	RB	Revenue Bonds
BRL	Brazilian Real	GO	General Obligation Bonds	REIT	Real Estate Investment Trust
BZDIOVER	Overnight Brazil CETIP - Interbank Rate	HUF	Hungarian Forint	REMIC	Real Estate Mortgage Investment Conduit
CAD	Canadian Dollar	INR	Indian Rupee	RUB	Russian Ruble
CDO	Collateralized Debt Obligation	JPY	Japanese Yen	S&P	Standard & Poor’s
CLO	Collateralized Loan Obligation	KRW	South Korean Won	SAR	Saudi Riyal
CLP	Chilean Peso	LIBOR	London Interbank Offered Rate	SCA	Svenska Celluosa Aktiebolaget
CNH	Chinese Yuan Offshore	MXIBTIIE	Mexico Interbank TIIE 28 Day	SEK	Swedish Krona
CNY	Chinese Yuan	MXN	Mexican Peso	TBA	To-be-announced
COOIS	Columbia Overnight Index Swap	MYR	Malaysian Ringgit	TRY	Turkish Lira
COP	Colombian Peso	NOK	Norwegian Krone	TWD	Taiwan New Dollar
ETF	Exchange-Traded Fund	NZD	New Zealand Dollar	USD	US Dollar
EUR	Euro	OIS	Overnight Index Swap	ZAR	South African Rand

See Notes to Financial Statements.

12 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
CIFC Funding Ltd.:
Series 2013-4A, Class B1, 2.68%, 11/27/24 (a)(b)	USD		1,780	$	1,768,485
Series 2014-1A, Class A, 2.18%, 4/18/25 (a)(b)			560		559,440
Series 2014-2A, Class A1L, 2.31%, 5/24/26 (a)(b)			2,914		2,913,924
Series 2014-5A, Class A1, 2.26%, 1/17/27 (a)(b)			5,690		5,693,384
Series 2015-3A, Class A, 2.11%, 10/19/27 (a)(b)			1,060		1,057,679
Colony American Homes, Series 2015-1A, Class A, 1.71%, 7/17/32 (a)(b)			1,176		1,177,864
Dryden XXV Senior Loan Fund, Series 2012-25A, Class A, 2.06%, 1/15/25 (a)(b)			3,290		3,290,572
Eastland CLO Ltd., Series 2007-1A, Class A2A, 0.99%, 5/01/22 (a)(b)			2,082		2,076,124
Flatiron CLO Ltd., Series 2011-1A, Class A, 2.23%, 1/15/23 (a)(b)			701		700,709
Ford Credit Floorplan Master Owner Trust, Series 2012-5, Class C, 2.14%, 9/15/19			2,085		2,091,869
GSAA Home Equity Trust, Series 2006-5, Class 2A1, 0.59%, 3/25/36 (b)			852		476,843
GT Loan Financing I Ltd., Series 2013-1A, Class A, 2.01%, 10/28/24 (a)(b)			4,330		4,318,112
Highbridge Loan Management Ltd.:
Series 2012-1AR, Class A2R, 2.90%, 9/20/22 (a)(b)			1,230		1,231,713
Series 6A-2015, Class A, 2.23%, 5/05/27 (a)(b)			2,100		2,095,257
IFC SBA Loan-Backed Adjustable Rate Certificate, Series 1997-1, Class A, 1.50%, 1/15/24 (a)(b)			51		49,131
Invitation Homes Trust:
Series 2014-SFR1, Class A, 1.51%, 6/17/31 (a)(b)			1,172		1,168,424
Series 2014-SFR2, Class A, 1.61%, 9/17/31 (a)(b)			945		943,916
Series 2014-SFR2, Class C, 2.73%, 9/17/31 (a)(b)			550		552,376
Series 2014-SFR3, Class A, 1.71%, 12/17/31 (a)(b)			678		678,741
Series 2015-SFR3, Class A, 1.81%, 8/17/32 (a)(b)			1,483		1,490,706
KKR Financial CLO Ltd., Series 2013-1A, Class A1, 1.83%, 7/15/25 (a)(b)			3,985		3,970,529
LCM IX LP, Series 9A, Class C, 3.52%, 7/14/22 (a)(b)			500		501,250
LCM XI LP, Series 11A, Class B, 2.84%, 4/19/22 (a)(b)			790		789,964
Lime Street CLO Ltd., Series 2007-1A, Class B, 1.20%, 6/20/21 (a)(b)			500		482,435
Madison Park Funding VIII Ltd., Series 2012-8A, Class BR, 2.90%, 4/22/22 (a)(b)			250		250,000
Madison Park Funding X Ltd., Series 2012-10A, Class B1, 3.05%, 1/20/25 (a)(b)			1,330		1,332,660
Mid-State Trust VII, Series 7, Class A, 6.34%, 10/15/36			2,197		2,337,271
Mountain Hawk I CLO Ltd., Series 2013-1A, Class B1, 2.88%, 1/20/24 (a)(b)			990		980,892
Mountain View CLO Ltd., Series 2013-1A, Class A, 1.83%, 4/12/24 (a)(b)			7,500		7,459,198
Muir Woods CLO Ltd., Series 2012-1A, Class C, 4.41%, 9/14/23 (a)(b)			500		500,731

Asset-Backed Securities		Par   (000)		Value
Navient Private Education Loan Trust:
Series 2014-CTA, Class B, 2.26%, 10/17/44 (a)(b)	USD		895	$	846,371
Series 2015-AA, Class A2A, 2.65%, 12/15/28 (a)			720		737,001
Series 2015-AA, Class A2B, 1.72%, 12/15/28 (a)(b)			680		685,777
Series 2015-AA, Class A3, 2.21%, 11/15/30 (a)(b)			632		648,537
Series 2016-AA, Class A2B, 2.66%, 12/15/45 (a)(b)			1,660		1,733,940
Series 2016-AA, Class B, 3.50%, 12/16/58 (a)			800		770,497
Neuberger Berman CLO XIII Ltd.:
Series 2012-13A, Class B, 3.01%, 1/23/24 (a)(b)			3,250		3,249,757
Series 2012-13A, Class C, 3.56%, 1/23/24 (a)(b)			500		504,100
Neuberger Berman CLO XVI Ltd., Series 2014-16A, Class B2R, 2.83%, 4/15/26 (a)(b)			635		635,000
Northwoods Capital IX Ltd., Series 2012-9A, Class A, 2.10%, 1/18/24 (a)(b)			3,895		3,891,250
Oaktree EIF II Ltd., Series 2014-A2, Class B, 3.12%, 11/15/25 (a)(b)			1,005		1,005,018
OCP CLO Ltd., Series 2015-8A, Class A1, 2.21%, 4/17/27 (a)(b)			200		200,021
Octagon Investment Partners XVI Ltd., Series 2013-1A, Class A, 1.80%, 7/17/25 (a)(b)			4,590		4,532,625
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class A2R, 2.31%, 10/25/25 (a)(b)			2,390		2,390,000
OHA Credit Partners IX Ltd., Series 2013-9A, Class A1, 2.10%, 10/20/25 (a)(b)			250		249,660
OHA Credit Partners VIII Ltd., Series 2013-8A, Class A, 1.82%, 4/20/25 (a)(b)			1,240		1,235,090
OHA Loan Funding Ltd., Series 2013-2A, Class A, 2.09%, 8/23/24 (a)(b)			4,495		4,483,238
OneMain Financial Issuance Trust:
Series 2014-1A, Class A, 2.43%, 6/18/24 (a)			1,495		1,496,412
Series 2014-1A, Class B, 3.24%, 6/18/24 (a)			1,415		1,424,999
Series 2014-2A, Class B, 3.02%, 9/18/24 (a)			850		848,802
Series 2015-1A, Class A, 3.19%, 3/18/26 (a)			997		1,007,156
Series 2015-1A, Class B, 3.85%, 3/18/26 (a)			997		1,013,397
Series 2015-2A, Class B, 3.10%, 7/18/25 (a)			2,566		2,569,082
OZLM Funding IV Ltd., Series 2013-4A, Class A1, 1.85%, 7/22/25 (a)(b)			8,315		8,254,301
OZLM Funding Ltd.:
Series 2012-2A, Class A1, 2.24%, 10/30/23 (a)(b)			4,090		4,090,000
Series 2012-2A, Class A2, 3.41%, 10/30/23 (a)(b)			250		250,750
OZLM VI Ltd., Series 2014-6A, Class B, 3.58%, 4/17/26 (a)(b)			380		379,976
OZLM VII Ltd., Series 2014-7A, Class A1A, 2.10%, 7/17/26 (a)(b)			1,860		1,856,051
PFS Tax Lien Trust, Series 2014-1, Class NOTE, 1.44%, 5/15/29 (a)			957		951,337

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 13

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Progress Residential Trust:
Series 2015-SFR2, Class A, 2.74%, 6/12/32 (a)	USD		785	$	795,657
Series 2016-SFR1, Class A, 1.98%, 9/17/33 (a)(b)			920		929,998
Scholar Funding Trust, Series 2011-A, Class A, 1.64%, 10/28/43 (a)(b)			4,645		4,458,473
Sheridan Square CLO Ltd., Series 2013-1A, Class A2, 1.85%, 4/15/25 (a)(b)			2,440		2,426,369
Silvermore CLO Ltd., Series 2014-1A, Class A1, 2.27%, 5/15/26 (a)(b)			1,289		1,284,560
SLC Private Student Loan Trust, Series 2010-B, Class A2, 4.01%, 7/15/42 (a)(b)			734		750,024
SLM Private Credit Student Loan Trust:
Series 2003-B, Class A2, 1.05%, 3/15/22 (b)			1,119		1,109,230
Series 2004-B, Class A2, 1.05%, 6/15/21 (b)			836		833,769
Series 2004-B, Class A3, 1.18%, 3/15/24 (b)			2,200		2,076,769
Series 2006-B, Class A4, 0.83%, 3/15/24 (b)			24		23,973
Series 2006-C, Class A4, 0.82%, 3/15/23 (b)			230		228,768
SLM Private Education Loan Trust:
Series 2011-B, Class A3, 2.76%, 6/16/42 (a)(b)			1,912		1,992,320
Series 2011-C, Class A2A, 3.76%, 10/17/44 (a)(b)			1,723		1,792,562
Series 2012-A, Class A1, 1.91%, 8/15/25 (a)(b)			1,191		1,193,288
Series 2012-E, Class A1, 1.26%, 10/16/23 (a)(b)			381		381,345
Series 2012-E, Class A2B, 2.26%, 6/15/45 (a)(b)			1,000		1,015,295
Series 2013-A, Class A1, 1.11%, 8/15/22 (a)(b)			1,073		1,074,817
Series 2013-A, Class B, 2.50%, 3/15/47 (a)			435		423,881
Series 2013-B, Class B, 3.00%, 5/16/44 (a)			585		578,060
Series 2014-A, Class A1, 1.11%, 7/15/22 (a)(b)			760		760,599
SMB Private Education Loan Trust:
Series 2014-A, Class A1, 1.01%, 9/15/21 (a)(b)			1,226		1,226,206
Series 2014-A, Class A3, 2.01%, 4/15/32 (a)(b)			590		593,100
Series 2015-A, Class A2A, 2.49%, 6/15/27 (a)			980		998,000
Series 2015-A, Class A3, 2.01%, 2/17/32 (a)(b)			1,100		1,105,641
Series 2015-B, Class A2B, 1.71%, 7/15/27 (a)(b)			680		681,286
Series 2015-B, Class A3, 2.26%, 5/17/32 (a)(b)			2,920		2,978,508
Series 2015-B, Class B, 3.50%, 12/17/40 (a)			1,530		1,499,079
Series 2015-C, Class A2B, 1.92%, 7/15/27 (a)(b)			330		335,993
Series 2015-C, Class A3, 2.46%, 8/16/32 (a)(b)			1,120		1,161,839
Series 2016-A, Class A2A, 2.70%, 5/15/31 (a)			800		815,276
Series 2016-A, Class A2B, 2.01%, 5/15/31 (a)(b)			2,000		2,029,160
Series 2016-B, Class A2A, 2.43%, 2/17/32 (a)			1,261		1,263,910
Series 2016-B, Class A2B, 1.94%, 2/17/32 (a)(b)			1,690		1,710,049

Asset-Backed Securities		Par   (000)		Value
SoFi Professional Loan Program LLC:
Series 2015-D, Class A2, 2.72%, 10/27/36 (a)	USD		981	$	1,004,102
Series 2016-C, Class A2B, 2.36%, 12/27/32 (a)			410		413,872
Series 2016-D, Class A2B, 2.34%, 4/25/33 (a)			380		379,946
Sound Point CLO I Ltd., Series 2012-1A, Class B, 3.40%, 10/20/23 (a)(b)			250		250,035
Sound Point CLO IV Ltd., Series 2013-3A, Class A, 2.07%, 1/21/26 (a)(b)			1,505		1,499,687
Sound Point CLO VI Ltd., Series 2014-2A, Class A1, 2.06%, 10/20/26 (a)(b)			940		933,640
Sound Point CLO XI Ltd., Series 2016-1A, Class A, 2.18%, 7/20/28 (a)(b)			2,000		2,007,400
Sound Point CLO XII Ltd., Series 2016-2A, Class A, 2.14%, 10/20/28 (a)(b)			1,010		1,012,525
Springleaf Funding Trust, Series 2015-AA, Class B, 3.62%, 11/15/24 (a)			1,445		1,457,872
Structured Asset Securities Corp. Assistance Loan Trust, Series 2003-AL1, Class A, 3.36%, 4/25/31 (a)			570		560,668
SWAY Residential Trust, Series 2014-1, Class A, 1.83%, 1/17/32 (a)(b)			4,186		4,191,318
Symphony CLO XI Ltd., Series 2013-11A, Class B1, 2.88%, 1/17/25 (a)(b)			280		281,988
TICP CLO III Ltd.:
Series 2014-3A, Class A, 2.24%, 1/20/27 (a)(b)			1,863		1,862,189
Series 2014-3A, Class B1, 3.05%, 1/20/27 (a)(b)			250		250,020
Tricon American Homes Trust, Series 2015-SFR1, Class A, 1.78%, 5/17/32 (a)(b)			528		526,599
Trimaran CLO VII Ltd., Series 2007-1A, Class A3L, 1.52%, 6/15/21 (a)(b)			200		196,244
Venture X CLO Ltd., Series 2012-10A, Class C, 3.95%, 7/20/22 (a)(b)			500		500,026
Venture XIX CLO Ltd., Series 2014-19A, Class A, 2.28%, 1/15/27 (a)(b)			1,190		1,190,274
Venture XVIII CLO Ltd., Series 2014-18A, Class A, 2.13%, 10/15/26 (a)(b)			3,230		3,227,043
Voya CLO Ltd.:
Series 2012-1A, Class A2R, 2.51%, 3/14/22 (a)(b)			1,000		1,000,027
Series 2012-2A, Class BR, 2.63%, 10/15/22 (a)(b)			1,120		1,120,327
Series 2013-3A, Class A1, 2.13%, 1/18/26 (a)(b)			2,175		2,173,651
Series 2013-3A, Class A2, 2.48%, 1/18/26 (a)(b)			620		614,398
Ziggurat CLO I Ltd., Series 2014-1A, Class A1, 2.26%, 10/17/26 (a)(b)			4,160		4,172,896
Total Asset-Backed Securities — 7.4%					238,850,464
Corporate Bonds
Aerospace & Defense — 0.4%
BAE Systems Holdings, Inc.:
2.85%, 12/15/20 (a)			568		581,389
3.85%, 12/15/25 (a)			369		392,384
4.75%, 10/07/44 (a)			107		118,310
Boeing Co.:
2.35%, 10/30/21			630		650,852
2.20%, 10/30/22			179		181,931
2.60%, 10/30/25			255		263,031

See Notes to Financial Statements.

14 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Lockheed Martin Corp.:
3.10%, 1/15/23	USD		242	$	255,199
3.55%, 1/15/26			661		714,269
3.60%, 3/01/35			1,192		1,221,813
4.50%, 5/15/36			262		298,142
4.07%, 12/15/42			821		879,479
4.70%, 5/15/46			761		904,160
Northrop Grumman Corp., 3.85%, 4/15/45			803		833,180
United Technologies Corp.:
1.78%, 5/04/18 (c)			3,519		3,538,179
4.15%, 5/15/45			956		1,058,189
					11,890,507
Air Freight & Logistics — 0.2%
FedEx Corp.:
4.90%, 1/15/34			1,826		2,094,992
3.90%, 2/01/35			164		168,756
4.10%, 2/01/45			968		1,003,798
4.75%, 11/15/45			849		969,791
4.55%, 4/01/46			1,173		1,302,947
					5,540,284
Airlines — 0.2%
American Airlines Pass-Through Trust, Series 2015-1, Class A, 3.38%, 5/01/27			3,431		3,516,263
Southwest Airlines Co.:
2.75%, 11/06/19			790		814,985
2.65%, 11/05/20			1,259		1,292,056
					5,623,304
Auto Components — 0.1%
BorgWarner, Inc., 3.38%, 3/15/25			1,159		1,185,558
Delphi Automotive PLC:
4.25%, 1/15/26			1,505		1,639,511
4.40%, 10/01/46			642		655,393
					3,480,462
Automobiles — 0.1%
Daimler Finance North America LLC, 2.45%, 5/18/20 (a)			2,660		2,716,153
Banks — 3.5%
Bank of America Corp.:
2.25%, 4/21/20			3,209		3,231,094
3.30%, 1/11/23			2,966		3,070,308
3.88%, 8/01/25			5,666		6,053,084
4.88%, 4/01/44			345		399,830
BB&T Corp., 2.45%, 1/15/20			1,685		1,724,318
Branch Banking & Trust Co., 2.30%, 10/15/18			1,380		1,403,474
Citigroup, Inc.:
1.80%, 2/05/18			2,564		2,570,464
2.50%, 9/26/18			2,919		2,965,322
2.50%, 7/29/19			5,149		5,253,782
3.50%, 5/15/23			1,779		1,827,640
3.88%, 3/26/25			1,890		1,950,493
4.13%, 7/25/28			3,359		3,414,853
Citizens Bank N.A., 2.30%, 12/03/18			1,128		1,141,033
Cooperatieve Rabobank UA, 4.38%, 8/04/25			1,997		2,107,386
Fifth Third Bank, 2.25%, 6/14/21			2,535		2,577,337
HSBC Holdings PLC, 2.65%, 1/05/22			9,668		9,635,100
JPMorgan Chase & Co.:
1.35%, 2/15/17			3,969		3,970,901
2.20%, 10/22/19			1,664		1,690,093
2.75%, 6/23/20			125		128,632
2.55%, 10/29/20			3,280		3,340,837
3.88%, 9/10/24			3,755		3,953,166

Corporate Bonds		Par   (000)		Value
Banks (continued)
3.90%, 7/15/25	USD		1,690	$	1,822,357
3.20%, 6/15/26			2,099		2,154,202
4.25%, 10/01/27			1,585		1,700,610
Lloyds Banking Group PLC, 5.30%, 12/01/45 (a)			386		415,525
Royal Bank of Scotland Group PLC, 3.88%, 9/12/23			7,464		7,344,524
Santander UK Group Holdings PLC:
2.88%, 8/05/21			13,690		13,684,428
4.75%, 9/15/25 (a)			1,024		1,025,151
U.S. Bancorp:
2.95%, 7/15/22			2,700		2,812,833
3.10%, 4/27/26			1,656		1,710,635
2.38%, 7/22/26			3,770		3,723,376
Wells Fargo & Co.:
2.60%, 7/22/20			1,098		1,120,278
2.55%, 12/07/20			1,391		1,418,297
2.10%, 7/26/21			6,500		6,477,731
3.55%, 9/29/25			2,107		2,225,352
3.90%, 5/01/45			1,408		1,448,579
4.90%, 11/17/45			787		866,496
					112,359,521
Beverages — 0.8%
Anheuser-Busch InBev Finance, Inc.:
2.65%, 2/01/21			4,356		4,494,939
3.30%, 2/01/23			2,530		2,670,438
3.65%, 2/01/26			8,623		9,261,102
4.70%, 2/01/36			1,010		1,161,271
4.90%, 2/01/46			964		1,146,949
Anheuser-Busch InBev Worldwide, Inc., 3.75%, 7/15/42			633		633,579
Molson Coors Brewing Co.:
3.00%, 7/15/26			2,263		2,278,674
5.00%, 5/01/42			446		516,553
4.20%, 7/15/46			806		839,804
PepsiCo, Inc., 4.45%, 4/14/46			1,840		2,178,597
					25,181,906
Biotechnology — 0.9%
AbbVie, Inc.:
2.50%, 5/14/20			2,557		2,606,795
2.90%, 11/06/22			1,994		2,044,634
4.50%, 5/14/35			944		1,006,036
Amgen, Inc.:
2.13%, 5/01/20			1,820		1,847,682
4.40%, 5/01/45			3,382		3,552,534
4.66%, 6/15/51 (a)			1,825		1,950,555
Biogen, Inc.:
2.90%, 9/15/20			726		753,989
3.63%, 9/15/22			1,240		1,328,158
4.05%, 9/15/25			1,044		1,136,654
5.20%, 9/15/45			820		964,529
Celgene Corp.:
2.25%, 5/15/19			1,533		1,559,035
3.25%, 8/15/22			1,551		1,627,874
Gilead Sciences, Inc.:
2.35%, 2/01/20			436		447,474
2.50%, 9/01/23			1,217		1,229,900
3.65%, 3/01/26			392		421,918
4.60%, 9/01/35			446		490,350
4.80%, 4/01/44			2,952		3,294,476

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 15

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Biotechnology (continued)
4.50%, 2/01/45	USD		946	$	1,010,196
4.75%, 3/01/46			1,005		1,123,140
					28,395,929
Capital Markets — 2.0%
Bank of New York Mellon Corp.:
2.10%, 1/15/19			2,546		2,588,559
2.05%, 5/03/21			11,382		11,459,113
Credit Suisse AG, 3.00%, 10/29/21			1,540		1,584,312
Credit Suisse Group Funding Guernsey Ltd.:
2.75%, 3/26/20			2,789		2,799,152
4.88%, 5/15/45			1,077		1,137,593
Goldman Sachs Group, Inc.:
2.63%, 1/31/19			4,578		4,671,515
2.00%, 4/25/19			813		818,415
2.60%, 4/23/20			2,065		2,098,777
2.75%, 9/15/20			1,050		1,075,542
2.63%, 4/25/21			1,757		1,784,119
2.35%, 11/15/21			5,186		5,173,968
3.50%, 1/23/25			1,137		1,175,867
3.75%, 5/22/25			4,025		4,226,524
4.80%, 7/08/44			653		734,435
Jefferies Group LLC, 6.50%, 1/20/43			456		475,926
Morgan Stanley:
2.80%, 6/16/20			3,482		3,572,072
3.75%, 2/25/23			1,799		1,910,704
3.70%, 10/23/24			2,571		2,712,809
4.00%, 7/23/25			3,710		3,989,582
State Street Corp., 2.65%, 5/19/26			3,383		3,421,478
UBS Group Funding Jersey Ltd.:
2.65%, 2/01/22 (a)			6,380		6,368,127
4.13%, 9/24/25 (a)			1,062		1,112,964
					64,891,553
Chemicals — 0.3%
Agrium, Inc., 4.13%, 3/15/35			828		813,974
Air Liquide Finance SA:
2.50%, 9/27/26 (a)			1,112		1,118,217
3.50%, 9/27/46 (a)			418		422,950
CF Industries, Inc.:
3.45%, 6/01/23			885		891,656
5.38%, 3/15/44			1,437		1,418,786
Dow Chemical Co.:
4.38%, 11/15/42			491		499,836
4.63%, 10/01/44			733		776,642
Eastman Chemical Co., 4.80%, 9/01/42			901		923,629
Ecolab, Inc., 2.25%, 1/12/20			1,121		1,141,975
Monsanto Co., 3.60%, 7/15/42			1,288		1,157,799
Sherwin-Williams Co., 4.00%, 12/15/42			398		391,190
					9,556,654
Commercial Services & Supplies — 0.2%
Aviation Capital Group Corp., 2.88%, 9/17/18 (a)			2,655		2,688,187
Republic Services, Inc., 3.20%, 3/15/25			1,893		1,981,295
Waste Management, Inc.:
3.13%, 3/01/25			855		897,010
3.90%, 3/01/35			947		1,009,732
					6,576,224
Communications Equipment — 0.1%
Harris Corp.:
2.70%, 4/27/20			522		531,756

Corporate Bonds		Par   (000)		Value
Communications Equipment (continued)
4.85%, 4/27/35	USD		1,505	$	1,653,203
5.05%, 4/27/45			625		715,793
Juniper Networks, Inc., 3.30%, 6/15/20			1,064		1,103,270
					4,004,022
Construction Materials — 0.1%
LafargeHolcim Finance U.S. LLC, 4.75%, 9/22/46 (a)			2,629		2,716,414
Consumer Finance — 2.1%
American Express Credit Corp.:
1.13%, 6/05/17			4,908		4,905,571
2.25%, 8/15/19			2,894		2,953,078
Capital One Bank USA N.A., 2.30%, 6/05/19			250		252,898
Capital One Financial Corp.:
4.75%, 7/15/21			65		72,332
4.20%, 10/29/25			491		512,256
3.75%, 7/28/26			9,690		9,724,341
Capital One N.A., 2.40%, 9/05/19			250		253,954
Discover Bank, 3.45%, 7/27/26			1,713		1,723,002
Ford Motor Credit Co. LLC:
1.72%, 12/06/17			8,843		8,851,312
2.15%, 1/09/18			1,938		1,948,099
2.02%, 5/03/19			8,728		8,745,028
3.34%, 3/18/21			4,547		4,678,117
4.25%, 9/20/22			1,752		1,895,717
General Motors Financial Co., Inc.:
3.10%, 1/15/19			651		663,583
3.70%, 11/24/20			1,784		1,856,487
3.20%, 7/06/21			6,899		6,983,727
3.45%, 4/10/22			1,524		1,545,804
4.00%, 1/15/25			2,580		2,604,371
Synchrony Financial:
2.60%, 1/15/19			1,381		1,397,267
2.70%, 2/03/20			742		751,299
4.50%, 7/23/25			1,599		1,689,746
Toyota Motor Credit Corp., 2.75%, 5/17/21			2,314		2,415,883
					66,423,872
Containers & Packaging — 0.1%
International Paper Co.:
3.65%, 6/15/24			1,016		1,068,652
4.80%, 6/15/44			618		652,313
					1,720,965
Diversified Financial Services — 0.8%
Berkshire Hathaway, Inc., 3.13%, 3/15/26			3,867		4,064,449
BHP Billiton Finance USA Ltd., 5.00%, 9/30/43			1,830		2,162,899
BP Capital Markets PLC, 2.24%, 5/10/19			2,933		2,979,831
GE Capital International Funding Co., 3.37%, 11/15/25			4,158		4,499,027
General Electric Co.:
3.15%, 9/07/22			617		655,930
3.10%, 1/09/23			979		1,040,059
Intercontinental Exchange, Inc.:
2.75%, 12/01/20			881		916,240
3.75%, 12/01/25			563		609,395
Moody’s Corp., 4.50%, 9/01/22			1,260		1,402,956
Shell International Finance BV:
2.13%, 5/11/20			3,827		3,884,749
4.13%, 5/11/35			3,400		3,646,837
3.63%, 8/21/42			821		793,795

See Notes to Financial Statements.

16 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Diversified Financial Services (continued)
Woodside Finance Ltd., 3.65%, 3/05/25 (a)	USD		236	$	237,966
					26,894,133
Diversified Telecommunication Services — 1.4%
AT&T Inc.:
2.38%, 11/27/18			1,237		1,260,290
2.30%, 3/11/19			1,546		1,571,951
2.45%, 6/30/20			3,151		3,209,215
4.60%, 2/15/21			3,717		4,077,716
3.88%, 8/15/21			1,796		1,938,674
3.00%, 6/30/22			3,143		3,231,343
3.40%, 5/15/25			3,583		3,681,203
6.38%, 3/01/41			780		977,345
4.30%, 12/15/42			1,745		1,721,172
4.75%, 5/15/46			769		804,724
Verizon Communications, Inc.:
2.63%, 2/21/20			4,203		4,322,407
3.45%, 3/15/21			4,356		4,641,270
2.63%, 8/15/26			3,825		3,754,123
5.05%, 3/15/34			889		999,212
4.40%, 11/01/34			3,454		3,654,809
3.85%, 11/01/42			3,807		3,623,567
4.13%, 8/15/46			851		851,235
4.86%, 8/21/46			2,083		2,333,091
					46,653,347
Electric Utilities — 1.5%
Alabama Power Co., 2.80%, 4/01/25			351		363,995
Baltimore Gas & Electric Co., 3.50%, 8/15/46			798		797,852
Commonwealth Edison Co., 4.70%, 1/15/44			1,636		1,950,719
Duke Energy Carolinas LLC:
4.25%, 12/15/41			2,567		2,851,762
3.75%, 6/01/45			851		887,689
Duke Energy Corp.:
3.05%, 8/15/22			129		134,849
3.75%, 4/15/24			1,337		1,443,804
2.65%, 9/01/26			892		875,290
4.80%, 12/15/45			1,150		1,305,569
3.75%, 9/01/46			575		557,620
Duke Energy Florida LLC:
5.90%, 3/01/33			645		802,200
3.85%, 11/15/42			851		887,971
Emera U.S. Finance LP:
2.15%, 6/15/19 (a)			1,705		1,723,649
2.70%, 6/15/21 (a)			2,554		2,613,654
3.55%, 6/15/26 (a)			2,020		2,093,528
Entergy Arkansas, Inc., 3.70%, 6/01/24			3,444		3,744,424
Entergy Corp., 2.95%, 9/01/26			3,062		3,066,985
Exelon Corp.:
2.85%, 6/15/20			1,186		1,229,747
2.45%, 4/15/21			470		479,384
Florida Power & Light Co.:
5.69%, 3/01/40			351		474,361
3.80%, 12/15/42			794		857,599
Northern States Power Co., 3.60%, 5/15/46			3,077		3,220,487
PacifiCorp:
3.60%, 4/01/24			4,499		4,900,549
3.35%, 7/01/25			3,089		3,325,639
Progress Energy, Inc., 4.88%, 12/01/19			372		407,453
Public Service Co. of Colorado, 2.50%, 3/15/23			1,723		1,755,801
Puget Sound Energy, Inc., 4.30%, 5/20/45			1,788		2,057,682
Southern California Edison Co., 1.25%, 11/01/17			808		809,734

Corporate Bonds		Par   (000)		Value
Electric Utilities (continued)
Trans-Allegheny Interstate Line Co., 3.85%, 6/01/25 (a)	USD		2,784	$	2,968,226
					48,588,222
Electrical Equipment — 0.0%
Rockwell Automation, Inc., 2.88%, 3/01/25			1,344		1,390,338
Energy Equipment & Services — 0.1%
Halliburton Co., 3.80%, 11/15/25			1,980		2,047,045
Schlumberger Holdings Corp., 3.00%, 12/21/20 (a)			2,393		2,495,262
Transocean, Inc., 6.80%, 3/15/38			345		225,975
					4,768,282
Equity Real Estate Investment Trusts (REITs) — 0.7%
American Tower Corp.:
3.30%, 2/15/21			1,090		1,139,469
3.45%, 9/15/21			1,247		1,312,414
2.25%, 1/15/22			9,561		9,541,486
3.50%, 1/31/23			318		331,695
5.00%, 2/15/24			302		342,070
4.40%, 2/15/26			214		234,389
3.38%, 10/15/26			1,987		2,014,057
AvalonBay Communities, Inc., 3.50%, 11/15/25			202		211,093
Crown Castle International Corp.:
3.40%, 2/15/21			572		598,623
2.25%, 9/01/21			2,097		2,095,301
3.70%, 6/15/26			439		458,053
ERP Operating LP, 3.38%, 6/01/25			842		878,875
Omega Healthcare Investors, Inc., 4.50%, 4/01/27			757		760,983
Prologis LP, 3.75%, 11/01/25			334		359,337
Simon Property Group LP:
2.50%, 7/15/21			652		669,303
3.38%, 10/01/24			1,279		1,358,283
4.25%, 10/01/44			913		994,928
					23,300,359
Food & Staples Retailing — 0.3%
CVS Health Corp.:
4.00%, 12/05/23			1,276		1,405,445
5.30%, 12/05/43			651		807,213
Sysco Corp., 4.50%, 4/01/46			572		623,712
Walgreens Boots Alliance, Inc.:
4.80%, 11/18/44			4,342		4,786,408
4.65%, 6/01/46			92		99,741
Wal-Mart Stores, Inc.:
2.55%, 4/11/23			1,030		1,069,451
4.00%, 4/11/43			786		876,588
					9,668,558
Food Products — 0.1%
Kraft Heinz Foods Co.:
3.00%, 6/01/26			1,618		1,630,908
6.88%, 1/26/39			511		709,289
					2,340,197
Health Care Equipment & Supplies — 0.9%
Abbott Laboratories, 2.55%, 3/15/22			2,600		2,671,575
Becton Dickinson and Co.:
1.45%, 5/15/17			1,312		1,314,167
1.80%, 12/15/17			641		643,918
2.68%, 12/15/19			2,017		2,082,976

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 17

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Health Care Equipment & Supplies (continued)
3.13%, 11/08/21	USD		957	$	1,005,832
4.69%, 12/15/44			279		318,194
Boston Scientific Corp.:
2.65%, 10/01/18			1,498		1,532,292
2.85%, 5/15/20			1,680		1,731,455
3.85%, 5/15/25			1,887		2,007,921
Medtronic, Inc.:
2.50%, 3/15/20			1,299		1,343,545
3.13%, 3/15/22			1,240		1,313,348
3.63%, 3/15/24			3,196		3,476,069
4.63%, 3/15/44			1,830		2,140,430
4.63%, 3/15/45			1,502		1,764,832
St. Jude Medical, Inc.:
2.80%, 9/15/20			1,249		1,287,473
3.88%, 9/15/25			400		426,327
Stryker Corp.:
3.38%, 11/01/25			568		595,751
3.50%, 3/15/26			1,000		1,059,345
4.63%, 3/15/46			863		967,970
Zimmer Biomet Holdings, Inc.:
3.55%, 4/01/25			621		640,032
4.25%, 8/15/35			1,477		1,498,863
					29,822,315
Health Care Providers & Services — 1.2%
Aetna, Inc.:
2.40%, 6/15/21			3,095		3,130,837
3.20%, 6/15/26			3,502		3,560,571
4.50%, 5/15/42			1,119		1,224,120
4.13%, 11/15/42			548		565,361
AmerisourceBergen Corp.:
1.15%, 5/15/17			1,676		1,674,926
3.25%, 3/01/25			454		479,868
4.25%, 3/01/45			454		491,700
Anthem, Inc.:
1.88%, 1/15/18			5,395		5,420,961
2.30%, 7/15/18			5,608		5,681,409
3.30%, 1/15/23			2,602		2,726,896
4.65%, 8/15/44			769		838,811
Cigna Corp., 3.25%, 4/15/25			2,837		2,925,080
Express Scripts Holding Co.:
1.25%, 6/02/17			1,368		1,368,387
3.90%, 2/15/22			921		993,761
Laboratory Corp. of America Holdings, 2.63%, 2/01/20			1,130		1,151,351
UnitedHealth Group, Inc.:
2.70%, 7/15/20			687		713,820
2.88%, 12/15/21			1,422		1,498,487
3.35%, 7/15/22			678		728,044
4.63%, 7/15/35			275		319,349
3.95%, 10/15/42			1,734		1,842,344
					37,336,083
Hotels, Restaurants & Leisure — 0.1%
McDonald’s Corp.:
2.75%, 12/09/20			492		510,528
3.70%, 1/30/26			472		507,800
4.70%, 12/09/35			350		396,394
4.60%, 5/26/45			444		498,216
4.88%, 12/09/45			415		481,637
					2,394,575

Corporate Bonds		Par   (000)		Value
Household Durables — 0.3%
Newell Brands, Inc.:
2.88%, 12/01/19	USD		2,926	$	3,003,993
4.20%, 4/01/26			5,139		5,596,926
					8,600,919
Household Products — 0.1%
Kimberly-Clark Corp.:
1.90%, 5/22/19			2,902		2,958,000
2.65%, 3/01/25			601		624,554
2.75%, 2/15/26			864		897,576
					4,480,130
Independent Power and Renewable Electricity Producers — 0.2%
AES Gener SA, 5.00%, 7/14/25 (a)			308		319,378
IPALCO Enterprises, Inc., 5.00%, 5/01/18			7,350		7,662,375
					7,981,753
Industrial Conglomerates — 0.4%
Eaton Corp., 2.75%, 11/02/22			7,843		8,107,623
General Electric Co., 4.50%, 3/11/44			3,536		4,070,749
					12,178,372
Insurance — 1.6%
Aflac, Inc., 3.63%, 6/15/23			860		924,840
Allstate Corp., 3.15%, 6/15/23			867		919,030
American International Group, Inc.:
3.38%, 8/15/20			1,705		1,799,142
3.75%, 7/10/25			1,141		1,196,733
3.90%, 4/01/26			9,318		9,857,913
3.88%, 1/15/35			869		852,110
4.50%, 7/16/44			1,112		1,132,731
4.38%, 1/15/55			851		804,256
Aon PLC, 4.75%, 5/15/45			1,609		1,744,201
Lincoln National Corp., 3.35%, 3/09/25			496		506,856
Loews Corp., 2.63%, 5/15/23			867		875,025
Marsh & McLennan Cos., Inc., 3.75%, 3/14/26			284		306,973
MassMutual Global Funding II, 2.35%, 4/09/19 (a)			2,955		3,021,532
MetLife, Inc., 4.05%, 3/01/45			2,079		2,062,202
Metropolitan Life Global Funding I:
1.30%, 4/10/17 (a)			11,166		11,177,724
2.30%, 4/10/19 (a)			4,528		4,615,685
Prudential Financial, Inc.:
4.50%, 11/15/20			4,970		5,479,092
4.60%, 5/15/44			2,310		2,467,006
Travelers Cos., Inc., 4.60%, 8/01/43			1,348		1,608,257
XLIT Ltd., 2.30%, 12/15/18			1,417		1,433,841
					52,785,149
Internet & Direct Marketing Retail — 0.1%
Amazon.com, Inc., 2.60%, 12/05/19			2,032		2,108,354
IT Services — 0.9%
Fidelity National Information Services, Inc., 3.63%, 10/15/20			208		220,620
Hewlett Packard Enterprise Co.:
2.85%, 10/05/18 (a)			3,115		3,173,821
3.60%, 10/15/20 (a)			2,756		2,891,659
International Business Machines Corp., 3.45%, 2/19/26			10,290		11,127,236
MasterCard, Inc., 3.38%, 4/01/24			1,755		1,891,994
Total System Services, Inc., 4.80%, 4/01/26			2,949		3,265,522

See Notes to Financial Statements.

18 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
IT Services (continued)
Visa, Inc.:
2.80%, 12/14/22	USD		2,860	$	2,998,230
3.15%, 12/14/25			2,321		2,451,744
4.15%, 12/14/35			784		887,415
					28,908,241
Life Sciences Tools & Services — 0.1%
Thermo Fisher Scientific, Inc.:
3.30%, 2/15/22			1,266		1,326,683
3.65%, 12/15/25			445		470,082
2.95%, 9/19/26			2,727		2,706,335
					4,503,100
Machinery — 0.1%
Ingersoll-Rand Luxembourg Finance SA:
2.63%, 5/01/20			1,180		1,202,483
4.65%, 11/01/44			247		269,497
John Deere Capital Corp., 3.35%, 6/12/24			2,019		2,166,133
					3,638,113
Media — 2.2%
21st Century Fox America, Inc.:
3.70%, 9/15/24			855		923,504
3.70%, 10/15/25			415		449,489
7.63%, 11/30/28			667		921,050
4.75%, 9/15/44			598		654,887
4.95%, 10/15/45			179		202,923
CBS Corp., 2.30%, 8/15/19			1,622		1,644,210
Charter Communications Operating LLC/Charter Communications Operating Capital:
3.58%, 7/23/20 (a)			1,970		2,059,040
4.46%, 7/23/22 (a)			3,971		4,284,955
4.91%, 7/23/25 (a)			2,025		2,233,686
6.38%, 10/23/35 (a)			1,662		1,957,470
6.48%, 10/23/45 (a)			1,978		2,392,039
Comcast Corp.:
2.75%, 3/01/23			5,818		6,028,559
3.38%, 8/15/25			2,318		2,491,006
3.15%, 3/01/26			7,210		7,614,250
4.25%, 1/15/33			535		594,212
4.40%, 8/15/35			2,336		2,645,861
4.60%, 8/15/45			769		888,160
3.40%, 7/15/46			1,500		1,458,153
Cox Communications, Inc., 3.35%, 9/15/26 (a)			1,039		1,047,367
Discovery Communications LLC:
3.45%, 3/15/25			1,007		995,441
4.90%, 3/11/26			4,956		5,384,600
4.88%, 4/01/43			2,876		2,737,014
Interpublic Group of Cos., Inc.:
4.00%, 3/15/22			1,061		1,133,790
3.75%, 2/15/23			806		841,953
NBCUniversal Media LLC, 4.45%, 1/15/43			1,295		1,456,244
Omnicom Group, Inc., 3.65%, 11/01/24			573		608,897
Scripps Networks Interactive, Inc., 2.75%, 11/15/19			1,064		1,092,399
Time Warner Cable LLC:
5.00%, 2/01/20			1,291		1,399,440
4.13%, 2/15/21			2,660		2,823,457
4.00%, 9/01/21			372		394,810
5.50%, 9/01/41			903		963,868
4.50%, 9/15/42			132		125,962
Time Warner, Inc.:
2.10%, 6/01/19			3,584		3,637,767
3.60%, 7/15/25			886		942,442
4.65%, 6/01/44			1,461		1,582,018
Viacom, Inc.:
2.75%, 12/15/19			1,292		1,312,368

Corporate Bonds		Par   (000)		Value
Media (continued)
4.50%, 3/01/21	USD		1,345	$	1,463,033
2.25%, 2/04/22			2,044		2,034,434
3.45%, 10/04/26			732		731,597
					72,152,355
Metals & Mining — 0.2%
Barrick Gold Corp.:
4.10%, 5/01/23			1,510		1,628,413
5.25%, 4/01/42			1,980		2,171,288
Newmont Mining Corp., 4.88%, 3/15/42			530		558,456
Nucor Corp., 5.20%, 8/01/43			693		790,149
Rio Tinto Finance USA PLC, 4.13%, 8/21/42			1,210		1,243,945
					6,392,251
Multiline Retail — 0.1%
Macy’s Retail Holdings, Inc., 4.50%, 12/15/34			1,030		967,223
Target Corp.:
3.50%, 7/01/24			589		643,987
4.00%, 7/01/42			904		984,620
					2,595,830
Multi-Utilities — 1.0%
Berkshire Hathaway Energy Co.:
2.40%, 2/01/20			1,015		1,039,675
3.50%, 2/01/25			966		1,036,509
CenterPoint Energy Houston Electric LLC, 4.50%, 4/01/44			845		1,002,123
CMS Energy Corp., 3.88%, 3/01/24			2,774		3,026,897
Consumers Energy Co., 3.95%, 5/15/43			819		902,180
Dominion Resources, Inc., 2.50%, 12/01/19			2,350		2,406,745
DTE Electric Co., 3.95%, 6/15/42			851		928,908
DTE Energy Co.:
2.40%, 12/01/19			719		733,320
3.50%, 6/01/24			2,577		2,745,080
2.85%, 10/01/26			7,520		7,502,553
NiSource Finance Corp., 3.85%, 2/15/23			1,395		1,493,265
Pacific Gas & Electric Co.:
4.75%, 2/15/44			1,066		1,272,161
4.30%, 3/15/45			769		862,533
PG&E Corp., 2.40%, 3/01/19			1,383		1,409,887
Sempra Energy, 2.88%, 10/01/22			766		791,883
Virginia Electric & Power Co.:
3.45%, 2/15/24			1,451		1,570,979
3.15%, 1/15/26			310		327,745
4.45%, 2/15/44			794		908,716
4.20%, 5/15/45			1,409		1,571,800
					31,532,959
Oil, Gas & Consumable Fuels — 2.1%
Anadarko Petroleum Corp.:
7.95%, 6/15/39			892		1,103,520
4.50%, 7/15/44			893		819,326
Apache Corp.:
4.75%, 4/15/43			1,610		1,645,035
4.25%, 1/15/44			1,140		1,107,418
Chevron Corp.:
2.19%, 11/15/19			639		651,915
1.96%, 3/03/20			3,253		3,298,217
ConocoPhillips Co., 4.95%, 3/15/26			3,480		3,922,541
Continental Resources, Inc.:
3.80%, 6/01/24			938		858,270
4.90%, 6/01/44			1,039		872,760
Devon Energy Corp.:
5.85%, 12/15/25			1,062		1,195,153
5.00%, 6/15/45			1,220		1,186,859
Energy Transfer Partners LP:
4.75%, 1/15/26			2,000		2,066,302

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 19

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Oil, Gas & Consumable Fuels (continued)
5.15%, 3/15/45	USD		1,478	$	1,369,045
Enterprise Products Operating LLC:
3.90%, 2/15/24			1,016		1,062,672
3.70%, 2/15/26			2,542		2,616,760
4.45%, 2/15/43			2,448		2,397,412
5.10%, 2/15/45			408		438,789
4.90%, 5/15/46			652		685,262
EOG Resources, Inc.:
2.45%, 4/01/20			4,202		4,261,719
4.15%, 1/15/26			859		938,210
Exxon Mobil Corp.:
1.82%, 3/15/19			3,177		3,217,160
4.11%, 3/01/46			1,535		1,715,812
Hess Corp., 5.60%, 2/15/41			1,310		1,305,757
Kinder Morgan Energy Partners LP:
3.50%, 3/01/21			6,569		6,782,801
3.95%, 9/01/22			810		846,179
5.63%, 9/01/41			350		347,174
4.70%, 11/01/42			1,401		1,292,379
Kinder Morgan, Inc.:
3.05%, 12/01/19			554		566,111
5.55%, 6/01/45			757		776,599
5.05%, 2/15/46			1,220		1,161,738
Marathon Petroleum Corp., 4.75%, 9/15/44			749		670,596
Noble Energy, Inc., 5.05%, 11/15/44			1,980		1,954,834
Occidental Petroleum Corp., 3.40%, 4/15/26			1,360		1,434,811
Petro-Canada, 6.80%, 5/15/38			910		1,194,893
Phillips 66, 4.88%, 11/15/44			771		856,495
Pioneer Natural Resources Co., 4.45%, 1/15/26			530		574,792
Plains All American Pipeline LP/PAA Finance Corp., 4.65%, 10/15/25			1,220		1,263,753
Sunoco Logistics Partners Operations LP:
3.90%, 7/15/26			359		366,077
5.35%, 5/15/45			530		541,486
TransCanada PipeLines Ltd.:
1.88%, 1/12/18			758		761,040
2.50%, 8/01/22			1,020		1,023,024
4.63%, 3/01/34			1,868		2,059,711
Valero Energy Corp., 3.65%, 3/15/25			2,188		2,235,248
Williams Partners LP, 4.00%, 9/15/25			2,750		2,749,499
					68,195,154
Paper & Forest Products — 0.0%
Fibria Overseas Finance Ltd., 5.25%, 5/12/24			57		59,280
Georgia-Pacific LLC, 7.38%, 12/01/25			1,203		1,603,449
					1,662,729
Pharmaceuticals — 1.9%
Actavis Funding SCS:
2.35%, 3/12/18			3,691		3,729,058
3.00%, 3/12/20			7,652		7,900,805
3.80%, 3/15/25			8,760		9,271,181
AstraZeneca PLC:
3.38%, 11/16/25			2,215		2,365,554
4.38%, 11/16/45			623		690,003
Bristol-Myers Squibb Co., 4.50%, 3/01/44			1,513		1,812,373
Eli Lilly & Co., 3.70%, 3/01/45			698		750,434
GlaxoSmithKline Capital PLC, 2.85%, 5/08/22			1,297		1,364,838
Johnson & Johnson, 2.45%, 3/01/26			4,797		4,929,853
Mylan, Inc., 3.13%, 1/15/23 (a)			907		899,214
Novartis Capital Corp.:
4.40%, 4/24/20			1,861		2,050,673
3.00%, 11/20/25			885		936,164
4.00%, 11/20/45			620		686,541

Corporate Bonds		Par   (000)		Value
Pharmaceuticals (continued)
Pfizer, Inc.:
2.75%, 6/03/26	USD		1,562	$	1,614,435
4.30%, 6/15/43			960		1,087,740
4.40%, 5/15/44			701		809,821
Roche Holdings, Inc.:
2.88%, 9/29/21 (a)			1,450		1,525,229
3.00%, 11/10/25 (a)			897		946,618
Shire Acquisitions Investments Ireland DAC:
2.88%, 9/23/23			7,291		7,326,310
3.20%, 9/23/26			3,951		3,972,252
Teva Pharmaceutical Finance Co. BV, 3.65%, 11/10/21			724		768,955
Teva Pharmaceutical Finance Netherlands III BV:
2.80%, 7/21/23			2,406		2,412,174
3.15%, 10/01/26			1,233		1,238,704
Zoetis, Inc., 3.25%, 2/01/23			873		899,642
					59,988,571
Road & Rail — 0.6%
Burlington Northern Santa Fe LLC:
3.45%, 9/15/21			495		533,673
3.00%, 3/15/23			1,602		1,685,471
4.15%, 4/01/45			559		615,653
4.70%, 9/01/45			535		629,005
Canadian National Railway Co., 2.75%, 3/01/26			2,757		2,864,024
CSX Corp.:
3.35%, 11/01/25			629		674,516
4.10%, 3/15/44			815		866,750
Norfolk Southern Corp.:
2.90%, 6/15/26			3,524		3,614,246
4.45%, 6/15/45			885		989,082
Penske Truck Leasing Co. LP/PTL Finance Corp., 3.38%, 2/01/22 (a)			981		1,020,163
Ryder System, Inc., 2.45%, 9/03/19			1,181		1,204,957
Union Pacific Corp.:
3.38%, 2/01/35			493		502,900
4.05%, 11/15/45			159		174,132
3.88%, 2/01/55			1,934		1,931,954
4.38%, 11/15/65			705		770,547
Union Pacific Railroad Co. Pass-Through Trust, Series 2014-1, 3.23%, 5/14/26			1,603		1,666,703
					19,743,776
Semiconductors & Semiconductor Equipment — 0.3%
Analog Devices, Inc.:
3.90%, 12/15/25			283		302,730
5.30%, 12/15/45			286		317,498
Lam Research Corp.:
2.80%, 6/15/21			1,349		1,384,638
3.90%, 6/15/26			728		758,023
NVIDIA Corp.:
2.20%, 9/16/21			4,512		4,525,739
3.20%, 9/16/26			1,470		1,481,575
QUALCOMM, Inc., 4.80%, 5/20/45			1,960		2,139,746
					10,909,949
Software — 0.9%
Microsoft Corp.:
3.50%, 2/12/35			2,108		2,158,105
3.75%, 2/12/45			713		723,649
4.45%, 11/03/45			981		1,115,304
3.70%, 8/08/46			4,198		4,249,153
Oracle Corp.:
2.80%, 7/08/21			6,954		7,264,044

See Notes to Financial Statements.

20 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Corporate Bonds		Par   (000)		Value
Software (continued)
2.65%, 7/15/26	USD		6,597	$	6,598,201
3.25%, 5/15/30			2,561		2,676,294
4.00%, 7/15/46			2,384		2,463,418
4.38%, 5/15/55			1,016		1,079,265
					28,327,433
Specialty Retail — 0.2%
Home Depot, Inc.:
3.35%, 9/15/25			330		357,666
5.40%, 9/15/40			511		666,091
4.40%, 3/15/45			372		433,163
Lowe’s Cos., Inc.:
3.38%, 9/15/25			363		391,324
4.25%, 9/15/44			730		810,918
4.38%, 9/15/45			273		309,507
QVC, Inc.:
3.13%, 4/01/19			793		813,086
5.13%, 7/02/22			1,339		1,419,274
					5,201,029
Technology Hardware, Storage & Peripherals —0.6%
Apple Inc.:
2.10%, 5/06/19			4,127		4,217,229
3.25%, 2/23/26			6,167		6,554,954
3.45%, 2/09/45			745		711,825
4.65%, 2/23/46			7,833		9,038,702
HP, Inc., 3.75%, 12/01/20			279		293,920
					20,816,630
Textiles, Apparel & Luxury Goods — 0.0%
NIKE, Inc., 3.88%, 11/01/45			963		1,055,669
Tobacco — 0.6%
Altria Group, Inc.:
2.63%, 1/14/20			1,249		1,292,087
2.85%, 8/09/22			870		908,403
4.25%, 8/09/42			529		572,343
5.38%, 1/31/44			1,772		2,231,001
3.88%, 9/16/46			2,270		2,355,014
Philip Morris International, Inc.:
1.13%, 8/21/17			2,480		2,478,750
2.75%, 2/25/26			6,359		6,523,170
4.13%, 3/04/43			852		916,351
4.88%, 11/15/43			1,319		1,586,009
Reynolds American, Inc.:
2.30%, 6/12/18			997		1,011,497
3.25%, 6/12/20			423		445,025
					20,319,650
Trading Companies & Distributors — 0.2%
Air Lease Corp., 3.00%, 9/15/23			5,012		4,955,014
GATX Corp., 2.60%, 3/30/20			1,182		1,197,669
					6,152,683
Wireless Telecommunication Services — 0.2%
Orange SA, 5.50%, 2/06/44			910		1,132,163
Rogers Communications, Inc.:
3.63%, 12/15/25			361		391,596
5.00%, 3/15/44			320		371,567
Vodafone Group PLC:
2.50%, 9/26/22			1,095		1,101,333
4.38%, 2/19/43			2,130		2,133,689
					5,130,348
Total Corporate Bonds — 33.1%					1,069,595,326

Foreign Agency Obligations		Par   (000)		Value
Mexico — 0.0%
Petroleos Mexicanos, 4.63%, 9/21/23 (a)	USD		351	$	351,491
Norway — 0.2%
Statoil ASA, 2.90%, 11/08/20			5,305		5,558,107
Total Foreign Agency Obligations — 0.2%					5,909,598
Foreign Government Obligations
Colombia — 0.2%
Republic of Colombia, 4.00%, 2/26/24			7,790		8,296,350
Germany — 0.4%
Deutsche Bundesrepublik Inflation Linked Bonds, 0.10%, 4/15/26	EUR		11,535		14,693,313
Hungary — 0.1%
Republic of Hungary, 5.38%, 3/25/24	USD		2,860		3,321,289
Indonesia — 0.2%
Republic of Indonesia:
3.38%, 4/15/23 (a)			1,625		1,674,329
5.38%, 10/17/23 (a)			3,275		3,774,837
5.88%, 1/15/24 (a)			635		748,835
					6,198,001
Mexico — 0.8%
United Mexican States:
4.75%, 6/14/18	MXN		25,300		1,293,087
4.00%, 10/02/23	USD		22,650		24,201,525
United Mexican States Inflation Linked Bond, 3.50%, 12/14/17	MXN		1,474		424,755
					25,919,367
Panama — 0.1%
Republic of Panama, 3.75%, 3/16/25	USD		2,081		2,244,879
Peru — 0.1%
Republic of Peru, 7.35%, 7/21/25			3,050		4,224,250
South Africa — 0.1%
Republic of South Africa, 4.88%, 4/14/26			1,930		2,028,816
Turkey — 0.1%
Republic of Turkey:
6.75%, 4/03/18			1,418		1,498,840
7.00%, 3/11/19			335		362,973
7.50%, 11/07/19			650		722,930
					2,584,743
Uruguay — 0.1%
Republic of Uruguay, 4.38%, 10/27/27			2,680		2,884,350
Total Foreign Government Obligations — 2.2%					72,395,358
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations — 0.5%
Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-7, Class 4A, 3.27%, 10/25/34 (b)			69		68,848
COLT Mortgage Loan Trust, Series 2016-1, Class A1, 3.00%, 5/25/46 (a)			736		742,493
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2004-29, Class 1A1, 1.07%, 2/25/35 (b)			576		542,047
HomeBanc Mortgage Trust, Series 2005-4, Class A1, 0.79%, 10/25/35 (b)			4,043		3,720,614

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 21

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Collateralized Mortgage Obligations (continued)
Mortgage Loan Resecuritization Trust, Series 2009-RS1, Class A85, 0.85%, 4/16/36 (a)(b)	USD		9,237	$	7,611,932
MortgageIT Trust, Series 2004-1, Class A1, 1.31%, 11/25/34 (b)			1,216		1,184,833
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-16, Class 3A1, 3.00%, 11/25/34 (b)			3,047		3,004,441
					16,875,208
Commercial Mortgage-Backed Securities — 3.8%
Banc of America Commercial Mortgage Trust:
Series 2007-1, Class A4, 5.45%, 1/15/49			1,739		1,746,215
Series 2007-1, Class AMFX, 5.48%, 1/15/49 (b)			514		511,680
Series 2007-2, Class AM, 5.80%, 4/10/49 (b)			380		386,516
Series 2007-3, Class A1A, 5.72%, 6/10/49 (b)			4,888		4,960,616
Series 2007-3, Class A4, 5.72%, 6/10/49 (b)			909		919,599
Series 2015-UBS7, Class D, 3.17%, 9/15/48			415		325,095
Banc of America Merrill Lynch Commercial Mortgage Securities Trust:
Series 2013-DSNY, Class A, 1.56%, 9/15/26 (a)(b)			407		406,562
Series 2013-DSNY, Class E, 3.11%, 9/15/26 (a)(b)			210		208,770
Barclays Commercial Mortgage Trust, Series 2015-SRCH, Class A1, 3.31%, 8/10/35 (a)			1,119		1,182,728
BB-UBS Trust, Series 2012-SHOW, Class E, 4.16%, 11/05/36 (a)(b)			260		256,727
Bear Stearns Commercial Mortgage Securities Trust:
Series 2007-PW15, Class A1A, 5.32%, 2/11/44			3,232		3,257,903
Series 2007-PW16, Class AM, 5.91%, 6/11/40 (b)			880		900,954
Series 2007-PW17, Class A1A, 5.65%, 6/11/50 (b)			2,923		3,003,149
Series 2007-PW17, Class AMFL, 1.20%, 6/11/50 (a)(b)			260		255,908
BHMS Mortgage Trust, Series 2014-ATLS, Class AFL, 2.02%, 7/05/33 (a)(b)			1,200		1,196,436
BWAY Mortgage Trust, Series 2013-1515, Class C, 3.45%, 3/10/33 (a)			2,810		2,814,064
BXHTL Mortgage Trust, Series 2015-JWRZ, Class A, 1.74%, 5/15/29 (a)(b)			1,020		1,021,918
CCRESG Commercial Mortgage Trust, Series 2016-HEAT, Class D, 5.67%, 4/10/29 (a)(b)			200		201,098
CD Mortgage Trust, Series 2006-CD3, Class AM, 5.65%, 10/15/48			2,750		2,752,346
CDGJ Commercial Mortgage Trust, Series 2014-BXCH, Class A, 1.91%, 12/15/27 (a)(b)			3,413		3,416,219
CFCRE Commercial Mortgage Trust, Series 2016-C4, Class A4, 3.28%, 5/10/58			280		294,170
CGGS Commercial Mortgage Trust:
Series 2016-RNDB, Class AFL, 2.16%, 2/15/33 (a)(b)			2,663		2,676,682
Series 2016-RNDB, Class CFL, 4.01%, 2/15/33 (a)(b)			1,283		1,290,645
Series 2016-RNDB, Class DFL, 5.23%, 2/15/33 (a)(b)			1,544		1,558,584

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Citigroup Commercial Mortgage Trust:
Series 16-SMPL, Class D, 3.52%, 9/08/31 (a)	USD		110	$	109,998
Series 2013-375P, Class C, 3.63%, 5/10/35 (a)(b)			245		252,579
Series 2016-GC37, Class D, 2.79%, 4/10/49 (a)			700		486,727
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD5, Class AMA, 6.32%, 11/15/44 (b)			2,061		2,147,981
COBALT CMBS Commercial Mortgage Trust, Series 2007-C3, Class AM, 5.96%, 5/15/46 (b)			1,475		1,506,228
Commercial Mortgage Loan Trust, Series 2008-LS1, Class A4B, 6.30%, 12/10/49 (b)			2,451		2,522,190
Commercial Mortgage Pass-Through Certificates:
Series 2007-GG11, Class AM, 5.87%, 12/10/49 (b)			400		412,859
Series 2010-RR1, Class GEB, 5.54%, 12/11/49 (a)(b)			2,050		2,079,535
Series 2013-WWP, Class D, 3.90%, 3/10/31 (a)			710		713,528
Series 2014-CR18, Class C, 4.90%, 7/15/47 (b)			1,090		1,165,999
Series 2014-FL4, Class D, 2.96%, 7/13/31 (a)(b)			490		476,585
Series 2014-FL5, Class D, 4.51%, 10/15/31 (a)(b)			1,945		1,743,616
Series 2015-CR25, Class D, 3.95%, 8/10/48 (b)			360		276,745
Core Industrial Trust:
Series 2015-TEXW, Class A, 3.08%, 2/10/34 (a)			3,400		3,571,517
Series 2015-TEXW, Class D, 3.98%, 2/10/34 (a)(b)			440		447,653
Credit Suisse Commercial Mortgage Trust:
Series 2008-C1, Class A2, 6.27%, 2/15/41 (b)			528		529,743
Series 2008-C1, Class A3, 6.27%, 2/15/41 (b)			1,180		1,214,058
Series 2015-DEAL, Class A, 1.83%, 4/15/29 (a)(b)			950		951,259
Credit Suisse First Boston Mortgage Securities Corp., Series 2005-C3, Class AJ, 4.77%, 7/15/37			16		16,155
Credit Suisse Mortgage Capital Certificates:
Series 2010-RR2, Class 2A, 6.14%, 9/15/39 (a)(b)			5,449		5,503,773
Series 2015-DEAL, Class D, 3.61%, 4/15/29 (a)(b)			545		539,751
Series 2015-GLPB, Class A, 3.64%, 11/15/34 (a)			1,119		1,209,980
CSAIL Commercial Mortgage Trust, Series 2015-C3, Class C, 4.51%, 8/15/48 (b)			290		299,005
Deutsche Bank JPMorgan Mortgage Trust, Series 2016-C3, Class D, 3.64%, 9/10/49 (a)(b)			1,450		1,105,523
Deutsche Bank Re-REMIC Trust:
Series 2011-C32, Class A3A, 5.89%, 6/17/49 (a)(b)			2,750		2,781,693
Series 2013-EZ3, Class A, 1.64%, 12/18/49 (a)(b)			205		205,147
Eleven Madison Mortgage Trust, Series 2015-11MD, Class A, 3.67%, 9/10/35 (a)(b)			260		281,457

See Notes to Financial Statements.

22 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
FREMF Mortgage Trust, Series 2016-K54, Class B, 4.05%, 2/25/26 (a)(b)	USD		340	$	344,639
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class AFL1, 1.81%, 12/15/34 (a)(b)			782		783,713
GS Mortgage Securities Trust:
Series 2015-GC32, Class D, 3.35%, 7/10/48			250		189,939
Series 2016-GS3, Class A4, 2.85%, 10/10/49			2,530		2,616,526
Series 2016-RENT, Class C, 4.20%, 2/10/29 (a)(b)			680		702,958
Hilton USA Trust:
Series 2013-HLT, Class AFX, 2.66%, 11/05/30 (a)			220		219,961
Series 2013-HLT, Class DFX, 4.41%, 11/05/30 (a)			1,105		1,105,243
Hudson Yards Mortgage Trust, Series 2016-10HY, Class A, 2.84%, 8/10/38 (a)			230		233,614
JPMBB Commercial Mortgage Securities Trust, Series 2014-C26, Class A4, 3.49%, 1/15/48			753		809,353
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2006-CB16, Class AM, 5.59%, 5/12/45			385		384,275
Series 2007-CB20, Class AM, 6.09%, 2/12/51 (b)			4,748		4,917,334
Series 2007-LD12, Class A1A, 5.85%, 2/15/51 (b)			6,021		6,170,616
Series 2008-C2, Class ASB, 6.13%, 2/12/51 (b)			592		598,961
Series 2014-DSTY, Class A, 3.43%, 6/10/27 (a)			645		665,972
Series 2014-FL6, Class A, 1.91%, 11/15/31 (a)(b)			2,113		2,108,054
Series 2015-CSMO, Class A, 1.76%, 1/15/32 (a)(b)			960		959,198
Series 2015-CSMO, Class D, 3.81%, 1/15/32 (a)(b)			590		588,418
Series 2015-JP1, Class D, 4.40%, 1/15/49 (b)			770		711,810
Series 2016-ATRM, Class D, 5.35%, 10/05/28 (a)			560		571,805
Series 2016-NINE, Class A, 2.85%, 10/06/38 (a)(b)			1,290		1,328,958
Lone Star Portfolio Trust:
Series 2015-LSP, Class A1A2, 2.31%, 9/15/28 (a)(b)			656		660,502
Series 2015-LSP, Class D, 4.51%, 9/15/28 (a)(b)			444		443,483
Merrill Lynch Mortgage Trust, Series 2007-C1, Class A1A, 6.01%, 6/12/50 (b)			2,048		2,082,663
ML-CFC Commercial Mortgage Trust:
Series 2006-4, Class AM, 5.20%, 12/12/49			239		239,082
Series 2007-7, Class A4, 5.81%, 6/12/50 (b)			1,232		1,252,626
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2015-C25, Class C, 4.68%, 10/15/48 (b)			110		115,348
Series 2015-C25, Class D, 3.07%, 10/15/48			390		283,422
Series 2015-C26, Class D, 3.06%, 10/15/48 (a)			1,655		1,185,296
Morgan Stanley Capital I Trust:
Series 2007-HQ11, Class AMFL, 0.70%, 2/12/44 (b)			492		486,818

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Series 2007-IQ13, Class AM, 5.41%, 3/15/44	USD		2,350	$	2,368,240
Series 2007-IQ14, Class A4, 5.69%, 4/15/49 (b)			1,020		1,031,102
Series 2007-IQ16, Class A4, 5.81%, 12/12/49			1,686		1,733,271
Series 2015-XLF2, Class AFSB, 3.26%, 8/15/26 (a)(b)			300		300,000
Morgan Stanley Re-REMIC Trust, Series 2010-GG10, Class A4B, 5.99%, 8/15/45 (a)(b)			5,012		5,081,186
RBSCF Trust, Series 2010-RR3, Class WBTA, 6.16%, 2/16/51 (a)(b)			3,809		3,804,064
STRIPs Ltd., Series 2012-1A, Class B, 0.50%, 12/25/44 (a)			1,580		1,516,800
Waldorf Astoria Boca Raton Trust, Series 2016-BOCA, Class A, 1.86%, 6/15/29 (a)(b)			1,300		1,300,085
Wells Fargo Commercial Mortgage Trust:
Series 2015-C27, Class C, 3.89%, 2/15/48			655		602,545
Series 2015-C31, Class D, 3.85%, 11/15/48			730		551,074
Series 2016-NXS5, Class D, 5.05%, 1/15/59 (b)			2,717		2,412,003
					121,556,825
Interest Only Commercial Mortgage-Backed Securities — 0.6%
Barclays Commercial Mortgage Trust, Series 2015-SRCH, Class XA, 1.12%, 8/10/35 (a)(b)			7,280		572,572
BB-UBS Trust, Series 2012-SHOW, Class XA, 0.73%, 11/05/36 (a)(b)			65,905		2,943,330
CFCRE Commercial Mortgage Trust:
Series 2016-C4, Class XA, 1.94%, 5/10/58 (b)			3,656		449,345
Series 2016-C4, Class XB, 0.89%, 5/10/58 (b)			2,030		122,998
Citigroup Commercial Mortgage Trust, Series 2013-SMP, Class XA, 0.90%, 1/12/30 (a)(b)			80,057		605,452
Commercial Mortgage Pass-Through Certificates:
Series 2013-CR6, Class XA, 1.62%, 3/10/46 (b)			27,959		1,168,387
Series 2013-LC6, Class XA, 1.86%, 1/10/46 (b)			16,726		992,637
Series 2014-CR14, Class XA, 0.99%, 2/10/47 (b)			19,725		703,586
Series 2015-3BP, Class XA, 0.17%, 2/10/35 (a)(b)			40,878		308,629
Series 2015-CR23, Class XA, 1.15%, 5/10/48 (b)			13,643		781,908
Series 2015-LC21, Class XA, 1.02%, 7/10/48 (b)			10,785		513,688
Core Industrial Trust, Series 2015-TEXW, Class XA, 0.90%, 2/10/34 (a)(b)			5,920		221,438
Credit Suisse Mortgage Capital Certificates, Series 2015-GLPA, Class XA, 0.40%, 11/15/37 (a)(b)			7,500		172,500
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.98%, 1/15/49 (b)			2,897		347,156
GS Mortgage Securities Corp. II, Series 2013-KING, Class XA, 0.84%, 12/10/27 (a)(b)			33,415		677,875
JPMBB Commercial Mortgage Securities Trust:
Series 2014-C21, Class XA, 1.25%, 8/15/47 (b)			2,422		153,613

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 23

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Interest Only Commercial Mortgage-Backed Securities (continued)
Series 2015-C28, Class XA, 1.34%, 10/15/48 (b)	USD		3,424	$	218,730
Series 2015-C33, Class XA, 1.20%, 12/15/48 (b)			6,496		448,116
Series 2016-C1, Class XA, 1.56%, 3/15/49 (b)			6,816		610,970
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2013-LC11, Class XB, 0.72%, 4/15/46 (b)			4,040		128,331
Series 2016-JP3, Class XC, 0.75%, 8/15/49 (b)			4,330		205,025
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2014-C19, Class XA, 1.30%, 12/15/47 (b)			5,873		347,762
Series 2015-C25, Class XA, 1.30%, 10/15/48 (b)			11,513		861,221
Series 2016-C29, Class XA, 1.82%, 5/15/49 (b)			2,494		279,474
Series 2016-C29, Class XB, 1.12%, 5/15/49 (b)			3,160		248,206
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.44%, 5/25/36 (a)(b)			706		5,810
Wells Fargo Commercial Mortgage Trust:
Series 2015-C27, Class XA, 1.14%, 2/15/48 (b)			5,925		363,496
Series 2015-NXS1, Class XA, 1.33%, 5/15/48 (b)			3,650		251,385
Series 2016-BNK1, Class XB, 1.49%, 8/15/49 (b)			2,300		257,899
Series 2016-BNK1, Class XD, 1.41%, 8/15/49 (a)(b)			1,180		114,566
WF-RBS Commercial Mortgage Trust:
Series 2012-C9, Class XA, 2.28%, 11/15/45 (a)(b)			3,935		327,184
Series 2013-C12, Class XA, 1.53%, 3/15/48 (a)(b)			32,779		1,936,241
Series 2014-C24, Class XA, 1.12%, 11/15/47 (b)			17,466		972,075
					18,311,605
Total Non-Agency Mortgage-Backed Securities — 4.9%					156,743,638
Preferred Securities
Capital Trusts
Capital Markets — 0.5%
Bank of New York Mellon Corp., 4.63% (b)(d)			13,718		13,512,230
State Street Capital Trust IV, 1.85%, 6/15/37 (b)			739		635,540
					14,147,770
Diversified Financial Services — 0.0%
Banco Nacional de Comercio Exterior SNC, 3.80%, 8/11/26 (a)(b)			655		635,972
Media — 0.1%
NBCUniversal Enterprise, Inc., 5.25% (a)(d)			3,190		3,405,325
Total Capital Trusts — 0.6%					18,189,067

Trust Preferreds		Shares		Value
Banks — 0.1%
Citigroup Capital XIII, 7.26%, 10/30/40 (b)			116,685	$	3,073,483
Total Preferred Securities — 0.7%					21,262,550
Project Loans — 0.0%		Par   (000)
Federal Housing Authority, USGI Project, Series 56, 7.46%, 1/01/23	USD		22		21,004
Taxable Municipal Bonds
Bay Area Toll Authority RB, 7.04%, 4/01/50			1,150		1,848,050
City Public Service Board of San Antonio, Texas RB, 5.81%, 2/01/41			1,180		1,639,610
Los Angeles Community College District GO, 6.60%, 8/01/42			800		1,233,680
Los Angeles Unified School District GO, 6.76%, 7/01/34			1,580		2,293,781
Metropolitan Transportation Authority RB:
6.67%, 11/15/39			200		287,076
6.81%, 11/15/40			610		884,293
Municipal Electric Authority of Georgia RB, 6.64%, 4/01/57			690		937,041
New Jersey State Turnpike Authority RB, 7.41%, 1/01/40			1,004		1,575,557
New York City Water & Sewer System RB:
5.38%, 6/15/43			4,120		4,811,707
5.50%, 6/15/43			4,935		5,793,197
5.88%, 6/15/44			795		1,151,717
New York State Dormitory Authority RB, 5.39%, 3/15/40			725		964,330
Port Authority of New York & New Jersey RB, 4.96%, 8/01/46			1,305		1,635,987
State of California GO:
7.55%, 4/01/39			920		1,469,378
7.60%, 11/01/40			2,770		4,506,956
State of Illinois GO, 5.10%, 6/01/33			3,525		3,392,213
University of California RB, 4.86%, 5/15/2112			630		696,377
Total Taxable Municipal Bonds — 1.1%					35,120,950
U.S. Government Sponsored Agency Securities
Agency Obligations — 0.7%
Fannie Mae, 6.63%, 11/15/30			1,500		2,280,927
Freddie Mac:
3.75%, 3/27/19			10,765		11,506,482
5.50%, 8/23/17			3,500		3,649,016
Resolution Funding Corp. Interest Strip, 0.00%, 7/15/18 (e)			4,575		4,506,329
Small Business Administration Participation Certificates:
Series 1996-20J, 7.20%, 10/01/16			9		8,639
Series 1996-20K, 6.95%, 11/01/16			23		22,946
Series 1997-20B, Class 1, 7.10%, 2/01/17			26		26,706
Series 1997-20F, Class 1, 7.20%, 6/01/17			14		14,235
Series 1997-20G, Class 1, 6.85%, 7/01/17			70		71,272
					22,086,552

See Notes to Financial Statements.

24 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

U.S. Government Sponsored Agency Securities		Par   (000)		Value
Collateralized Mortgage Obligations — 0.0%
Fannie Mae:
Series 2002-T6, Class A1, 3.31%, 2/25/32	USD		70	$	70,342
Series 2005-29, Class AT, 4.50%, 4/25/35			46		47,349
Series 2005-29, Class WB, 4.75%, 4/25/35			337		360,558
Series 2005-48, Class AR, 5.50%, 2/25/35			357		376,308
Series 2005-62, Class CQ, 4.75%, 7/25/35			297		312,421
Freddie Mac:
Series 1591, Class PK, 6.35%, 10/15/23			706		773,829
Series 2996, Class MK, 5.50%, 6/15/35			18		19,900
					1,960,707
Commercial Mortgage-Backed Securities — 0.4%
Fannie Mae, Series 2006-M2, Class A2A, 5.27%, 10/25/32 (b)			12,719		14,035,395
Interest Only Commercial Mortgage-Backed Securities — 0.2%
Fannie Mae:
Series 2013-M4, Class X1, 4.09%, 2/25/18 (b)			36,674		1,087,971
Series 2013-M5, Class X2, 2.42%, 1/25/22 (b)			10,389		851,649
Freddie Mac:
Series K038, Class X1, 1.19%, 3/25/24 (b)			7,143		511,349
Series K055, Class X1, 1.50%, 3/25/26			8,308		863,939
Series K056, Class X1, 1.40%, 5/25/26			3,239		312,652
Ginnie Mae:
Series 2012-120, Class IO, 0.88%, 2/16/53 (b)			16,677		960,466
Series 2014-172, Class IO, 1.06%, 1/16/49			8,292		507,312
Series 2016-87, Class IO, 1.01%, 8/16/58			3,157		258,209
					5,353,547
Mortgage-Backed Securities — 42.9%
Fannie Mae:
4.00%, 6/01/46			50		53,714
4.00%, 10/01/45			606		651,341
4.00%, 8/01/45			52		55,595
4.00%, 12/01/45			93		99,785
Fannie Mae Mortgage-Backed Securities:
2.22%, 10/01/42 (b)			1,994		2,081,833
2.50%, 5/01/26-10/01/31 (f)			17,060		17,688,746
2.54%, 8/01/28			649		667,843
2.55%, 12/01/34 (b)			552		582,851
3.00%, 4/01/29-10/01/46 (f)			148,093		155,089,698
3.38%, 6/01/41 (b)			2,621		2,757,448
3.50%, 8/01/27-10/01/46 (f)			195,811		207,939,184
4.00%, 1/01/25-10/01/46 (f)			240,453		259,610,701
4.50%, 2/01/25-10/01/46 (f)			58,442		64,178,531
5.00%, 11/01/32-10/01/46 (f)			40,893		45,726,319
5.50%, 11/01/16-4/01/41			10,953		12,446,587
6.00%, 1/01/21-10/01/46 (f)			22,720		26,198,819
6.50%, 5/01/40			3,750		4,325,692
7.00%, 6/01/32			19		21,655
Freddie Mac Mortgage-Backed Securities:
2.50%, 11/01/29-10/01/31 (f)			15,553		16,133,162
3.00%, 1/01/30-10/01/46 (f)			72,337		75,510,669
3.50%, 10/01/31-10/01/46 (f)			112,023		118,527,312
4.00%, 8/01/40-10/01/46 (f)			56,638		60,927,922
4.50%, 2/01/39-10/01/46 (f)			29,069		31,878,932

U.S. Government Sponsored Agency Securities		Par   (000)			Value
Mortgage-Backed Securities (continued)
5.00%, 7/01/35-10/01/46 (f)	USD		15,301		$	17,027,390
5.50%, 4/01/17-6/01/41			5,574			6,272,285
6.00%, 1/01/17-12/01/32			75			77,105
6.50%, 7/01/17			2			1,959
8.00%, 11/01/22			1			1,185
Ginnie Mae Mortgage-Backed Securities:
3.00%, 10/15/46 (f)			58,973			61,776,294
3.50%, 12/20/41-10/15/46 (f)			95,473			101,625,319
4.00%, 9/20/40-10/15/46 (f)			42,251			45,334,845
4.50%, 12/20/39-11/20/44			28,868			31,760,138
5.00%, 12/15/38-7/20/41			10,403			11,585,309
5.50%, 3/15/32-10/15/46 (f)			4,409			4,867,664
6.00%, 12/15/36			150			171,997
7.50%, 11/15/29			—	(g)		441
9.00%, 7/15/18			—	(g)		186
						1,383,656,456
Principal Only Collateralized Mortgage Obligations — 0.0%
Fannie Mae, Series 1989-16, Class B, 0.00%, 3/25/19 (e)			6			6,328
Total U.S. Government Sponsored Agency Securities — 44.2%						1,427,098,985
U.S. Treasury Obligations
U.S. Treasury Bonds:
3.00%, 11/15/45 (h)			44,889			51,219,067
2.50%, 2/15/46-5/15/46 (h)			63,736			65,905,980
U.S. Treasury Inflation Indexed Notes:
0.13%, 4/15/21-7/15/26			85,527			87,149,827
0.63%, 1/15/26			32,351			34,022,655
U.S. Treasury Notes:
0.75%, 2/28/18-7/15/19 (h)			324,892			324,447,344
0.88%, 3/31/18 (h)			73,799			73,948,886
1.00%, 3/15/19 (h)			92,587			92,941,423
1.38%, 5/31/21-6/30/23			145,968			146,827,321
1.13%, 6/30/21-8/31/21 (h)			265,209			264,905,648
1.50%, 3/31/23-8/15/26			11,840			11,852,323
1.63%, 4/30/23-5/15/26			76,420			77,047,497
1.25%, 7/31/23 (h)			39,837			39,419,946
2.00%, 8/15/25			31,795			32,902,865
2.25%, 11/15/25			30,970			32,692,706
Total U.S. Treasury Obligations — 41.4%						1,335,283,488
Total Long-Term Investments (Cost — $4,284,628,811) — 135.2%						4,362,281,361
Short-Term Securities
Certificates of Deposit
Domestic — 0.2%
Wells Fargo Bank N.A., 1.34%, 9/22/17 (b)			8,150			8,149,267
Yankee — 1.8% (i)
Bank of Tokyo-Mitsubishi UFJ Ltd., New York, 1.43%, 8/17/17 (b)			8,200			8,213,850
Cooperatieve Rabobank UA, New York, 1.31%, 8/16/17 (b)			8,190			8,194,578
Credit Industriel et Commercial, New York, 1.41%, 8/16/17 (b)			8,190			8,201,810

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 25

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Certificates of Deposit		Par   (000)		Value
Yankee (continued)
Credit Suisse AG, New York, 1.58%, 8/16/17 (b)	USD		4,020	$	4,025,845
Credit Suisse AG, New York, 1.61%, 8/24/17 (b)			4,080		4,085,418
Skandinaviska Enskilda Banken AB, New York, 1.29%, 8/17/17 (b)			8,200		8,203,067
Sumitomo Mitsui Banking Corp., New York, 1.43%, 8/18/17 (b)			4,245		4,246,167
Toronto-Dominion Bank, New York, 1.30%, 8/15/17 (b)			8,050		8,054,959
UBS AG, Stamford, 1.53%, 9/01/17			4,140		4,140,541
					57,366,235
Total Certificates of Deposit — 2.0%					65,515,502
Commercial Paper
BNP Paribas SA, (New York Branch), 1.53%, 8/17/17 (b)			4,200		4,204,120
BPCE SA, 1.49%, 8/14/17 (j)			8,220		8,115,442
Mizuho Corporate Bank, (New York Branch), 1.37%, 8/16/17 (j)			8,120		8,018,302
Nordea Bank AB, 1.21%, 3/09/17 (j)			4,020		4,002,008
Norinchukin Bank, (New York Branch), 1.20%, 2/22/17 (b)			4,200		4,202,046
Sumitomo Mitsui Trust Bank Ltd., (New York Branch), 1.53%, 8/16/17 (b)			8,190		8,194,916
Svenska Handelsbanken AB, (New York Branch), 1.20%, 2/27/17 (b)			4,260		4,262,010
Swedbank AB, (New York Branch), 1.38%, 8/18/17 (b)			4,180		4,185,257
Total Commercial Paper — 1.4%					45,184,101
			Shares
Money Market Funds — 0.1%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (k)(l)			2,666,751		2,666,751
Total Short-Term Securities
(Cost — $113,298,369) — 3.5%					113,366,354

Options Purchased			Value
(Cost — $2,395,141) — 0.1%			$	1,719,350
Total Investments Before TBA Sale Commitments and Options Written
(Cost — $4,400,322,321) — 138.8%				4,477,367,065
TBA Sale Commitments (f)		Par   (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/31	USD	12,734		(13,189,298	)
3.00%, 10/01/31-10/01/46		115,212		(119,830,496	)
3.50%, 10/01/31-10/01/46		120,205		(126,803,222	)
4.00%, 10/01/31-10/01/46		117,507		(126,067,718	)
4.50%, 10/01/31-10/01/46		29,985		(32,529,893	)
5.00%, 10/01/46		27,644		(30,698,331	)
5.50%, 10/01/46		2,100		(2,366,438	)
6.00%, 10/01/46		12,538		(14,367,500	)
Freddie Mac Mortgage-Backed Securities:
3.00%, 10/01/46		23,800		(24,731,546	)
3.50%, 10/01/46		45,808		(48,326,547	)
4.00%, 10/01/46		20,876		(22,392,364	)
4.50%, 10/01/46		13,507		(14,784,343	)
5.00%, 10/01/46		6,586		(7,295,198	)
Ginnie Mae Mortgage-Backed Securities:
3.50%, 10/15/46		7,048		(7,492,629	)
4.50%, 10/15/46		7,819		(8,603,775	)
Total TBA Sale Commitments
(Proceeds — $598,693,404) — (18.6)%				(599,479,298	)
Options Written
(Premiums Received — $ 193,703) — (0.0)%				(87,019	)
Total Investments Net of TBA Sale Commitments and Options Written — 120.2%				3,877,800,748
Liabilities in Excess of Other Assets — (20.2)%				(650,464,755	)
Net Assets — 100.0%			$	3,227,335,993

      Notes to Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

(c) Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

(d) Perpetual security with no stated maturity date.

(e) Zero-coupon bond.

(f) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Barclays Capital, Inc.	$	(36,400,022	)		$(131,247	)
BNP Paribas Securities Corp.	$	20,153,259			$   38,832
Citigroup Global Markets, Inc.	$	(12,837,535	)		$   21,692
Credit Suisse Securities (USA) LLC	$	(27,713,945	)		$   29,969
Deutsche Bank Securities, Inc.		—			$     8,802
Goldman Sachs & Co.	$	86,331,150			$ 323,268
J.P. Morgan Securities LLC	$	(67,980,633	)		$(182,948	)

See Notes to Financial Statements.

26 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Counterparty	Value			Unrealized Appreciation (Depreciation)
Jefferies LLC	$	25,236,229			$ 22,400
Merrill Lynch, Pierce, Fenner & Smith, Inc.	$	(5,561,396	)		$ 26,919
Morgan Stanley & Co. LLC	$	6,901,136			$  (1,637	)
Nomura Securities International, Inc.	$	33,486,490			$ 58,326
RBC Capital Markets, LLC	$	(24,038,019	)		$(98,052	)
Wells Fargo Securities, LLC	$	13,440,374			$  (3,177	)

(g) Amount is less than $500.

(h) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(i) Issuer is a U.S. branch of a foreign domiciled bank.

(j) Rates are discount rates or a range of discount rates at the time of purchase.

(k) During the year ended September 30, 2016, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2015		Net Activity		Shares Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		—		—		—		—	$	16,518		$808
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		2,666,751		2,666,751		$2,666,751		595		—
Total								$2,666,751	$	17,113		$808

(l) Current yield as of period end.

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements
Counterparty	Interest Rate			Trade Date		Maturity Date1		Face Value		Face Value Including Accrued Interest		Type of Underlying Collateral		Remaining Contractual Maturity of the Agreements
Credit Agricole Corporate and Investment Bank		0.80	%		6/27/16		Open		$  48,457,500		$  48,560,876		U.S. Treasury Obligations		Open/Demand
Credit Agricole Corporate and Investment Bank		0.44	%		9/19/16		Open		81,857,550		81,869,556		U.S. Treasury Obligations		Open/Demand
Amherst Pierpont Securities LLC		1.05	%		9/30/16		10/03/16		21,556,362		21,556,990		U.S. Treasury Obligations		Overnight
Barclays Capital, Inc.		1.15	%		9/30/16		10/03/16		133,500,968		133,505,232		U.S. Treasury Obligations		Overnight
Citigroup Global Markets, Inc.		0.90	%		9/30/16		10/03/16		69,912,500		69,914,248		U.S. Treasury Obligations		Overnight
Credit Suisse Securities (USA) LLC		1.45	%		9/30/16		10/03/16		73,983,498		73,986,477		U.S. Treasury Obligations		Overnight
Deutsche Bank Securities, Inc.		0.30	%		9/30/16		10/03/16		60,150,000		60,150,501		U.S. Treasury Obligations		Overnight
Deutsche Bank Securities, Inc.		1.40	%		9/30/16		10/03/16		93,165,669		93,169,292		U.S. Treasury Obligations		Overnight
Merrill Lynch, Pierce, Fenner & Smith, Inc.		0.89	%		9/30/16		10/03/16		50,039,788		50,041,025		U.S. Treasury Obligations		Overnight
Total									$632,623,835		$632,754,197

¹  Certain agreements have no stated maturity and can be terminated by either party at any time.

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)	Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
(89)	Euro-Bund	December 2016		USD              16,566,463		$(113,064	)
(116)	Long Gilt British	December 2016		USD              19,583,425		19,857

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 27

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Contracts Long (Short)	Issue		Expiration		Notional Value		Unrealized Appreciation (Depreciation)
619		U.S. Treasury Bonds (30 Year)		December 2016		USD              104,088,719		$    (712,473	)
(1,815)		U.S. Treasury Notes (10 Year)		December 2016		USD              237,991,875		(548,203	)
(1,543)		U.S. Treasury Notes (2 Year)		December 2016		USD              337,097,281		(2,960	)
(567)		U.S. Treasury Notes (5 Year)		December 2016		USD                68,899,359		(132,251	)
(193)		U.S. Ultra Treasury Bonds		December 2016		USD                35,487,875		424,622
(46)		Euro Dollar		December 2017		USD                11,377,525		(637	)
Total								$(1,065,109	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
CLP	605,013,100	USD	890,000	Credit Suisse International	10/03/16		$   29,757
COP	648,340,000	USD	220,000	Credit Suisse International	10/03/16		4,720
COP	648,566,600	USD	220,000	Credit Suisse International	10/03/16		4,799
USD	890,000	CLP	601,292,900	Credit Suisse International	10/03/16		(24,101	)
USD	440,000	COP	1,308,916,400	Credit Suisse International	10/03/16		(13,681	)
BRL	1,363,950	USD	420,000	Goldman Sachs International	10/04/16		(1,095	)
BRL	2,425,275	USD	750,000	Goldman Sachs International	10/04/16		(5,134	)
BRL	9,033,763	USD	2,785,954	Goldman Sachs International	10/04/16		(11,449	)
BRL	1,469,820	USD	440,000	Royal Bank of Scotland PLC	10/04/16		11,420
CAD	2,093,813	USD	1,620,000	Barclays Bank PLC	10/04/16		(23,996	)
CAD	2,094,234	USD	1,620,000	Barclays Bank PLC	10/04/16		(23,675	)
EUR	1,021,196	USD	1,155,000	Citibank N.A.	10/04/16		(7,615	)
EUR	1,843,034	USD	2,085,000	Citibank N.A.	10/04/16		(14,222	)
GBP	1,223,286	USD	1,620,000	Barclays Bank PLC	10/04/16		(34,311	)
GBP	1,223,330	USD	1,620,000	JPMorgan Chase Bank N.A.	10/04/16		(34,254	)
HUF	898,627,932	USD	3,240,000	Citibank N.A.	10/04/16		37,450
JPY	162,482,581	USD	1,620,000	Barclays Bank PLC	10/04/16		(17,414	)
JPY	162,497,129	USD	1,620,000	Barclays Bank PLC	10/04/16		(17,270	)
MXN	214,176	USD	11,000	Bank of America N.A.	10/04/16		41
MXN	1,470,600	USD	75,000	Bank of America N.A.	10/04/16		808
MXN	8,862,300	USD	450,000	Bank of America N.A.	10/04/16		6,841
MXN	1,463,431	USD	75,000	Citibank N.A.	10/04/16		438
MXN	1,463,588	USD	75,000	Citibank N.A.	10/04/16		446
MXN	1,471,943	USD	75,000	Citibank N.A.	10/04/16		877
MXN	8,686,322	USD	450,000	JPMorgan Chase Bank N.A.	10/04/16		(2,231	)
MXN	1,464,514	USD	75,000	UBS AG	10/04/16		494
MXN	1,472,115	USD	75,000	UBS AG	10/04/16		886
RUB	206,874,000	USD	3,240,000	JPMorgan Chase Bank N.A.	10/04/16		51,185
SEK	13,574,937	USD	1,620,000	Goldman Sachs International	10/04/16		(37,292	)
SEK	13,579,120	USD	1,620,000	Morgan Stanley & Co. International PLC	10/04/16		(36,804	)
TRY	9,578,088	USD	3,240,000	Goldman Sachs International	10/04/16		(51,029	)
USD	160,000	BRL	531,520	Goldman Sachs International	10/04/16		(3,244	)
USD	440,000	BRL	1,461,020	Goldman Sachs International	10/04/16		(8,718	)
USD	590,000	BRL	1,930,775	Goldman Sachs International	10/04/16		(2,992	)
USD	770,000	BRL	2,500,190	Goldman Sachs International	10/04/16		2,126
USD	1,795,954	BRL	5,815,300	Royal Bank of Scotland PLC	10/04/16		9,923
USD	640,000	BRL	2,160,000	UBS AG	10/04/16		(23,393	)
USD	3,240,000	CAD	4,185,432	Goldman Sachs International	10/04/16		49,664

See Notes to Financial Statements.

28 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
USD	3,240,000	EUR	2,890,148	Credit Suisse International	10/04/16		$   (7,284	)
USD	3,240,000	GBP	2,503,876	Deutsche Bank AG	10/04/16		(5,658	)
USD	3,240,000	HUF	883,272,600	Goldman Sachs International	10/04/16		18,553
USD	3,240,000	JPY	327,056,940	Goldman Sachs International	10/04/16		14,196
USD	450,000	MXN	8,859,742	Citibank N.A.	10/04/16		(6,709	)
USD	1,620,000	RUB	106,725,600	BNP Paribas S.A.	10/04/16		(77,911	)
USD	1,620,000	RUB	106,830,900	Morgan Stanley & Co. International PLC	10/04/16		(79,586	)
USD	3,240,000	SEK	27,729,394	Barclays Bank PLC	10/04/16		7,017
USD	1,620,000	TRY	4,824,754	BNP Paribas S.A.	10/04/16		13,625
USD	1,620,000	TRY	4,823,974	Deutsche Bank AG	10/04/16		13,884
USD	1,620,000	ZAR	23,120,559	Bank of America N.A.	10/04/16		(63,537	)
USD	1,620,000	ZAR	23,108,934	Credit Suisse International	10/04/16		(62,690	)
ZAR	44,333,131	USD	3,240,000	Barclays Bank PLC	10/04/16		(11,858	)
BRL	10,453,860	USD	3,240,000	Royal Bank of Scotland PLC	10/05/16		(30,292	)
COP	3,335,957,500	USD	1,145,000	BNP Paribas S.A.	10/05/16		10,803
COP	2,759,750,000	USD	950,000	Royal Bank of Scotland PLC	10/05/16		6,166
COP	3,326,225,000	USD	1,145,000	Royal Bank of Scotland PLC	10/05/16		7,431
USD	1,620,000	BRL	5,286,060	Credit Suisse International	10/05/16		(3,009	)
USD	1,620,000	BRL	5,287,680	Deutsche Bank AG	10/05/16		(3,507	)
USD	2,085,000	COP	6,169,515,000	Royal Bank of Scotland PLC	10/05/16		(52,541	)
USD	1,155,000	COP	3,419,377,500	Standard Chartered Bank	10/05/16		(29,706	)
USD	31,325	EUR	28,000	HSBC Bank PLC	10/05/16		(136	)
USD	12,930,179	EUR	11,591,000	Royal Bank of Scotland PLC	10/05/16		(93,746	)
USD	575,938	MXN	10,889,000	Royal Bank of Scotland PLC	10/05/16		14,691
RUB	30,304,800	USD	460,000	Deutsche Bank AG	10/06/16		21,885
USD	460,000	RUB	30,065,600	BNP Paribas S.A.	10/06/16		(18,082	)
RUB	144,109,621	USD	2,202,753	BNP Paribas S.A.	10/11/16		85,954
RUB	84,728,820	USD	1,320,000	JPMorgan Chase Bank N.A.	10/11/16		25,639
USD	745,753	RUB	48,936,324	Deutsche Bank AG	10/11/16		(31,439	)
TWD	14,268,800	USD	455,000	Bank of America N.A.	10/12/16		362
TWD	28,337,400	USD	910,000	BNP Paribas S.A.	10/12/16		(5,666	)
USD	455,000	TWD	14,259,700	Morgan Stanley & Co. International PLC	10/12/16		(71	)
INR	4,734,280	USD	71,000	Royal Bank of Scotland PLC	10/13/16		(61	)
INR	44,235,800	USD	665,000	Standard Chartered Bank	10/13/16		(2,163	)
INR	44,634,800	USD	665,000	UBS AG	10/13/16		3,816
TWD	14,418,950	USD	455,000	HSBC Bank PLC	10/13/16		5,166
USD	665,000	INR	44,574,950	BNP Paribas S.A.	10/13/16		(2,919	)
USD	455,000	TWD	14,405,300	HSBC Bank PLC	10/13/16		(4,730	)
USD	22,000	CLP	14,542,000	Royal Bank of Scotland PLC	10/17/16		(80	)
USD	670,000	CLP	453,255,000	State Street Bank and Trust Co.	10/17/16		(18,210	)
USD	518,000	COP	1,541,050,000	Royal Bank of Scotland PLC	10/18/16		(14,525	)
USD	687,391	GBP	520,000	Morgan Stanley & Co. International PLC	10/19/16		13,123
KRW	585,081,000	USD	518,000	Morgan Stanley & Co. International PLC	10/20/16		13,159
RUB	28,437,726	USD	437,100	Deutsche Bank AG	10/20/16		13,541
USD	518,000	KRW	581,455,000	JPMorgan Chase Bank N.A.	10/20/16		(9,868	)
USD	30,311	TWD	949,795	JPMorgan Chase Bank N.A.	10/21/16		(7	)
USD	686,689	TWD	21,749,775	Morgan Stanley & Co. International PLC	10/21/16		(7,586	)
MYR	3,112,200	USD	760,000	JPMorgan Chase Bank N.A.	10/24/16		(8,497	)
MYR	33,096	USD	8,000	Royal Bank of Scotland PLC	10/24/16		(8	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 29

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
JPY	76,094,434	USD	754,000	Royal Bank of Scotland PLC	10/26/16		$   (2,767	)
USD	225,000	ZAR	3,079,375	Goldman Sachs International	10/26/16		1,742
USD	225,000	ZAR	3,077,391	Morgan Stanley & Co. International PLC	10/26/16		1,885
RUB	28,890,000	USD	450,000	BNP Paribas S.A.	10/27/16		7,023
KRW	332,027,394	USD	300,206	UBS AG	10/28/16		1,204
KRW	775,067,585	USD	700,594	UBS AG	10/28/16		3,000
USD	1,000,800	KRW	1,103,382,000	Standard Chartered Bank	10/28/16		(833	)
BRL	111,091	USD	34,046	Royal Bank of Scotland PLC	11/03/16		(226	)
BRL	5,863,072	USD	1,795,954	Royal Bank of Scotland PLC	11/03/16		(11,053	)
USD	13,071,514	EUR	11,645,000	Royal Bank of Scotland PLC	11/03/16		(9,963	)
USD	555,008	MXN	10,889,000	Citibank N.A.	11/03/16		(6,577	)
MXN	17,766,322	USD	911,000	Royal Bank of Scotland PLC	11/04/16		1,461
CNH	2,006,421	USD	300,000	BNP Paribas S.A.	11/07/16		(148	)
CNH	2,006,189	USD	300,000	Goldman Sachs International	11/07/16		(183	)
CNH	2,006,290	USD	300,000	Goldman Sachs International	11/07/16		(167	)
CNH	2,420,514	USD	362,000	Goldman Sachs International	11/07/16		(263	)
CNH	6,224,894	USD	937,000	Goldman Sachs International	11/07/16		(6,713	)
CNH	2,006,779	USD	300,000	Royal Bank of Canada	11/07/16		(94	)
USD	3,905,000	CNH	25,779,248	Deutsche Bank AG	11/07/16		52,387
USD	88,000	CNH	588,314	Morgan Stanley & Co. International PLC	11/07/16		79
USD	10,475,000	SAR	39,951,650	BNP Paribas S.A.	11/23/16		(159,206	)
USD	7,840,000	SAR	29,795,920	Citibank N.A.	11/23/16		(90,986	)
USD	10,635,000	SAR	40,540,620	Citibank N.A.	11/23/16		(155,977	)
BRL	1,256,112	USD	366,000	BNP Paribas S.A.	12/21/16		10,861
BRL	724,109	USD	219,600	Goldman Sachs International	12/21/16		(2,351	)
BRL	515,977	USD	150,400	JPMorgan Chase Bank N.A.	12/21/16		4,405
BRL	246,062	USD	73,200	Nomura International PLC	12/21/16		624
BRL	970,193	USD	292,800	Royal Bank of Scotland PLC	12/21/16		(1,721	)
CAD	483,925	USD	366,000	BNP Paribas S.A.	12/21/16		3,085
CAD	190,971	USD	146,400	Royal Bank of Scotland PLC	12/21/16		(748	)
EUR	231,000	RUB	17,232,600	BNP Paribas S.A.	12/21/16		(8,253	)
EUR	388,080	RUB	29,190,019	Deutsche Bank AG	12/21/16		(17,596	)
EUR	161,040	SEK	1,533,874	Citibank N.A.	12/21/16		2,043
EUR	3,660	SEK	39,949	Standard Chartered Bank	12/21/16		36
EUR	329,400	USD	370,013	BNP Paribas S.A.	12/21/16		1,472
EUR	58,560	USD	66,100	Royal Bank of Scotland PLC	12/21/16		(58	)
EUR	673,440	USD	760,280	Royal Bank of Scotland PLC	12/21/16		(800	)
EUR	73,200	USD	81,940	Standard Chartered Bank	12/21/16		612
GBP	512,400	USD	663,302	HSBC Bank PLC	12/21/16		2,041
GBP	190,320	USD	251,651	JPMorgan Chase Bank N.A.	12/21/16		(4,524	)
GBP	530,000	USD	690,834	Royal Bank of Scotland PLC	12/21/16		(2,638	)
JPY	29,627,846	USD	292,800	BNP Paribas S.A.	12/21/16		493
JPY	18,286,636	USD	179,340	HSBC Bank PLC	12/21/16		1,684
JPY	1,606,650,877	USD	16,035,000	Nomura International PLC	12/21/16		(130,388	)
JPY	11,201,345	USD	109,800	Northern Trust Corp.	12/21/16		1,085
KRW	323,690,400	USD	292,800	BNP Paribas S.A.	12/21/16		973
KRW	323,719,680	USD	292,800	Citibank N.A.	12/21/16		1,000
KRW	323,734,320	USD	292,800	HSBC Bank PLC	12/21/16		1,013
KRW	327,291,840	USD	292,800	HSBC Bank PLC	12/21/16		4,242

See Notes to Financial Statements.

30 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
KRW	880,403,130	USD	801,000	HSBC Bank PLC	12/21/16		$   (1,968	)
KRW	832,415,174	USD	739,320	JPMorgan Chase Bank N.A.	12/21/16		16,160
MXN	4,485,297	USD	234,240	UBS AG	12/21/16		(5,048	)
NOK	1,826,872	USD	219,600	BNP Paribas S.A.	12/21/16		8,966
NOK	4,440,638	USD	541,680	BNP Paribas S.A.	12/21/16		13,903
NOK	1,567,984	USD	190,320	Morgan Stanley & Co. International PLC	12/21/16		5,856
NOK	1,214,900	USD	146,400	Royal Bank of Scotland PLC	12/21/16		5,600
NZD	259,860	USD	188,656	Royal Bank of Scotland PLC	12/21/16		(46	)
NZD	732,000	USD	529,664	Westpac Banking Corp.	12/21/16		1,631
RUB	3,458,572	EUR	46,200	JPMorgan Chase Bank N.A.	12/21/16		1,838
SEK	139,065	EUR	14,640	Goldman Sachs International	12/21/16		(230	)
USD	110,269	AUD	146,400	Goldman Sachs International	12/21/16		(1,566	)
USD	174,686	AUD	234,240	Goldman Sachs International	12/21/16		(4,251	)
USD	559,523	AUD	732,000	Goldman Sachs International	12/21/16		346
USD	224,549	AUD	292,800	Royal Bank of Scotland PLC	12/21/16		879
USD	366,000	BRL	1,199,492	BNP Paribas S.A.	12/21/16		6,126
USD	366,000	BRL	1,204,396	Royal Bank of Scotland PLC	12/21/16		4,654
USD	175,680	CAD	231,485	Goldman Sachs International	12/21/16		(871	)
USD	439,200	CAD	579,454	Royal Bank of Scotland PLC	12/21/16		(2,743	)
USD	165,313	EUR	146,400	BNP Paribas S.A.	12/21/16		209
USD	206,488	EUR	183,000	BNP Paribas S.A.	12/21/16		108
USD	328,566	EUR	292,800	Royal Bank of Scotland PLC	12/21/16		(1,643	)
USD	562,121	EUR	497,760	UBS AG	12/21/16		766
USD	701,345	GBP	530,000	Bank of America N.A.	12/21/16		13,149
USD	747,181	GBP	563,640	Bank of America N.A.	12/21/16		15,304
USD	191,703	GBP	146,400	Citibank N.A.	12/21/16		1,605
USD	190,973	GBP	146,400	HSBC Bank PLC	12/21/16		875
USD	571,884	GBP	439,200	HSBC Bank PLC	12/21/16		1,590
USD	287,381	GBP	219,600	JPMorgan Chase Bank N.A.	12/21/16		2,234
USD	14,640	JPY	1,481,970	Barclays Bank PLC	12/21/16		(30	)
USD	190,320	KRW	207,601,056	BNP Paribas S.A.	12/21/16		1,906
USD	1,000,800	KRW	1,129,052,520	Deutsche Bank AG	12/21/16		(23,900	)
USD	512,400	KRW	562,666,440	HSBC Bank PLC	12/21/16		1,738
USD	380,640	KRW	415,080,307	Standard Chartered Bank	12/21/16		3,923
USD	146,400	MXN	2,893,157	Citibank N.A.	12/21/16		(1,436	)
USD	197,640	MXN	3,831,335	JPMorgan Chase Bank N.A.	12/21/16		1,864
USD	248,880	MXN	4,604,902	Royal Bank of Scotland PLC	12/21/16		13,576
USD	1,758,146	MXN	34,077,970	Royal Bank of Scotland PLC	12/21/16		16,812
USD	585,600	NOK	4,752,788	Citibank N.A.	12/21/16		(9,038	)
USD	732,000	NOK	5,939,540	Citibank N.A.	12/21/16		(11,116	)
USD	10,884	NZD	14,640	Credit Suisse International	12/21/16		258
USD	428,293	NZD	585,600	Westpac Banking Corp.	12/21/16		3,257
USD	292,800	ZAR	4,172,327	BNP Paribas S.A.	12/21/16		(6,328	)
USD	366,000	ZAR	5,291,811	BNP Paribas S.A.	12/21/16		(13,388	)
USD	292,800	ZAR	4,076,430	Goldman Sachs International	12/21/16		547
USD	172,020	ZAR	2,505,356	JPMorgan Chase Bank N.A.	12/21/16		(7,597	)
ZAR	4,131,994	USD	292,800	BNP Paribas S.A.	12/21/16		3,437
ZAR	5,414,604	USD	366,000	HSBC Bank PLC	12/21/16		22,191
ZAR	2,594,752	USD	175,680	UBS AG	12/21/16		10,347

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 31

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
INR	54,974,700		USD	810,000	UBS AG		12/23/16		$      3,928
Total									$(960,515)

OTC Barrier Options Purchased

Description

Put/ Call

Type of Option

Counterparty

Expiration Date

Strike Price

Barrier Price

Notional Amount (000)

Value

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

—

CAD

1.43

USD

70

$

4,760

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

—

MXN

23.00

USD

53

3,846

Total

$

8,606

Exchange-Traded Options Purchased

Description	Put/Call		Expiration Date		Strike Price			Contracts		Value
U.S. Treasury Notes (10 Year) Future		Put		10/21/16		USD	131.00		1,089	$	493,453
Euro Dollar Futures		Put		12/16/16		USD	98.50		4,641		841,181
Total										$	1,334,634

OTC Options Purchased

Description	Put/Call	Counterparty	Expiration Date	Strike Price		Notional Amount (000)			Value
USD Currency	Call	Goldman Sachs International	10/07/16	TWD	31.00		USD	910	$	10,822
USD Currency	Call	Goldman Sachs International	11/14/16	MXN	19.00		USD	970		36,002
USD Currency	Call	BNP Paribas S.A.	11/23/16	TWD	32.00		USD	900		3,626
USD Currency	Call	Deutsche Bank AG	11/23/16	MXN	19.90		USD	890		18,752
USD Currency	Put	Morgan Stanley & Co. International PLC	10/18/16	MXN	19.30		USD	900		12,634
USD Currency	Put	Morgan Stanley & Co. International PLC	11/10/16	INR	67.80		USD	1,500		24,944
USD Currency	Put	Morgan Stanley & Co. International PLC	11/23/16	BRL	3.30		USD	750		20,995
USD Currency	Put	Deutsche Bank AG	12/01/16	INR	67.50		USD	900		11,672
Total									$	139,447

OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/   Call

Exercise Rate

Pay/Receive   Exercise Rate

Floating Rate   Index

Expiration   Date

Notional Amount (000)

Value

30-Year Interest Rate Swap

Bank of America N.A.

Put

2.05%

Receive

3-month LIBOR

11/18/16

USD 47,653

$

236,663

Exchange-Traded Options Written

Description

Put/ Call

Expiration Date

Strike Price

Contracts

Value

Euro Dollar Futures

Put

12/16/16

USD

98.00

4,641

$

(87,019

)

See Notes to Financial Statements.

32 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

       Centrally Cleared Interest Rate Swaps    

Fixed Rate	Floating Rate	Effective Date		Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
0.65%1	3-month LIBOR		N/A		11/26/16		USD	2,530		$    (2,868	)
1.26%1	3-month LIBOR		N/A		1/12/17		USD	149,961		(362,320	)
1.02%2	3-month LIBOR		1/05/173		9/30/18		USD	473,055		(98,326	)
1.31%1	3-month LIBOR		12/30/163		8/15/23		USD	63,795		8,718
2.13%2	3-month LIBOR		N/A		8/25/25		USD	485		30,464
2.27%1	3-month LIBOR		N/A		9/11/25		USD	367		(27,335	)
1.75%1	3-month LIBOR		12/30/163		2/15/36		USD	24,869		(67,027	)
Total										$(518,694	)

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

³  Forward swap.

       OTC Credit Default Swaps — Buy Protection    

Issuer/Index	Pay Fixed Rate			Counterparty	Expiration Date	Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
United Mexican States		1.00	%	JPMorgan Chase Bank N.A.	6/20/20		USD	1,491	$	14,238		$	9,747			$    4,491
United Mexican States		1.00	%	Bank of America N.A.	9/20/20		USD	1,491		19,050			14,870			4,180
Loews Corp.		1.00	%	Barclays Bank PLC	12/20/20		USD	1,730		(52,742	)		(55,129	)		2,387
Valero Energy Corp.		1.00	%	Morgan Stanley Capital Services LLC	12/20/20		USD	1,750		9,318			36,431			(27,113	)
Commonwealth Bank of Australia		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	1,655		(30,504	)		(18,597	)		(11,907	)
Commonwealth Bank of Australia		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	1,320		(24,330	)		(14,833	)		(9,497	)
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	834		1,690			6,141			(4,451	)
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	194		394			1,059			(665	)
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	62		125			359			(234	)
Australia & New Zealand Banking Group Ltd.		1.00	%	Goldman Sachs International	12/20/21		USD	8,894		(153,129	)		(140,994	)		(12,135	)
Australia and New Zealand Banking Group Ltd.		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	1,886		(32,481	)		(31,801	)		(680	)
Commonwealth Bank of Australia		1.00	%	Deutsche Bank AG	12/20/21		USD	1,005		(17,093	)		(15,930	)		(1,163	)
Commonwealth Bank of Australia		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	2,689		(46,159	)		(41,248	)		(4,911	)
Federation of Malaysia		1.00	%	Barclays Bank PLC	12/20/21		USD	968		9,766			16,452			(6,686	)
Federation of Malaysia		1.00	%	Barclays Bank PLC	12/20/21		USD	80		798			906			(108	)
HSBC Holdings PLC ADR		1.00	%	Bank of America N.A.	12/20/21		EUR	2,657		(39,791	)		(41,666	)		1,875
HSBC Holdings PLC ADR		1.00	%	BNP Paribas S.A.	12/20/21		EUR	3,572		(53,498	)		(51,427	)		(2,071	)
HSBC Holdings PLC ADR		1.00	%	Credit Suisse International	12/20/21		EUR	2,167		(32,453	)		(32,100	)		(353	)
National Australia Bank Ltd.		1.00	%	BNP Paribas S.A.	12/20/21		USD	2,090		(32,504	)		(32,139	)		(365	)
Prudential Financial, Inc.		1.00	%	Citibank N.A.	12/20/21		USD	6,445		46,892			63,556			(16,664	)
Republic of Colombia		1.00	%	Barclays Bank PLC	12/20/21		USD	438		15,200			16,933			(1,733	)
Republic of Colombia		1.00	%	Barclays Bank PLC	12/20/21		USD	438		15,200			17,344			(2,144	)
Republic of Colombia		1.00	%	Citibank N.A.	12/20/21		USD	374		12,980			14,810			(1,830	)
Republic of Colombia		1.00	%	Morgan Stanley Capital Services LLC	12/20/21		USD	446		15,478			16,332			(854	)
Republic of South Africa		1.00	%	Bank of America N.A.	12/20/21		USD	725		52,098			55,729			(3,631	)
Republic of South Africa		1.00	%	Barclays Bank PLC	12/20/21		USD	4,350		312,589			332,448			(19,859	)
Republic of South Africa		1.00	%	BNP Paribas S.A.	12/20/21		USD	785		56,410			60,972			(4,562	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 33

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Issuer/Index	Pay Fixed Rate			Counterparty	Expiration Date	Notional Amount (000)			Value		Premiums Paid (Received)		Unrealized Appreciation (Depreciation)
Republic of South Africa		1.00	%	Citibank N.A.	12/20/21		USD	1,770		$127,191	$	136,055		$  (8,864	)
Republic of South Africa		1.00	%	Goldman Sachs International	12/20/21		USD	441		31,690		33,703		(2,013	)
Republic of South Africa		1.00	%	HSBC Bank PLC	12/20/21		USD	845		60,722		65,539		(4,817	)
Republic of South Africa		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	1,835		131,863		141,052		(9,189	)
Republic of the Philippines		1.00	%	Bank of America N.A.	12/20/21		USD	502		3,740		4,472		(732	)
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	3,829		28,944		15,446		13,498
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	1,089		8,230		4,921		3,309
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	618		4,669		2,906		1,763
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	386		2,918		1,533		1,385
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	309		2,334		1,226		1,108
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	154		1,167		613		554
Republic of the Philippines		1.00	%	BNP Paribas S.A.	12/20/21		USD	228		1,727		698		1,029
Republic of the Philippines		1.00	%	Citibank N.A.	12/20/21		USD	913		6,801		7,245		(444	)
Republic of the Philippines		1.00	%	Citibank N.A.	12/20/21		USD	447		3,382		1,996		1,386
Republic of the Philippines		1.00	%	Citibank N.A.	12/20/21		USD	219		1,655		562		1,093
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	856		6,473		2,196		4,277
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	410		3,100		1,854		1,246
Republic of the Philippines		1.00	%	UBS AG	12/20/21		USD	381		2,881		1,514		1,367
Standard Chartered PLC		1.00	%	BNP Paribas S.A.	12/20/21		EUR	2,868		28,180		27,549		631
Standard Chartered PLC		1.00	%	Citibank N.A.	12/20/21		EUR	4,819		47,345		40,020		7,325
United Mexican States		1.00	%	Barclays Bank PLC	12/20/21		USD	329		11,139		11,713		(574	)
United Mexican States		1.00	%	Barclays Bank PLC	12/20/21		USD	200		6,772		7,262		(490	)
United Mexican States		1.00	%	BNP Paribas S.A.	12/20/21		USD	903		30,575		30,195		380
United Mexican States		1.00	%	BNP Paribas S.A.	12/20/21		USD	903		30,574		31,260		(686	)
United Mexican States		1.00	%	Citibank N.A.	12/20/21		USD	452		15,304		16,186		(882	)
United Mexican States		1.00	%	Citibank N.A.	12/20/21		USD	451		15,271		15,726		(455	)
United Mexican States		1.00	%	Citibank N.A.	12/20/21		USD	451		15,271		16,151		(880	)
United Mexican States		1.00	%	Citibank N.A.	12/20/21		USD	451		15,271		16,151		(880	)
United Mexican States		1.00	%	Citibank N.A.	12/20/21		USD	197		6,670		7,338		(668	)
United Mexican States		1.00	%	Morgan Stanley Capital Services LLC	12/20/21		USD	471		15,947		15,914		33
United Mexican States		1.00	%	Morgan Stanley Capital Services LLC	12/20/21		USD	471		15,947		16,025		(78	)
CMBX.NA Series 8 AAA		0.50	%	Credit Suisse International	10/17/57		USD	840		20,378		37,375		(16,997	)
CMBX.NA Series 9 AAA		0.50	%	Goldman Sachs International	9/17/58		USD	2,530		92,785		82,395		10,390
CMBX.NA Series 6 BBB-		3.00	%	J.P. Morgan Securities LLC	5/11/63		USD	280		25,024		18,565		6,459
CMBX.NA Series 6 BBB-		3.00	%	J.P. Morgan Securities LLC	5/11/63		USD	280		25,024		18,565		6,459
CMBX.NA Series 6 BBB-		3.00	%	Morgan Stanley Capital Services LLC	5/11/63		USD	280		25,025		17,063		7,962
Total										$939,531	$	1,037,209		$(97,678)

OTC Credit Default Swaps — Sell Protection

Issuer/Index	Receive Fixed Rate			Counterparty	Expiration Date	Credit Rating1	Notional Amount (000)2			Value		Premiums Received		Unrealized Appreciation (Depreciation)
United Mexican States		1.00	%	Bank of America N.A.	6/20/20	BBB+		USD	1,491		$(14,237)		$  (11,298)		$  (2,939	)
United Mexican States		1.00	%	JPMorgan Chase Bank N.A.	9/20/20	BBB+		USD	1,491		(19,051)		(12,955)		(6,096	)
CMBX.NA Series 3 AM		0.50	%	Credit Suisse International	12/13/49	BBB+		USD	371		(6,650)		(33,461)		26,811
CMBX.NA Series 3 AM		0.50	%	Goldman Sachs International	12/13/49	BBB+		USD	928		(16,625)		(84,711)		68,086
CMBX.NA Series 3 AM		0.50	%	JPMorgan Chase Bank N.A.	12/13/49	BBB+		USD	4,638		(83,126)		(401,911)		318,785
CMBX.NA Series 4 AM		0.50	%	Deutsche Bank AG	2/17/51	BB+		USD	1,820		(49,919)		(248,191)		198,272

See Notes to Financial Statements.

34 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Issuer/Index	Receive Fixed Rate			Counterparty	Expiration Date	Credit Rating1		Notional Amount (000)2			Value		Premiums Received			Unrealized Appreciation (Depreciation)
CMBX.NA Series 8 A		2.00	%	Morgan Stanley Capital Services LLC	10/17/57		Not Rated		USD	755		$  (58,304)	$	(74,945	)		$  16,641
CMBX.NA Series 6 BBB-		3.00	%	Credit Suisse International	5/11/63		BBB-		USD	280		(25,021)		(23,884	)		(1,137	)
Total												$(272,933)	$	(891,356)			$618,423

¹  Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

OTC Interest Rate Swaps

Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
13.13%1	1-day BZDIOVER	Bank of America N.A.	7/03/17	BRL	6,677	$	(2,567	)		—			$   (2,567)
12.93%1	1-day BZDIOVER	Citibank N.A.	7/03/17	BRL	13,351		(1,131	)		—			(1,131	)
13.11%1	1-day BZDIOVER	Citibank N.A.	7/03/17	BRL	8,014		(2,726	)		—			(2,726	)
12.85%1	1-day BZDIOVER	JPMorgan Chase Bank N.A.	7/03/17	BRL	1,491		55			—			55
1.92%2	3-month KRW Certificate of Deposit	Deutsche Bank AG	11/10/17	KRW	2,278,440		16,630			$3,337			13,293
1.69%1	3-month KRW Certificate of Deposit	Deutsche Bank AG	11/10/17	KRW	2,278,440		(10,706	)		—			(10,706	)
4.30%1	28-day MXIBTIIE	Bank of America N.A.	12/07/17	MXN	4,907		3,923			5			3,918
4.55%1	28-day MXIBTIIE	Barclays Bank PLC	3/21/18	MXN	8,957		7,516			125			7,391
4.85%1	28-day MXIBTIIE	Bank of America N.A.	11/01/18	MXN	7,677		7,317			21			7,296
4.77%1	28-day MXIBTIIE	Citibank N.A.	12/05/18	MXN	3,324		3,641			5			3,636
4.70%1	28-day MXIBTIIE	Bank of America N.A.	12/06/18	MXN	3,324		3,901			5			3,896
4.76%1	28-day MXIBTIIE	Citibank N.A.	12/06/18	MXN	3,324		3,682			5			3,677
12.24%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	10,679		33,405			—			33,405
12.03%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	5,762		14,786			—			14,786
12.02%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	5,600		14,006			—			14,006
12.46%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	5,374		23,104			—			23,104
12.29%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	5,363		16,853			—			16,853
11.50%2	1-day BZDIOVER	Bank of America N.A.	1/02/19	BRL	2,358		(430	)		—			(430	)
12.52%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.	1/02/19	BRL	5,370		25,521			—			25,521
12.31%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.	1/02/19	BRL	2,914		10,523			—			10,523
11.68%2	1-day BZDIOVER	Bank of America N.A.	1/02/20	BRL	5,637		10,673			—			10,673
11.65%2	1-day BZDIOVER	Citibank N.A.	1/02/20	BRL	4,514		7,299			—			7,299
11.93%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.	1/02/20	BRL	4,456		19,119			—			19,119
11.88%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.	1/02/20	BRL	4,383		16,789			—			16,789
11.38%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.	1/02/20	BRL	818		(298	)		—			(298	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.	5/12/21	CNY	4,495		(635	)		(6	)		(629	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 35

Schedule of Investments (continued) BlackRock Core Bond Portfolio

Fixed Rate	Floating Rate	Counterparty	Expiration Date		Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21		CNY	4,490		$       (634	)		$     (6	)		$       (628)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21		CNY	3,599		(509	)		(20	)		(489	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21		CNY	2,245		(317	)		(3	)		(314	)
3.27%1	3-month LIBOR	Deutsche Bank AG		5/16/21		USD	8,580		(918,952	)		—			(918,952	)
5.73%1	28-day MXIBTIIE	Bank of America N.A.		1/03/25		MXN	7,400		14,450			98			14,352
6.43%2	28-day MXIBTIIE	Bank of America N.A.		6/06/25		MXN	6,011		2,305			(102	)		2,407
6.33%2	28-day MXIBTIIE	Citibank N.A.		6/09/25		MXN	3,006		122			(16	)		138
6.33%2	28-day MXIBTIIE	Citibank N.A.		7/17/25		MXN	7,228		(117	)		(34	)		(83	)
6.32%2	28-day MXIBTIIE	Morgan Stanley Capital Services LLC		7/17/25		MXN	14,506		(490	)		(67	)		(423	)
6.32%2	28-day MXIBTIIE	Goldman Sachs International		8/06/25		MXN	21,681		(546	)		(99	)		(447	)
6.31%1	28-day MXIBTIIE	Bank of America N.A.		8/11/25		MXN	7,575		576			34			542
6.31%1	28-day MXIBTIIE	Bank of America N.A.		8/11/25		MXN	7,575		576			34			542
6.31%1	28-day MXIBTIIE	Deutsche Bank AG		8/11/25		MXN	28,117		2,420			123			2,297
6.27%2	28-day MXIBTIIE	Bank of America N.A.		12/05/25		MXN	901		(266	)		(12	)		(254	)
7.05%2	1-day COOIS	Credit Suisse International		7/22/26		COP	623,577		9,410			—			9,410
7.00%2	1-day COOIS	Credit Suisse International		7/22/26		COP	623,577		8,652			—			8,652
Total									$(663,070	)		$3,427			$(666,497)

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

OTC Total Return — Volatility Swaps

Reference Entity	Volatility Strike Price1		Counterparty		Expiration Date		Notional Amount (000)			Value			Premiums Paid		Unrealized Depreciation
EUR Currency		9.20%		JPMorgan Chase Bank N.A.		10/13/16		EUR	23,220	$	(86,653	)		—		$  (86,653	)
EUR Currency		9.00%		BNP Paribas S.A.		12/13/16		EUR	23,919		(69,536	)		$5,986		(75,522	)
EUR Currency		9.15%		BNP Paribas S.A.		12/13/16		EUR	23,596		(83,192	)		—		(83,192	)
EUR Currency		9.08%		Goldman Sachs International		12/13/16		EUR	23,620		(75,972	)		—		(75,972	)
Total										$	(315,353	)		$5,986		$(321,339	)

¹  At expiration, the Fund receives the difference between the implied volatility and predefined volatility strike price multiplied by the notional amount.

    Transactions in Options Written for the Year Ended September 30, 2016

	Calls								Puts
				Notional (000)								Notional (000)
	Contracts			KRW		Premiums Received			Contracts			USD		Premiums Received
Outstanding options, beginning of year		—			2,278,440	$	1,253			—			—		—
Options written		2,454			—		1,025,900			8,007			565,848	$	2,341,602
Options expired		(432	)		(2,278,440)		(85,350	)		(2,918	)		—		(225,321	)
Options closed		(2,022	)		—		(941,803	)		(448	)		(565,848)		(1,922,578	)
Outstanding options, end of year		—			—		—			4,641			—	$	193,703

See Notes to Financial Statements.

36 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

    Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Futures contracts	Net unrealized appreciation1		—		—		—		—	$	444,479		—	$	444,479
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts		—		—		—	$	790,919		—		—		790,919
Options purchased	Investments at value — unaffiliated2		—		—		—		148,053		1,571,297		—		1,719,350
	Unrealized appreciation on OTC swaps;
Swaps — OTC	Swap premiums paid		—	$	2,226,255		—		—		283,358		—		2,509,613
Swaps — centrally cleared	Net unrealized appreciation1		—		—		—		—		39,182		—		39,182
Total			—	$	2,226,255		—	$	938,972	$	2,338,316		—	$	5,503,543
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1		—		—		—		—	$	1,509,588		—	$	1,509,588
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts		—		—		—	$	1,751,434		—		—		1,751,434
Options written	Options written at value		—		—		—		—		87,019		—		87,019
Swaps — OTC	Unrealized depreciation on OTC swaps; Swap premiums received		—	$	1,559,657		—		—		1,261,781		—		2,821,438
Swaps — centrally cleared	Net unrealized depreciation1		—		—		—		—		557,876		—		557,876
Total			—	$	1,559,657		—	$	1,751,434	$	3,416,264		—	$	6,727,355

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts			Equity Contracts	Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Futures contracts	—		—		—		—		$	(9,970,871	)		—	$	(9,970,871	)
Forward foreign currency exchange contracts	—		—		—	$	923,589			—			—		923,589
Options purchased1	—		—		—		(29,423	)		(2,580,230	)		—		(2,609,653	)
Options written	—		—		—		—			902,031			—		902,031
Swaps	—	$	(3,265,655	)	—		—			140,103			—		(3,125,552	)
Total	—	$	(3,265,655	)	—	$	894,166		$	(11,508,967	)		—	$	(13,880,456	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—		—		—		—		$	2,498,990			—	$	2,498,990
Forward foreign currency exchange contracts	—		—		—	$	(2,025,386	)		—			—		(2,025,386	)
Options purchased2	—		—		—		54,825			(440,326	)		—		(385,501	)
Options written	—		—		—		—			110,877			—		110,877
Swaps	—	$	1,148,587		—		—			824,530			—		1,973,117
Total	—	$	1,148,587		—	$	(1,970,561	)	$	2,994,071			—	$	2,172,097

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 37

Schedule of Investments (continued) BlackRock Core Bond Portfolio

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	154,728,254
Average notional value of contracts — short	$	578,339,871
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	144,050,942
Average amounts sold — in USD	$	85,182,507
Options:
Average value of option contracts purchased	$	948,813
Average value of option contracts written	$	255,724
Average notional value of swaption contracts purchased	$	28,733,250
Average notional value of swaption contracts written	$	56,584,800	1
Credit default swaps:
Average notional value — buy protection	$	86,437,592
Average notional value — sell protection	$	17,248,750
Interest rate swaps:
Average notional value — pays fixed rate	$	268,896,819
Average notional value — receives fixed rate	$	41,623,050

¹  Actual amounts for the period are shown due to limited derivative financial instructions as of each quarter end.

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	1,375,234		$	699,888
Forward foreign currency exchange contracts		790,919			1,751,434
Options		1,719,350	1		87,019
Swaps — centrally cleared.		88,142			—
Swaps — OTC2		2,509,613			2,821,438
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	6,483,258		$	5,359,779
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(2,798,010	)		(786,907	)
Total derivative assets and liabilities subject to an MNA	$	3,685,248		$	4,572,872

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

See Notes to Financial Statements.

38 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Core Bond Portfolio

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received2			Cash Collateral Received			Net Amount of Derivative Assets3
Bank of America N.A.		$   500,271		$   (129,263	)		$(371,008	)		—			—
Barclays Bank PLC		468,240		(215,277	)		—			—			$252,963
BNP Paribas S.A.		331,270		(331,270	)		—			—			—
Citibank N.A.		404,219		(339,233	)		—			—			64,986
Credit Suisse International		121,782		(121,782	)		—			—			—
Deutsche Bank AG		349,443		(349,443	)		—			—			—
Goldman Sachs International		328,572		(328,572	)		—			—			—
HSBC Bank PLC		106,079		(11,651	)		—			—			94,428
J.P. Morgan Securities LLC		50,048		—			—			—			50,048
JPMorgan Chase Bank N.A.		666,539		(666,539	)		—			—			—
Morgan Stanley & Co. International PLC		101,281		(101,281	)		—			—			—
Morgan Stanley Capital Services LLC		126,401		(103,480	)		—			—			22,921
Nomura International PLC		624		(624	)		—			—			—
Northern Trust Corp		1,085		—			—			—			1,085
Royal Bank of Scotland PLC		92,613		(92,613	)		—			—			—
Standard Chartered Bank		4,571		(4,571	)		—			—			—
UBS AG		27,322		(27,322	)		—			—			—
Westpac Banking Corp		4,888		—			—			—			4,888
Total		$3,685,248		$(2,822,921	)		$(371,008	)		—			$491,319
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged			Cash Collateral Pledged4			Net Amount of Derivative Liabilities5
Bank of America N.A.		$   129,263		$   (129,263	)		—			—			—
Barclays Bank PLC		215,277		(215,277	)		—			—			—
BNP Paribas S.A.		541,865		(331,270	)		—			—			$210,595
Citibank N.A.		339,233		(339,233	)		—			—			—
Credit Suisse International		218,697		(121,782	)		—			—			96,915
Deutsche Bank AG		1,277,042		(349,443	)		—			$(927,599	)		—
Goldman Sachs International		453,919		(328,572	)		—			—			125,347
HSBC Bank PLC		11,651		(11,651	)		—			—			—
JPMorgan Chase Bank N.A.		722,904		(666,539	)		—			—			56,365
Morgan Stanley & Co. International PLC		124,047		(101,281	)		—			—			22,766
Morgan Stanley Capital Services LLC		103,480		(103,480	)		—			—			—
Nomura International PLC		130,388		(624	)		—			—			129,764
Royal Bank of Canada		94		—			—			—			94
Royal Bank of Scotland PLC		225,659		(92,613	)		—			—			133,046
Standard Chartered Bank		32,702		(4,571	)		—			—			28,131
State Street Bank and Trust Co.		18,210		—			—			—			18,210
UBS AG		28,441		(27,322	)		—			—			1,119
Total		$4,572,872		$(2,822,921	)		—			$(927,599	)		$822,352

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

³  Net amount represents the net amount receivable from the counterparty in the event of default.

⁴  Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.

⁵  Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 39

Schedule of Investments (continued) BlackRock Core Bond Portfolio

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	182,688,650		$	56,161,814	$	238,850,464
Corporate Bonds1		—			1,069,595,326			—		1,069,595,326
Foreign Agency Obligations		—			5,909,598			—		5,909,598
Foreign Government Obligations		—			72,395,358			—		72,395,358
Non-Agency Mortgage-Backed Securities		—			151,281,354			5,462,284		156,743,638
Preferred Securities1	$	3,073,483			18,189,067			—		21,262,550
Project Loans		—			—			21,004		21,004
Taxable Municipal Bonds		—			35,120,950			—		35,120,950
U.S. Government Sponsored Agency Securities		—			1,427,098,985			—		1,427,098,985
U.S. Treasury Obligations		—			1,335,283,488			—		1,335,283,488
Short-Term Securities		2,666,751			110,699,603			—		113,366,354
Options Purchased:
Foreign currency exchange contracts		—			148,053			—		148,053
Interest rate contracts		1,334,634			236,663			—		1,571,297
Liabilities:
Investments:
TBA Sale Commitments		—			(599,479,298	)		—		(599,479,298	)
Total	$	7,074,868		$	3,809,167,797		$	61,645,102	$	3,877,887,767
Derivative Financial Instruments2
Assets:
Credit contracts		—		$	713,182			—	$	713,182
Foreign currency exchange contracts		—			790,919			—		790,919
Interest rate contracts	$	. 444,479			312,762			—		757,241
Liabilities:
Credit contracts		—			(192,437	)		—		(192,437	)
Foreign currency exchange contracts		—			(1,751,434	)		—		(1,751,434	)
Interest rate contracts		(1,596,607	)		(1,819,292	)		—		(3,415,899	)
Total	$	(1,152,128	)	$	(1,946,300	)		—	$	(3,098,428	)

¹  See above Schedule of Investments for values in each industry.

²  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

See Notes to Financial Statements.

40 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (concluded) BlackRock Core Bond Portfolio

The Fund may hold assets and/or liabilities in which the fair value, approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Foreign currency at value	$	2,235,805		—			—	$	2,235,805
Cash pledged:
Collateral — OTC derivatives		1,210,000		—			—		1,210,000
Futures contracts		4,321,520		—			—		4,321,520
Centrally cleared swaps		2,830,750		—			—		2,830,750
Liabilities:
Bank overdraft		—	$	(38,104	)		—		(38,104	)
Reverse repurchase agreements		—		(632,754,197	)		—		(632,754,197	)
Cash received:
Collateral — reverse repurchase agreements		—		(760,000	)		—		(760,000	)
Collateral — TBA commitments		—		(17,000	)		—		(17,000	)
Total	$	10,598,075	$	(633,569,301)			—	$	(622,971,226	)
During the year ended September 30, 2016, there were no transfers between Level 1 and Level 2. A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Non-Agency Mortgage-Backed Securities			Project Loans			Total
Assets:
Opening Balance, as of September 30, 2015	$	41,486,407		$	4,046,895		$	24,867		$	45,558,169
Transfers into Level 3		—			—			—			—
Transfers out of Level 3		(13,349,739	)		(554,742	)		—			(13,904,481	)
Accrued discounts/premiums		51,507			9,137			11			60,655
Net realized gain (loss)		37,316			102,797			11			140,124
Net change in unrealized appreciation (depreciation)1,2		200,565			11,208			(326	)		211,447
Purchases		38,151,962			4,797,636			—			42,949,598
Sales		(10,416,204	)		(2,950,647	)		(3,559	)		(13,370,410	)
Closing Balance, as of September 30, 2016	$	56,161,814		$	5,462,284		$	21,004		$	61,645,102
Net change in unrealized appreciation (depreciation) on investments still held at September 30, 20162	$	253,863		$	98,258		$	(326	)	$	351,795

¹  Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

²  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at September 30, 2016, is generally due to investments no longer held or categorized as Level 3 at year end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 41

Consolidated Schedule of Investments September 30, 2016	BlackRock High Yield Bond Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities		Par   (000)		Value
ACAS CLO Ltd.:
Series 2014-1A, Class C, 3.58%, 7/18/26 (a)(b)	USD		750	$	745,908
Series 2015-1A, Class D, 4.33%, 4/18/27 (a)(b)			2,750		2,651,661
Adagio V CLO DAC, Series V-X, Class E, 6.70%, 10/15/29	EUR		820		898,518
AIMCO CLO, Series 2015-AA, Class E, 8.50%, 1/15/28 (a)(b)	USD		1,000		985,297
ALM V Ltd., Series 2012-5A, Class DR, 6.68%, 10/18/27 (a)(b)			8,500		8,026,689
ALM VI Ltd.:
Series 2012-6A, Class CR, 4.43%, 7/15/26 (a)(b)			4,750		4,734,800
Series 2012-6A, Class DR, 6.33%, 7/15/26 (a)(b)			6,700		6,147,250
ALM VII Ltd.:
Series 2012-7A, Class BR, 3.33%, 10/15/28 (a)(b)			7,000		7,000,000
Series 2012-7A, Class CR, 4.68%, 10/15/28 (a)(b)			5,500		5,439,280
ALM VII R Ltd., Series 2013-7RA, Class D, 5.71%, 4/24/24 (a)(b)			5,175		4,850,441
ALM VII R-2 Ltd., Series 2013-7R2A, Class C, 4.16%, 4/24/24 (a)(b)			2,750		2,675,471
ALM VIII Ltd.:
Series 2013-8A, Class C, 3.90%, 1/20/26 (a)(b)			2,800		2,800,015
Series 2013-8A, Class CR, 4.80%, 10/15/28 (a)(b)			2,750		2,721,400
ALM X Ltd., Series 2013-10A, Class B, 3.28%, 1/15/25 (a)(b)			500		500,075
ALM XI Ltd., Series 2014-11A, Class C, 4.18%, 10/17/26 (a)(b)			1,250		1,215,625
ALM XII Ltd.:
Series 2015-12A, Class C1, 4.43%, 4/16/27 (a)(b)			3,500		3,358,600
Series 2015-12A, Class D, 6.18%, 4/16/27 (a)(b)			1,000		909,577
ALM XIV Ltd., Series 2014-14A, Class C, 4.19%, 7/28/26 (a)(b)			2,650		2,584,164
ALM XVI Ltd./ALM XVI LLC:
Series 2015-16A, Class C1, 4.18%, 7/15/27 (a)(b)			6,000		5,778,915
Series 2015-16A, Class D, 6.03%, 7/15/27 (a)(b)			3,750		3,276,374
ALM XVIII Ltd., Series 2016-18A, Class D, 8.26%, 7/15/27 (a)(b)			1,000		950,000
AMMC CLO 15 Ltd.:
Series 2014-15A, Class C1, 4.29%, 12/09/26 (a)(b)			1,000		1,002,500
Series 2014-15A, Class D, 5.03%, 12/09/26 (a)(b)			2,500		2,456,250
AMMC CLO 16 Ltd., Series 2015-16A, Class C, 3.77%, 4/14/27 (a)(b)			3,750		3,760,632
AMMC CLO 18 Ltd., Series 2016-18A, Class D, 5.67%, 5/26/28 (a)(b)			1,000		1,000,000
AMMC CLO IX Ltd.:
Series 2011-9A, Class DR, 6.33%, 1/15/22 (a)(b)			2,000		1,998,469
Series 2011-9A, Class ER, 8.33%, 1/15/22 (a)(b)			3,500		3,507,534
Anchorage Capital CLO 6 Ltd.:
Series 2015-6A, Class C, 3.53%, 4/15/27 (a)(b)			2,300		2,305,980
Series 2015-6A, Class D, 4.08%, 4/15/27 (a)(b)			3,250		3,116,469
Series 2015-6A, Class E1, 5.58%, 4/15/27 (a)(b)			3,250		2,748,824

Asset-Backed Securities		Par   (000)		Value
Anchorage Capital CLO 7 Ltd.:
Series 2015-7A, Class C, 3.73%, 10/15/27 (a)(b)	USD		3,625	$	3,625,000
Series 2015-7A, Class D, 4.33%, 10/15/27 (a)(b)			3,000		2,916,686
Anchorage Capital CLO 8 Ltd., Series 2016-8A, Class D, 4.92%, 7/28/28 (a)(b)			1,500		1,503,750
Anchorage Capital CLO Ltd.:
Series 2012-1A, Class DR, 8.12%, 1/13/27 (a)(b)			1,000		962,900
Series 2014-3A, Class C, 4.24%, 4/28/26 (a)(b)			1,000		977,863
Apidos CLO IX, Series 2012-9AR, Class ER, 6.78%, 7/15/23 (a)(b)			1,500		1,493,573
Apidos CLO XII, Series 2013-12A, Class D, 3.73%, 4/15/25 (a)(b)			1,000		948,355
Apidos CLO XVI, Series 2013-16A, Class C, 3.94%, 1/19/25 (a)(b)			3,500		3,348,906
Apidos CLO XVIII:
Series 2014-18A, Class C, 4.35%, 7/22/26 (a)(b)			1,850		1,823,945
Series 2014-18A, Class D, 5.90%, 7/22/26 (a)(b)			2,500		2,265,811
Apidos CLO XXI, Series 2015-21A, Class C, 4.23%, 7/18/27 (a)(b)			1,000		925,674
Arbour CLO IV DAC, Series 4X, Class E, 0.00%, 1/15/30 (b)	EUR		917		967,177
ARES CLO Ltd.:
Series 2012-2A, Class CR, 3.37%, 10/12/23 (a)(b)	USD		1,750		1,746,167
Series 2012-2A, Class DR, 4.37%, 10/12/23 (a)(b)			1,500		1,462,395
Series 2015-4A, Class C, 4.93%, 10/15/26 (a)(b)			2,850		2,821,901
Series 2015-4A, Class D2, 7.70%, 10/15/26 (a)(b)			1,000		957,749
ARES XXII CLO Ltd., Series 2007-22A, Class C, 3.33%, 8/15/19 (a)(b)			750		750,750
ARES XXIII CLO Ltd., Series 2012-1A, Class E, 6.29%, 4/19/23 (a)(b)			1,200		1,173,693
ARES XXV CLO Ltd., Series 2012-3A, Class CR, 3.05%, 1/17/24 (a)(b)			4,000		4,000,000
ARES XXXII CLO Ltd., Series 2014-32A, Class B, 4.07%, 11/15/25 (a)(b)			2,000		2,040,782
ARES XXXIII CLO Ltd.:
Series 2015-1A, Class C, 5.14%, 12/05/25 (a)(b)			2,750		2,737,232
Series 2015-1A, Class D, 7.07%, 12/05/25 (a)(b)			1,000		934,787
ARES XXXIX CLO Ltd., Series 2016-39A, Class E, 7.94%, 7/18/28 (a)(b)			2,500		2,321,750
ARES XXXVII CLO Ltd., Series 2015-4A, Class D1, 7.48%, 10/15/26 (a)(b)			3,000		2,880,755
Atlas Senior Loan Fund II Ltd., Series 2012-2A, Class DR, 4.73%, 1/30/24 (a)(b)			2,000		1,988,458
Atlas Senior Loan Fund IV Ltd., Series 2013-2A, Class A3L, 3.52%, 2/17/26 (a)(b)			1,900		1,872,112
Atlas Senior Loan Fund Ltd.:
Series 2012-1A, Class A3LR, 3.26%, 8/15/24 (a)(b)			1,250		1,250,000
Series 2012-1A, Class B1LR, 4.66%, 8/15/24 (a)(b)			1,500		1,500,000
Series 2012-1A, Class B2L, 7.07%, 8/15/24 (a)(b)			3,250		3,250,034
Atlas Senior Loan Fund V Ltd., Series 2014-1A, Class C, 3.63%, 7/16/26 (a)(b)			750		750,016
Atlas Senior Loan Fund VI Ltd., Series 2014-6A, Class D, 4.38%, 10/15/26 (a)(b)			1,000		966,228

See Notes to Financial Statements.

42 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Atrium CDO Corp.:
Series 8A, Class D, 5.21%, 10/23/22 (a)(b)	USD		1,450	$	1,450,056
Series 8I, Class SUB, 0.00%, 10/23/22 (c)			11,500		7,608,874
Atrium IX, Series 9A, Class D, 4.33%, 2/28/24 (a)(b)			1,000		982,500
Atrium X, Series 10A, Class D, 4.18%, 7/16/25 (a)(b)			2,000		1,940,984
Atrium XII, Series -12A, Class D, 4.60%, 10/22/26 (a)(b)			4,500		4,500,000
Babson CLO Ltd.:
Series 2015-2A, Class E, 6.25%, 7/20/27 (a)(b)			1,250		1,099,256
Series 2016-1A, Class E, 7.26%, 4/23/27 (a)(b)			1,100		1,039,500
Ballyrock CLO Ltd., Series 2016-1A, Class C, 3.52%, 10/15/28 (a)(b)			2,750		2,736,250
Battalion CLO VIII Ltd.:
Series 2015-8A, Class C, 4.58%, 4/18/27 (a)(b)			1,250		1,213,875
Series 2015-8A, Class D, 6.13%, 4/18/27 (a)(b)			1,650		1,394,811
Benefit Street Partners CLO IV Ltd., Series 2014-IVA, Class C, 4.20%, 7/20/26 (a)(b)			2,750		2,612,775
Benefit Street Partners CLO VI Ltd.:
Series 2015-VIA, Class C, 4.38%, 4/18/27 (a)(b)			3,250		3,153,081
Series 2015-VIA, Class D, 6.23%, 4/18/27 (a)(b)			2,500		2,300,000
Benefit Street Partners CLO VIII Ltd., Series 2015-8A, Class C, 4.60%, 1/20/28 (a)(b)			3,500		3,426,850
Betony CLO Ltd., Series 2015-1A, Class D, 4.28%, 4/15/27 (a)(b)			3,000		2,780,554
Birchwood Park CLO Ltd., Series 2014-1A, Class D1, 4.13%, 7/15/26 (a)(b)			1,000		952,245
BlueMountain CLO Ltd.:
Series 2012-1A, Class D, 5.05%, 7/20/23 (a)(b)			3,850		3,904,492
Series 2013-1A, Class B, 3.47%, 5/15/25 (a)(b)			1,500		1,491,926
Series 2013-4A, Class D, 4.38%, 4/15/25 (a)(b)			1,000		990,229
Series 2014-4A, Class E, 6.13%, 11/30/26 (a)(b)			3,125		2,883,075
Series 2015-1A, Class B, 3.82%, 4/13/27 (a)(b)			1,500		1,503,750
Series 2015-1A, Class C, 4.42%, 4/13/27 (a)(b)			1,250		1,224,166
Series 2015-1A, Class D, 6.12%, 4/13/27 (a)(b)			1,500		1,434,893
Series 2015-2A, Class E, 6.03%, 7/18/27 (a)(b)			1,500		1,298,791
Series 2015-4A, Class D2, 4.75%, 1/20/27 (a)(b)			1,500		1,475,573
Series 2015-4A, Class E, 7.20%, 1/20/27 (a)(b)			1,250		1,197,869
BlueMountain EUR CLO, Series 2016-1X, Class E, 6.60%, 4/25/30 (b)	EUR		1,650		1,866,141
Cadogan Square CLO VII BV, Series 7X, Class E, 6.00%, 5/25/29			2,800		3,099,987
Canyon Capital CLO Ltd.:
Series 2016-1A, Class E, 8.12%, 4/15/28 (a)(b)	USD		1,000		977,200
Series 2016-2A, Class E, 7.54%, 10/15/28 (a)(b)			1,000		942,690
Carlyle Global Market Strategies CLO Ltd.:
Series 2012-2A, Class C1R, 3.60%, 7/20/23 (a)(b)			500		501,598

Asset-Backed Securities		Par   (000)		Value
Series 2012-2AR, Class ER, 6.80%, 7/20/23 (a)(b)	USD		260	$	259,968
Series 2012-3A, Class A1R, 2.08%, 10/14/28 (a)(b)			6,500		6,500,000
Series 2012-3A, Class BR, 4.17%, 10/14/28 (a)(b)			3,000		3,000,000
Series 2013-1A, Class C, 4.82%, 2/14/25 (a)(b)			2,000		1,999,881
Series 2013-2A, Class D, 4.43%, 4/18/25 (a)(b)			2,250		2,239,246
Series 2013-3A, Class B, 3.33%, 7/15/25 (a)(b)			750		748,349
Series 2013-3A, Class C, 4.08%, 7/15/25 (a)(b)			1,000		969,744
Series 2014-4A, Class C, 3.83%, 10/15/26 (a)(b)			1,245		1,245,811
Series 2014-5A, Class C, 4.83%, 10/16/25 (a)(b)			2,750		2,750,985
Series 2015-1A, Class C, 3.85%, 4/20/27 (a)(b)			1,250		1,260,726
Series 2015-1A, Class D, 4.45%, 4/20/27 (a)(b)			3,500		3,427,703
Series 2015-1A, Class E1, 6.00%, 4/20/27 (a)(b)			2,750		2,469,833
Series 2015-2A, Class C, 4.48%, 4/27/27 (a)(b)			1,250		1,224,371
Series 2015-2A, Class D, 6.03%, 4/27/27 (a)(b)			1,500		1,328,490
Series 2015-4A, Class SBB1, 9.20%, 10/20/27 (a)(b)			4,004		3,895,737
Series 2016-1A, Class C, 5.53%, 4/20/27 (a)(b)			2,000		2,013,600
Series 2016-1A, Class D, 8.23%, 4/20/27 (a)(b)			2,000		2,008,400
Series 2016-3A, Class C, 4.79%, 10/20/29 (a)(b)			1,000		988,600
Carlyle Global Market Strategies Euro CLO:
Series 2015-2X, Class D, 5.50%, 9/21/29	EUR		1,000		1,113,484
Series 2015-3X, Class D, 5.55%, 1/15/29 (b)			2,200		2,390,809
Cedar Funding III CLO Ltd., Series 2014-3A, Class D, 4.36%, 5/20/26 (a)(b)	USD		3,695		3,622,697
Cedar Funding V CLO Ltd., Series 2016-5A, Class A1, 2.24%, 7/17/28 (a)(b)			3,000		3,003,750
CFIP CLO Ltd., Series 2013-1A, Class D, 4.45%, 4/20/24 (a)(b)			2,000		1,965,877
CIFC Funding Ltd.:
Series 2012-1A, Class B1R, 4.97%, 8/14/24 (a)(b)			2,250		2,250,237
Series 2014-2A, Class A3L, 3.68%, 5/24/26 (a)(b)			2,545		2,524,916
Series 2014-3A, Class C1, 3.50%, 7/22/26 (a)(b)			3,000		2,997,407
Series 2014-3A, Class D, 4.10%, 7/22/26 (a)(b)			2,763		2,618,277
Series 2014-5A, Class A1, 2.26%, 1/17/27 (a)(b)			4,750		4,752,825
Series 2015-1A, Class A1, 2.22%, 1/22/27 (a)(b)			1,000		1,000,702
Series 2015-1A, Class D, 4.70%, 1/22/27 (a)(b)			2,300		2,212,474
Series 2015-2A, Class D, 4.33%, 4/15/27 (a)(b)			1,750		1,652,501
Series 2015-4A, Class C1, 4.50%, 10/20/27 (a)(b)			1,750		1,677,112
Cole Park CLO Ltd., Series 2015-1A, Class E, 6.80%, 10/20/28 (a)(b)			1,000		930,000
Dryden 34 Senior Loan Fund:
Series 2014-34A, Class C, 3.48%, 10/15/26 (a)(b)			1,600		1,591,027

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 43

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Series 2014-34A, Class D, 4.28%, 10/15/26 (a)(b)	USD		1,150	$	1,106,875
Dryden 36 Senior Loan Fund:
Series 2014-36A, Class D, 4.54%, 11/09/25 (a)(b)			1,000		968,283
Series 2014-36A, Class E, 5.99%, 11/09/25 (a)(b)			1,000		891,067
Dryden 43 Senior Loan Fund, Series 2016-43A, Class E, 7.90%, 7/20/29 (a)(b)			1,000		995,000
Euro-Galaxy IV CLO BV, Series 2015-4X, Class E, 4.50%, 7/30/28 (b)	EUR		2,500		2,491,696
Euro-Galaxy V CLO BV, Series 2016-5X, Class E, 0.00%, 11/10/30 (b)			700		770,150
Flatiron CLO Ltd.:
Series 2012-1A, Class C, 5.21%, 10/25/24 (a)(b)			1,650		1,649,975
Series 12-1AR, Class CR, 5.35%, 10/25/21 (a)(b)	USD		1,650		1,650,000
Fraser Sullivan CLO VII Ltd.:
Series 2012-7A, Class CR, 4.15%, 4/20/23 (a)(b)			3,800		3,805,762
Series 2012-7A, Class DR, 5.95%, 4/20/23 (a)(b)			1,000		980,572
Series 2012-7A, Class ER, 4.95%, 4/20/23 (a)(b)			2,570		2,104,897
Series 2012-7A, Class SUBR, 0.00%, 4/20/23 (a)(c)			3,580		1,102,687
Galaxy XIV CLO Ltd., Series 2012-14A, Class D, 5.22%, 11/15/24 (a)(b)			2,150		2,149,978
GoldenTree Loan Opportunities VI Ltd., Series 2012-6A, Class E, 6.18%, 4/17/22 (a)(b)			600		599,098
GoldenTree Loan Opportunities VII Ltd., Series 2013-7A, Class D, 4.01%, 4/25/25 (a)(b)			1,500		1,448,107
GoldenTree Loan Opportunities VIII Ltd., Series 2014-8A, Class D, 4.31%, 4/19/26 (a)(b)			1,500		1,476,300
GoldenTree Loan Opportunities XI Ltd., Series 2015-11A, Class D, 4.38%, 4/18/27 (a)(b)			3,750		3,662,447
Gramercy Park CLO Ltd., Series 2012-1AR, Class DR, 6.18%, 7/17/23 (a)(b)			2,080		2,055,623
Harvest CLO XVI DAC, Series 16X, Class E, 6.40%, 10/15/29	EUR		1,125		1,233,858
Highbridge Loan Management Ltd.:
Series 2015-6A, Class D, 4.43%, 5/05/27 (a)(b)	USD		2,500		2,345,675
Series 2015-6A, Class E1, 6.23%, 5/05/27 (a)(b)			2,000		1,789,858
Series 2016-8A, Class D, 5.55%, 4/20/27 (a)(b)			1,500		1,445,084
Series 2016-8A, Class E, 8.60%, 4/20/27 (a)(b)			1,000		998,321
HPS Loan Management Ltd., Series 9A-2016, Class D2, 7.08%, 7/19/27 (a)(b)			1,000		916,000
Jamestown CLO IV Ltd., Series 2014-4A, Class SUB, 0.00%, 7/15/26 (a)(c)			2,000		732,490
LCM IX LP:
Series 9A, Class A, 1.87%, 7/14/22 (a)(b)			251		251,209
Series 9A, Class E, 4.87%, 7/14/22 (a)(b)			1,125		1,123,522
LCM X LP, Series 10AR, Class ER, 6.18%, 4/15/22 (a)(b)			1,550		1,517,392
LCM XI LP, Series 11A, Class E, 5.84%, 4/19/22 (a)(b)			1,000		958,973
LCM XIII LP, Series 13A, Class D, 4.49%, 1/19/23 (a)(b)			1,250		1,244,073

Asset-Backed Securities		Par   (000)		Value
LCM XV LP, Series 15A, Class C, 3.93%, 8/25/24 (a)(b)	USD		1,000	$	1,000,010
LCM XVIII LP:
Series 18A, Class D, 4.50%, 4/20/27 (a)(b)			3,250		3,185,493
Series 18A, Class E, 6.05%, 4/20/27 (a)(b)			3,500		3,130,304
Series 18A, Class INC, 0.00%, 4/20/27 (a)(b)			2,565		1,709,633
Madison Park Funding Ltd., Series 2012-9A, Class DR, 4.67%, 8/15/22 (a)(b)			6,000		5,964,539
Madison Park Funding VIII Ltd., Series 2012-8AR, Class DR, 4.55%, 4/22/22 (a)(b)			3,500		3,499,258
Madison Park Funding XIII Ltd., Series 2014-13A, Class D, 4.04%, 1/19/25 (a)(b)			1,500		1,457,085
Madison Park Funding XIV Ltd., Series 2014-14A, Class D, 4.30%, 7/20/26 (a)(b)			4,221		4,145,788
Madison Park Funding XIX Ltd., Series 2015-19A, Class D, 7.15%, 1/22/28 (a)(b)			1,000		955,049
Madison Park Funding XV Ltd., Series 2014-15A, Class B1, 3.98%, 1/27/26 (a)(b)			1,000		1,001,016
Madison Park Funding XVI Ltd.:
Series 2015-16A, Class B, 3.70%, 4/20/26 (a)(b)			1,500		1,505,850
Series 2015-16A, Class C, 4.40%, 4/20/26 (a)(b)			1,500		1,477,298
Mill Creek CLO Ltd., Series 2016-1A, Class E, 8.37%, 4/20/28 (a)(b)			1,000		1,000,000
Neuberger Berman CLO XIII Ltd.:
Series 2012-13A, Class C, 3.56%, 1/23/24 (a)(b)			2,000		2,016,400
Series 2012-13A, Class D, 5.21%, 1/23/24 (a)(b)			1,000		999,986
Neuberger Berman CLO XVII Ltd., Series 2014-17A, Class D, 4.32%, 8/04/25 (a)(b)			1,500		1,438,500
Neuberger Berman CLO XVIII Ltd.:
Series 2014-18A, Class B, 3.97%, 11/14/25 (a)(b)			1,000		1,000,008
Series 2014-18A, Class C, 4.57%, 11/14/25 (a)(b)			3,250		3,146,748
Neuberger Berman CLO XX Ltd.:
Series 2015-20A, Class D, 4.62%, 1/15/28 (a)(b)			1,000		928,159
Series 2015-20A, Class E, 7.12%, 1/15/28 (a)(b)			3,875		3,536,912
Neuberger Berman CLO XXII Ltd.:
Series 2016-22A, Class D, 4.67%, 10/17/27 (a)(b)			3,750		3,640,500
Series 2016-22A, Class E, 7.67%, 10/17/27 (a)(b)			2,000		1,881,800
Oak Hill Credit Partners XII Ltd., Series 2015-12A, Class D1, 4.64%, 1/23/27 (a)(b)			1,950		1,930,500
OCP CLO Ltd.:
Series 2013-3A, Class B, 3.43%, 1/17/25 (a)(b)			2,500		2,499,971
Series 2014-7A, Class A1A, 2.30%, 10/20/26 (a)(b)			1,000		999,957
Series 2016-12A, Class C, 5.00%, 10/18/28 (a)(b)			2,000		1,912,200
Octagon Investment Partners 26 Ltd.:
Series 2016-1A, Class D, 5.63%, 4/15/27 (a)(b)			1,000		1,001,396

See Notes to Financial Statements.

44 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Series 2016-1A, Class E, 8.53%, 4/15/27 (a)(b)	USD		2,500	$	2,499,729
Octagon Investment Partners 27 Ltd.,
Series 2016-1A, Class E, 7.76%, 7/15/27 (a)(b)			1,500		1,492,800
Octagon Investment Partners XII Ltd.:
Series 2012-1AR, Class ER, 6.28%, 5/05/23 (a)(b)			1,150		1,125,111
Series 2012-1X, Class DR, 4.58%, 5/05/23			1,000		999,921
Octagon Investment Partners XVII Ltd.,
Series 2013-1A, Class A2R, 2.31%, 10/25/25 (a)(b)			3,500		3,500,000
Octagon Investment Partners XXI Ltd.,
Series 2014-1A, Class C, 4.47%, 11/14/26 (a)(b)			2,250		2,173,702
Octagon Investment Partners XXII Ltd.:
Series 2014-1A, Class C1, 3.95%, 11/25/25 (a)(b)			1,750		1,750,373
Series 2014-1A, Class D1, 4.60%, 11/25/25 (a)(b)			1,750		1,709,049
OHA Credit Partners XI Ltd., Series 2015-11A, Class E, 7.40%, 10/20/28 (a)(b)			2,250		2,128,966
OneMain Financial Issuance Trust,
Series 2015-2A, Class C, 4.32%, 7/18/25 (a)			1,500		1,494,257
OZLM Funding III Ltd., Series 2013-3A, Class C, 4.60%, 1/22/25 (a)(b)			2,250		2,230,198
OZLM Funding Ltd.:
Series 2012-1A, Class DR, 7.40%, 7/22/27 (a)(b)			3,500		3,289,905
Series 2012-2A, Class C, 5.11%, 10/30/23 (a)(b)			1,000		1,000,000
OZLM IX Ltd., Series 2014-9A, Class C, 4.30%, 1/20/27 (a)(b)			2,000		1,936,086
OZLM VII Ltd.:
Series 2014-7A, Class C, 4.28%, 7/17/26 (a)(b)			5,600		5,376,334
Series 2014-7A, Class D, 5.68%, 7/17/26 (a)(b)			2,900		2,632,200
OZLM XI Ltd.:
Series 2015-11A, Class B, 3.76%, 1/30/27 (a)(b)			3,000		2,999,768
Series 2015-11A, Class C1, 4.81%, 1/30/27 (a)(b)			5,750		5,552,292
OZLM XII Ltd.:
Series 2015-12A, Class B, 3.66%, 4/30/27 (a)(b)			1,500		1,499,905
Series 2015-12A, Class C, 4.46%, 4/30/27 (a)(b)			4,750		4,410,736
Series 2015-12A, Class D, 6.16%, 4/30/27 (a)(b)			2,000		1,741,127
OZLM XIII Ltd.:
Series 2015-13A, Class C, 5.26%, 7/30/27 (a)(b)			1,500		1,499,940
Series 2015-13A, Class D, 6.21%, 7/30/27 (a)(b)			3,250		2,820,447
OZLM XIV Ltd.:
Series 2015-14A, Class C, 5.03%, 1/15/29 (a)(b)			3,000		2,968,329
Series 2015-14A, Class D, 7.03%, 1/15/29 (a)(b)			1,500		1,391,215
Palmer Square CLO Ltd., Series 2014-1A, Class C, 4.53%, 10/17/22 (a)(b)			1,825		1,797,845
Race Point IX CLO Ltd., Series 2015-9A, Class A1, 2.19%, 4/15/27 (a)(b)			1,000		1,000,327
Regatta Funding LP:
Series 2013-2A, Class C, 4.68%, 1/15/25 (a)(b)			2,750		2,599,592

Asset-Backed Securities		Par   (000)		Value
Series 2013-2A, Class D, 6.18%, 1/15/25 (a)(b)	USD		4,000	$	3,454,188
Regatta IV Funding Ltd., Series 2014-1A, Class C, 3.66%, 7/25/26 (a)(b)			2,000		1,999,872
Seneca Park CLO Ltd., Series 2014-1A, Class SUB, 0.00%, 7/17/26 (a)(c)			2,500		1,314,725
Sound Point CLO III Ltd., Series 2013-2A, Class D, 4.58%, 7/15/25 (a)(b)			3,250		3,217,191
Sound Point CLO IV Ltd., Series 2013-3A, Class D, 4.20%, 1/21/26 (a)(b)			3,750		3,622,153
Sound Point CLO IX Ltd.:
Series 2015-2A, Class D, 4.25%, 7/20/27 (a)(b)			2,000		1,897,153
Series 2015-2A, Class E, 6.20%, 7/20/27 (a)(b)			2,000		1,790,000
Sound Point CLO XII Ltd.:
Series 2016-2A, Class D, 4.73%, 10/20/28 (a)(b)			1,000		1,000,000
Series 2016-2A, Class E, 6.88%, 10/20/28 (a)(b)			1,000		924,474
Steele Creek CLO Ltd., Series 2014-1A, Class C, 4.01%, 8/21/26 (a)(b)			3,000		3,000,000
Stewart Park CLO Ltd., Series 2015-1A, Class E, 6.13%, 4/15/26 (a)(b)			5,000		4,467,319
Symphony CLO X Ltd.:
Series 2012-10AR, Class DR, 4.56%, 7/23/23 (a)(b)			3,625		3,603,845
Series 2012-10AR, Class ER, 6.56%, 7/23/23 (a)(b)			6,520		6,455,470
Symphony CLO XI Ltd., Series 2013-11A, Class B1, 2.88%, 1/17/25 (a)(b)			1,000		1,007,100
Symphony CLO XVI Ltd., Series 2015-16A, Class E, 6.13%, 7/15/28 (a)(b)			1,000		886,928
Symphony CLO XVII Ltd., Series 2016-17A, Class D, 5.50%, 4/15/28 (a)(b)			750		756,750
THL Credit Wind River CLO Ltd., Series 2012-1A, Class D, 5.68%, 1/15/24 (a)(b)			1,000		1,000,700
TICP CLO I Ltd.:
Series 2015-1A, Class C, 3.70%, 7/20/27 (a)(b)			1,500		1,482,144
Series 2015-1A, Class D, 4.25%, 7/20/27 (a)(b)			1,500		1,391,553
Treman Park CLO Ltd., Series 2015-1A, Class D, 4.56%, 4/20/27 (a)(b)			1,800		1,774,179
Venture XI CLO Ltd., Series 2012-11AR, Class DR, 4.77%, 11/14/22 (a)(b)			2,150		2,136,077
Venture XII CLO Ltd., Series 2012-12A, Class D, 4.48%, 2/28/24 (a)(b)			1,500		1,476,315
Venture XIII CLO Ltd., Series 2013-13A, Class D, 4.40%, 6/10/25 (a)(b)			2,000		1,962,543
Venture XIX CLO Ltd., Series 2014-19A, Class C, 3.98%, 1/15/26 (a)(b)			1,700		1,700,000
Venture XVII CLO Ltd., Series 2014-17A, Class B1, 2.78%, 7/15/26 (a)(b)			1,000		999,975
Venture XX CLO Ltd.:
Series 2015-20A, Class C, 3.83%, 4/15/27 (a)(b)			2,250		2,250,453
Series 2015-20A, Class D, 4.53%, 4/15/27 (a)(b)			1,670		1,612,668
Venture XXI CLO Ltd., Series 2015-21A, Class D, 4.28%, 7/15/27 (a)(b)			2,780		2,554,924
Vibrant CLO II Ltd., Series 2013-2A, Class C, 4.31%, 7/24/24 (a)(b)			1,000		950,257
Voya CLO Ltd.:
Series 2012-2RA, Class DR, 4.63%, 10/15/22 (a)(b)			2,250		2,249,910

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 45

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Series 2012-2RA, Class ER, 6.68%, 10/15/22 (a)(b)	USD		3,125	$	3,072,656
Series 2013-2A, Class C, 4.21%, 4/25/25 (a)(b)			1,000		975,396
Series 2014-4A, Class C, 4.67%, 10/14/26 (a)(b)			3,000		2,949,371
Series 2015-1A, Class D, 6.28%, 4/18/27 (a)(b)			2,500		2,254,006
Series 2016-3A, Class C, 4.71%, 10/18/27 (a)(b)			2,000		1,956,202
Series 2016-3A, Class D, 7.71%, 10/18/27 (a)(b)			1,000		947,680
Westcott Park CLO Ltd.:
Series 2016-1A, Class D, 5.05%, 7/20/28 (a)(b)			1,250		1,237,500
Series 2016-1A, Class E, 7.90%, 7/20/28 (a)(b)			1,000		952,500
York CLO 1 Ltd., Series 2014-1A, Class D, 4.80%, 1/22/27 (a)(b)			2,500		2,465,767
York CLO 2 Ltd., Series 2015-1A, Class E, 6.95%, 10/22/27 (a)(b)			1,000		917,533
Ziggurat CLO I Ltd., Series 2014-1A, Class C, 3.78%, 10/17/26 (a)(b)			3,000		3,017,400
Total Asset-Backed Securities — 2.8%					536,665,060
Common Stocks		Shares
Auto Components — 0.0%
Lear Corp.			1,538		186,436
Banks — 0.3%
Bank of America Corp.			831,395		13,011,332
Citigroup, Inc.			271,904		12,842,026
JPMorgan Chase & Co.			189,473		12,617,007
Wells Fargo & Co.			260,996		11,556,903
					50,027,268
Capital Markets — 0.9%
American Capital Ltd. (d)			9,132,000		154,422,120
Freedom Pay, Inc. (d)			314,534		3
Goldman Sachs Group, Inc.			73,562		11,863,344
Morgan Stanley			420,774		13,490,014
					179,775,481
Chemicals — 0.0%
Advanced Emissions Solutions, Inc. (d)			310,220		2,332,854
Consumer Finance — 1.1%
Ally Financial, Inc.			4,600,276		89,567,366
Ally Financial, Inc. (d)			4,053,560		78,922,813
Ally Financial, Inc. (d)			1,720,096		33,490,269
					201,980,448
Diversified Financial Services — 0.1%
Adelphia Recovery Trust, Series ACC-1 INT			1,108,793		1,109
Adelphia Recovery Trust, Series Arahova INT			242,876		2,429
Adelphia Recovery Trust, Series Frontiervision INT			131,748		527
Concrete Investment I SCA (d)			165,000		21,501,028
Concrete Investment I SCA — Stapled (d)(e)			165,000		2
Concrete Investment II SCA — Stapled (d)(e)			34,464		—
					21,505,095
Equity Real Estate Investment Trusts (REITs) — 0.0%
Ovation Acquisition I, LLC (Acquired 12/28/15, cost $98,247) (d)(f)			98,247		98,247

Common Stocks		Shares		Value
Hotels, Restaurants & Leisure — 0.3%
Amaya, Inc. (d)	2,258,029			$	36,573,891
Amaya, Inc. (d)			781,880		12,664,316
					49,238,207
Oil, Gas & Consumable Fuels — 0.1%
Denbury Resources, Inc. (d)	1,298,440				4,150,853
Laricina Energy Ltd. (d)(g)			376,471		3
Osum Oil Sands Corp. (d)(g)	1,600,000				3,829,414
Peninsula Energy Ltd. (d)(h)	13,944,024				5,957,962
					13,938,232
Semiconductors & Semiconductor Equipment — 0.0%
SunPower Corp. (d)			1,381		12,319
Software — 0.0%
kCAD Holdings I Ltd. (d)	4,067,849,248				1,301,712
Transportation Infrastructure — 0.1%
Gener8 Maritime, Inc. (d)	4,104,897				21,017,073
Wireless Telecommunication Services — 0.1%
T-Mobile U.S., Inc. (d)			520,200		24,303,744
Total Common Stocks — 3.0%					565,717,116
Corporate Bonds		Par   (000)
Aerospace & Defense — 1.4%
Bombardier, Inc.:
5.50%, 9/15/18 (a)	USD		16,677		16,927,155
6.00%, 10/15/22 (a)			5,658		5,120,490
6.13%, 1/15/23 (a)			13,762		12,213,775
7.50%, 3/15/25 (a)			42,254		38,926,497
KLX, Inc., 5.88%, 12/01/22 (a)			22,751		23,547,285
Meccanica Holdings USA, Inc.:
6.25%, 7/15/19 (a)			1,292		1,408,280
6.25%, 1/15/40 (a)			1,200		1,176,000
TransDigm, Inc.:
6.00%, 7/15/22			74,620		78,724,100
6.50%, 7/15/24			53,190		55,982,475
6.38%, 6/15/26 (a)			37,365		38,579,363
					272,605,420
Air Freight & Logistics — 0.3%
WFS Global Holding SAS, 9.50%, 7/15/22			1,960		2,173,568
XPO Logistics, Inc.:
5.75%, 6/15/21	EUR		3,941		4,505,727
6.50%, 6/15/22 (a)	USD		21,142		22,040,535
6.13%, 9/01/23 (a)			26,465		27,126,625
					55,846,455
Airlines — 0.5%
Air Medical Merger Sub Corp., 6.38%, 5/15/23 (a)(i)			11,775		11,392,313
American Airlines Pass-Through Trust, Series 2013-2, Class C, 6.00%, 1/15/17 (a)			49,531		50,026,566
National Air Cargo Group, Inc.:
11.88%, 5/15/18			1,891		1,891,405
11.88%, 5/15/18			1,826		1,826,414
Norwegian Air Shuttle ASA Pass-Through Trust, Series 2016-1, Class B, 7.50%, 11/10/23 (a)			13,205		13,138,975
Virgin Australia Trust:
Series 2013-1C, 7.13%, 10/23/18 (a)			18,143		18,370,078
Series 2013-1D, 8.50%, 10/23/16 (a)			5,586		5,604,887
					102,250,638

See Notes to Financial Statements.

46 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Auto Components — 0.8%
AA Bond Co. Ltd., 5.50%, 7/31/43	GBP		2,368	$	3,030,901
Adient Global Holdings Ltd.:
3.50%, 8/15/24	EUR		2,175		2,440,244
4.88%, 8/15/26 (a)	USD		15,248		15,267,060
Dana Holding Corp., 5.38%, 9/15/21			5,000		5,200,000
Faurecia, 3.63%, 6/15/23	EUR		3,357		3,859,726
FTE Verwaltungs GmbH, 9.00%, 7/15/20			520		613,352
Goodyear Dunlop Tires Europe BV, 3.75%, 12/15/23	USD		1,200		1,408,014
Icahn Enterprises LP/Icahn Enterprises Finance Corp., 4.88%, 3/15/19			54,433		54,705,165
Samvardhana Motherson Automotive Systems
Group BV, 4.13%, 7/15/21	EUR		1,215		1,384,804
Schaeffler Finance BV, 3.25%, 5/15/25	USD		1,100		1,335,164
Schaeffler Verwaltung Zwei GmbH:
2.75% (2.75% Cash or 3.50% PIK), 9/15/21 (j)	EUR		4,500		5,052,351
4.13%, 9/15/21 (a)(j)	USD		12,074		12,194,740
3.25% (3.25% Cash or 4.00% PIK), 9/15/23 (j)	EUR		4,425		4,949,772
4.50%, 9/15/23 (a)(j)	USD		12,891		13,011,789
3.75% (3.75% Cash or 4.50% PIK), 9/15/26 (j)	EUR		2,825		3,154,512
4.75%, 9/15/26 (a)(j)	USD		11,405		11,462,025
UCI International, Inc., 8.63%, 2/15/19 (b)(d)(k)			54,182		11,378,220
					150,447,839
Automobiles — 0.1%
Fiat Chrysler Finance Europe:
4.75%, 3/22/21	EUR		3,100		3,801,878
4.75%, 7/15/22			10,240		12,566,515
Jaguar Land Rover Automotive PLC, 3.88%, 3/01/23	USD		938		1,256,657
					17,625,050
Banks — 0.9%
Allied Irish Banks PLC, 4.13%, 11/26/25 (b)			8,593		9,269,289
Banco Espirito Santo SA:
2.63%, 5/08/17 (b)(d)(k)	EUR		10,400		2,546,872
4.75%, 1/15/18 (b)(d)(k)			12,300		3,012,166
4.00%, 1/21/19 (b)(d)(k)			12,000		2,938,698
Bank of Ireland, 4.25%, 6/11/24 (b)			1,674		1,861,320
Bankia SA, 4.00%, 5/22/24 (b)			14,100		15,707,025
CIT Group, Inc.:
5.25%, 3/15/18	USD		18,230		19,004,775
5.50%, 2/15/19 (a)			19,829		20,993,954
5.00%, 8/01/23			34,287		36,301,361
6.00%, 4/01/36			21,122		20,593,950
Commerzbank AG:
7.75%, 3/16/21	EUR		1,200		1,576,295
4.00%, 3/23/26	USD		2,374		2,655,531
HSH Nordbank AG:
0.50%, 2/14/17 (b)	EUR		5,272		5,715,050
0.54%, 2/14/17 (b)			1,344		1,456,947
Ibercaja Banco SA, 5.00%, 7/28/25 (b)	USD		4,900		5,101,193
Intesa Sanpaolo SpA:
5.00%, 9/23/19	EUR		1,000		1,221,798
5.15%, 7/16/20			1,000		1,252,298
6.63%, 9/13/23			935		1,230,502
2.86%, 4/23/25	USD		958		1,047,893
3.93%, 9/15/26	EUR		2,469		2,795,787
UniCredit SpA:
6.95%, 10/31/22			3,550		4,495,466
5.75%, 10/28/25 (b)			8,970		10,512,571
4.38%, 1/03/27 (b)			4,400		4,898,488
					176,189,229

Corporate Bonds		Par   (000)		Value
Biotechnology — 0.1%
Grifols Worldwide Operations Ltd., 5.25%, 4/01/22	USD		11,695	$	12,104,325
Building Products — 1.3%
Builders FirstSource, Inc., 5.63%, 9/01/24 (a)			9,840		10,086,000
CPG Merger Sub LLC, 8.00%, 10/01/21 (a)			38,913		39,691,260
Masonite International Corp., 5.63%, 3/15/23 (a)			21,237		22,405,035
Pfleiderer GmbH, 7.88%, 8/01/19	EUR		4,220		4,910,842
Ply Gem Industries, Inc., 6.50%, 2/01/22	USD		47,849		49,284,470
Standard Industries, Inc.:
5.13%, 2/15/21 (a)			8,342		8,759,100
5.50%, 2/15/23 (a)			21,683		22,658,735
6.00%, 10/15/25 (a)(l)			35,505		37,990,350
USG Corp.:
9.50%, 1/15/18			8,814		9,572,004
5.88%, 11/01/21 (a)			16,906		17,687,903
5.50%, 3/01/25 (a)			22,422		24,047,595
					247,093,294
Capital Markets — 0.2%
CPUK Finance Ltd., 7.00%, 2/28/42	GBP		1,675		2,290,989
Deutsche Bank AG:
1.35%, 3/17/25	USD		1,000		1,048,187
4.50%, 5/19/26	EUR		4,700		5,021,813
E*TRADE Financial Corp.:
4.63%, 9/15/23 (l)	USD		20,666		21,478,484
Series A, 0.00%, 8/31/19 (c)(m)			328		924,891
Lehman Brothers Holdings, Inc.:
5.38%, 10/17/12 (b)(d)(k)	EUR		4,550		451,836
4.75%, 1/16/14 (b)(d)(k)			14,545		1,444,386
0.00%, 2/05/14 (b)(d)(k)			22,800		2,279,513
					34,940,099
Chemicals — 1.4%
Axalta Coating Systems Dutch Holding B BV, 3.75%, 1/15/25			1,800		1,990,901
Axalta Coating Systems LLC, 4.88%, 8/15/24 (a)	USD		16,291		16,688,093
Chemours Co.:
6.63%, 5/15/23			21,865		21,318,375
7.00%, 5/15/25			11,494		11,292,855
Huntsman International LLC:
5.13%, 11/15/22 (l)			12,945		13,462,800
5.13%, 4/15/21	EUR		2,090		2,450,742
INEOS Finance PLC, 4.00%, 5/01/23	USD		7,310		8,223,227
INOVYN Finance PLC, 6.25%, 5/15/21			1,300		1,510,234
Momentive Performance Materials, Inc.:
3.88%, 10/24/21			48,290		40,261,787
Escrow, 8.88%, 10/15/20 (d)(k)			22,959		2
Monitchem HoldCo 3 SA, 5.25%, 6/15/21	EUR		1,647		1,854,903
Platform Specialty Products Corp.:
10.38%, 5/01/21 (a)	USD		3,878		4,178,545
6.50%, 2/01/22 (a)			89,764		87,295,490
PQ Corp., 6.75%, 11/15/22 (a)			23,212		24,604,720
PSPC Escrow Corp., 6.00%, 1/02/23	EUR		3,207		3,369,657
Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc., 6.38%, 5/01/22	USD		3,929		4,634,348
WR Grace & Co-Conn, 5.13%, 10/01/21 (a)			11,437		12,151,813
					255,288,492
Commercial Services & Supplies — 1.1%
Acosta, Inc., 7.75%, 10/01/22 (a)			30,067		24,730,107
ADT Corp.:
3.50%, 7/15/22 (l)			29,153		28,059,763
4.13%, 6/15/23 (l)			6,562		6,463,570
4.88%, 7/15/32 (a)			14,221		12,478,927

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 47

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Commercial Services & Supplies (continued)
Advanced Disposal Services, Inc., 8.25%, 10/01/20	USD		7,095	$	7,449,750
Befesa Zinc SAU Via Zinc Capital SA, 8.88%, 5/15/18	EUR		3,452		3,951,502
Bilbao Luxembourg SA, 11.06% (10.50% Cash or 11.25% PIK), 12/01/18 (j)			3,582		4,014,255
Ceridian HCM Holding, Inc., 11.00%, 3/15/21 (a)	USD		16,567		17,519,603
Mobile Mini, Inc., 5.88%, 7/01/24			27,176		28,330,980
Prime Security Services Borrower LLC/Prime Finance, Inc., 9.25%, 5/15/23 (a)			45,055		49,109,950
Verisure Holding AB, 6.00%, 11/01/22	EUR		4,450		5,386,350
WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (a)	USD		23,094		23,960,025
					211,454,782
Communications Equipment — 1.2%
Alcatel-Lucent USA, Inc., 6.45%, 3/15/29			78,624		86,977,800
CommScope Technologies Finance LLC, 6.00%, 6/15/25 (a)			18,973		20,229,961
CommScope, Inc.:
4.38%, 6/15/20 (a)			15,433		15,895,990
5.50%, 6/15/24 (a)			19,474		20,447,700
Hughes Satellite Systems Corp.:
5.25%, 8/01/26 (a)			15,570		15,375,375
6.63%, 8/01/26 (a)			11,397		10,998,105
Nokia OYJ:
5.38%, 5/15/19			2,500		2,693,750
6.63%, 5/15/39			34,790		37,747,150
Riverbed Technology, Inc., 8.88%, 3/01/23 (a)			19,453		20,790,394
					231,156,225
Construction & Engineering — 0.2%
AECOM, 5.88%, 10/15/24			9,839		10,503,133
Brand Energy & Infrastructure Services, Inc., 8.50%, 12/01/21 (a)			18,044		18,044,000
Engility Corp., 8.88%, 9/01/24 (a)			10,328		10,457,100
Modular Space Corp., 10.25%, 1/31/19 (a)(d)(k)			8,130		3,414,600
Novafives SAS, 4.50%, 6/30/21	EUR		3,050		2,992,816
					45,411,649
Construction Materials — 0.1%
BMBG Bond Finance SCA, 3.00%, 6/15/21			1,750		2,006,700
Cemex Finance LLC, 4.63%, 6/15/24			3,300		3,794,005
Dry Mix Solutions Investissements SAS, 3.95%, 6/15/21 (b)			500		561,678
HeidelbergCement AG, 2.25%, 3/30/23	USD		4,250		5,021,950
Kerneos Corp. SAS, 5.75%, 3/01/21	EUR		789		919,565
					12,303,898
Consumer Finance — 1.3%
Ally Financial, Inc.:
5.13%, 9/30/24	USD		2,598		2,753,880
4.63%, 3/30/25			7,345		7,528,625
8.00%, 11/01/31			124,262		153,152,915
DFC Finance Corp., 12.00%, 6/16/20 (a)(j)			14,750		8,407,667
Navient Corp.:
5.00%, 10/26/20			5,000		4,931,250
6.63%, 7/26/21			10,388		10,465,910
5.50%, 1/25/23			9,138		8,384,115
7.25%, 9/25/23			15,526		15,526,000
6.13%, 3/25/24			9,581		8,922,306
5.88%, 10/25/24			8,246		7,503,860
5.63%, 8/01/33			10,133		8,055,735
OneMain Financial Holdings LLC:
6.75%, 12/15/19 (a)			6,552		6,887,790

Corporate Bonds		Par   (000)		Value
Consumer Finance (continued)
7.25%, 12/15/21 (a)	USD		7,602	$	7,991,603
					250,511,656
Containers & Packaging — 2.8%
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.:
6.25%, 1/31/19 (a)			35,359		36,110,379
6.75%, 1/31/21 (a)			20,341		21,002,083
4.07%, 5/15/21 (a)(b)			7,849		7,966,735
6.00%, 6/30/21 (a)			35,936		36,924,240
4.25%, 1/15/22	EUR		6,522		7,474,375
4.13%, 5/15/23	USD		2,450		2,821,027
4.63%, 5/15/23 (a)			13,606		13,674,030
6.75%, 5/15/24	EUR		4,250		4,995,071
7.25%, 5/15/24 (a)	USD		60,260		64,176,900
Ball Corp.:
5.00%, 3/15/22			14,130		15,225,075
4.00%, 11/15/23			2,995		3,017,463
Berry Plastics Corp., 6.00%, 10/15/22			5,000		5,275,000
Beverage Packaging Holdings Luxembourg II SA, 5.63%, 12/15/16 (a)			7,307		7,289,463
Crown European Holdings SA, 3.38%, 5/15/25			4,300		4,936,216
JH-Holding Finance SA, 8.25% (8.25% Cash or 10.00% PIK), 12/01/22 (j)			2,200		2,662,915
ProGroup AG, 5.13%, 5/01/22			2,838		3,395,309
Reynolds Group Issuer, Inc.:
6.88%, 2/15/21			21,289		22,087,337
8.25%, 2/15/21			48,340		50,394,450
4.13%, 7/15/21 (a)(b)			38,838		39,420,570
5.13%, 7/15/23 (a)			2,093		2,161,023
7.00%, 7/15/24 (a)			47,522		50,967,345
5.75%, 10/15/20			70,131		72,322,594
Sealed Air Corp.:
4.88%, 12/01/22 (a)			13,201		13,861,050
4.50%, 9/15/23	EUR		1,426		1,764,643
6.88%, 7/15/33 (a)	USD		13,371		14,340,397
SGD Group SAS, 5.63%, 5/15/19	EUR		1,043		1,202,639
Signode Industrial Group Lux SA/Signode Industrial Group U.S., Inc., 6.38%, 5/01/22 (a)	USD		8,337		8,441,213
Smurfit Kappa Acquisitions, 2.75%, 2/01/25			700		821,735
Verallia Packaging SASU, 5.13%, 8/01/22			4,400		5,183,725
					519,915,002
Distributors — 0.1%
American Tire Distributors, Inc., 10.25%, 3/01/22 (a)			15,065		13,709,150
LKQ Italia Bondco SpA, 3.88%, 4/01/24	EUR		5,489		6,566,896
					20,276,046
Diversified Consumer Services — 0.1%
Cognita Financing PLC, 7.75%, 8/15/21	GBP		2,150		2,912,109
Service Corp. International:
4.50%, 11/15/20	USD		3,900		3,987,750
5.38%, 1/15/22			2,750		2,860,000
5.38%, 5/15/24			8,691		9,212,460
					18,972,319
Diversified Financial Services — 0.9%
Altice Financing SA:
5.25%, 2/15/23	EUR		3,880		4,517,710
6.63%, 2/15/23 (a)	USD		5,000		5,131,250
7.50%, 5/15/26 (a)			24,803		25,826,124
Arrow Global Finance PLC, 5.13%, 9/15/24			900		1,127,443
BCD Acquisition, Inc., 9.63%, 9/15/23 (a)			5,105		5,334,725

See Notes to Financial Statements.

48 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Diversified Financial Services (continued)
CNH Industrial Finance Europe SA, 2.88%, 5/17/23	EUR		9,000	$	10,335,173
Double Eagle Acquisition Sub, Inc., 7.50%, 10/01/24 (a)	USD		16,839		17,133,683
eircom Finance DAC, 4.50%, 5/31/22	EUR		3,550		4,046,794
FBM Finance, Inc., 8.25%, 8/15/21 (a)	USD		7,195		7,518,775
Garfunkelux Holdco 3 SA, 8.50%, 11/01/22	GBP		1,900		2,508,231
Iceland Bondco PLC, 6.25%, 7/15/21			1,100		1,361,242
Jerrold Finco PLC, 6.25%, 9/15/21	USD		850		1,105,082
Mercury Bondco PLC, 8.25% (8.25% Cash or 9.00% PIK), 5/30/21 (j)	EUR		5,407		6,261,277
Titan Global Finance PLC, 3.50%, 6/17/21			1,050		1,209,896
Virgin Media Finance PLC:
4.50%, 1/15/25			723		802,334
5.75%, 1/15/25 (a)	USD		33,090		33,503,625
Virgin Media Secured Finance PLC:
6.00%, 4/15/21	GBP		12,775		17,159,388
5.25%, 1/15/26 (a)	USD		11,447		11,618,705
5.50%, 8/15/26 (a)			11,006		11,226,120
4.88%, 1/15/27	GBP		7,956		10,327,582
					178,055,159
Diversified Telecommunication Services — 4.3%
Altice Finco SA, 9.00%, 6/15/23	EUR		2,100		2,668,568
Cellnex Telecom SA, 2.38%, 1/16/24	USD		1,600		1,842,102
CenturyLink, Inc.:
Series S, 6.45%, 6/15/21			33,238		35,606,207
Series W, 6.75%, 12/01/23			6,115		6,359,600
Cincinnati Bell, Inc., 7.00%, 7/15/24 (a)			20,461		20,972,525
Columbus International, Inc., 7.38%, 3/30/21 (a)			21,244		22,531,386
Consolidated Communications, Inc., 6.50%, 10/01/22			8,252		8,004,440
Frontier Communications Corp.:
8.88%, 9/15/20			4,022		4,338,733
6.25%, 9/15/21			19,428		18,675,165
10.50%, 9/15/22			9,380		9,942,800
7.13%, 1/15/23			14,480		13,502,600
7.63%, 4/15/24			30,285		28,316,475
6.88%, 1/15/25			51,414		45,501,390
11.00%, 9/15/25			23,142		24,154,463
Intelsat Jackson Holdings SA:
7.25%, 10/15/20			23,607		18,295,425
5.50%, 8/01/23			20,776		14,387,380
Level 3 Financing, Inc.:
5.38%, 8/15/22			1,360		1,421,200
5.63%, 2/01/23			33,109		34,391,974
5.13%, 5/01/23			32,838		33,823,140
5.38%, 1/15/24			24,778		25,815,579
5.38%, 5/01/25			38,568		40,207,140
5.25%, 3/15/26 (a)			21,984		22,698,480
OTE PLC, 3.50%, 7/09/20	EUR		7,250		8,222,514
SBA Communications Corp.:
5.63%, 10/01/19	USD		13,946		14,338,301
4.88%, 9/01/24 (a)			41,160		41,468,700
Telecom Italia Capital SA:
6.38%, 11/15/33			9,784		9,955,220
6.00%, 9/30/34			37,181		36,818,485
7.20%, 7/18/36			10,900		11,608,500
Telecom Italia Finance SA, 7.75%, 1/24/33	EUR		1,800		2,697,402
Telecom Italia SpA:
4.50%, 1/25/21			1,900		2,390,501
3.25%, 1/16/23	USD		4,400		5,246,251
5.88%, 5/19/23	GBP		6,750		10,210,042
3.63%, 1/19/24	EUR		2,400		2,859,408
5.30%, 5/30/24 (a)	USD		5,375		5,495,239

Corporate Bonds		Par   (000)		Value
Diversified Telecommunication Services (continued)
Telenet Finance V Luxembourg SCA, 6.75%, 8/15/24	EUR		12,449	$	15,418,082
UPC Holding BV, 6.75%, 3/15/23			3,000		3,618,778
Wind Acquisition Finance SA:
6.50%, 4/30/20 (a)	USD		19,725		20,661,937
4.00%, 7/15/20	EUR		6,900		7,838,355
7.00%, 4/23/21			1,200		1,407,003
7.38%, 4/23/21 (a)	USD		30,197		31,555,865
4.75%, 7/15/20 (a)			10,485		10,563,637
Zayo Group LLC/Zayo Capital, Inc.:
6.00%, 4/01/23 (l)			56,741		59,578,050
6.38%, 5/15/25			51,626		54,723,560
Ziggo Bond Finance BV:
4.63%, 1/15/25	EUR		736		826,376
5.88%, 1/15/25 (a)	USD		22,981		22,981,000
					813,939,978
Electric Utilities — 0.0%
ContourGlobal Power Holdings SA, 5.13%, 6/15/21	EUR		1,450		1,693,857
FPL Energy National Wind Portfolio LLC, 6.13%, 3/25/19 (a)	USD		16		16,396
Viridian Group FundCo II Ltd., 7.50%, 3/01/20	EUR		3,866		4,587,051
					6,297,304
Electrical Equipment — 0.4%
Cortes NP Acquisition Corp., 9.25%, 10/15/24 (a)	USD		19,480		19,480,000
GrafTech International Ltd., 6.38%, 11/15/20			5,000		3,825,000
Rapid Holding GmbH, 6.63%, 11/15/20	EUR		9,724		11,360,451
Sensata Technologies BV:
5.63%, 11/01/24 (a)	USD		5,526		5,836,837
5.00%, 10/01/25 (a)			20,723		21,189,267
Sensata Technologies UK Financing Co. PLC, 6.25%, 2/15/26 (a)			18,690		20,231,925
					81,923,480
Electronic Equipment, Instruments & Components — 0.6%
Anixter, Inc., 5.63%, 5/01/19			3,455		3,670,937
Belden, Inc., 5.50%, 4/15/23	EUR		7,200		8,480,437
CDW LLC/CDW Finance Corp.:
6.00%, 8/15/22	USD		7,905		8,418,825
5.00%, 9/01/23			42,699		44,086,717
5.50%, 12/01/24			52,882		56,451,535
					121,108,451
Energy Equipment & Services — 0.7%
Ensco PLC, 4.50%, 10/01/24			7,234		5,208,480
Noble Holding International Ltd.:
4.63%, 3/01/21			1,925		1,540,000
6.95%, 4/01/25			2,410		1,903,900
Noble Holding U.S. Corp./Noble Drilling Services 6 LLC/Noble Drilling Holding LLC, 7.50%, 3/15/19			8,700		8,787,000
Saipem Finance International BV:
3.00%, 3/08/21			1,375		1,581,314
3.75%, 9/08/23			775		895,726
Transocean, Inc.:
3.75%, 10/15/17			13,834		13,903,170
6.00%, 3/15/18 (l)			31,063		31,218,315
7.38%, 4/15/18			2,660		2,699,900
8.13%, 12/15/21			10,632		10,153,560
5.05%, 10/15/22			21,354		16,736,197
Weatherford International LLC, 6.80%, 6/15/37			2,027		1,459,440

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 49

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Energy Equipment & Services (continued)
Weatherford International Ltd.:
7.75%, 6/15/21	USD		11,466	$	11,351,340
4.50%, 4/15/22 (l)			5,997		5,067,465
6.50%, 8/01/36			4,904		3,481,840
7.00%, 3/15/38			6,065		4,457,775
5.95%, 4/15/42			4,849		3,321,565
					123,766,987
Equity Real Estate Investment Trusts (REITs) — 1.7%
Communications Sales & Leasing, Inc./CSL Capital LLC:
6.00%, 4/15/23 (a)			4,431		4,597,163
8.25%, 10/15/23 (l)			56,297		59,083,139
Corrections Corp. of America, 5.00%, 10/15/22			3,200		2,896,000
Equinix, Inc.:
5.38%, 4/01/23			9,145		9,590,819
5.88%, 1/15/26			21,808		23,443,600
ESH Hospitality, Inc., 5.25%, 5/01/25 (a)			38,992		38,943,260
GEO Group, Inc.:
5.13%, 4/01/23			12,070		10,259,500
5.88%, 10/15/24			8,870		7,628,200
6.00%, 4/15/26			6,291		5,347,350
Iron Mountain, Inc.:
6.00%, 10/01/20 (a)			13,010		13,725,550
6.00%, 8/15/23			5,000		5,337,500
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc.:
5.63%, 5/01/24 (a)			100,803		109,341,014
4.50%, 9/01/26 (a)			17,398		17,398,000
RHP Hotel Properties LP/RHP Finance Corp., 5.00%, 4/15/23			4,170		4,232,550
					311,823,645
Food & Staples Retailing — 1.1%
Albertsons Cos. LLC/Safeway, Inc./New Albertson’s, Inc./Albertson’s LLC:
6.63%, 6/15/24 (a)			9,943		10,340,720
5.75%, 3/15/25 (a)			17,722		17,677,695
Casino Guichard Perrachon SA:
5.98%, 5/26/21	EUR		1,700		2,254,215
3.31%, 1/25/23			3,600		4,477,307
3.25%, 3/07/24			4,200		5,104,761
2.33%, 2/07/25	USD		4,600		5,240,251
4.05%, 8/05/26	EUR		900		1,071,773
Rite Aid Corp.:
9.25%, 3/15/20	USD		15,515		16,368,325
6.75%, 6/15/21			25,395		26,823,469
6.13%, 4/01/23 (a)			78,989		85,242,559
7.70%, 2/15/27			18,109		23,179,520
Tesco PLC:
5.00%, 3/24/23	GBP		1,064		1,509,526
6.00%, 12/14/29	USD		1,560		2,336,317
					201,626,438
Food Products — 1.1%
Darling Global Finance BV, 4.75%, 5/30/22	EUR		1,052		1,205,406
Dean Foods Co., 6.50%, 3/15/23 (a)	USD		4,431		4,725,661
FAGE International SA/FAGE USA Dairy Industry, Inc., 5.63%, 8/15/26 (a)			12,562		12,938,860
JBS USA LUX SA/JBS USA Finance, Inc.:
7.25%, 6/01/21 (a)			6,835		7,065,681
5.88%, 7/15/24 (a)			5,304		5,277,480
5.75%, 6/15/25 (a)			25,191		24,750,157
Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., 5.88%, 1/15/24 (a)			3,962		4,229,435

Corporate Bonds		Par   (000)		Value
Food Products (continued)
Post Holdings, Inc.:
6.75%, 12/01/21 (a)	USD		15,871	$	17,001,809
6.00%, 12/15/22 (a)			4,945		5,223,156
7.75%, 3/15/24 (a)			38,450		43,064,000
8.00%, 7/15/25 (a)			17,294		19,790,821
5.00%, 8/15/26 (a)			26,609		26,475,955
R&R Pik PLC, 9.25% (9.25% Cash or 9.75% PIK), 5/15/18 (j)	EUR		4,089		4,592,840
Smithfield Foods, Inc.:
5.88%, 8/01/21 (a)	USD		4,674		4,884,330
6.63%, 8/15/22			7,270		7,688,025
Tereos Finance Groupe I SA, 4.13%, 6/16/23	EUR		3,900		4,477,922
TreeHouse Foods, Inc., 6.00%, 2/15/24 (a)	USD		8,346		8,982,383
WhiteWave Foods Co., 5.38%, 10/01/22			12,103		13,752,034
					216,125,955
Health Care Equipment & Supplies — 0.6%
Alere, Inc.:
6.50%, 6/15/20			1,562		1,562,000
6.38%, 7/01/23 (a)			23,535		24,005,700
DJO Finco, Inc./DJO Finance LLC/DJO Finance Corp., 8.13%, 6/15/21 (a)			57,626		53,448,115
Hologic, Inc., 5.25%, 7/15/22 (a)			27,636		29,328,705
Teleflex, Inc., 4.88%, 6/01/26			3,759		3,890,565
					112,235,085
Health Care Providers & Services — 4.7%
Acadia Healthcare Co., Inc.:
5.13%, 7/01/22			3,775		3,737,250
5.63%, 2/15/23			13,681		13,886,215
6.50%, 3/01/24			8,738		9,153,055
Amsurg Corp.:
5.63%, 11/30/20			3,530		3,627,075
5.63%, 7/15/22			47,680		48,752,800
Centene Corp.:
5.63%, 2/15/21			21,630		22,927,800
4.75%, 5/15/22			18,137		18,726,453
6.13%, 2/15/24			3,527		3,826,795
CHS/Community Health Systems, Inc.:
5.13%, 8/15/18			1,695		1,711,950
8.00%, 11/15/19			21,259		20,833,820
6.88%, 2/01/22			17,367		14,935,620
DaVita, Inc.:
5.13%, 7/15/24			10,758		10,973,160
5.00%, 5/01/25			32,713		32,835,674
Envision Healthcare Corp., 5.13%, 7/01/22 (a)			35,133		34,957,335
Ephios Holdco II PLC, 8.25%, 7/01/23	EUR		2,293		2,743,285
Fresenius Medical Care U.S. Finance II, Inc., 4.75%, 10/15/24 (a)	USD		12,370		12,988,500
Fresenius Medical Care U.S. Finance, Inc., 5.75%, 2/15/21 (a)			180		201,600
HCA, Inc.:
6.50%, 2/15/20 (l)			35,269		39,060,417
7.50%, 2/15/22			12,662		14,529,645
5.88%, 3/15/22			26,300		28,995,750
4.75%, 5/01/23 (l)			3,212		3,348,510
5.00%, 3/15/24 (l)			44,125		46,551,875
5.38%, 2/01/25			47,400		48,940,500
5.25%, 4/15/25 (l)			18,400		19,619,000
5.88%, 2/15/26			25,430		27,114,737
5.25%, 6/15/26			45,669		48,523,313
4.50%, 2/15/27			41,505		41,764,406
Series 1, 5.88%, 5/01/23			25,410		27,061,650
HealthSouth Corp.:
5.13%, 3/15/23			10,613		10,586,467

See Notes to Financial Statements.

50 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Health Care Providers & Services (continued)
5.75%, 11/01/24	USD		38,100	$	39,457,122
5.75%, 9/15/25			5,811		6,057,967
IDH Finance PLC, 6.25%, 8/15/22			2,425		3,066,454
MEDNAX, Inc., 5.25%, 12/01/23 (a)			18,901		19,869,676
MPH Acquisition Holdings LLC, 7.13%, 6/01/24 (a)			20,081		21,587,075
RegionalCare Hospital Partners Holdings, Inc., 8.25%, 5/01/23 (a)			20,482		21,147,665
Surgery Center Holdings, Inc., 8.88%, 4/15/21 (a)			4,963		5,298,003
Surgical Care Affiliates, Inc., 6.00%, 4/01/23 (a)			7,007		7,357,350
Synlab Bondco PLC, 6.25%, 7/01/22	EUR		6,920		8,224,491
Tenet Healthcare Corp.:
6.25%, 11/01/18	USD		7,389		7,887,757
6.75%, 2/01/20			11,015		10,822,237
4.75%, 6/01/20			14,290		14,504,350
6.00%, 10/01/20			4,015		4,245,863
4.50%, 4/01/21			2,091		2,104,069
4.38%, 10/01/21			3,208		3,191,960
8.13%, 4/01/22			44,158		44,158,000
6.75%, 6/15/23			46,746		43,473,780
Voyage Care Bondco PLC:
6.50%, 8/01/18	GBP		4,138		5,285,134
11.00%, 2/01/19			2,405		3,070,777
WellCare Health Plans, Inc., 5.75%, 11/15/20	USD		9,230		9,529,975
					893,254,362
Health Care Technology — 0.1%
IMS Health, Inc., 6.00%, 11/01/20 (a)			8,779		8,910,685
Hotels, Restaurants & Leisure — 3.1%
Aramark Services, Inc.:
5.13%, 1/15/24			25,350		26,364,000
5.13%, 1/15/24 (a)			13,869		14,423,760
BC ULC/New Red Finance, Inc.:
4.63%, 1/15/22 (a)			7,877		8,192,080
6.00%, 4/01/22 (a)			40,264		42,176,540
Boyd Gaming Corp.:
6.88%, 5/15/23			22,417		24,266,403
6.38%, 4/01/26 (a)			115		123,337
Caesars Entertainment Resort Properties LLC, 8.00%, 10/01/20			52,495		54,266,706
Carlson Travel Holdings, Inc., 7.50% (7.50%
Cash or 8.25% PIK), 8/15/19 (a)(j)			4,339		4,295,610
Cirsa Funding Luxembourg SA:
5.75%, 5/15/21	EUR		2,225		2,619,441
5.88%, 5/15/23	USD		1,246		1,453,940
Codere Finance 2 Luxembourg SA:
9.00% (3.50% Cash and 5.50% PIK), 6/30/21			1,359		1,391,276
9.00% (3.50% Cash and 5.50% PIK), 6/30/21			804		822,641
Gala Electric Casinos PLC, 11.50%, 6/01/19	GBP		64		85,163
Gala Group Finance PLC, 8.88%, 9/01/18			1,708		2,268,763
Hilton Domestic Operating Co., Inc., 4.25%, 9/01/24 (a)	USD		14,935		15,233,700
International Game Technology PLC:
6.25%, 2/15/22 (a)			8,800		9,328,000
4.75%, 2/15/23	EUR		904		1,091,931
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC:
5.00%, 6/01/24 (a)	USD		2,329		2,433,805
5.25%, 6/01/26 (a)			1,312		1,387,440
MGM Resorts International:
8.63%, 2/01/19			17,647		19,896,993
5.25%, 3/31/20			30,415		32,391,975
6.75%, 10/01/20			27,200		30,464,000

Corporate Bonds		Par   (000)		Value
Hotels, Restaurants & Leisure (continued)
6.63%, 12/15/21	USD		40,615	$	45,691,875
6.00%, 3/15/23			4,865		5,278,525
4.63%, 9/01/26			14,420		14,059,500
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., 5.00%, 8/01/18 (a)			7,309		7,436,907
NH Hotel Group SA, 3.75%, 10/01/23	EUR		2,025		2,293,107
Pizzaexpress Financing 2 PLC, 6.63%, 8/01/21	GBP		1,290		1,628,132
PortAventura Entertainment Barcelona BV, 7.25%, 12/01/20	EUR		9,577		11,160,859
Punch Taverns Finance B Ltd.:
Series A6, 5.94%, 9/30/22	GBP		5,771		7,168,348
Series A7, 5.27%, 3/30/24			7,290		8,574,405
Punch Taverns Finance PLC, Series M3, 6.03%, 10/15/27 (a)(b)			7,544		8,311,661
Schumann SpA, 7.00%, 7/31/23	USD		750		833,862
Scientific Games International, Inc.:
7.00%, 1/01/22 (a)			11,992		12,681,540
10.00%, 12/01/22			22,158		20,440,755
Six Flags Entertainment Corp.:
5.25%, 1/15/21 (a)			10,248		10,581,060
4.88%, 7/31/24 (a)			6,572		6,637,720
Snai SpA, 7.63%, 6/15/18	EUR		1,489		1,706,130
Station Casinos LLC, 7.50%, 3/01/21	USD		55,240		58,422,929
Sterling Entertainment Enterprises LLC, 9.75%, 12/25/19 (a)			29,820		29,521,800
Unique Pub Finance Co. PLC:
Series A3, 6.54%, 3/30/21	GBP		3,348		4,664,234
Series A4, 5.66%, 6/30/27			5,895		7,969,272
Series N, 6.46%, 3/30/32			4,100		4,518,036
Vougeot Bidco PLC, 7.88%, 7/15/20			1,942		2,612,760
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.50%, 3/01/25 (a)	USD		2,606		2,638,575
Yum! Brands, Inc.:
3.75%, 11/01/21			4,611		4,680,165
3.88%, 11/01/23			1,725		1,699,125
					576,188,786
Household Durables — 1.3%
Allegion U.S. Holding Co., Inc., 5.75%, 10/01/21			3,733		3,896,319
Beazer Homes USA, Inc., 6.63%, 4/15/18			4,047		4,119,846
Brookfield Residential Properties, Inc./Brookfield Residential U.S. Corp., 6.13%, 7/01/22 (a)			10,392		10,495,920
CalAtlantic Group, Inc.:
6.63%, 5/01/20			2,870		3,210,813
8.38%, 1/15/21			31,359		37,238,813
5.88%, 11/15/24			8,882		9,503,740
5.25%, 6/01/26			3,265		3,266,956
DR Horton, Inc., 4.75%, 2/15/23			7,064		7,664,440
Lennar Corp.:
4.50%, 11/15/19			141		148,579
4.75%, 4/01/21			20,454		21,783,510
4.75%, 11/15/22			15,079		15,569,067
4.88%, 12/15/23			8,287		8,494,175
PulteGroup, Inc.:
5.50%, 3/01/26			18,450		19,372,500
6.38%, 5/15/33			19,215		20,015,631
6.00%, 2/15/35			11,112		11,223,120
Serta Simmons Bedding LLC, 8.13%, 10/01/20 (a)			7,400		7,733,000
Tempur Sealy International, Inc.:
5.63%, 10/15/23			2,500		2,631,250
5.50%, 6/15/26 (a)			7,521		7,746,630
TRI Pointe Group, Inc.:
4.38%, 6/15/19			13,100		13,476,625

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 51

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Household Durables (continued)
4.88%, 7/01/21	USD		12,330	$	12,638,250
5.88%, 6/15/24			5,150		5,356,000
Weekley Homes LLC/Weekley Finance Corp., 6.00%, 2/01/23			5,531		4,922,590
Woodside Homes Co. LLC/Woodside Homes Finance, Inc., 6.75%, 12/15/21 (a)			12,675		12,278,906
					242,786,680
Household Products — 0.4%
Avon International Operations, Inc., 7.88%, 8/15/22 (a)			7,144		7,376,180
HRG Group, Inc., 7.88%, 7/15/19			11,930		12,571,237
Spectrum Brands, Inc.:
6.38%, 11/15/20			10,873		11,270,952
6.63%, 11/15/22			18,742		20,241,360
6.13%, 12/15/24			9,454		10,237,075
5.75%, 7/15/25			11,563		12,488,040
					74,184,844
Independent Power and Renewable Electricity Producers — 1.2%
AES Corp.:
4.88%, 5/15/23			17,115		17,371,725
5.50%, 3/15/24			234		243,505
5.50%, 4/15/25			5,000		5,150,000
6.00%, 5/15/26			4,481		4,738,657
Calpine Corp.:
6.00%, 1/15/22 (a)			8,173		8,561,217
5.38%, 1/15/23			4,712		4,694,330
5.88%, 1/15/24 (a)			11,885		12,553,531
5.50%, 2/01/24			14,561		14,378,987
Dynegy, Inc.:
6.75%, 11/01/19			25,190		25,819,750
7.38%, 11/01/22			32,409		32,003,887
7.63%, 11/01/24			11,325		11,121,150
NRG Energy, Inc.:
7.88%, 5/15/21			11,366		11,877,470
6.63%, 3/15/23			2,575		2,600,750
6.25%, 5/01/24			2,995		3,039,925
7.25%, 5/15/26 (a)			14,115		14,362,013
6.63%, 1/15/27 (a)			45,222		44,317,560
NRG Yield Operating LLC, 5.38%, 8/15/24			5,815		5,974,913
					218,809,370
Insurance — 0.9%
Assicurazioni Generali SpA:
5.50%, 10/27/47			260		303,025
5.00%, 6/08/48 (b)	EUR		1,069		1,211,003
BNP Paribas Cardif SA, 4.03% (b)(n)			5,400		6,019,472
Credit Agricole Assurances SA, 4.50% (b)(n)			2,000		2,216,044
HUB International Ltd.:
9.25%, 2/15/21 (a)	USD		26,629		27,707,475
7.88%, 10/01/21 (a)			29,368		29,955,360
Old Mutual PLC, 8.00%, 6/03/21	GBP		1,100		1,625,363
Pension Insurance Corp. PLC, 6.50%, 7/03/24			2,625		3,376,252
Radian Group, Inc.:
5.25%, 6/15/20	USD		7,680		8,121,600
7.00%, 3/15/21			2,725		3,055,406
Solera LLC/Solera Finance, Inc., 10.50%, 3/01/24 (a)			48,198		53,740,770
Wayne Merger Sub LLC, 8.25%, 8/01/23 (a)			31,202		31,709,033
					169,040,803
Internet & Direct Marketing Retail — 0.1%
Netflix, Inc.:
5.50%, 2/15/22			14,248		15,334,410

Corporate Bonds		Par   (000)		Value
Internet & Direct Marketing Retail (continued)
5.75%, 3/01/24	USD		4,465	$	4,799,875
5.88%, 2/15/25			2,435		2,629,800
					22,764,085
Internet Software & Services — 0.1%
JDA Escrow LLC/JDA Bond Finance, Inc., 7.38%, 10/15/24 (a)			7,137		7,333,267
United Group BV, 7.88%, 11/15/20	EUR		6,510		7,605,567
					14,938,834
IT Services — 2.4%
Alliance Data Systems Corp.:
5.25%, 12/01/17 (a)	USD		16,822		17,158,440
6.38%, 4/01/20 (a)			5,000		5,093,750
5.38%, 8/01/22 (a)			27,089		26,411,775
APX Group, Inc.:
6.38%, 12/01/19			5,429		5,530,794
8.75%, 12/01/20			7,310		7,163,800
7.88%, 12/01/22 (a)			8,776		9,192,860
First Data Corp.:
5.38%, 8/15/23 (a)			4,329		4,458,870
7.00%, 12/01/23 (a)			155,137		164,057,377
5.75%, 1/15/24 (a)			148,878		152,972,145
Iron Mountain Europe PLC, 6.13%, 9/15/22	GBP		420		566,155
Sabre GLBL, Inc.:
5.38%, 4/15/23 (a)	USD		23,674		24,325,035
5.25%, 11/15/23 (a)			6,775		6,893,563
WEX, Inc., 4.75%, 2/01/23 (a)			21,090		20,800,013
					444,624,577
Life Sciences Tools & Services — 0.8%
Crimson Merger Sub, Inc., 6.63%, 5/15/22 (a)			43,739		38,599,667
DPx Holdings BV, 7.50%, 2/01/22 (a)			28,091		29,706,233
Jaguar Holding Co. II/Pharmaceutical Product Development LLC, 6.38%, 8/01/23 (a)			82,422		85,718,880
Sterigenics-Nordion Holdings LLC, 6.50%, 5/15/23 (a)			5,356		5,570,240
					159,595,020
Machinery — 0.8%
Accudyne Industries Borrower/Accudyne Industries LLC, 7.75%, 12/15/20 (a)			36,317		28,781,223
Allison Transmission, Inc., 5.00%, 10/01/24 (a)			12,520		12,833,000
Gardner Denver, Inc., 6.88%, 8/15/21 (a)			9,475		8,882,813
Gates Global LLC/Gates Global Co.:
5.75%, 7/15/22	EUR		2,200		2,298,386
6.00%, 7/15/22 (a)	USD		23,627		22,445,650
Schaeffler Holding Finance BV:
6.88% (6.88% Cash or 7.38% PIK), 8/15/18 (j)	EUR		3,713		4,243,441
6.88% (6.88% Cash or 7.63% PIK), 8/15/18 (a)(j)	USD		1,780		1,811,157
6.25% (6.25% Cash or 6.75% PIK), 11/15/19 (a)(j)			16,430		17,025,587
5.75% (5.75% Cash or 6.50% PIK), 11/15/21 (j)	EUR		2,042		2,503,586
6.75% (6.75% Cash or 7.25% PIK), 11/15/22 (a)(j)	USD		23,804		27,195,852
SPX FLOW, Inc.:
5.63%, 8/15/24 (a)			11,537		11,710,055
5.88%, 8/15/26 (a)			9,913		10,024,521
					149,755,271
Marine — 0.0%
Onorato Armatori SpA, 7.75%, 2/15/23	EUR		3,578		3,878,689

See Notes to Financial Statements.

52 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Media — 9.5%
Altice Luxembourg SA:
7.75%, 5/15/22 (a)	USD		25,172	$	26,871,110
6.25%, 2/15/25	EUR		5,404		6,092,772
7.63%, 2/15/25 (a)	USD		12,996		13,320,900
Altice U.S. Finance I Corp.:
5.38%, 7/15/23 (a)			58,272		60,238,680
5.50%, 5/15/26 (a)			27,493		28,249,057
Altice U.S. Finance II Corp., 7.75%, 7/15/25 (a)			58,731		63,429,480
AMC Networks, Inc.:
4.75%, 12/15/22			18,964		19,201,050
5.00%, 4/01/24			15,085		15,179,281
Cablevision Systems Corp.:
8.63%, 9/15/17			7,297		7,643,607
7.75%, 4/15/18			38,072		40,261,140
8.00%, 4/15/20			8,135		8,521,413
CCO Holdings LLC/CCO Holdings Capital Corp.:
5.25%, 9/30/22			36,170		37,797,650
5.13%, 5/01/23 (a)			38,264		39,938,050
5.88%, 4/01/24 (a)			20,252		21,606,859
5.75%, 2/15/26 (a)			20,862		22,113,720
5.50%, 5/01/26 (a)			26,491		27,616,867
5.88%, 5/01/27 (a)			58,597		62,405,805
Cengage Learning Acquisitions, Inc., 0.00%, 4/15/20 (c)(d)(k)(m)			14,769		1
Cequel Communications Holdings I LLC/Cequel Capital Corp.:
6.38%, 9/15/20 (a)			5,648		5,817,440
5.13%, 12/15/21 (a)			41,832		41,727,838
5.13%, 12/15/21 (a)			18,959		18,959,000
Clear Channel International BV, 8.75%, 12/15/20 (a)			28,688		30,696,160
Clear Channel Worldwide Holdings, Inc.:
Series A, 7.63%, 3/15/20			18,475		17,736,000
Series A, 6.50%, 11/15/22			24,852		25,038,390
Series B, 7.63%, 3/15/20			33,790		33,494,337
Series B, 6.50%, 11/15/22			124,621		129,761,616
CSC Holdings LLC:
10.13%, 1/15/23 (a)			72,581		83,649,603
5.25%, 6/01/24			69,844		66,351,800
6.63%, 10/15/25 (a)			12,290		13,334,650
10.88%, 10/15/25 (a)			26,211		30,666,870
DISH DBS Corp.:
6.75%, 6/01/21			7,772		8,393,760
5.88%, 7/15/22			7,460		7,666,866
5.00%, 3/15/23			17,330		16,853,425
5.88%, 11/15/24			14,332		14,152,850
7.75%, 7/01/26 (a)			54,945		58,379,063
DISH Network Corp., 3.38%, 8/15/26 (a)(m)			18,277		20,013,315
iHeartCommunications, Inc.:
9.00%, 12/15/19			10,046		7,948,897
9.00%, 3/01/21			10,107		7,529,715
9.00%, 9/15/22			24,190		17,598,225
10.63%, 3/15/23			44,752		33,340,240
LGE HoldCo VI BV, 7.13%, 5/15/24			1,000		1,250,857
Live Nation Entertainment, Inc., 5.38%, 6/15/22 (a)			3,850		3,975,125
McGraw-Hill Global Education Holdings LLC/McGraw-Hill Global Education Finance, 7.88%, 5/15/24 (a)			5,926		6,400,080
MDC Partners, Inc., 6.50%, 5/01/24 (a)			31,690		29,313,250
Midcontinent Communications & Midcontinent Finance Corp., 6.25%, 8/01/21 (a)			13,295		13,926,513
National CineMedia LLC, 5.75%, 8/15/26 (a)			5,844		6,063,150
Nexstar Escrow Corp., 5.63%, 8/01/24 (a)			11,804		11,833,510
Nielsen Finance LLC/Nielsen Finance Co., 5.00%, 4/15/22 (a)			31,087		32,097,327

Corporate Bonds		Par   (000)		Value
Media (continued)
Outfront Media Capital LLC/Outfront Media Capital Corp.:
5.25%, 2/15/22	USD		14,104	$	14,668,160
5.63%, 2/15/24			4,602		4,786,080
5.88%, 3/15/25			2,700		2,835,000
Radio One, Inc., 7.38%, 4/15/22 (a)			4,415		4,437,075
RCN Telecom Services LLC/RCN Capital Corp., 8.50%, 8/15/20 (a)			9,410		10,033,413
Regal Entertainment Group, 5.75%, 2/01/25			3,919		3,948,393
SFR Group SA:
5.38%, 5/15/22	EUR		2,921		3,387,965
6.00%, 5/15/22 (a)	USD		52,542		53,592,840
5.63%, 5/15/24	EUR		5,252		6,088,660
7.38%, 5/01/26 (a)	USD		132,873		135,821,452
Sirius XM Radio, Inc.:
5.75%, 8/01/21 (a)			3,085		3,229,995
4.63%, 5/15/23 (a)			18,081		18,081,000
TEGNA, Inc.:
5.13%, 10/15/19			5,496		5,640,270
4.88%, 9/15/21 (a)			11,429		11,886,160
5.50%, 9/15/24 (a)			8,106		8,369,445
Townsquare Media, Inc., 6.50%, 4/01/23 (a)			4,806		4,878,090
Tribune Media Co., 5.88%, 7/15/22			42,984		43,494,435
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH:
5.75%, 1/15/23	EUR		6,627		7,882,341
5.63%, 4/15/23			1,078		1,281,344
4.00%, 1/15/25	USD		6,711		7,746,158
4.63%, 2/15/26	EUR		4,000		4,763,028
3.50%, 1/15/27	USD		3,741		4,139,437
Univision Communications, Inc.:
8.50%, 5/15/21 (a)			819		847,665
6.75%, 9/15/22 (a)			1,480		1,570,650
5.13%, 5/15/23 (a)			50,428		51,058,350
5.13%, 2/15/25 (a)			62,078		62,465,987
UPCB Finance IV Ltd., 4.00%, 1/15/27	EUR		8,500		9,453,038
Virgin Media Receivables Financing Notes I DAC, 5.50%, 9/15/24	GBP		2,550		3,312,601
					1,784,156,346
Metals & Mining — 5.3%
Alcoa Nederland Holding BV:
6.75%, 9/30/24 (a)	USD		7,135		7,411,481
7.00%, 9/30/26 (a)			6,617		6,840,324
Alcoa, Inc.:
6.15%, 8/15/20 (l)			11,850		13,064,625
5.13%, 10/01/24 (l)			26,349		28,028,749
5.90%, 2/01/27 (l)			1,200		1,284,000
6.75%, 1/15/28 (l)			2,652		2,897,310
5.95%, 2/01/37 (l)			1,480		1,488,140
Anglo American Capital PLC:
6.88%, 5/01/18	GBP		1,000		1,387,910
2.50%, 9/18/18	EUR		1,000		1,148,912
2.75%, 6/07/19			4,502		5,218,975
1.50%, 4/01/20	USD		600		660,403
3.63%, 5/14/20 (a)			9,279		9,279,000
4.45%, 9/27/20 (a)			7,280		7,407,400
2.88%, 11/20/20	EUR		2,700		3,074,474
4.13%, 4/15/21 (a)	USD		3,000		3,007,500
2.50%, 4/29/21	EUR		1,100		1,224,946
3.50%, 3/28/22			3,850		4,425,219
4.13%, 9/27/22 (a)	USD		21,681		21,464,190
3.25%, 4/03/23	EUR		3,200		3,567,882
ArcelorMittal:
7.25%, 2/25/22	USD		1,458		1,654,830

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 53

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Metals & Mining (continued)
8.00%, 10/15/39	USD		5,840	$	6,307,200
7.75%, 3/01/41			19,928		20,774,940
Constellium NV:
7.88%, 4/01/21 (a)			1,561		1,666,367
4.63%, 5/15/21	EUR		1,000		995,136
8.00%, 1/15/23 (a)	USD		44,796		45,131,970
5.75%, 5/15/24 (a)			36,992		34,217,600
First Quantum Minerals Ltd.:
7.00%, 2/15/21 (a)			5,694		5,096,130
7.25%, 5/15/22 (a)			13,506		11,952,810
Freeport-McMoRan, Inc.:
2.30%, 11/14/17			15,889		15,809,555
2.38%, 3/15/18			114,542		112,823,870
3.10%, 3/15/20			9,370		8,971,775
4.00%, 11/14/21			16,789		15,886,591
3.55%, 3/01/22			64,648		58,829,680
3.88%, 3/15/23			79,941		71,740,652
4.55%, 11/14/24			4,096		3,712,000
5.40%, 11/14/34			8,369		6,946,270
5.45%, 3/15/43			53,355		42,817,387
Glencore Finance Europe SA, 3.38%, 9/30/20	EUR		2,629		3,195,030
Joseph T Ryerson & Son, Inc., 11.00%, 5/15/22 (a)	USD		12,029		13,231,900
Kaiser Aluminum Corp., 5.88%, 5/15/24			5,126		5,356,670
Novelis Corp.:
6.25%, 8/15/24 (a)			62,714		66,555,233
5.88%, 9/30/26 (a)			55,599		56,919,476
Officine Maccaferri SpA, 5.75%, 6/01/21	EUR		3,079		2,834,538
Outokumpu OYJ, 7.25%, 6/16/21	USD		1,575		1,883,852
Steel Dynamics, Inc.:
5.13%, 10/01/21			21,444		22,274,955
6.38%, 8/15/22			12,995		13,677,237
5.25%, 4/15/23			11,386		11,812,975
5.50%, 10/01/24			9,873		10,341,967
SunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., 7.38%, 2/01/20 (a)			9,453		8,838,555
Teck Resources Ltd.:
3.00%, 3/01/19			13,718		13,512,230
4.75%, 1/15/22			4,800		4,704,000
3.75%, 2/01/23			19,825		18,164,656
8.50%, 6/01/24 (a)			30,016		34,368,320
6.13%, 10/01/35			5,915		5,560,100
6.00%, 8/15/40			29,864		27,549,540
6.25%, 7/15/41			24,022		23,001,065
5.20%, 3/01/42			22,578		19,304,190
United States Steel Corp., 8.38%, 7/01/21 (a)			20,963		22,928,281
Wise Metals Group LLC/Wise Alloys Finance Corp., 8.75%, 12/15/18 (a)			22,767		23,222,340
					997,453,313
Mortgage Real Estate Investment Trusts (REITs) — 0.0%
iStar, Inc., 4.00%, 11/01/17			5,910		5,924,775
Multiline Retail — 0.7%
Dollar Tree, Inc.:
5.25%, 3/01/20			6,868		7,125,550
5.75%, 3/01/23			94,148		101,326,785
Enterprise Funding Ltd., 3.50%, 9/10/20 (m)	GBP		3,300		3,322,157
Family Dollar Stores, Inc., 5.00%, 2/01/21 (l)	USD		18,619		20,061,973
JC Penney Corp., Inc.:
6.38%, 10/15/36			5,074		4,363,640
7.40%, 4/01/37			3,744		3,463,200
					139,663,305

Corporate Bonds		Par   (000)		Value
Oil, Gas & Consumable Fuels — 11.7%
Antero Midstream Partners LP/Antero Midstream Finance Corp., 5.38%, 9/15/24 (a)	USD		3,720	$	3,766,500
Antero Resources Corp., 5.63%, 6/01/23			2,511		2,558,081
Blackstone CQP HoldCo LP, 9.30%, 3/31/19			163,883		165,726,856
California Resources Corp., 8.00%, 12/15/22 (a)			27,430		18,240,950
Callon Petroleum Co., 6.13%, 10/01/24 (a)			5,216		5,398,560
Carrizo Oil & Gas, Inc.:
7.50%, 9/15/20			6,670		6,903,450
6.25%, 4/15/23			22,801		22,572,990
Cenovus Energy, Inc.:
5.70%, 10/15/19			3,021		3,242,808
5.20%, 9/15/43			1,300		1,167,353
Cheniere Corpus Christi Holdings LLC, 7.00%, 6/30/24 (a)			38,946		42,061,680
Chesapeake Energy Corp.:
6.50%, 8/15/17			3,040		3,085,600
3.93%, 4/15/19 (b)			32,029		29,947,115
6.63%, 8/15/20			11,999		11,294,059
6.88%, 11/15/20			10,745		10,046,575
8.00%, 12/15/22 (a)			4,255		4,313,506
5.50%, 9/15/26 (a)			17,713		17,713,000
Concho Resources, Inc., 6.50%, 1/15/22			2,585		2,681,937
CONSOL Energy, Inc.:
5.88%, 4/15/22			146,038		134,354,960
8.00%, 4/01/23			1,498		1,453,060
Continental Resources, Inc.:
5.00%, 9/15/22			20,275		20,224,313
4.50%, 4/15/23			20,125		19,320,000
3.80%, 6/01/24			34,891		31,925,265
4.90%, 6/01/44			6,787		5,701,080
Corral Petroleum Holdings AB, 11.75% (11.75% Cash or 11.75% PIK), 5/15/21 (j)	EUR		224		228,758
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp.:
6.00%, 12/15/20	USD		2,130		2,145,975
6.25%, 4/01/23			11,960		12,109,500
CrownRock LP/CrownRock Finance, Inc.:
7.13%, 4/15/21 (a)			25,699		26,855,455
7.75%, 2/15/23 (a)			9,490		10,178,025
DCP Midstream LLC:
6.45%, 11/03/36 (a)			8,632		8,394,620
6.75%, 9/15/37 (a)			16,918		16,706,525
DEA Finance SA, 7.50%, 10/15/22			2,450		2,752,221
Denbury Resources, Inc.:
9.00%, 5/15/21 (a)			13,921		14,582,247
5.50%, 5/01/22			4,275		3,067,313
Diamondback Energy, Inc., 7.63%, 10/01/21			18,219		19,312,140
Encana Corp.:
3.90%, 11/15/21 (l)			9,644		9,663,095
6.50%, 2/01/38 (l)			7,690		7,969,301
5.15%, 11/15/41 (l)			12,895		11,558,691
Energy Transfer Equity LP:
7.50%, 10/15/20			13,714		15,051,115
5.88%, 1/15/24			28,092		29,145,450
5.50%, 6/01/27			39,234		39,037,830
Extraction Oil & Gas Holdings LLC/Extraction Finance Corp., 7.88%, 7/15/21 (a)			20,030		20,831,200
Genesis Energy LP/Genesis Energy Finance Corp.:
5.75%, 2/15/21			4,525		4,525,000

See Notes to Financial Statements.

54 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par (000)		Value
Oil, Gas & Consumable Fuels (continued)
6.75%, 8/01/22	USD		16,085	$	16,573,662
6.00%, 5/15/23			4,433		4,399,753
5.63%, 6/15/24			5,473		5,363,540
Great Western Petroleum LLC/Great Western Finance, Inc., 9.00%, 9/30/21 (a)			13,713		13,747,283
Gulfport Energy Corp.:
7.75%, 11/01/20			15,846		16,460,033
6.63%, 5/01/23			6,553		6,716,825
Halcon Resources Corp., 8.63%, 2/01/20 (a)			9,440		9,487,200
Hilcorp Energy I LP/Hilcorp Finance Co.:
7.63%, 4/15/21 (a)			3,011		3,093,803
5.00%, 12/01/24 (a)			16,847		16,131,003
MEG Energy Corp.:
6.50%, 3/15/21 (a)			41,571		33,932,329
6.38%, 1/30/23 (a)			15,828		12,523,905
7.00%, 3/31/24 (a)			61,319		48,442,010
Memorial Production Partners LP/Memorial Production Finance Corp., 6.88%, 8/01/22			13,754		6,636,305
Murphy Oil Corp., 6.88%, 8/15/24			17,627		18,221,065
Newfield Exploration Co., 5.63%, 7/01/24			1,900		1,947,500
NGPL PipeCo LLC:
7.12%, 12/15/17 (a)			156,064		163,086,880
9.63%, 6/01/19 (a)			26,055		27,390,319
7.77%, 12/15/37 (a)			10,337		11,215,645
Oasis Petroleum, Inc.:
6.50%, 11/01/21			34,493		32,940,815
6.88%, 3/15/22 (l)			26,512		25,385,240
6.88%, 1/15/23			8,515		8,131,825
ONEOK, Inc.:
4.25%, 2/01/22			4,946		4,847,080
7.50%, 9/01/23			16,365		18,328,800
Parsley Energy LLC/Parsley Finance Corp.:
7.50%, 2/15/22 (a)			33,880		35,997,500
6.25%, 6/01/24 (a)			12,092		12,484,990
PDC Energy, Inc., 7.75%, 10/15/22			17,536		18,719,680
QEP Resources, Inc.:
6.88%, 3/01/21			16,842		17,557,785
5.38%, 10/01/22			19,853		19,704,103
5.25%, 5/01/23			14,434		14,217,490
Range Resources Corp.:
5.75%, 6/01/21 (a)			4,537		4,593,713
5.88%, 7/01/22 (a)			34,505		34,850,050
5.00%, 3/15/23 (a)			18,447		18,031,943
Rockies Express Pipeline LLC:
6.85%, 7/15/18 (a)			2,091		2,200,777
6.00%, 1/15/19 (a)			6,053		6,355,650
5.63%, 4/15/20 (a)			3,595		3,792,725
6.88%, 4/15/40 (a)			38,171		39,316,130
RSP Permian, Inc., 6.63%, 10/01/22			14,714		15,412,915
Sabine Pass Liquefaction LLC:
5.63%, 2/01/21			29,233		30,877,356
6.25%, 3/15/22			6,333		6,918,803
5.63%, 4/15/23			22,172		23,668,610
5.75%, 5/15/24			42,782		46,044,127
5.63%, 3/01/25			10,777		11,585,275
5.88%, 6/30/26 (a)			32,239		35,039,763
5.00%, 3/15/27 (a)			29,430		30,165,750
Sabine Pass LNG LP, 6.50%, 11/01/20			5,055		5,231,925
Sanchez Energy Corp.:
7.75%, 6/15/21			2,010		1,768,800
6.13%, 1/15/23 (l)			57,758		46,350,795
Seven Generations Energy Ltd.:
8.25%, 5/15/20 (a)			8,723		9,279,091

Corporate Bonds		Par (000)		Value
Oil, Gas & Consumable Fuels (continued)
6.75%, 5/01/23 (a)	USD		10,043	$	10,419,613
6.88%, 6/30/23 (a)			44,383		46,158,320
SM Energy Co.:
6.13%, 11/15/22			14,016		14,016,000
6.50%, 1/01/23			2,878		2,906,780
5.00%, 1/15/24			5,076		4,771,440
5.63%, 6/01/25			290		272,600
6.75%, 9/15/26			9,296		9,388,960
Southwestern Energy Co.:
7.50%, 2/01/18			1,415		1,482,213
5.80%, 1/23/20			20,131		20,080,673
4.10%, 3/15/22			20,727		18,809,753
6.70%, 1/23/25			824		824,000
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., 5.50%, 9/15/24 (a)			11,660		11,747,450
Targa Resources Partners LP/Targa Resources Partners Finance Corp.:
6.88%, 2/01/21			4,979		5,140,817
6.38%, 8/01/22			23,209		24,021,315
5.25%, 5/01/23			995		1,007,437
6.75%, 3/15/24			4,996		5,345,720
5.13%, 2/01/25 (a)			5,312		5,318,640
5.38%, 2/01/27 (a)			3,189		3,208,931
Tesoro Logistics LP/Tesoro Logistics Finance Corp.:
6.13%, 10/15/21			12,348		12,903,660
6.25%, 10/15/22			90		96,075
6.38%, 5/01/24			9,641		10,339,973
TransCanada Trust, 5.88%, 8/15/76 (b)			13,975		14,785,550
Tullow Oil Jersey Ltd., 6.63%, 7/12/21			1,400		1,670,760
Tullow Oil PLC, 6.00%, 11/01/20 (a)			1,160		1,046,900
Whiting Petroleum Corp.:
1.25%, 6/05/20 (m)			46,905		45,028,838
5.75%, 3/15/21			108		100,980
Series C-1, 5.75%, 3/15/21 (m)			18,978		19,452,204
Series D-1, 6.25%, 4/01/23 (m)			2,390		2,425,525
Williams Cos., Inc.:
3.70%, 1/15/23			3,440		3,336,800
4.55%, 6/24/24			15,235		15,532,844
5.75%, 6/24/44			37,857		38,992,710
WPX Energy, Inc.:
5.25%, 1/15/17			2,920		2,941,900
7.50%, 8/01/20			3,770		3,986,775
6.00%, 1/15/22 (l)			19,071		19,035,242
8.25%, 8/01/23			11,700		12,577,500
					2,202,157,623
Paper & Forest Products — 0.2%
Lecta SA, 6.50%, 8/01/23	EUR		1,675		1,856,595
Louisiana-Pacific Corp., 4.88%, 9/15/24 (a)	USD		6,016		6,016,000
Norbord, Inc., 6.25%, 4/15/23 (a)			9,595		10,194,687
Norske Skog AS, 11.75%, 12/15/19			2,100		1,993,583
Sappi Papier Holding GmbH, 4.00%, 4/01/23	EUR		2,000		2,307,373
Stora Enso OYJ, 2.13%, 6/16/23			1,575		1,808,701
Unifrax I LLC/Unifrax Holding Co., 7.50%, 2/15/19 (a)	USD		14,252		13,325,620
					37,502,559
Personal Products — 0.2%
NBTY, Inc., 7.63%, 5/15/21 (a)			41,502		42,428,325
Pharmaceuticals — 1.6%
Capsugel SA, 7.00% (7.00% Cash or 7.75% PIK), 5/15/19 (a)(j)			4,487		4,498,217

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 55

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par   (000)		Value
Pharmaceuticals (continued)
Concordia International Corp., 7.00%, 4/15/23 (a)	USD		3,059	$	1,965,407
Endo Finance LLC, 5.75%, 1/15/22 (a)			11,305		10,428,863
Endo Finance LLC/Endo Finco, Inc., 7.25%, 1/15/22 (a)			8,766		8,415,360
Endo Ltd./Endo Finance LLC/Endo Finco, Inc.:
6.00%, 7/15/23 (a)			7,828		7,123,480
6.00%, 2/01/25 (a)			24,437		21,596,199
Mallinckrodt International Finance SA/Mallinckrodt CB LLC:
4.88%, 4/15/20 (a)			3,900		3,978,000
5.75%, 8/01/22 (a)			5,905		5,823,806
5.63%, 10/15/23 (a)			6,226		5,961,395
5.50%, 4/15/25 (a)			4,944		4,696,800
Prestige Brands, Inc., 6.38%, 3/01/24 (a)			15,850		16,840,625
Valeant Pharmaceuticals International, Inc.:
5.38%, 3/15/20 (a)			38,049		35,195,325
7.00%, 10/01/20 (a)			37,696		36,565,120
6.38%, 10/15/20 (a)			55,023		51,584,063
7.50%, 7/15/21 (a)			43,181		41,803,526
6.75%, 8/15/21 (a)			1,270		1,193,800
5.63%, 12/01/21 (a)			10,181		9,086,543
7.25%, 7/15/22 (a)			4,420		4,099,550
5.50%, 3/01/23 (a)			1,462		1,250,010
4.50%, 5/15/23	EUR		1,214		1,077,365
5.88%, 5/15/23 (a)	USD		22,915		19,764,187
6.13%, 4/15/25 (a)			20,531		17,682,324
					310,629,965
Professional Services — 0.0%
TMF Group Holding BV, 9.88%, 12/01/19	EUR		2,925		3,490,850
Real Estate Management & Development — 0.8%
Annington Finance No. 5 PLC, 13.00% (13.00% Cash or 13.50% PIK), 1/15/23 (j)	GBP		4,178		6,308,244
Aroundtown Property Holdings PLC, 3.00%, 5/05/20 (m)	USD		1,200		1,798,942
Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 8/15/17 (a)			13,400		13,467,000
Realogy Group LLC/Realogy Co-Issuer Corp.:
4.50%, 4/15/19 (a)			8,254		8,594,477
5.25%, 12/01/21 (a)(l)			34,636		36,443,445
4.88%, 6/01/23 (a)			86,582		87,988,957
Tropicana Entertainment LLC/Tropicana Finance Corp., 9.63%, 12/15/14 (d)(k)			1,115		—
					154,601,065
Road & Rail — 0.8%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.:
5.13%, 6/01/22 (a)			18,760		18,818,625
5.50%, 4/01/23			6,020		6,072,675
6.38%, 4/01/24 (a)			10,770		10,985,400
5.25%, 3/15/25 (a)			33,844		32,490,240
Avis Budget Finance PLC, 4.13%, 11/15/24	EUR		3,100		3,395,343
EC Finance PLC, 5.13%, 7/15/21			693		805,732
Florida East Coast Holdings Corp., 6.75%, 5/01/19 (a)	USD		14,608		14,973,200
Hertz Corp.:
7.38%, 1/15/21			27,642		28,713,127
5.50%, 10/15/24 (a)			21,776		21,694,340
Hertz Holdings Netherlands BV, 4.13%, 10/15/21	EUR		2,125		2,440,841
Jack Cooper Enterprises, Inc., 10.50% (10.50% Cash or 11.25% PIK), 3/15/19 (a)(j)	USD		10,696		2,780,865
Watco Cos. LLC/Watco Finance Corp., 6.38%, 4/01/23 (a)			7,749		7,826,490
					150,996,878

Corporate Bonds		Par   (000)		Value
Semiconductors & Semiconductor Equipment — 0.7%
Advanced Micro Devices, Inc.:
7.50%, 8/15/22	USD		3,731	$	3,828,939
7.00%, 7/01/24			3,170		3,114,525
Micron Technology, Inc.:
5.25%, 8/01/23 (a)			20,291		20,037,363
5.63%, 1/15/26 (a)			6,220		5,955,650
Microsemi Corp., 9.13%, 4/15/23 (a)			2,477		2,823,780
NXP BV/NXP Funding LLC:
4.13%, 6/15/20 (a)			15,678		16,638,277
4.13%, 6/01/21 (a)			23,150		24,799,437
4.63%, 6/15/22 (a)			15,667		16,920,360
3.88%, 9/01/22 (a)			9,004		9,431,690
5.75%, 3/15/23 (a)			10,277		11,022,083
4.63%, 6/01/23 (a)			9,329		10,203,594
Versum Materials, Inc., 5.50%, 9/30/24 (a)			12,028		12,358,770
					137,134,468
Software — 1.0%
BMC Software Finance, Inc., 8.13%, 7/15/21 (a)			21,061		19,112,857
Infinity Acquisition LLC/Infinity Acquisition Finance Corp., 7.25%, 8/01/22 (a)			2,990		2,601,300
Infor Software Parent LLC/Infor Software Parent, Inc., 7.13% (7.13% Cash or 7.88% PIK), 5/01/21 (a)(j)			16,832		16,327,040
Infor U.S., Inc., 6.50%, 5/15/22			68,946		69,807,825
Informatica LLC, 7.13%, 7/15/23 (a)			20,208		18,894,480
Nuance Communications, Inc.:
5.38%, 8/15/20 (a)			4,677		4,793,925
6.00%, 7/01/24 (a)			9,015		9,398,137
PTC, Inc., 6.00%, 5/15/24			6,916		7,382,830
Sophia LP, 9.00%, 9/30/23 (a)			7,280		7,644,000
SS&C Technologies Holdings, Inc., 5.88%, 7/15/23			36,534		38,452,035
Veritas U.S., Inc./Veritas Bermuda Ltd., 7.50%, 2/01/23	EUR		3,040		3,274,986
					197,689,415
Specialty Retail — 0.9%
Asbury Automotive Group, Inc., 6.00%, 12/15/24	USD		27,465		28,288,950
CST Brands, Inc., 5.00%, 5/01/23			4,076		4,284,895
Groupe Fnac SA, 3.25%, 9/30/23			1,875		2,113,401
L Brands, Inc.:
6.88%, 11/01/35			30,135		32,847,150
6.75%, 7/01/36			12,340		13,273,151
Michaels Stores, Inc., 5.88%, 12/15/20 (a)			3,542		3,674,825
Neiman Marcus Group Ltd. LLC, 8.00%, 10/15/21 (a)			33,369		27,863,115
Penske Automotive Group, Inc.:
5.75%, 10/01/22			15,176		15,745,100
5.38%, 12/01/24			10,842		10,896,210
5.50%, 5/15/26			12,374		12,343,065
Sally Holdings LLC/Sally Capital, Inc.:
5.75%, 6/01/22			4,950		5,160,375
5.50%, 11/01/23			3,225		3,402,375
Sonic Automotive, Inc., 5.00%, 5/15/23			2,939		2,894,915
THOM Europe SAS, 7.38%, 7/15/19			2,100		2,474,475
					165,262,002
Technology Hardware, Storage & Peripherals — 0.4%
Diamond 1 Finance Corp./Diamond 2 Finance Corp., 7.13%, 6/15/24 (a)			34,803		38,278,010
Western Digital Corp.:
7.38%, 4/01/23 (a)			20,664		22,730,400
10.50%, 4/01/24 (a)			7,217		8,371,720
					69,380,130

See Notes to Financial Statements.

56 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Corporate Bonds		Par (000)		Value
Textiles, Apparel & Luxury Goods — 0.1%
BiSoho SAS, 5.88%, 5/01/23	EUR		3,525	$	4,195,637
Hanesbrands, Inc.:
4.63%, 5/15/24 (a)	USD		3,407		3,496,434
4.88%, 5/15/26 (a)			8,757		8,954,033
PVH Corp.:
4.50%, 12/15/22			5,000		5,212,500
7.75%, 11/15/23			450		520,875
Springs Industries, Inc., 6.25%, 6/01/21			2,844		2,943,540
					25,323,019
Thrifts & Mortgage Finance — 0.3%
Jefferies Finance LLC/JFIN Co-Issuer Corp.:
7.38%, 4/01/20 (a)			13,150		12,821,250
6.88%, 4/15/22 (a)			24,154		22,463,220
MGIC Investment Corp., 5.75%, 8/15/23			10,772		11,202,880
Rialto Holdings LLC/Rialto Corp., 7.00%, 12/01/18 (a)			9,040		9,175,600
					55,662,950
Trading Companies & Distributors — 2.3%
Aircastle Ltd.:
7.63%, 4/15/20			1,026		1,168,357
5.13%, 3/15/21			4,779		5,107,556
5.50%, 2/15/22			18,858		20,319,495
5.00%, 4/01/23			12,550		13,146,125
American Builders & Contractors Supply Co., Inc.:
5.63%, 4/15/21 (a)			5,985		6,194,475
5.75%, 12/15/23 (a)			28,130		29,255,200
Ashtead Capital, Inc., 5.63%, 10/01/24 (a)			4,934		5,193,035
Beacon Roofing Supply, Inc., 6.38%, 10/01/23			19,508		21,068,640
BlueLine Rental Finance Corp., 7.00%, 2/01/19 (a)			26,026		22,707,685
HD Supply, Inc.:
7.50%, 7/15/20			67,648		70,259,213
5.25%, 12/15/21 (a)			95,747		101,252,453
5.75%, 4/15/24 (a)			61,318		64,383,900
Herc Rentals, Inc.:
7.50%, 6/01/22 (a)			11,060		11,447,100
7.75%, 6/01/24 (a)			6,402		6,578,055
Loxam SAS, 3.50%, 5/03/23	EUR		1,100		1,260,405
Rexel SA, 3.50%, 6/15/23	USD		7,792		8,950,134
United Rentals North America, Inc.:
7.63%, 4/15/22			8,406		8,952,390
6.13%, 6/15/23			4,701		4,930,174
4.63%, 7/15/23			18,220		18,675,500
5.75%, 11/15/24			5,519		5,725,963
5.88%, 9/15/26			1,400		1,442,000
					428,017,855
Transportation Infrastructure — 0.1%
OHL Investments SA, 4.00%, 4/25/18 (m)	EUR		3,600		3,760,995
Silk Bidco AS, 7.50%, 2/01/22	USD		2,869		3,363,910
Swissport Investments SA, 6.75%, 12/15/21			2,745		3,176,120
					10,301,025
Wireless Telecommunication Services — 3.6%
Digicel Group Ltd., 7.13%, 4/01/22 (a)			13,495		10,319,627
Digicel Ltd., 6.00%, 4/15/21 (a)			60,233		53,209,832
Matterhorn Telecom SA, 3.88%, 5/01/22	EUR		4,075		4,554,786
SoftBank Group Corp.:
4.75%, 7/30/25	USD		3,388		4,177,197
5.25%, 7/30/27			500		632,842
Sprint Capital Corp.:
6.90%, 5/01/19			13,935		14,370,469

Corporate Bonds		Par (000)		Value
Wireless Telecommunication Services (continued)
6.88%, 11/15/28	USD		67,469	$	63,336,524
8.75%, 3/15/32			3,683		3,756,660
Sprint Communications, Inc.:
9.00%, 11/15/18 (a)			134,333		148,270,049
7.00%, 8/15/20			33,125		33,290,625
Sprint Corp.:
7.25%, 9/15/21			39,317		39,464,439
7.88%, 9/15/23			43,698		43,971,113
7.13%, 6/15/24			51,126		49,847,850
7.63%, 2/15/25			38,898		38,509,020
T-Mobile USA, Inc.:
6.25%, 4/01/21			19,305		20,258,184
6.73%, 4/28/22			9,345		9,812,250
6.00%, 3/01/23			43,702		46,687,284
6.63%, 4/01/23			6,680		7,172,650
6.84%, 4/28/23			8,795		9,476,613
6.38%, 3/01/25			38,275		41,624,063
6.50%, 1/15/26			26,010		28,773,563
					671,515,640
Total Corporate Bonds — 81.4%					15,369,318,414
Floating Rate Loan Interests (b)
Air Freight & Logistics — 0.2%
Ceva Group PLC (FKA Louis No.1 PLC/TNT Logistics), Pre-Funded L/C Loan, 6.50%, 3/19/21			10,107		8,081,637
Ceva Intercompany BV, Dutch BV Term Loan, 6.50%, 3/19/21			10,393		8,309,811
Ceva Logistics Canada ULC (FKA TNT Canada ULC), Canadian Term Loan, 6.50%, 3/19/21			1,790		1,431,311
Ceva Logistics U.S. Holdings, Inc. (FKA Louis U.S. Holdco, Inc.), U.S. Term Loan, 6.50%, 3/19/21			14,345		11,469,965
					29,292,724
Airlines — 0.1%
Air Medical Group Holdings, Inc., Initial Term Loan, 4.25%, 4/28/22			8,581		8,492,901
Northwest Airlines, Inc.:
Term Loan B757-200 (N551), 2.46%, 9/10/18			2,786		2,723,543
Term Loan B757-200 (N554), 2.46%, 9/10/18			2,811		2,747,427
Term Loan B757-300 (N550), 1.77%, 3/10/17			2,768		2,698,396
Term Loan B757-300 (N583), 2.39%, 3/10/17			1,139		1,130,458
Term Loan B757-300 (N584), 2.39%, 3/10/17			1,141		1,133,778
					18,926,503
Chemicals — 0.2%
Ascend Performance Materials Operations LLC, Term B Loan, 6.75%, 8/12/22			28,947		28,512,555
Chemours Co., Tranche B Term Loan, 3.75%, 5/12/22			1,512		1,495,980
MacDermid, Inc. (Platform Specialty Products Corp.), Tranche B-3 Term Loan, 5.50%, 6/07/20			10,999		11,040,146
					41,048,681

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 57

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Floating Rate Loan Interests(b)		Par (000)		Value
Commercial Services & Supplies — 0.1%
Laureate Education, Inc., Series 2021 Extended Term Loan, 8.16%, 3/17/21	USD		15,029	$	14,935,117
Construction & Engineering — 0.1%
Brand Energy & Infrastructure Services, Inc. (FKA FR Brand Acquisition Corp.), Initial Term Loan, 4.75%, 11/26/20			24,921		24,616,794
Containers & Packaging — 0.1%
BWay Intermediate Co., Inc., Initial Term Loan, 5.50% - 7.00%, 8/14/20			10,842		10,893,137
Diversified Financial Services — 0.1%
Camelot Finance LP (Camelot Cayman LP) (AKA Thomson Reuters Intellectual Property & Science), Initial Term Loan, 3.75%, 9/15/23			19,870		19,884,903
Diversified Telecommunication Services — 1.0%
Hawaiian Telcom Communications, Inc., Term Loan, 5.25%, 6/06/19			1,103		1,108,396
Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19			71,572		67,976,551
Ligado Networks LLC (FKA New LightSquared LLC), Junior Loan, 13.50%, 12/07/20 (d)(k)			194,888		125,702,745
					194,787,692
Electric Utilities — 0.3%
Energy Future Intermediate Holding Co. LLC (EFIH Finance, Inc.), Term Loan, 4.25%, 12/19/16			8,554		8,613,878
Texas Competitive Electric Holdings Co. LLC (TXU):
Term C Loan, 5.00%, 10/31/17			8,105		8,162,960
Term Loan, 5.00%, 10/31/17			35,274		35,526,136
					52,302,974
Electrical Equipment — 0.3%
Cortes NP Acquisition Corp., 9/29/23			48,501		47,288,475
Energy Equipment & Services — 0.1%
Weatherford International Ltd., Loan, 1.96%, 7/13/20			23,479		22,305,295
Food Products — 0.1%
Chobani LLC, Term B Loan (First Lien), 5.25%, 9/29/23			20,836		20,731,820
Health Care Equipment & Supplies — 0.2%
Alere, Inc. (FKA IM U.S. Holdings LLC), B Term Loan, 4.25%, 6/20/22			18,634		18,476,176
DJO Finance LLC, Initial Term Loan, 4.25%, 6/08/20			10,204		10,012,348
Immucor, Inc. (FKA IVD Acquisition Corp.), Term B-2 Loan, 5.00%, 8/17/18			15,338		14,929,164
					43,417,688
Health Care Providers & Services — 0.1%
MPH Acquisition Holdings LLC, Initial Term Loan, 5.00%, 6/07/23			19,917		20,156,733
Vizient, Inc., Initial Term Loan, 6.25%, 2/13/23			6,083		6,147,453
					26,304,186
Hotels, Restaurants & Leisure — 0.9%
Amaya Holdings BV:
Initial Term B Loan (First Lien), 5.00%, 8/01/21			28,548		28,512,319
Initial Term B Loan (Second Lien), 8.00%, 8/01/22			1,175		1,166,798
Caesars Entertainment Resort Properties LLC, Term B Loan, 7.00%, 10/11/20			134,639		134,218,737
Scientific Games International, Inc., Initial Term Loan, 6.00%, 10/18/20			8,575		8,599,044
					172,496,898

Floating Rate Loan Interests(b)		Par (000)		Value
Insurance — 0.2%
Alliant Holdings Intermediate LLC, 2016 Term Loan, 5.25%, 8/12/22	USD		15,372	$	15,403,217
AssuredPartners, Inc., First Lien Term Loan, 5.75%, 10/21/22			7,561		7,591,805
Solera LLC (Solera Finance, Inc.), Dollar Term Loan, 5.75%, 3/03/23			15,393		15,543,344
					38,538,366
IT Services — 0.1%
Engility Corp. (FKA TASC, Inc.):
Term B1 Loan, 4.88%, 8/12/20			5,698		5,750,251
Term B2 Loan, 5.75% - 7.25%, 8/14/23			10,559		10,654,650
WEX, Inc., Term B Loan, 4.25%, 6/30/23			9,052		9,150,349
					25,555,250
Leisure Products — 0.1%
Leslie’s Poolmart, Inc., Tranche B Term Loan, 5.25%, 8/16/23			9,977		10,035,166
Life Sciences Tools & Services — 0.4%
DPX Holdings BV (FKA JLL/Delta Dutch Newco BV), 2015 Incremental Dollar Term Loan, 4.25%, 3/11/21			19,553		19,519,994
InVentiv Health, Inc. (FKA Ventiv Health, Inc.), Term Loan B, 3.75%, 9/29/23			21,556		21,600,836
Jaguar Holding Co. I (AKA Pharmaceutical Product Development, Inc.), Initial Term Loan, 4.25%, 8/18/22			36,243		36,352,746
					77,473,576
Machinery — 0.3%
Accudyne Industries Borrower SCA/Accudyne Industries LLC (FKA Silver II U.S. Holdings LLC), Refinancing Term Loan, 4.00%, 12/13/19			24,620		22,978,905
Gates Global LLC, Initial Dollar Term Loan, 4.25%, 7/06/21			30,445		29,960,668
					52,939,573
Media — 0.4%
Advantage Sales & Marketing, Inc.:
Initial Term Loan (First Lien), 4.25%, 7/23/21			7,972		7,867,703
Term Loan (Second Lien), 7.50%, 7/25/22			21,373		20,277,807
Cengage Learning Acquisitions, Inc. (FKA TL Acquisitions, Inc.), Term Loan, 0.00%, 6/30/16 (c)(d)(k)			7,781		1
iHeartCommunications, Inc. (FKA Clear Channel Communications, Inc.), Tranche D Term Loan, 7.27%, 1/30/19			56,159		43,140,073
Telenet Financing USD LLC, Term Loan AD Facility, 4.36%, 6/30/24			12,260		12,351,950
					83,637,534
Metals & Mining — 0.2%
FMG Resources (August 2006) Property Ltd. (FMG America Finance, Inc.), Term Loan, 4.25%, 6/30/19			24,103		24,069,492
Novelis, Inc., Initial Term Loan, 4.00% - 4.09%, 6/02/22			8,771		8,809,357
					32,878,849
Oil, Gas & Consumable Fuels — 0.9%
California Resources Corp., Term Loan, 3.70%, 9/24/19			16,943		16,116,905
Chesapeake Energy Corp., Class A Loan, 8.50%, 8/23/21			81,561		85,562,418
CITGO Holding, Inc., Term Loan, 9.50%, 5/12/18			10,550		10,665,704

See Notes to Financial Statements.

58 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Floating Rate Loan Interests(b)		Par (000)		Value
Oil, Gas & Consumable Fuels (continued)
MEG Energy Corp., New Term Loan, 3.75%, 3/31/20	USD		5,188	$	4,828,731
Ultra Resources, Inc., Revolving Credit, 4.75%, 10/06/16			50,400		46,998,000
					164,171,758
Pharmaceuticals — 0.2%
Valeant Pharmaceuticals International, Inc.:
Series A-3 Tranche A Term Loan, 3.72%, 10/20/18			5,017		5,010,809
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19			4,405		4,407,354
Series D-2 Tranche B Term Loan, 5.00%, 2/13/19			1,535		1,535,721
Series E-1 Tranche B Term Loan, 5.25%, 8/05/20			16,819		16,844,916
Series F-1 Tranche B Term Loan, 5.50%, 4/01/22			6,500		6,516,818
					34,315,618
Semiconductors & Semiconductor Equipment — 0.1%
Avago Technologies Cayman Holdings Ltd., Term B-3 Loan, 3.52%, 2/01/23			9,361		9,468,005
Software — 0.6%
BMC Software Finance, Inc., Initial U.S. Term Loan, 5.00%, 9/10/20			39,385		37,926,827
Infor (U.S.), Inc. (FKA Lawson Software, Inc.), Tranche B-5 Term Loan, 3.75%, 6/03/20			28,165		27,982,355
Informatica Corp., Dollar Term Loan, 4.50%, 8/05/22			10,410		10,124,023
Kronos, Inc., Initial Term Loan (Second Lien), 9.75%, 4/30/20			19,066		19,367,852
RP Crown Parent LLC, Term Loan B, 3.50%, 9/22/23			11,136		11,138,784
TIBCO Software, Inc., Term Loan, 5.50%, 12/04/20			13,646		13,433,764
					119,973,605
Specialty Retail — 0.0%
J. Crew Group, Inc., Term Loan,, 4.00%, 3/05/21			7,442		5,890,291
Total Floating Rate Loan Interests — 7.4%					1,394,110,478
Foreign Agency Obligations
Canada — 0.2%
NOVA Chemicals Corp.:
5.25%, 8/01/23 (a)			16,623		16,997,017
5.00%, 5/01/25 (a)			9,634		9,754,425
					26,751,442
France — 0.0%
Areva SA, 4.88%, 9/23/24	EUR		750		851,700
Japan — 0.0%
Softbank Group Corp., 4.00%, 7/30/22	USD		1,510		1,828,576
Total Foreign Agency Obligations — 0.2%					29,431,718

Investment Companies		Shares		Value
Financial Select Sector SPDR Fund			4,388,931	$	84,706,368
iShares iBoxx $ High Yield Corporate Bond ETF (o)			1,707,968		149,037,288
Pershing Square Holdings Ltd. (a)			14,000,000		13,965,000
SPDR Barclays High Yield Bond ETF (o)			4,976,127		182,723,383
SPDR S&P Oil & Gas Exploration & Production ETF (o)			239,422		9,208,170
Uranium Participation Corp.			1,150,920		3,438,855
Total Investment Companies — 2.4%					443,079,064
Non-Agency Mortgage-Backed Securities		Par  (000)
Commercial Mortgage-Backed Securities — 0.2%
Core Industrial Trust, Series 2015-CALW, Class G, 3.98%, 2/10/34 (a)(b)	USD		6,000		5,508,600
Credit Suisse Mortgage Capital Certificates, Series 2014-TIKI, Class F, 4.33%, 9/15/38 (a)(b)			2,330		2,205,916
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class EFX, 3.49%, 12/15/34 (a)(b)			20,075		19,242,872
GRACE Mortgage Trust, Series 2014-GRCE, Class F, 3.71%, 6/10/28 (a)(b)			1,000		988,690
Hilton USA Trust, Series 2013-HLT, Class EFX, 5.61%, 11/05/30 (a)(b)			13,572		13,592,950
Wachovia Bank Commercial Mortgage Trust, Series 2006-C28, Class AJ, 5.63%, 10/15/48 (b)			1,826		1,820,615
					43,359,643
Total Non-Agency Mortgage-Backed Securities — 0.2%					43,359,643
Other Interests (p)		Beneficial Interest (000)
Auto Components — 0.0%
Lear Corp., Escrow (d)(k)			7,955		1
Lear Corp., Escrow (d)(k)			7,495		1
					2
Capital Markets — 0.0%
Lehman Brothers Holdings Capital Trust VII Escrow Bonds (d)(k)			9,030		681,765
Lehman Brothers Holdings Capital Trust VII Escrow Bonds (d)(k)			5,675		428,463
Lehman Brothers Holdings Capital Trust VII Escrow Bonds (d)(k)			5,500		415,250
Lehman Brothers Holdings Capital Trust VII Escrow Bonds (d)(k)			2,520		190,260
Lehman Brothers Holdings Capital Trust VII Escrow Bonds (d)(k)			1,000		76,000
					1,791,738

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 59

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Other Interests (p)		Beneficial Interest (000)		Value
Electric Utilities — 0.0%
Mirant America Corp., Escrow (d)(k)	USD		3,270	$	—
Mirant America, Inc., Escrow (d)(k)			1,880		—
Mirant Americas Generation LLC, Escrow (d)(k)			1,215		—
					—
Household Durables — 0.1%
Stanley-Martin, Class B Membership Units			20		24,587,500
Media — 0.0%
Adelphia Communications Corp., Escrow (d)(k)			800		—
Adelphia Communications Corp., Escrow (d)(k)			325		16
Century Communications, Escrow (d)(k)			625		—
					16
Total Other Interests — 0.1%					26,379,256
Preferred Securities		Par   (000)
Capital Trusts
Banks — 1.6%
Banco Bilbao Vizcaya Argentaria SA:
6.75% (b)(n)			5,200		5,404,100
8.88% (b)(n)			600		707,714
7.00% (b)(n)	EUR		9,800		10,239,100
Banco Popular Espanol SA:
8.25% (b)(n)	USD		2,800		2,842,652
11.50% (b)(n)	EUR		6,400		7,405,161
Banco Santander SA, 6.25% (b)(n)			4,700		4,725,396
Bank of America Corp.:
Series AA, 6.10% (b)(n)	USD		16,496		17,197,080
Series X, 6.25% (b)(n)			29,294		30,505,307
Series Z, 6.50% (b)(n)			21,036		22,784,617
Bank of Ireland, 7.38% (b)(n)	EUR		1,016		1,086,717
Barclays PLC, 7.88% (b)(n)	USD		2,200		2,166,085
BNP Paribas SA:
7.20% (b)(n)			1,100		1,237,500
7.38% (a)(b)(n)			675		673,313
Citigroup, Inc.:
5.95% (b)(n)			32,916		33,924,320
6.25% (b)(n)			13,000		13,991,250
Series N, 5.80% (b)(n)			19,380		19,546,804
Series O, 5.88% (b)(n)			6,570		6,636,357
Series R, 6.13% (b)(n)			14,372		14,946,880
Cooperatieve Rabobank UA:
5.50% (b)(n)	EUR		2,300		2,561,111
6.63% (b)(n)			1,000		1,181,088
Intesa Sanpaolo SpA:
7.00% (b)(n)			5,900		6,130,714
7.70% (a)(b)(n)	USD		8,475		7,415,625
JPMorgan Chase & Co.:
Series 1, 7.90% (b)(n)			11,830		12,155,325
Series V, 5.00% (b)(n)			22,540		22,224,440
Royal Bank of Scotland Group PLC, 8.63% (b)(n)			10,371		10,150,616
Societe Generale SA, 7.38% (a)(b)(n)			3,150		3,087,000
Wells Fargo & Co., Series U, 5.88% (b)(n)			31,269		33,926,865
					294,853,137
Capital Markets — 0.3%
Credit Suisse Group AG, 6.25% (a)(b)(n)			6,104		5,775,910
Goldman Sachs Group, Inc.:
Series L, 5.70% (b)(n)			13,836		14,026,245
Series O, 5.30% (b)(n)			9,380		9,614,500

Capital Trusts		Par (000)		Value
Electric Utilities — 0.1%
Morgan Stanley, Series H, 5.45% (b)(n)	USD		8,391	$	8,419,026
UBS Group AG:
5.75% (b)(n)	EUR		5,350		6,184,770
6.88% (b)(n)	USD		1,966		1,938,574
7.00% (b)(n)			1,775		1,872,625
					47,831,650
Chemicals — 0.0%
Solvay Finance SA, 5.12% (n)			2,336		2,779,853
Diversified Financial Services — 0.0%
HBOS Capital Funding LP, 6.85% (n)			650		658,125
Origin Energy Finance Ltd.:
7.88%, 6/16/71 (b)	EUR		1,000		1,191,038
4.00%, 9/16/74 (b)			550		592,551
					2,441,714
Diversified Telecommunication Services — 0.0%
Koninklijke KPN NV, 6.13% (b)(n)			3,332		4,019,069
Enel SpA:
6.50%, 1/10/74 (b)			5,715		6,939,996
5.00%, 1/15/75 (b)			1,500		1,792,158
7.75%, 9/10/75 (b)	GBP		950		1,367,859
Gas Natural Fenosa Finance BV:
3.38% (b)(n)	USD		4,100		4,388,136
4.13% (b)(n)			1,900		2,187,735
					16,675,884
Insurance — 0.0%
Assicurazioni Generali SpA, 6.42% (b)(n)	GBP		2,200		2,885,756
Credit Agricole SA, 6.50% (b)(n)	EUR		4,590		5,122,687
					8,008,443
Media — 0.0%
NBCUniversal Enterprise, Inc., 5.25% (a)(n)	USD		2,827		3,017,823
Oil, Gas & Consumable Fuels — 0.1%
DCP Midstream LLC, 5.85%, 5/21/43 (a)(b)			2,865		2,377,950
Repsol International Finance BV, 4.50%, 3/25/75 (b)	EUR		4,531		4,760,810
TOTAL SA, 3.88% (b)(n)	USD		5,475		6,525,545
					13,664,305
Wireless Telecommunication Services — 0.1%
Orange SA:
4.00% (b)(n)	EUR		1,000		1,186,544
5.00% (b)(n)			2,100		2,557,325
5.75% (b)(n)	GBP		1,500		2,103,154
Telefonica Europe BV:
3.75% (n)	USD		1,500		1,676,457
4.20% (b)(n)			11,600		13,389,276
5.00% (b)(n)	EUR		2,400		2,805,783
6.50% (b)(n)			1,000		1,206,203
6.75% (b)(n)	GBP		900		1,247,140
					26,171,882
Total Capital Trusts — 2.2%					419,463,760

See Notes to Financial Statements.

60 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Preferred Securities	Shares		Value
Preferred Stocks
Diversified Financial Services — 0.1%
Concrete Investment II SCA (d)(n)		34,464		$    4,452,263
Hotels, Restaurants & Leisure — 0.6%
Amaya, Inc. (d)(m)(n)		131,343		116,771,581
Wireless Telecommunication Services — 0.0%
CF-B L2 (D), LLC (Acquired 4/08/15- 12/07/15, cost $3,422,703) (d)(f)(n)		3,446,312		2,834,592
Total Preferred Stocks — 0.7%				124,058,436
Trust Preferreds
Consumer Finance — 0.3%
GMAC Capital Trust I, Series 2, 6.60%, 2/15/40 (b)		2,348,443		59,673,937
Total Preferred Securities — 3.2%				603,196,133
Warrants
Media — 0.0%
HMH Holdings, Inc. (Education Media) (Expires 6/22/19) (d)		11,931		18,736
Oil, Gas & Consumable Fuels — 0.0%
Peninsula Energy Ltd. (Expires 12/31/17) (d)(h)		1,961,180		—
Peninsula Energy Ltd. (Expires 12/31/18) (d)(h)		3,502,309		214,440
				214,440
Total Warrants — 0.0%				233,176
Total Long-Term Investments (Cost — $18,827,343,138) — 100.7%				19,011,490,058

Short-Term Securities		Shares		Value
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (q)(r)			258,744,884	$	258,744,884
		Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.51% (q)(r)(s)	USD		199,273		199,272,779
Total Short-Term Securities (Cost — $458,017,663) — 2.4%					458,017,663
Options Purchased
(Cost — $2,305,800) — 0.0%					485,829
Total Investments Before Options Written (Cost — $19,287,666,601) — 103.1%					19,469,993,550
Options Written
(Premiums Received — $ 171,000) — (0.0)%					(27,088	)
Total Investments Net of Options Written — 103.1%					19,469,966,462
Liabilities in Excess of Other Assets — (3.1)%					(591,570,541	)
Net Assets — 100.0%				$	18,878,395,921

      Notes to Consolidated Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

(c) Zero-coupon bond.

(d) Non-income producing security.

(e) Securities contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately.

(f) Restricted security as to resale, excluding 144A securities. As of period end, the Fund held restricted securities with a current value of $2,932,839 and an original cost of $3,520,950 which was less than 0.05% of its net assets.

(g) All or a portion of security is held by a wholly-owned subsidiary.

(h) During the year ended September 30, 2016, investments in issuers that are affiliated persons and/or related parties of the Fund, as applicable, were as follows:

Affiliate	Shares Held at September 30, 2015		Shares Purchased		Shares Sold			Shares Held at September 30, 2016		Value at September 30, 2016		Realized Loss
Peninsula Energy Ltd.		13,944,025		—		(1	)		13,944,024		$5,957,962		$  (1	)
Peninsula Energy Ltd., Warrants (Expires 12/31/15)		3,406,493		—		(3,406,493	)		—		—		(14	)
Peninsula Energy Ltd., Warrants (Expires 12/31/17)		1,961,180		—		—			1,961,180		—		—
Peninsula Energy Ltd., Warrants (Expires 12/31/18)		3,502,309		—		—			3,502,309		214,440		—
Total											$6,172,402		$(15	)

(i) All or a portion of security has been pledged as collateral in connection with outstanding OTC derivatives.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 61

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

(j) Payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.

(k) Issuer filed for bankruptcy and/or is in default.

(l) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(m) Convertible security.

(n) Perpetual security with no stated maturity date.

(o) Security, or a portion of security, is on loan.

(p) Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

(q) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2015		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2016		Value at September 30, 2016		Income			Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		677,378,350		—			(677,378,350	)1		—		—	$	1,062,742		$	15,283
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		258,744,884	2		—			258,744,884		$258,744,884		17,570			—
BlackRock Liquidity Series, LLC, Money Market Series		—	$	199,272,779	2		—		$	199,272,779		199,272,779		495,663	3		—
iShares iBoxx $ High Yield Corporate Bond ETF		—		17,591,939			(15,883,971	)		1,707,968		149,037,288		8,021,607			4,569,234
Total												$607,054,951	$	9,597,582		$	4,584,517

¹  Represents net shares sold.

²  Represents net shares/beneficial interest purchased.

³  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

(r) Current yield as of period end.

(s) Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements
Counterparty	Interest Rate			Trade Date		Maturity Date1		Face Value			Face Value Including Accrued Interest		Type of Underlying Collateral		Remaining Contractual Maturity of the Agreements
RBC Capital Markets, LLC		(0.25	)%		6/29/16		Open		$	14,312,220		$ 14,303,076		Corporate Bonds		Open/Demand
Deutsche Bank Securities, Inc.		(3.00	)%		7/14/16		Open			13,755,000		13,664,446		Corporate Bonds		Open/Demand
Barclays Capital, Inc.		(4.00	)%		8/04/16		Open			3,750,000		3,726,250		Corporate Bonds		Open/Demand
Deutsche Bank Securities, Inc.		(0.38	)%		8/09/16		Open			9,512,500		9,507,347		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/18/16		Open			18,153,525		18,170,166		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/18/16		Open			8,727,820		8,735,821		Corporate Bonds		Open/Demand
Barclays Capital, Inc.		0.00	%		8/25/16		Open			4,310,344		4,310,344		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/25/16		Open			35,860,050		35,887,692		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/29/16		Open			26,408,250		26,426,406		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/29/16		Open			18,216,000		18,228,524		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/29/16		Open			3,083,520		3,085,640		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.64	%		8/30/16		Open			20,975,990		20,987,923		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/30/16		Open			11,790,750		11,798,610		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/30/16		Open			2,744,820		2,746,650		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/30/16		Open			1,161,000		1,161,774		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		8/30/16		Open			1,361,600		1,362,508		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		1.00	%		8/30/16		Open			7,166,090		7,172,460		Corporate Bonds		Open/Demand
HSBC Securities (USA), Inc.		1.00	%		9/01/16		Open			24,504,000		24,523,739		Corporate Bonds		Open/Demand
HSBC Securities (USA), Inc.		1.00	%		9/08/16		Open			5,717,000		5,720,017		Corporate Bonds		Open/Demand
HSBC Securities (USA), Inc.		1.00	%		9/13/16		Open			32,311,000		32,325,360		Corporate Bonds		Open/Demand
Deutsche Bank Securities, Inc.		1.10	%		9/14/16		Open			48,021,000		48,044,477		Corporate Bonds		Open/Demand
Deutsche Bank Securities, Inc.		1.10	%		9/14/16		Open			36,734,000		36,751,959		Corporate Bonds		Open/Demand

See Notes to Financial Statements.

62 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Counterparty	Interest Rate			Trade Date		Maturity Date1		Face Value		Face Value     Including     Accrued Interest		Type of Underlying Collateral		Remaining Contractual Maturity of the Agreements
Deutsche Bank Securities, Inc.		1.10	%		9/14/16		Open		$  48,343,000		$  48,366,634		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		1.00	%		9/19/16		Open		5,596,440		5,597,995		Corporate Bonds		Open/Demand
Barclays Capital, Inc.		(0.75	)%		9/21/16		Open		4,313,913		4,313,194		Corporate Bonds		Open/Demand
HSBC Securities (USA), Inc.		0.95	%		9/22/16		Open		10,279,000		10,281,441		Corporate Bonds		Open/Demand
HSBC Securities (USA), Inc.		0.95	%		9/22/16		Open		34,136,000		34,144,107		Corporate Bonds		Open/Demand
Barclays Capital, Inc.		0.00	%		9/23/16		Open		3,827,268		3,827,269		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.75	%		9/26/16		Open		15,829,550		15,830,539		Corporate Bonds		Open/Demand
RBC Capital Markets, LLC		0.00	%		9/30/16		Open		7,267,050		7,267,050		Corporate Bonds		Open/Demand
Total									$478,168,700		$478,269,418

¹ Certain agreements have no stated maturity and can be terminated by either party at any time.

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Short	Issue	Expiration	Notional Value			Unrealized Depreciation
(82)	Euro-Bobl	December 2016		USD	12,167,492	$	(12,056	)
(1,023)	Russell 2000 Mini Index	December 2016		USD	127,701,090		(3,920,954	)
(4,695)	S&P 500 E-Mini Index	December 2016		USD	507,153,900		(8,259,115	)
Total						$	(12,192,125	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
EUR	2,500,000	USD	2,803,973	Australia & New Zealand Bank Group Ltd.	10/05/16		$     5,087
EUR	10,702,000	USD	12,027,545	Barclays Bank PLC	10/05/16		(2,522	)
EUR	8,250,000	USD	9,290,170	Morgan Stanley & Co. International PLC	10/05/16		(20,273	)
EUR	2,500,000	USD	2,805,363	Standard Chartered Bank	10/05/16		3,697
GBP	1,800,000	USD	2,384,158	Commonwealth Bank of Australia	10/05/16		(50,852	)
GBP	2,611,000	USD	3,467,876	Goldman Sachs International	10/05/16		(83,286	)
USD	11,189,143	AUD	14,898,000	Commonwealth Bank of Australia	10/05/16		(211,693	)
USD	140,377,812	CAD	184,150,000	Westpac Banking Corp.	10/05/16		8,828
USD	241,122	EUR	216,000	Australia & New Zealand Bank Group Ltd.	10/05/16		(1,581	)
USD	1,092,907	EUR	971,000	Barclays Bank PLC	10/05/16		1,868
USD	1,821,830	EUR	1,622,000	Citibank N.A.	10/05/16		(688	)
USD	2,001,310	EUR	1,781,000	Citibank N.A.	10/05/16		136
USD	4,408,264	EUR	3,926,000	Citibank N.A.	10/05/16		(3,083	)
USD	2,359,489	EUR	2,102,000	HSBC Bank PLC	10/05/16		(2,369	)
USD	2,399,686	EUR	2,150,000	HSBC Bank PLC	10/05/16		(16,105	)
USD	157,168	EUR	140,000	Morgan Stanley & Co. International PLC	10/05/16		(139	)
USD	697,272	EUR	624,000	Morgan Stanley & Co. International PLC	10/05/16		(3,869	)
USD	5,571,681	EUR	4,977,000	Morgan Stanley & Co. International PLC	10/05/16		(20,596	)
USD	15,429,188	EUR	13,791,000	Royal Bank of Scotland PLC	10/05/16		(66,709	)
USD	660,706,357	EUR	592,277,000	Royal Bank of Scotland PLC	10/05/16		(4,790,242	)
USD	695,616	EUR	623,000	Standard Chartered Bank	10/05/16		(4,401	)
USD	1,998,757	EUR	1,778,000	Standard Chartered Bank	10/05/16		954
USD	712,408	GBP	544,000	Goldman Sachs International	10/05/16		7,231
USD	1,267,644	GBP	977,000	Goldman Sachs International	10/05/16		1,177
USD	141,900,145	GBP	108,205,000	Royal Bank of Scotland PLC	10/05/16		1,636,049

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 63

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

Currency Purchased		Currency Sold			Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
USD	11,352,082		AUD	14,898,000	BNP Paribas S.A.	11/03/16		$          317
USD	140,300,711		CAD	184,150,000	JPMorgan Chase Bank N.A.	11/03/16		698,480
USD	671,534,576		EUR	598,249,000	Royal Bank of Scotland PLC	11/03/16		302,514
USD	141,081,630		GBP	108,715,000	Nomura International PLC	11/03/16		2,641,448
Total								$     29,378

Exchange-Traded Options Purchased
Description	Put/Call	Expiration Date	Strike Price		Contracts	Value
U.S. Treasury Bonds (30 Year) Futures	Put	10/21/16	USD	164.00	1,313	$410,313

OTC Options Purchased
Description	Put/Call	Counterparty	Expiration Date	Strike Price		Contracts	Value
Marsico Parent Superholdco LLC	Call	Goldman Sachs & Co.	12/14/19	USD	942.86	107		$1

OTC Credit Default Swaptions Purchased

Description

Counterparty

Put/ Call

Strike Price

Pay/Receive Floating Rate Index

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

Bought Protection on 5-Year Credit Default Swap

Goldman Sachs International

Put

USD

103.00

Pay

CDX.NA.HY Series 26 Version 1

10/19/16

USD

90,000

$75,515

OTC Credit Default Swaptions Written

Description

Counterparty

Put/ Call

Strike Price

Pay/Receive Floating Rate Index

Floating Rate Index

Rating1

Expiration Date

Notional Amount2 (000)

Value

Sold Protection on 5-Year Credit Default Swap

Goldman Sachs International

Put

USD

100.00

Receive

CDX.NA.HY Series 26 Version 1

B+

10/19/16

USD

90,000

$

(27,088

)

¹  Using S&P’s rating of the underlying securities of the index.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

Centrally Cleared Credit Default Swaps — Buy Protection

Index

Pay Fixed Rate

Expiration Date

Notional Amount (000)

Unrealized Depreciation

iTraxx Europe Crossover Series 26 Version 1

5.00

%

12/20/21

EUR

12,710

$(56,439

)

Centrally Cleared Credit Default Swaps — Sell Protection

Index

Receive Fixed Rate

Expiration Date

Credit Rating1

Notional Amount (000)2

Unrealized Appreciation

CDX.NA.HY Series 27 Version 1

5.00

%

12/20/21

B+

USD

574,825

$2,454,692

¹  Using S&P’s rating of the underlying securities of the index.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

64 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

OTC Credit Default Swaps — Sell Protection

Issuer	Receive Fixed Rate			Counterparty		Expiration Date		Credit Rating1		Notional Amount (000)2			Value		Premiums Paid (Received)			Unrealized Appreciation
Charter Communication, Inc.		8.00	%		Deutsche Bank AG		9/20/17		Not Rated		USD	16,770		$1,303,719		$      (390	)		$1,304,109
CNH Industrial NV		5.00	%		BNP Paribas S.A.		12/20/20		BB+		EUR	1,489		198,596		146,053			52,543
CNH Industrial NV		5.00	%		Goldman Sachs International		6/20/21		BB+		EUR	591		80,352		55,456			24,896
Total														$1,582,667		$201,119			$1,381,548

¹  Using S&P’s rating of the issuer.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

OTC Total Return Swaps

Reference Entity	Fixed Rate/ Floating Rate		Counterparty		Expiration Date		Notional Amount/ Contract Amount (000)				Value		Premiums Received			Unrealized Appreciation
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		12/20/16		USD	35,000			$  2,452,926		$  (32,729	)		$  2,485,655
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		12/20/16		USD	29,000			2,258,562		(25,611	)		2,284,173
iBoxx USD Liquid High Yield Index		3-month LIBOR1		JPMorgan Chase Bank N.A.		12/20/16		USD	96,000			6,643,319		(98,082	)		6,741,401
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Morgan Stanley & Co. International PLC		12/20/16		USD	34,500			2,388,233		(35,248	)		2,423,481
iBoxx USD Liquid High Yield Index		3-month LIBOR1		JPMorgan Chase Bank N.A.		12/20/16		USD	34,500			1,757,274		(47,197	)		1,804,471
Markit iBoxx USD Liquid High Yield Oil & Gas (5/25/50 Issuer Cap) Index		3-month LIBOR1		Goldman Sachs International		12/20/16		USD	23,100			532,943		(21,990	)		554,933
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		3/20/17		USD	74,400			3,975,219		(1,336	)		3,976,555
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		3/20/17		USD	159,000			3,024,940		(94,242	)		3,119,182
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		3/20/17		USD	40,000			724,621		(22,990	)		747,611
Morgan Stanley Energy Long Basket Index		Overnight OIS plus 0.25%1		Morgan Stanley & Co. International PLC		3/30/17			318,314	2		2,409,270		—			2,409,270
Morgan Stanley Energy Long Basket Index		Overnight OIS plus 0.25%1		Morgan Stanley & Co. International PLC		3/30/17			43,588	2		329,911		—			329,911
Morgan Stanley Energy Long Basket Index		Overnight OIS plus 0.25%1		Morgan Stanley & Co. International PLC		3/30/17			43,129	2		326,437		—			326,437
Morgan Stanley Energy Long Basket Index		Overnight OIS plus 0.25%1		Morgan Stanley & Co. International PLC		3/30/17			21,775	2		164,812		—			164,812
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Goldman Sachs International		6/20/17		USD	23,200			285,566		(21,668	)		307,234
iBoxx USD Liquid High Yield Index		3-month LIBOR1		Morgan Stanley & Co. International PLC		6/20/17		USD	34,500			283,585		(35,940	)		319,525
iBoxx USD Liquid High Yield Index		3-month  LIBOR1		Morgan Stanley & Co. International PLC		6/20/17		USD	17,200			659,898		(5,561	)		665,459
Total												$28,217,516		$(442,594)			$28,660,110

¹  Fund receives the total return of the reference entity and pays the floating rate.

²  Contract amount shown.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 65

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

    Transactions in Options Written for the Year Ended September 30, 2016

	Calls						Puts
										Notional (000)
				Premiums								Premiums
	Contracts			Received			Contracts			USD		Received
Outstanding options, beginning of year		—			—			—			—			—
Options written		16,147			$ 501,489			57,278			90,000		$	3,850,556
Options expired		—			—			(48,078	)					(2,741,549	)
Options closed		(16,147	)		(501,489	)		(9,200	)		—			(938,007	)
Outstanding options, end of year		—			—			—			90,000		$	171,000

    Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts	Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—		—		—	$	5,307,786		—	—	$	5,307,786
Options purchased	Investments at value — unaffiliated2	—	$	75,515	$	1		—	$	410,313	—		485,829
	Unrealized appreciation on OTC swaps;
Swaps — OTC	Swap premiums paid	—		1,583,057		554,933		—		28,105,177	—		30,243,167
Swaps — centrally cleared	Net unrealized appreciation1	—		2,454,692		—		—		—	—		2,454,692
Total		—	$	4,113,264	$	554,934	$	5,307,786		28,515,490	—	$	38,491,474
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—		—	$	12,180,069		—	$	12,056	—	$	12,192,125
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—		—		—	$	5,278,408		—	—		5,278,408
Options written	Options written at value	—	$	27,088		—		—		—	—		27,088
Swaps — OTC	Swap premiums received	—		390		21,990		—		420,604	—		442,984
Swaps — centrally cleared	Net unrealized depreciation1	—		56,439		—		—		—	—		56,439
Total		—	$	83,917	$	12,202,059	$	5,278,408	$	432,660	—	$	17,997,044

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts			Equity Contracts			Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts		Total
Futures contracts	—		—		$	(90,538,623	)		—		$	(7,513,426	)		—	$	(98,052,049	)
Forward foreign currency exchange contracts	—		—			—		$	52,700,635			—			—		52,700,635
Options purchased1	—		—			(15,166,818	)		—			—			—		(15,166,818	)
Options written	—		—			3,525,802			—			—			—		3,525,802
Swaps	—	$	64,888,254			(44,615,870	)		—			31,084,454			—		51,356,838
Total	—	$	64,888,254		$	(146,795,509	)	$	52,700,635		$	23,571,028			—	$	(5,635,592	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—		—			$(36,812,984	)		—		$	1,485,620			—	$	(35,327,364	)
Forward foreign currency exchange contracts	—		—			—		$	(9,551,144	)		—			—		(9,551,144	)
Options purchased2	—	$	(464,485	)		—			—			(1,251,305	)		—		(1,715,790	)
Options written	—		143,912			—			—			—			—		143,912
Swaps	—		392,311			1,270,694			—			71,030,060			—		72,693,065
Total	—	$	71,738			$(35,542,290	)	$	(9,551,144	)	$	71,264,375			—	$	26,242,679

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

66 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

     Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — short	$	780,666,329
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	1,992,825,325
Average amounts sold — in USD	$	32,548,536
Options:
Average value of option contracts purchased	$	529,763
Average value of option contracts written	$	23,415
Average notional value of swaption contracts purchased	$	22,500,000
Average notional value of swaption contracts written	$	22,500,000
Credit default swaps:
Average notional value — buy protection	$	12,925,052
Average notional value — sell protection	$	525,739,635
Total return swaps:
Average notional value	$	883,671,329

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

     Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts		$         4,606		$	4,030,766
Forward foreign currency exchange contracts		5,307,786			5,278,408
Options		485,829	1		27,088
Swaps — centrally cleared		532,490			—
Swaps — OTC2		30,243,167			442,984
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$36,573,878		$	9,779,246
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(947,409	)		(4,030,766	)
Total derivative assets and liabilities subject to an MNA		$35,626,469		$	5,748,480

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 67

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received2			Net Amount of Derivative Assets3,5
Australia & New Zealand Bank Group Ltd		$         5,087		$       (1,581	)	—		—			$       3,506
Barclays Bank PLC		1,868		(1,868	)	—		—			—
BNP Paribas S.A		198,913		—		—		—			198,913
Citibank N.A		136		(136	)	—		—			—
Deutsche Bank AG		1,304,109		(390	)	—		$  (1,303,719	)		—
Goldman Sachs & Co		1		—		—		—			1
Goldman Sachs International		13,639,618		(330,940	)	—		(11,800,000	)		1,508,678
JPMorgan Chase Bank N.A		9,244,352		(145,279	)	—		(8,460,000	)		639,073
Morgan Stanley & Co. International PLC		6,638,895		(121,626	)	—		(4,570,000	)		1,947,269
Nomura International PLC		2,641,448		—		—		—			2,641,448
Royal Bank of Scotland PLC		1,938,563		(1,938,563	)	—		—			—
Standard Chartered Bank		4,651		(4,401	)	—		—			250
Westpac Banking Corp		8,828		—		—		—			8,828
Total		$35,626,469		$(2,544,784	)	—		$(26,133,719	)		$6,947,966
Counterparty	Derivative Liabilities Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged			Net Amount of Derivative Liabilities4,5
Australia & New Zealand Bank Group Ltd		$       1,581		$        (1,581	)	—		—			—
Barclays Bank PLC		2,522		(1,868	)	—		—			$          654
Citibank N.A		3,771		(136	)	—		—			3,635
Commonwealth Bank of Australia		262,545		—		—		—			262,545
Deutsche Bank AG		390		(390	)	—		—			—
Goldman Sachs International		330,940		(330,940	)	—		—			—
HSBC Bank PLC		18,474		—		—		—			18,474
JPMorgan Chase Bank N.A		145,279		(145,279	)	—		—			—
Morgan Stanley & Co. International PLC		121,626		(121,626	)	—		—			—
Royal Bank of Scotland PLC		4,856,951		(1,938,563	)	—		—			2,918,388
Standard Chartered Bank		4,401		(4,401	)	—		—			—
Total		$5,748,480		$(2,544,784	)	—		—			$3,203,696

¹ The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

³  Net amount represents the net amount receivable from the counterparty in the event of default.

⁴  Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities.

⁵  Net amount may also include forward foreign currency exchange contracts that are not required to be collaterized.

See Notes to Financial Statements.

68 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Schedule of Investments (continued) BlackRock High Yield Bond Portfolio

       Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	403,274,564		$	133,390,496	$	536,665,060
Common Stocks1	$	326,702,259			212,284,448			26,730,409		565,717,116
Corporate Bonds1		—			15,327,671,127			41,647,287		15,369,318,414
Floating Rate Loan Interests1		—			1,332,859,025			61,251,453		1,394,110,478
Foreign Agency Obligations		—			29,431,718			—		29,431,718
Investment Companies		429,114,064			13,965,000			—		443,079,064
Non-Agency Mortgage-Backed Securities		—			43,359,643			—		43,359,643
Other Interests1		—			1,791,738			24,587,518		26,379,256
Preferred Securities1		59,673,937			419,463,760			121,223,844		600,361,541
Warrants1		214,440			—			18,736		233,176
Short-Term Securities		258,744,884			—			—		258,744,884
Options Purchased:
Credit contracts		—			75,515			—		75,515
Equity contracts		—			—			1		1
Interest rate contracts		410,313			—			—		410,313
Subtotal	$	1,074,859,897		$	17,784,176,538		$	408,849,744	$	19,267,886,179
Investments Valued at NAV2 :										202,107,371
Total investments									$	19,469,993,550
Derivative Financial Instruments3
Assets:
Credit contracts		—		$	3,836,240			—	$	3,836,240
Equity contracts		—			554,933			—		554,933
Foreign currency exchange contracts		—			5,307,786			—		5,307,786
Interest rate contracts		—			28,105,177			—		28,105,177
Liabilities:
Credit contracts		—			(83,527	)		—		(83,527	)
Equity contracts	$	(12,180,069	)		—			—		(12,180,069	)
Foreign currency exchange contracts		—			(5,278,408	)		—		(5,278,408	)
Interest rate contracts		(12,056	)		—			—		(12,056	)
Total	$	(12,192,125	)	$	32,442,201			—	$	20,250,076

¹  See above Schedule of Investments for values in each industry.

²  As of September 30, 2016, certain of the Fund’s investments were fair valued using NAV per share or its equivalent and have been excluded from the fair value hierarchy.

³  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 69

Consolidated Schedule of Investments (concluded) BlackRock High Yield Bond Portfolio

The Fund may hold assets and/or liabilities in which the fair value, approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	28,047,185		—			—	$	28,047,185
Foreign currency at value		1,156,530		—			—		1,156,530
Cash pledged:
Futures contracts		28,723,950		—			—		28,723,950
Centrally cleared swaps		39,537,000		—			—		39,537,000
Liabilities:
Cash collateral on securities loaned at value		—	$	(199,272,779	)		—		(199,272,779	)
Cash received:
Collateral — OTC derivatives		—		(26,620,000	)		—		(26,620,000	)
Collateral — reverse repurchase agreements		—		(197,000	)		—		(197,000	)
Reverse repurchase agreements.		—		(478,269,418	)		—		(478,269,418	)
Total	$	97,464,665	$	(704,359,197	)		—	$	(606,894,532	)

During the year ended September 30, 2016, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Common Stocks			Corporate Bonds			Floating Rate Loan Interests			Non-Agency Mortgage- Backed Securities			Other Interests			Preferred Securities			Warrants			Options Purchased		Total
Assets:
Opening Balance, as of September 30, 20151		$183,049,020		$	7,535,003		$	182,537,628			$ 62,148,325		$	19,000,530		$	27,378,140		$	140,041,273		$	969,420			—	$	622,659,339
Transfers into Level 3		—			—			—			24,616,342			—			5,625			—			—			$1		24,621,968
Transfers out of Level 3		(99,311,189	)		—			(146,859,515	)		—			—			—			—			(589,987	)		—		(246,760,691	)
Other2		—			10,732,684			—			—			—			—			(10,732,684	)		—			—		—
Accrued discounts/premiums		280,489			—			58,510			447,161			24,151			—			—			—			—		810,311
Net realized gain (loss)		(1,796,527	)		(6,550,660	)		(2,992	)		(245,488	)		(473,623	)		(2,550	)		(5,105,249	)		(15	)		—		(14,177,104	)
Net change in unrealized appreciation (depreciation)2,3		997,056			5,019,060			(4,176,388	)		3,401,391			110,042			(2,793,697	)		7,707,131			(360,682	)		—		9,903,913
Purchases		73,710,060			9,994,323			16,227,325			27,130,110			—			—			—			—			—		127,061,818
Sales		(23,538,413	)		(1	)		(6,137,281	)		(56,246,388	)		(18,661,100	)		—			(10,686,627	)		—			—		(115,269,810	)
Closing Balance, as of September 30, 2016		$133,390,496		$	26,730,409		$	41,647,287			$ 61,251,453			—		$	24,587,518		$	121,223,844		$	18,736			$1	$	408,849,744
Net change in unrealized appreciation (depreciation) on investments still held at September 30, 20163		$       895,924		$	(1,497,432	)	$	(4,273,553	)		$   3,170,255			—		$	(2,796,245	)	$	7,707,131		$	(169,415	)		—	$	3,036,665

¹ The opening balance of Preferred Securities has been restated to exclude certain investments amounting to $ 3,032,935 that were fair valued using NAV per share that have been excluded from the fair value hierarchy.

²  Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

³  Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at September 30, 2016, is generally due to investments no longer held or categorized as Level 3 at year end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

70 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock Low Duration Bond Portfolio
	(Percentages shown are based on Net Assets)

Asset-Backed Securities		Par  (000)		Value
ACAS CLO Ltd., Series 2012-1AR, Class A1R, 2.11%, 9/20/23 (a)(b)	USD		23,753	$	23,752,878
Aircraft Lease Securitisation Ltd., Series 2007-1A, Class G3, 0.76%, 5/10/32 (a)(b)			396		393,128
ALM VII Ltd., Series 2012-7A, Class A1, 2.11%, 10/19/24 (a)(b)			6,000		6,000,043
AmeriCredit Automobile Receivables, Series 2016-3, Class A3, 1.46%, 5/08/21			23,030		23,058,419
AMMC CLO XII Ltd., Series 2013-12A, Class B, 2.71%, 5/10/25 (a)(b)			5,000		4,962,373
AMMC CLO XIII Ltd., Series 2013-13A, Class A1L, 2.16%, 1/26/26 (a)(b)			4,000		4,001,200
Anchorage Capital CLO Ltd., Series 2013-1A, Class A1, 1.86%, 7/13/25 (a)(b)			7,000		6,970,600
APOLLO Trust, Series 2009-1, Class A3, 3.31%, 6/03/17 (b)	AUD		2,702		2,073,885
Arbor Realty Commercial Real Estate Notes Ltd., Series 2016-FL1A, Class A, 2.20%, 9/15/26 (a)(b)	USD		8,830		8,830,000
ARES IIIR/IVR CLO Ltd., Series 2007-3RA, Class A2, 0.90%, 4/16/21 (a)(b)			5,091		5,050,031
Ares XXVII CLO Ltd., Series 2013-2A, Class Al, 1.99%, 7/28/25 (a)(b)			8,000		8,004,000
Atlas Senior Loan Fund IV Ltd., Series 2013-2A, Class A1L, 2.32%, 2/17/26 (a)(b)			10,000		10,000,000
Atrium CDO Corp.:
Series 5A, Class A4, 1.20%, 7/20/20 (a)(b)			6,010		5,917,774
Series 7AR, Class AR, 1.92%, 11/16/22 (a)(b)			4,252		4,248,745
AUTO ABS FCT Compartiment, Series 2013-2, Class A, 0.48%, 1/27/23 (b)	EUR		2,596		2,920,348
B2R Mortgage Trust, Series 2015-1, Class A1, 2.52%, 5/15/48 (a)	USD		12,244		12,248,947
Benefit Street Partners CLO II Ltd., Series 2013-IIA, Class A1, 1.88%, 7/15/24 (a)(b)			17,650		17,567,432
BlueMountain CLO Ltd.:
Series 2012-1A, Class A, 2.02%, 7/20/23 (a)(b)			10,700		10,701,905
Series 2012-2A, Class A1, 2.23%, 11/20/24 (a)(b)			7,000		7,003,500
Series 2013-1A, Class A1, 2.02%, 5/15/25 (a)(b)			3,000		2,988,437
Series 2013-3A, Class A, 2.15%, 10/29/25 (a)(b)			12,500		12,482,145
Series 2013-4A, Class A, 2.18%, 4/15/25 (a)(b)			6,500		6,500,000
Capital One Multi-Asset Execution Trust, Series 2015-A2, Class A2, 2.08%, 3/15/23			20,000		20,474,296
Carlyle Global Market Strategies CLO Ltd., Series 2012-2A, Class B1R, 2.80%, 7/20/23 (a)(b)			5,500		5,499,865
CarMax Auto Owner Trust:
Series 2014-4, Class C, 2.44%, 11/16/20			3,500		3,551,648
Series 2016-2, Class A3, 1.52%, 2/16/21			12,810		12,890,561
Chase Issuance Trust, Series 2016-A2, Class A, 1.37%, 6/15/21			40,610		40,728,825
Chesapeake Funding II LLC, Series 2016-2A, Class A1, 1.88%, 6/15/28 (a)			34,640		34,769,858
CIFC Funding Ltd.:
Series 2012-2A, Class A1R, 2.19%, 12/05/24 (a)(b)			20,250		20,249,800
Series 2012-3A, Class A1L, 2.13%, 1/29/25 (a)(b)			10,000		10,004,962
Citigroup Commercial Mortgage Trust, Series 2010-RR3, Class MLSR, 5.81%, 6/14/50 (a)(b)			8,496		8,569,722

Asset-Backed Securities		Par  (000)		Value
CNH Equipment Trust, Series 2016-B, Class A3, 1.63%, 8/15/21	USD		17,920	$	18,056,106
Colony American Homes, Series 2015-1A, Class A, 1.71%, 7/17/32 (a)(b)			14,447		14,473,751
Conseco Financial Corp., Series 1993-4, Class A5, 7.05%, 1/15/19			11		10,771
Cornerstone CLO Ltd., Series 2007-1A, Class A1S, 0.90%, 7/15/21 (a)(b)			232		232,364
Credit Acceptance Auto Loan Trust:
Series 2013-2A, Class B, 2.26%, 10/15/21 (a)			3,029		3,029,716
Series 2015-1A, Class A, 2.00%, 7/15/22 (a)			21,055		21,104,515
Series 2016-2A, Class A, 2.42%, 11/15/23 (a)			37,760		37,961,484
Crusade ABS Trust, Series 2012-1, Class A, 2.62%, 7/12/23 (b)	AUD		2,141		1,639,686
Drive Auto Receivables Trust, Series 2015-AA, Class B, 2.28%, 6/17/19 (a)	USD		13,261		13,284,745
Dryden XXV Senior Loan Fund, Series 2012-25A, Class A, 2.06%, 1/15/25 (a)(b)			9,700		9,701,688
Enterprise Fleet Financing LLC:
Series 2016-2 Class A2, 1.74%, 2/22/22 (a)			23,480		23,507,624
Series 2016-2, Class A3, 2.04%, 2/22/22 (a)			13,010		13,034,117
Flatiron CLO Ltd., Series 2011-1A, Class A, 2.23%, 1/15/23 (a)(b)			3,593		3,593,381
Ford Credit Auto Owner Trust, Series 2016-B, Class A3, 1.33%, 10/15/20			30,334		30,423,940
Fraser Sullivan CLO VII Ltd.:
Series 2012-7A, Class A2R, 2.50%, 4/20/23 (a)(b)			8,250		8,249,082
Series 2012-7A, Class BR, 3.20%, 4/20/23 (a)(b)			6,800		6,799,532
Series 2012-7A, Class CR, 4.15%, 4/20/23 (a)(b)			2,100		2,103,184
GoldenTree Loan Opportunities VII Ltd., Series 2013-7A, Class A, 1.86%, 4/25/25 (a)(b)			5,000		4,979,182
Heller Financial, Series 1998-1, Class A, 2.90%, 7/15/24 (a)(b)			164		95,335
Honda Auto Receivables Owner Trust, Series 2016-2, Class A3, 1.39%, 4/15/20			25,430		25,540,430
Hyundai Floorplan Master Owner Trust, Series 2016-1A, Class A2, 1.82%, 3/15/21 (a)			1,940		1,954,124
IFC SBA Loan-Backed Adjustable Rate Certificate, Series 1997-1, Class A, 1.50%, 1/15/24 (a)(b)			72		69,856
LCM XII LP, Series 12A, Class AR, 1.89%, 10/19/22 (a)(b)			29,750		29,700,666
LCM XIV LP, Series 14A, Class A, 1.83%, 7/15/25 (a)(b)			2,100		2,092,559
Litigation Fee Residual Funding LLC, Series 2015-1, Class A, 4.00%, 10/01/27 (a)			14,475		14,399,559
Madison Park Funding VIII Ltd.:
Series 2012-8A, Class CR, 3.50%, 4/22/22 (a)(b)			1,900		1,900,140
Series 2012-8AR, Class DR, 4.55%, 4/22/22 (a)(b)			1,000		999,788
Madison Park Funding X Ltd.:
Series 2012-10A, Class A2, 2.10%, 1/20/25 (a)(b)			5,085		5,061,779
Series 2012-10A, Class B1, 3.05%, 1/20/25 (a)(b)			8,500		8,517,000
Madison Park Funding XIV Ltd., Series 2014-14A, Class D, 4.30%, 7/20/26 (a)(b)			1,750		1,718,817

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 71

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Asset-Backed Securities		Par  (000)		Value
Mercedes-Benz Master Owner Trust, Series 2016-BA, Class A, 1.22%, 5/17/21 (a)(b)	USD		25,457	$	25,594,727
Navient Private Education Loan Trust, Series 2014-CTA, Class A, 1.22%, 9/16/24 (a)(b)			1,705		1,701,623
Neuberger Berman CLO XIII Ltd., Series 2012-13A, Class B, 3.01%, 1/23/24 (a)(b)			8,600		8,599,356
Neuberger Berman CLO XVI Ltd., Series 2014-16A, Class A1R, 2.11%, 4/15/26 (a)(b)			3,050		3,050,000
NextGear Floorplan Master Owner Trust:
Series 2014-1A, Class A, 1.92%, 10/15/19 (a)			25,820		25,750,454
Series 2014-1A, Class B, 2.61%, 10/15/19 (a)			3,285		3,269,427
Nissan Auto Receivables Owner Trust, Series 2016-B, Class A3, 1.32%, 1/15/21			34,630		34,768,510
Nissan Master Owner Trust Receivables, Series 2016-A, Class A2, 1.54%, 6/15/21			21,120		21,049,932
Octagon Investment Partners XVII Ltd., Series 2013-1A, Class A2R, 2.31%, 10/25/25 (a)(b)			42,500		42,500,000
OHA Credit Partners VII Ltd., Series 2012-7A, Class A, 2.23%, 11/20/23 (a)(b)			5,550		5,549,907
OHA Park Avenue CLO I Ltd., Series 2007-1A, Class A1B, 1.09%, 3/14/22 (a)(b)			4,835		4,778,287
OneMain Financial Issuance Trust:
Series 2014-1A, Class A, 2.43%, 6/18/24 (a)			11,949		11,958,712
Series 2014-2A, Class A, 2.47%, 9/18/24 (a)			21,094		21,141,240
OZLM Funding III Ltd., Series 2013-3A, Class A1, 2.03%, 1/22/25 (a)(b)			18,770		18,768,861
Palmer Square CLO Ltd., Series 2014-1A, Class A1, 1.95%, 10/17/22 (a)(b)			13,841		13,841,152
PFS Financing Corp.:
Series 2014-AA, Class B, 1.47%, 2/15/19 (a)(b)			4,400		4,385,005
Series 2015-AA, Class A, 1.14%, 4/15/20 (a)(b)			10,015		9,937,297
Race Point VIII CLO Ltd., Series 2013-8A, Class A, 2.06%, 2/20/25 (a)(b)			3,150		3,149,663
Santander Drive Auto Receivables Trust:
Series 2012-5, Class C, 2.70%, 8/15/18 Series 2012-6, Class C, 1.94%, 3/15/18			422		422,471
			63		62,829
Series 2013-A, Class C, 3.12%, 10/15/19 (a)			12,567		12,674,603
Series 2014-2, Class C, 2.33%, 11/15/19			4,602		4,634,426
Series 2014-4, Class C, 2.60%, 11/16/20			10,065		10,175,862
Series 2016-2, Class A3, 1.56%, 5/15/20			9,050		9,015,051
Sheridan Square CLO Ltd., Series 2013-1A, Class A1, 1.73%, 4/15/25 (a)(b)			3,300		3,272,805
Silver Bay Realty Trust, Series 2014-1, Class A, 1.53%, 9/17/31 (a)(b)			10,995		10,923,920
SLC Private Student Loan Trust, Series 2006-A, Class A5, 0.85%, 7/15/36 (b)			1,151		1,148,934
SLM Private Credit Student Loan Trust:
Series 2003-B, Class A2, 1.05%, 3/15/22 (b)			1,428		1,415,225
Series 2004-A, Class A3, 1.25%, 6/15/33 (b)			3,076		2,903,954
Series 2004-B, Class A2, 1.05%, 6/15/21 (b)			938		935,603

Asset-Backed Securities		Par  (000)		Value
Series 2004-B, Class A3, 1.18%, 3/15/24 (b)	USD		6,000	$	5,663,917
Series 2005-B, Class A2, 1.03%, 3/15/23 (b)			1,411		1,407,242
SLM Private Education Loan Trust:
Series 2011-A, Class A3, 3.02%, 1/15/43 (a)(b)			6,258		6,409,177
Series 2011-C, Class A2B, 4.54%, 10/17/44 (a)			7,243		7,612,381
Series 2012-A, Class A2, 3.83%, 1/17/45 (a)			5,445		5,635,631
Series 2012-B, Class A2, 3.48%, 10/15/30 (a)			5,606		5,719,441
Series 2013-B, Class A2A, 1.85%, 6/17/30 (a)			3,500		3,497,817
Series 2013-C, Class A1, 1.37%, 2/15/22 (a)(b)			3,001		3,004,642
Series 2014-A, Class A2B, 1.67%, 1/15/26 (a)(b)			2,500		2,516,174
SLM Student Loan Trust:
Series 2003-11, Class A6, 1.60%, 12/15/25 (a)(b)			11,900		11,586,629
Series 2013-4, Class A, 1.07%, 6/25/27 (b)			9,873		9,530,692
SMB Private Education Loan Trust:
Series 2016-A, Class A2A, 2.70%, 5/15/31 (a)			8,480		8,641,929
Series 2016-B, Class A2A, 2.43%, 2/17/32 (a)			6,925		6,940,982
SoFi Professional Loan Program LLC:
Series 2015-A, Class A1, 1.73%, 3/25/33 (a)(b)			12,732		12,795,830
Series 2015-D, Class A2, 2.72%, 10/27/36 (a)			16,875		17,281,337
Series 2016-C, Class A2B, 2.36%, 12/27/32 (a)			3,820		3,856,080
Series 2016-D, Class A2A, 1.53%, 4/25/33 (a)			10,800		10,799,446
Series 2016-D, Class A2B, 2.34%, 4/25/33 (a)			3,440		3,439,510
Soundview Home Loan Trust, Series 2003-2, Class A2, 1.83%, 11/25/33 (b)			723		716,013
Springleaf Funding Trust, Series 2015-AA, Class A, 3.16%, 11/15/24 (a)			10,000		10,124,927
SWAY Residential Trust, Series 2014-1, Class A, 1.83%, 1/17/32 (a)(b)			12,652		12,668,195
Symphony CLO IX LP, Series 2012-9A, Class B, 3.18%, 4/16/22 (a)(b)			1,000		1,001,231
Symphony CLO XI Ltd., Series 2013-11A, Class A, 1.98%, 1/17/25 (a)(b)			6,110		6,109,658
Synchrony Credit Card Master Note Trust:
Series 2015-2, Class A, 1.60%, 4/15/21			8,325		8,363,042
Series 2016-2, Class A, 2.21%, 5/15/24			56,040		57,147,479
Series 2016-3, Class A, 1.58%, 9/15/22			17,720		17,718,038
Toyota Auto Receivables Owner Trust:
Series 2016-B, Class A3, 1.30%, 4/15/20			12,080		12,098,484
Series 2016-B, Class A4, 1.52%, 8/16/21			13,190		13,256,289
Tryon Park CLO Ltd., Series 2013-1A, Class A1, 1.80%, 7/15/25 (a)(b)			5,070		5,043,175
Voya CLO Ltd.:
Series 2012-1A, Class A2R, 2.51%, 3/14/22 (a)(b)			5,000		5,000,134

See Notes to Financial Statements.

72 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Asset-Backed Securities		Par   (000)		Value
Series 2012-1RA, Class A1R, 2.06%, 3/14/22 (a)(b)	USD		14,105	$	14,105,350
Series 2013-1A, Class A1, 1.82%, 4/15/24 (a)(b)			2,500		2,484,409
Series 2013-3A, Class A1, 2.13%, 1/18/26 (a)(b)			25,000		24,984,493
Series 2013-3A, Class A2, 2.48%, 1/18/26 (a)(b)			5,000		4,954,821
Wheels SPV 2 LLC, Series 2016-1A, Class A2, 1.59%, 5/20/25 (a)			3,840		3,851,908
World Financial Network Credit Card Master Trust, Series 2016-A, Class A, 2.03%, 4/15/25			27,060		27,244,130
Total Asset-Backed Securities — 24.9%					1,317,240,717
Capital Trusts
Diversified Financial Services — 0.0%
Banco Nacional de Comercio Exterior SNC, 3.80%, 8/11/26 (a)(b)			1,469		1,426,326
Corporate Bonds
Air Freight & Logistics — 0.0%
Federal Express Corp. Pass-Through Trust, Series 2012, 2.63%, 1/15/18 (a)			1,130		1,133,480
Airlines — 1.0%
American Airlines Pass-Through Trust, Series 2013-2, Class B, 5.60%, 7/15/20 (a)			6,703		7,013,007
Continental Airlines Pass-Through Trust:
Series 2000-1, Class B, 8.39%, 11/01/20			139		143,834
Series 2003-ERJ1, Class RJO3, 7.88%, 7/02/18			102		105,978
Series 2009-2, Class B, 9.25%, 5/10/17			7,465		7,782,339
Delta Air Lines Pass-Through Trust, Series 2012-1, Class B, 6.88%, 5/07/19 (a)			3,236		3,495,181
Northwest Airlines Pass-Through Trust, Series 2002-1, Class G-2, 6.26%, 11/20/21			999		1,082,196
U.S. Airways Pass-Through Trust:
Series 2011-1, Class B, 9.75%, 10/22/18			10,364		11,607,836
Series 2012-1, Class B, 8.00%, 10/01/19			5,165		5,719,812
Series 2012-2, Class C , 5.45%, 6/03/18			1,500		1,537,500
Virgin Australia Trust:
Series 2013-1A, 5.00%, 10/23/23 (a)			5,930		6,151,865
Series 2013-1B, 6.00%, 10/23/20 (a)			9,530		9,672,809
					54,312,357
Auto Components — 0.3%
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
3.50%, 3/15/17			5,500		5,506,600
4.88%, 3/15/19			7,040		7,075,200
					12,581,800
Automobiles — 0.3%
Ford Motor Credit Co. LLC, 1.90%, 8/12/19			3,450		3,445,018
Volkswagen Group of America Finance LLC, 1.65%, 5/22/18 (a)			10,980		10,945,051
					14,390,069

Corporate Bonds		Par   (000)		Value
Banks — 8.4%
Bank of America Corp.:
Series L, 2.60%, 1/15/19	USD		42,700	$	43,533,376
Series L, 2.65%, 4/01/19			41,150		42,049,580
Bank of Montreal, 1.90%, 8/27/21			5,495		5,466,300
Bank of Nova Scotia:
1.95%, 1/30/17 (a)			65,000		65,212,550
1.88%, 4/26/21			27,330		27,518,304
CIT Group, Inc., 5.25%, 3/15/18			15,000		15,637,500
Citigroup, Inc., 2.26%, 9/01/23 (b)			13,120		13,182,792
Citizens Bank N.A.:
2.30%, 12/03/18			6,790		6,868,452
2.55%, 5/13/21			1,915		1,949,087
Fifth Third Bank, 1.63%, 9/27/19			9,255		9,249,734
HSBC Holdings PLC, 2.65%, 1/05/22			7,645		7,618,984
International Bank For Reconstruction & Development, 0.88%, 8/15/19			59,255		58,950,311
JPMorgan Chase & Co.:
2.40%, 6/07/21			31,415		31,769,612
2.30%, 8/15/21			3,375		3,382,341
Royal Bank of Canada:
1.20%, 9/19/17			43,370		43,351,351
2.20%, 9/23/19			4,510		4,598,590
2.10%, 10/14/20			19,225		19,545,673
Santander UK Group Holdings PLC, 2.88%, 8/05/21			3,000		2,998,779
Westpac Banking Corp.:
1.38%, 5/30/18 (a)			35,000		35,026,740
1.60%, 8/19/19			8,000		8,000,352
					445,910,408
Beverages — 0.3%
Anheuser-Busch InBev Finance, Inc., 2.65%, 2/01/21			13,550		13,982,191
Constellation Brands, Inc., 7.25%, 5/15/17			1,214		1,254,973
					15,237,164
Biotechnology — 0.2%
AbbVie, Inc.:
2.50%, 5/14/20			3,800		3,874,001
2.30%, 5/14/21			3,785		3,817,873
					7,691,874
Capital Markets — 1.5%
Goldman Sachs Group, Inc.:
2.90%, 7/19/18			19,661		20,126,808
2.60%, 4/23/20			1,120		1,138,320
2.75%, 9/15/20			12,000		12,291,912
Morgan Stanley:
2.45%, 2/01/19			7,000		7,126,133
2.38%, 7/23/19			30,337		30,864,469
2.50%, 4/21/21			4,585		4,642,326
UBS Group Funding Jersey Ltd., 2.65%, 2/01/22 (a)			3,100		3,094,231
					79,284,199
Chemicals — 0.1%
Air Liquide Finance SA, 1.75%, 9/27/21 (a)			4,085		4,079,020
Commercial Services & Supplies — 0.0%
Aviation Capital Group Corp., 4.63%, 1/31/18 (a)			1,000		1,036,250
Communications Equipment — 0.2%
CommScope, Inc., 4.38%, 6/15/20 (a)			1,925		1,982,750
Harris Corp., 2.00%, 4/27/18			6,000		6,034,116
					8,016,866

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 73

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Corporate Bonds		Par   (000)		Value
Construction Materials — 0.0%
Cemex Finance LLC, 9.38%, 10/12/22 (a)	USD		200	$	219,250
Consumer Finance — 3.4%
Ally Financial, Inc.:
5.50%, 2/15/17			15,000		15,187,500
6.25%, 12/01/17			3,254		3,384,160
3.25%, 2/13/18			7,000		7,070,000
Capital One N.A., 2.35%, 8/17/18			40,050		40,537,409
Ford Motor Credit Co. LLC:
1.72%, 12/06/17			47,000		47,044,180
2.94%, 1/08/19			4,000		4,096,776
2.02%, 5/03/19			2,995		3,000,843
General Motors Financial Co., Inc.:
3.00%, 9/25/17			5,000		5,063,855
3.25%, 5/15/18			1,450		1,475,633
3.10%, 1/15/19			15,690		15,993,256
2.40%, 5/09/19			2,525		2,539,236
3.70%, 11/24/20			4,750		4,943,002
3.20%, 7/06/21			3,240		3,279,790
Navient Corp., 5.00%, 6/15/18			7,000		7,000,000
Nissan Motor Acceptance Corp., 2.00%, 3/08/19 (a)			7,210		7,275,971
Synchrony Financial:
1.88%, 8/15/17			6,700		6,713,460
2.60%, 1/15/19			6,785		6,864,921
					181,469,992
Diversified Financial Services — 0.9%
BP Capital Markets PLC, 2.52%, 1/15/20			2,300		2,362,295
CNH Industrial Capital LLC, 6.25%, 11/01/16			7,500		7,522,500
Hyundai Capital America, 2.40%, 10/30/18 (a)			4,395		4,456,047
Shell International Finance BV, 4.38%, 3/25/20			6,225		6,794,351
Voya Financial, Inc., 2.90%, 2/15/18			20,183		20,561,855
WEA Finance LLC/Westfield UK & Europe Finance PLC, 1.75%, 9/15/17 (a)			7,665		7,678,881
					49,375,929
Diversified Telecommunication Services — 0.4%
AT&T Inc., 2.45%, 6/30/20			6,370		6,487,686
Frontier Communications Corp., 8.88%, 9/15/20			4,550		4,908,313
Verizon Communications, Inc., 4.50%, 9/15/20			7,530		8,263,181
					19,659,180
Electric Utilities — 0.4%
Emera U.S. Finance LP, 2.15%, 6/15/19 (a)			4,965		5,019,307
Generacion Mediterranea SA/Generacion Frias SA/Central Termica Roca SA, 9.63%, 7/27/23 (a)			461		480,593
Kentucky Power Co., 6.00%, 9/15/17 (a)			1,000		1,041,763
Southern Co., 1.85%, 7/01/19			16,255		16,382,829
					22,924,492
Equity Real Estate Investment Trusts (REITs) — 0.5%
HCP, Inc.:
5.63%, 5/01/17			7,320		7,491,830
6.70%, 1/30/18			5,440		5,803,909
Nationwide Health Properties, Inc., 6.59%, 7/07/38			1,400		1,724,027
Ventas Realty LP/Ventas Capital Corp., 2.00%, 2/15/18			11,890		11,961,435
					26,981,201
Food & Staples Retailing — 0.3%
CVS Health Corp., 2.13%, 6/01/21			12,980		13,111,747

Corporate Bonds		Par   (000)		Value
Food & Staples Retailing (continued)
Walgreens Boots Alliance, Inc., 2.60%, 6/01/21	USD		2,680	$	2,742,629
					15,854,376
Food Products — 0.0%
Arcor SAIC, 6.00%, 7/06/23 (a)			318		338,670
Marfrig Holdings Europe BV, 8.00%, 6/08/23 (a)			630		645,435
Minerva Luxembourg SA, 6.50%, 9/20/26 (a)			442		434,265
					1,418,370
Health Care Equipment & Supplies — 0.4%
St. Jude Medical, Inc., 2.00%, 9/15/18			12,275		12,404,145
Stryker Corp., 2.00%, 3/08/19			4,710		4,769,214
Zimmer Biomet Holdings, Inc., 2.00%, 4/01/18			3,930		3,956,264
					21,129,623
Health Care Providers & Services — 0.2%
Aetna, Inc., 1.90%, 6/07/19			11,650		11,756,900
Hotels, Restaurants & Leisure — 0.3%
Carnival Corp., 3.95%, 10/15/20			4,525		4,891,439
Unique Pub Finance Co. PLC:
Series A3, 6.54%, 3/30/21	GBP		3,479		4,847,145
Series M, 7.40%, 3/28/24			4,920		6,431,547
					16,170,131
Household Durables — 0.2%
D.R. Horton, Inc.:
4.75%, 5/15/17	USD		1,980		2,017,125
3.75%, 3/01/19			2,135		2,223,069
Lennar Corp., 4.75%, 12/15/17			4,332		4,440,300
Toll Brothers Finance Corp., 8.91%, 10/15/17			1,710		1,829,700
					10,510,194
Household Products — 0.0%
Avon International Operations, Inc., 7.88%, 8/15/22 (a)			1,345		1,388,713
Independent Power and Renewable Electricity Producers — 0.0%
AES Gener SA, 5.00%, 7/14/25 (a)			690		715,490
AES Panama SRL, 6.00%, 6/25/22 (a)			265		277,587
					993,077
Insurance — 1.0%
American International Group, Inc.:
5.85%, 1/16/18			7,010		7,395,522
6.40%, 12/15/20			1,965		2,304,562
3.30%, 3/01/21			20,887		21,914,619
AXIS Specialty Finance PLC, 2.65%, 4/01/19			13,545		13,689,742
Genworth Holdings, Inc.:
6.52%, 5/22/18			5,750		5,865,000
7.70%, 6/15/20			3,033		3,010,253
					54,179,698
IT Services — 0.5%
Hewlett Packard Enterprise Co., 2.85%, 10/05/18 (a)			26,353		26,850,624
Machinery — 0.2%
Case New Holland Industrial, Inc., 7.88%, 12/01/17			8,240		8,755,000
Media — 1.2%
Cablevision Systems Corp., 8.63%, 9/15/17			1,973		2,066,717
Charter Communications Operating LLC/Charter Communications Operating Capital, 3.58%, 7/23/20 (a)			10,158		10,617,121

See Notes to Financial Statements.

74 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Corporate Bonds		Par   (000)		Value
Media (continued)
DISH DBS Corp.:
4.63%, 7/15/17	USD		1,820	$	1,851,850
4.25%, 4/01/18			5,000		5,137,500
Interpublic Group of Cos., Inc., 2.25%, 11/15/17			13,816		13,875,616
Sky PLC:
6.10%, 2/15/18 (a)			9,277		9,790,334
2.63%, 9/16/19 (a)			20,595		20,940,666
Viacom, Inc., 2.75%, 12/15/19			1,150		1,168,130
					65,447,934
Oil, Gas & Consumable Fuels — 0.5%
Anadarko Petroleum Corp., 4.85%, 3/15/21			1,045		1,121,826
ConocoPhillips, 6.00%, 1/15/20			3,740		4,217,467
Energy Transfer Partners LP, 4.15%, 10/01/20			775		810,592
Enterprise Products Operating LLC, 1.65%, 5/07/18			2,100		2,100,762
GNL Quintero SA:
4.63%, 7/31/29 (a)			683		717,150
4.63%, 7/31/29			253		265,650
Kinder Morgan Energy Partners LP, 6.50%, 4/01/20			2,725		3,059,311
Kinder Morgan, Inc., 3.05%, 12/01/19			2,420		2,472,904
Pioneer Natural Resources Co., 3.45%, 1/15/21			670		696,708
Sabine Pass LNG LP, 7.50%, 11/30/16			7,740		7,798,050
TransCanada PipeLines Ltd., 6.50%, 8/15/18			4,415		4,800,624
					28,061,044
Paper & Forest Products — 0.0%
Fibria Overseas Finance Ltd., 5.25%, 5/12/24			516		536,640
Suzano Austria GmbH, 5.75%, 7/14/26 (a)			635		639,826
Suzano Trading Ltd., 5.88%, 1/23/21 (a)			315		329,175
					1,505,641
Pharmaceuticals — 1.6%
Actavis Funding SCS:
2.35%, 3/12/18			7,000		7,072,177
2.45%, 6/15/19			1,650		1,687,341
Forest Laboratories LLC, 4.38%, 2/01/19 (a)			25,000		26,335,550
Perrigo Co. PLC, 2.30%, 11/08/18			7,306		7,331,067
Shire Acquisitions Investments Ireland DAC:
1.90%, 9/23/19			17,970		17,960,781
2.40%, 9/23/21			13,620		13,637,148
Teva Pharmaceutical Finance Netherlands III BV, 1.70%, 7/19/19			10,495		10,471,250
					84,495,314
Professional Services — 0.0%
Equifax, Inc., 2.30%, 6/01/21			1,100		1,111,481
Road & Rail — 0.9%
ERAC USA Finance LLC, 6.38%, 10/15/17 (a)			6,000		6,287,394
Kansas City Southern, 1.44%, 10/28/16 (b)			14,000		13,999,776
Penske Truck Leasing Co. LP/PTL Finance Corp.:
3.75%, 5/11/17 (a)			1,460		1,479,920
3.38%, 3/15/18 (a)			5,000		5,125,180
2.88%, 7/17/18 (a)			16,908		17,235,237
3.05%, 1/09/20 (a)			5,346		5,496,966
					49,624,473
Semiconductors & Semiconductor Equipment — 0.7%
Lam Research Corp.:
2.75%, 3/15/20			7,863		8,046,884
2.80%, 6/15/21			1,820		1,868,081
Maxim Integrated Products, Inc., 2.50%, 11/15/18			18,000		18,274,590
NVIDIA Corp., 2.20%, 9/16/21			5,645		5,662,189

Corporate Bonds		Par   (000)		Value
Semiconductors & Semiconductor Equipment (continued)
NXP BV/NXP Funding LLC, 3.75%, 6/01/18 (a)	USD		2,167	$	2,229,301
					36,081,045
Software — 0.4%
Oracle Corp., 1.90%, 9/15/21			23,080		23,138,554
Specialty Retail — 0.3%
QVC, Inc., 3.13%, 4/01/19			12,530		12,847,372
Trading Companies & Distributors — 1.1%
Air Lease Corp.:
2.13%, 1/15/18			21,140		21,245,700
2.63%, 9/04/18			8,975		9,056,547
3.38%, 1/15/19			3,500		3,594,920
Aircastle Ltd., 6.75%, 4/15/17			16,732		17,066,640
International Lease Finance Corp., 7.13%, 9/01/18 (a)			3,680		4,015,800
					54,979,607
Wireless Telecommunication Services — 0.3%
Sprint Communications, Inc., 9.00%, 11/15/18 (a)			12,715		14,034,181
T-Mobile USA, Inc., 6.63%, 4/28/21			1,410		1,484,025
					15,518,206
Total Corporate Bonds — 28.0%					1,486,120,908
Floating Rate Loan Interests (b)
Hotels, Restaurants & Leisure — 0.1%
Caesars Entertainment Resort Properties LLC, Term B Loan, 7.00%, 10/11/20			4,974		4,958,904
Foreign Agency Obligations
Argentina — 0.1%
Petrobras Argentina SA, 7.38%, 7/21/23 (a)			595		614,337
YPF SA:
8.50%, 3/23/21			533		594,828
8.75%, 4/04/24 (a)			1,512		1,683,763
8.50%, 7/28/25 (a)			1,039		1,139,990
					4,032,918
Austria — 0.6%
Oesterreichische Kontrollbank AG, 1.13%, 4/26/19			31,168		31,141,383
Brazil — 0.2%
Petrobras Global Finance BV:
2.82%, 1/15/19 (b)			838		821,240
3.00%, 1/15/19			1,142		1,119,160
5.75%, 1/20/20			1,818		1,873,449
5.38%, 1/27/21			3,668		3,627,652
8.38%, 5/23/21			2,708		2,958,490
6.25%, 12/14/26	GBP		476		572,697
6.85%, 6/05/2115	USD		881		745,326
					11,718,014
Canada — 0.3%
Export Development Canada, 0.88%, 8/27/18 (a)			13,545		13,520,768

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 75

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Foreign Agency Obligations		Par   (000)		Value
Germany — 0.7%
KFW:
1.88%, 6/30/20	USD		16,470	$	16,815,129
1.88%, 11/30/20			20,080		20,531,880
					37,347,009
Mexico — 0.1%
Petroleos Mexicanos:
3.50%, 7/18/18			5,047		5,163,081
4.63%, 9/21/23 (a)			938		939,313
					6,102,394
Netherlands — 0.6%
Bank Nederlandse Gemeenten NV, 1.13%, 5/25/18 (a)			30,432		30,477,648
Panama — 0.0%
Aeropuerto Internacional de Tocumen SA, 5.63%, 5/18/36 (a)			462		487,410
Russia — 0.0%
Gazprom OAO Via Gaz Capital SA, 4.95%, 7/19/22 (a)			430		449,135
Total Foreign Agency Obligations — 2.6%					135,276,679
Foreign Government Obligations
Argentina — 0.3%
Republic of Argentina:
6.25%, 4/22/19 (a)			11,124		11,797,002
7.82%, 12/31/33	EUR		2,250		2,824,449
7.82%, 12/31/33			1,102		1,368,862
					15,990,313
Brazil — 0.1%
Federative Republic of Brazil:
4.88%, 1/22/21	USD		862		920,185
2.88%, 4/01/21	EUR		776		887,851
7.13%, 1/20/37	USD		1,295		1,521,625
5.00%, 1/27/45			530		480,975
					3,810,636
Cyprus — 0.4%
Republic of Cyprus:
4.75%, 6/25/19	EUR		9,815		11,867,000
4.63%, 2/03/20			8,454		10,242,731
					22,109,731
Egypt — 0.0%
Arab Republic of Egypt, 5.88%, 6/11/25	USD		810		769,759
Mexico — 0.0%
United Mexican States Inflation Linked Bond, 3.50%, 12/14/17	MXN		1,965		566,340

Foreign Government Obligations		Par   (000)		Value
Turkey — 0.3%
Republic of Turkey:
6.75%, 4/03/18	USD		3,726	$	3,938,419
7.00%, 3/11/19			1,871		2,027,229
8.50%, 7/10/19	TRY		4,165		1,381,425
7.50%, 11/07/19	USD		2,325		2,585,865
10.50%, 1/15/20	TRY		6,249		2,185,380
5.63%, 3/30/21	USD		1,005		1,070,325
					13,188,643
Total Foreign Government Obligations — 1.1%					56,435,422
Investment Companies — 1.1%		Shares
iShares Short Maturity Bond ETF (c)	1,180,000				59,224,200
Non-Agency Mortgage-Backed Securities		Par (000)
Collateralized Mortgage Obligations — 2.7%
Banc of America Mortgage Trust, Series 2003-J, Class 2A1, 3.04%, 11/25/33 (b)	USD		843		841,376
BCAP LLC Trust, Series 2010-RR2, Class 1A3, 3.03%, 6/26/45 (a)(b)			2,369		2,350,519
Bear Stearns Adjustable Rate Mortgage Trust:
Series 2004-5, Class 2A, 3.49%, 7/25/34 (b)			1,133		1,130,030
Series 2004-7, Class 4A, 3.27%, 10/25/34 (b)			154		152,739
Berica ABS SRL, Series 2012-2, Class A1, 0.00%, 11/30/51 (b)	EUR		1,236		1,387,721
BlackRock Capital Finance LP, Series 1997-R2, Class AP, 7.40%, 12/25/35 (a)(b)(c)	USD		39		37,997
Countrywide Home Loan Mortgage Pass-Through Trust:
Series 2004-29, Class 1A1, 1.07%, 2/25/35 (b)			659		619,585
Series 2005-17, Class 1A6, 5.50%, 9/25/35			1,754		1,745,889
Series 2005-HYB8, Class 2A1, 3.15%, 12/20/35 (b)			1,506		1,290,516
First Horizon Mortgage Pass-Through Trust, Series 2004-AR7, Class 1A1, 2.80%, 2/25/35 (b)			307		303,822
JP Morgan Mortgage Trust, Series 2016-2, Class A1, 2.69%, 6/25/46 (a)			23,828		24,239,867
Mill City Mortgage Loan Trust, Series 2016-1, Class A1, 2.50%, 4/25/57 (a)(b)			31,065		31,238,652
MortgageIT Trust, Series 2004-1, Class A1, 1.31%, 11/25/34 (b)			2,241		2,183,045
National RMBS Trust, Series 2012-2, Class A1, 2.95%, 6/20/44 (b)	AUD		2,024		1,544,034
New Residential Mortgage Loan Trust, Series 2016-3A, Class A1B, 3.25%, 9/25/56 (a)(b)	USD		5,429		5,584,812
Rochester Financing No.1 PLC, Series 1, Class A1, 1.97%, 7/16/46 (b)	GBP		3,633		4,715,877

See Notes to Financial Statements.

76 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Collateralized Mortgage Obligations (continued)
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-13, Class A2, 0.82%, 9/25/34 (b)	USD		1,446	$	1,250,794
Structured Agency Credit Risk Debt Notes, Series 2016-HQA2, Class M1, 1.73%, 11/25/28 (b)			7,498		7,517,962
TORRENS Trust, Series 2013-1, Class A, 2.57%, 4/12/44 (b)	AUD		11,039		8,377,723
Towd Point Mortgage Trust:
Series 2016-3, Class A1, 2.25%, 8/25/55 (a)(b)	USD		19,155		19,146,385
Series 2016-4, Class A1, 2.25%, 7/25/56 (a)(b)			23,730		23,830,409
Walsh Acceptance, Series 1997-2, Class A, 2.53%, 3/01/27 (a)(b)			13		3,922
					139,493,676
Commercial Mortgage-Backed Securities — 10.4%
Banc of America Commercial Mortgage Trust:
Series 2007-2, Class AM, 5.80%, 4/10/49 (b)			4,150		4,221,165
Series 2007-5, Class AM, 5.77%, 2/10/51 (b)			6,719		6,888,462
Barclays Commercial Mortgage Trust, Series 2015-SLP, Class D, 3.72%, 2/15/28 (a)(b)			5,000		4,894,181
Bear Stearns Commercial Mortgage Securities Trust:
Series 2007-PW18, Class AMA, 6.09%, 6/11/50 (b)			5,000		5,168,797
Series 2014-PWR4, Class F, 6.15%, 6/11/41 (a)(b)			2,500		2,777,005
BXHTL Mortgage Trust, Series 2015-JWRZ, Class A, 1.74%, 5/15/29 (a)(b)			6,590		6,602,389
CDGJ Commercial Mortgage Trust, Series 2014-BXCH, Class A, 1.91%, 12/15/27 (a)(b)			23,833		23,855,394
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class AMFX, 5.37%, 12/11/49 (b)			13,674		13,804,356
Citigroup/Deutsche Bank Mortgage Trust, Series 2007-CD5, Class AJ, 6.32%, 11/15/44 (b)			5,970		5,997,537
Commercial Mortgage Pass-Through Certificates:
Series 2012-9W57, Class A, 2.36%, 2/10/29 (a)			9,490		9,509,828
Series 2012-CR1, Class A3, 3.39%, 5/15/45			5,125		5,480,030
Series 2013-CR10, Class ASB, 3.80%, 8/10/46			3,300		3,557,626
Series 2013-CR12, Class A2, 2.90%, 10/10/46			19,170		19,615,332
Series 2014-FL5, Class B, 2.67%, 10/15/31 (a)(b)			5,800		5,735,592
Series 2014-PAT, Class A, 1.33%, 8/13/27 (a)(b)			14,450		14,368,378
Series 2015-CR23, Class A2, 2.85%, 5/10/48			16,620		17,247,741
Series 2015-LC21, Class A2, 2.98%, 7/10/48			32,500		33,927,861
Core Industrial Trust, Series 2015-CALW, Class A, 3.04%, 2/10/34 (a)			10,000		10,527,150
Credit Suisse Commercial Mortgage Trust:
Series 2007-C4, Class A1AM, 6.13%, 9/15/39 (b)			2,160		2,219,016
Series 2007-C5, Class AAB, 5.62%, 9/15/40 (b)			264		356,202
Series 2008-C1, Class A2, 6.27%, 2/15/41 (b)			706		707,869

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Series 2015-DEAL, Class A, 1.83%, 4/15/29 (a)(b)	USD		2,000	$	2,002,650
Deutsche Bank Re-REMIC Trust, Series 2011-C32, Class A3A, 5.89%, 6/17/49 (a)(b)			14,940		15,112,178
GAHR Commercial Mortgage Trust, Series 2015-NRF, Class AFX, 3.23%, 12/15/34 (a)			10,000		10,395,219
GS Mortgage Securities Corp. Trust, Series 2012-ALOH, Class A, 3.55%, 4/10/34 (a)			5,000		5,401,525
GS Mortgage Securities Trust:
Series 2007-GG10, Class A1A, 5.99%, 8/10/45 (b)			17,301		17,598,130
Series 2007-GG10, Class A4, 5.99%, 8/10/45 (b)			4,350		4,415,555
Series 2013-GC13, Class AAB, 3.72%, 7/10/46 (b)			8,300		8,887,321
Series 2014-GSFL, Class D, 4.42%, 7/15/31 (a)(b)			6,575		6,382,139
Hilton USA Trust:
Series 2013-HLT, Class DFX, 4.41%, 11/05/30 (a)			2,716		2,716,598
Series 2013-HLT, Class EFX, 5.61%, 11/05/30 (a)(b)			14,610		14,632,552
JPMorgan Chase Commercial Mortgage Securities Trust:
Series 2007-LD11, Class ASB, 5.94%, 6/15/49 (b)			420		419,588
Series 2007-LDPX, Class A3, 5.42%, 1/15/49			1,313		1,323,229
Series 2008-C2, Class A4FL, 2.02%, 2/12/51 (b)			10,771		10,487,696
Series 2014-FL6, Class A, 1.91%, 11/15/31 (a)(b)			12,833		12,803,797
Series 2015-CSMO, Class A, 1.76%, 1/15/32 (a)(b)			32,260		32,233,040
LB Commercial Mortgage Trust, Series 2007-C3, Class AM, 6.11%, 7/15/44 (b)			4,045		4,134,106
LB-UBS Commercial Mortgage Trust:
Series 2007-C6, Class A4, 5.86%, 7/15/40 (b)			9,410		9,525,173
Series 2007-C7, Class AM, 6.37%, 9/15/45 (b)			17,500		18,258,116
London & Regional Debt Securitisation PLC, Series 2, Class A, 3.53%, 10/15/18 (b)	GBP		3,172		4,083,124
Merrill Lynch Mortgage Trust, Series 2007-C1, Class A1A, 6.01%, 6/12/50 (b)	USD		6,801		6,916,147
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class AM, 5.20%, 12/12/49			949		948,665
Morgan Stanley Bank of America Merrill Lynch Trust:
Series 2013-C9, Class AAB, 2.66%, 5/15/46			6,000		6,223,064
Series 2014-C19, Class A2, 3.10%, 12/15/47			5,600		5,854,446
Morgan Stanley Capital I Trust:
Series 2007-HQ11, Class A4FL, 0.66%, 2/12/44 (b)			11,487		11,441,386
Series 2007-HQ12, Class AM, 5.90%, 4/12/49 (b)			2,200		2,206,966
Series 2007-HQ13, Class A3, 5.57%, 12/15/44			10,007		10,254,907
Series 2007-IQ13, Class AM, 5.41%, 3/15/44			3,795		3,824,456
Series 2007-IQ16, Class A4, 5.81%, 12/12/49			7,361		7,568,868

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 77

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Commercial Mortgage-Backed Securities (continued)
Series 2012-C4, Class A4, 3.24%, 3/15/45	USD		4,655	$	4,957,845
Resource Capital Corp. Ltd., Series 2014-CRE2, Class A, 1.58%, 4/15/32 (a)(b)			2,268		2,243,799
STRIPs Ltd., Series 2012-1A, Class A, 1.50%, 12/25/44 (a)			329		328,793
UBS Commercial Mortgage Trust, Series 2012-C1, Class A3, 3.40%, 5/10/45			4,548		4,851,125
UBS-Barclays Commercial Mortgage Trust, Series 2013-C6, Class ASB 2.79%, 4/10/46			8,000		8,281,428
Wachovia Bank Commercial Mortgage Trust:
Series 2006-C28, Class AJ, 5.63%, 10/15/48 (b)			1,110		1,106,726
Series 2007-C32, Class A1A, 5.89%, 6/15/49 (b)			10,836		11,013,270
Series 2007-C32, Class AMFL, 0.75%, 6/15/49 (a)(b)			13,164		12,668,242
Series 2007-C32, Class AMFX, 5.70%, 6/15/49 (a)			15,555		15,809,960
Series 2007-C33, Class AM, 6.16%, 2/15/51 (b)			5,540		5,654,132
Series 2007-C34, Class A1A, 5.61%, 5/15/46 (b)			16,673		17,075,898
Waldorf Astoria Boca Raton Trust, Series 2016-BOCA, Class A, 1.86%, 6/15/29 (a)(b)			3,510		3,510,231
Wells Fargo Commercial Mortgage Trust, Series 2014-TISH, Class SCH1, 3.27%, 1/15/27 (a)(b)			3,500		3,385,113
WF-RBS Commercial Mortgage Trust:
Series 2011-C5, Class A4, 3.67%, 11/15/44			13,691		14,833,261
Series 2012-C6, Class A4, 3.44%, 4/15/45			1,970		2,111,592
Series 2014-C24, Class ASB, 3.32%, 11/15/47			10,315		10,970,987
					552,314,954
Interest Only Commercial Mortgage-Backed Securities — 1.2%
Citigroup Commercial Mortgage Trust, Series 2014-GC19, Class XA, 1.42%, 3/10/47 (b)			36,117		2,313,773
Commercial Mortgage Pass-Through Certificates:
Series 2014-CR15, Class XA, 1.45%, 2/10/47 (b)			60,890		3,067,782
Series 2015-CR22, Class XA, 1.16%, 3/10/48 (b)			61,052		3,511,656
Series 2015-CR23, Class XA, 1.15%, 5/10/48 (b)			40,873		2,342,432
Series 2015-LC21, Class XA, 1.02%, 7/10/48 (b)			130,317		6,206,907
Core Industrial Trust:
Series 2015-CALW, Class XA, 0.94%, 2/10/34 (a)(b)			157,420		6,164,079
Series 2015-TEXW, Class XA, 0.90%, 2/10/34 (a)(b)			100,000		3,740,510
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.98%, 1/15/49 (b)			13,285		1,592,128
JPMBB Commercial Mortgage Securities Trust, Series 2015-C28, Class XA, 1.34%, 10/15/48 (b)			66,487		4,247,806
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C23, Class A2, 2.98%, 7/15/50			25,100		26,145,904
UBS-Barclays Commercial Mortgage Trust, Series 2012-C2, Class XA, 1.79%, 5/10/63 (a)(b)			53,670		2,864,202

Non-Agency Mortgage-Backed Securities		Par   (000)		Value
Interest Only Commercial Mortgage-Backed Securities (continued)
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.44%, 5/25/36 (a)(b)	USD		627	$	5,157
WF-RBS Commercial Mortgage Trust, Series 2012-C8, Class XA, 2.26%, 8/15/45 (a)(b)			27,051		2,093,799
					64,296,135
Total Non-Agency Mortgage-Backed Securities — 14.3%					756,104,765
U.S. Government Sponsored Agency Securities
Agency Obligations — 4.7%
Freddie Mac:
1.00%, 4/27/18			50,470		50,452,941
1.05%, 4/26/18-4/27/18			100,100		100,077,033
1.29%, 5/03/19			83,500		83,526,052
1.30%, 4/29/19			17,325		17,328,985
					251,385,011
Collateralized Mortgage Obligations — 2.6%
Fannie Mae:
Series 1997-20, Class FB, 0.95%, 3/25/27 (b)			226		223,893
Series 2002-T6, Class A1, 3.31%, 2/25/32			67		66,904
Series 2011-48, Class MG, 4.00%, 6/25/26 (d)			3,699		3,943,252
Series 2011-84, Class MG, 4.00%, 9/25/26 (d)			4,937		5,297,689
Series 2014-C02, Class 1M1, 1.48%, 5/25/24 (b)			3,212		3,216,006
Freddie Mac:
Series 1165, Class LD, 7.00%, 11/15/21			132		143,083
Series 2577, Class UC, 5.00%, 2/15/18			55		56,213
Series 3710, Class MG, 4.00%, 8/15/25 (d)			2,220		2,356,804
Series 3959, Class MA, 4.50%, 9/15/41-11/15/41			10,523		11,441,497
Series 4390, Class CA, 3.50%, 6/15/50			12,722		13,514,225
Series 4446, Class MA, 3.50%, 12/15/50			21,847		23,018,792
Series 4569, Class JA, 3.00%, 3/15/42			23,078		24,014,620
Series 4593, Class MP, 4.00%, 4/15/54			35,221		38,060,726
Ginnie Mae, Series 2013-131, Class PA, 3.50%, 6/16/42			11,025		11,522,735
					136,876,439
Commercial Mortgage-Backed Securities — 1.1%
Freddie Mac:
Series KJO5, Class A2, 2.16%, 10/25/21			11,543		11,771,457
Series KP03, Class A2, 1.78%, 7/25/19			43,750		44,152,732
					55,924,189

See Notes to Financial Statements.

78 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

U.S. Government Sponsored Agency Securities		Par   (000)		Value
Interest Only Commercial Mortgage-Backed Securities — 0.2%
Fannie Mae:
Series 2012-M9, Class X1, 4.20%, 12/25/17 (b)	USD		43,017	$	1,233,587
Series 2013-M4, Class X1, 4.09%, 2/25/18 (b)			22,699		673,377
Series 2013-M5, Class X2, 2.42%, 1/25/22 (b)			29,128		2,387,710
Freddie Mac:
Series K044, Class X1, 0.88%, 1/25/25			54,877		2,813,807
Series K718, Class X1, 0.77%, 1/25/22 (b)			12,931		372,096
Series KW01, Class X1, 1.12%, 1/25/26 (b)			47,988		3,408,625
Ginnie Mae, Series 2012-120, Class IO, 0.88%, 2/16/53 (b)			34,120		1,965,036
					12,854,238
Mortgage-Backed Securities — 6.2%
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/31 (e)			95,625		99,044,024
2.86%, 9/01/45 (b)			17,521		18,172,722
2.92%, 11/01/45 (b)			1,623		1,684,961
3.00%, 10/01/31 (e)			29,920		31,411,327
3.15%, 6/01/45 (b)			21,713		22,654,048
3.59%, 9/01/42 (b)			14,480		15,166,091
4.00%, 10/01/31 (e)			21,255		21,935,823
4.50%, 10/01/31 (e)			10,490		10,752,258
5.00%, 4/01/21			2		2,161
5.50%, 6/01/20-10/01/21			782		834,438
6.00%, 2/01/17			1		763
6.50%, 4/01/21			110		115,358
7.00%, 8/01/17-11/01/17			10		10,125
Freddie Mac Mortgage-Backed Securities:
2.92%, 10/01/45 (b)			8,469		8,770,213
3.00%, 10/01/31 (e)			50,215		52,744,385
3.50%, 10/01/31 (e)			43,215		45,640,066
					328,938,763
Total U.S. Government Sponsored Agency Securities — 14.8%					785,978,640
U.S. Treasury Obligations
U.S. Treasury Inflation Indexed Notes, 0.63%, 1/15/26			27,043		28,440,089
U.S. Treasury Notes:
0.88%, 10/15/17-9/15/19 (f)			317,450		317,884,792
0.75%, 10/31/17-7/15/19			345,105		344,695,038
1.00%, 12/15/17			30,000		30,106,650
Total U.S. Treasury Obligations — 13.6%					721,126,569
Total Long-Term Investments (Cost — $5,330,110,951) — 100.5%					5,323,893,130

Short-Term Securities		Par   (000)		Value
Foreign Government Obligations — 1.0%
Government of Japan Treasury Bills, 0.23%, 11/21/16 (g)	JPY		5,260,000	$	51,886,771
Money Market Funds — 0.5%		Shares
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (c)(h)			28,057,043		28,057,043
Repurchase Agreements — 1.5%		Par   (000)
Mizuho Securities USA, Inc., 1.95%, 12/29/16 (Purchased on 9/30/16 to be repurchased at $80,012,971, collateralized by various Asset-Backed Securities, 0.00% to 5.35% due from 9/1/21 to 1/22/22, aggregate original par and fair value of $263,347,330 and $91,501,729, respectively) (i)	USD		80,000		80,000,000
Total Value of Mizuho Securities USA, Inc. (Collateral value of $91,501,729)					80,000,000
Total Short-Term Securities (Cost — $160,587,408) — 3.0%					159,943,814
Options Purchased
(Cost — $6,576,499) — 0.1%					5,428,226
Total Investments Before Options Written (Cost — $5,497,274,858) — 103.6%					5,489,265,170
Options Written
(Premiums Received — $ 5,480,600) — (0.1)%					(3,614,862	)
Total Investments Net of Options Written — 103.5%					5,485,650,308
Liabilities in Excess of Other Assets — (3.5)%					(184,183,639	)
Net Assets — 100.0%				$	5,301,466,669

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 79

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

      Notes to Schedule of Investments

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate as of period end.

(c) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/Par Held at September 30, 2015		Shares/Par Purchased			Shares/Par Sold			Shares/Par Held at September 30, 2016		Value at September 30, 2016		Income		Realized Gain (Loss)
BlackRock Liquidity Funds, TempFund, Institutional Class		1,377,592		—			(1,377,592	)1		—		—	$	147,058	$	1,108
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		28,057,043	2		—			28,057,043		$28,057,043	$	10,076		—
BlackRock Capital Finance LP, Series 1997-R2, Class AP		$      39,806		—			(1,198	)		$       38,608		37,997		1,847		7
iShares Short Maturity Bond ETF		—		1,180,000			—			1,180,000		59,224,200		31,274		—
iShares 1-3 Year Credit Bond ETF		50,000		190,270			(240,270	)		—		—		48,134		(142,108	)
Total												$87,319,240	$	238,389	$	(140,993	)

¹  Represents net shares sold.

²  Represents net shares purchased.

(d) Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

(e) Represents or includes a TBA transaction. As of period end, unsettled TBA transactions were as follows:

Counterparty	Value		Unrealized Appreciation (Depreciation)
BNP Paribas Securities Corp.		$24,728,963		$ (10,448	)
Credit Suisse Securities (USA) LLC		$99,044,024		$370,977
Goldman Sachs & Co.		$94,907,970		$268,084
Merrill Lynch, Pierce, Fenner & Smith, Inc.		$21,935,823		$ (16,607	)
Wells Fargo Securities, LLC		$20,911,103		$ (34,358	)

(f) All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

(g) Rate shown is discount rate at the time of purchase.

(h) Current yield as of period end.

(i) Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand.

• For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

Counterparty

Interest Rate

Trade Date

Maturity Date1

Face Value

Face Value Including Accrued Interest

Type of Underlying Collateral

Remaining Contractual Maturity of the Agreements

Bank of Montreal

0.55

%

9/13/16

Open

$45,112,500

$45,124,906

U.S. Treasury Obligations

Open/Demand

¹ Certain agreements have no stated maturity and can be terminated by either party at any time.

      Derivative Financial Instruments Outstanding as of Period End

Futures Contracts
Contracts Long (Short)	Issue	Expiration		Notional Value		Unrealized Appreciation (Depreciation)
(4)	Euro-Bobl	December 2016	USD		593,536		$    (2,161	)
(22)	Euro-Bund	December 2016	USD		4,095,081		(25,971	)
(2)	Long Gilt British	December 2016	USD		337,645		3,161
(7)	U.S. Treasury Bonds (30 Year)	December 2016	USD		1,177,094		14,174
(371)	U.S. Treasury Notes (10 Year)	December 2016	USD		48,647,375		55,976
7,646	U.S. Treasury Notes (2 Year)	December 2016	USD		1,670,412,063		582,526
(2,699)	U.S. Treasury Notes (5 Year)	December 2016	USD		327,970,672		(725,247	)

See Notes to Financial Statements.

80 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Contracts Long (Short)	Issue	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
8	U.S. Ultra Treasury Bonds	December 2016	USD	1,471,000		$  (17,061	)
(395)	U.S. Ultra Treasury Notes (10 Year)	December 2016	USD	56,941,719		81,686
1,997	Euro Dollar	December 2017	USD	493,932,988		(564,519	)
(2,119)	Euro Dollar	December 2018	USD	523,419,488		466,573
Total						$(130,863	)

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
CLP	1,626,737,470	USD	2,393,000	Credit Suisse International	10/03/16		$  80,008
COP	1,753,465,000	USD	595,000	Credit Suisse International	10/03/16		12,766
COP	1,754,077,850	USD	595,000	Credit Suisse International	10/03/16		12,978
USD	2,393,000	CLP	1,616,734,730	Credit Suisse International	10/03/16		(64,802	)
USD	1,190,000	COP	3,540,023,900	Credit Suisse International	10/03/16		(37,002	)
BRL	3,917,420	USD	1,220,000	Bank of America N.A.	10/04/16		(16,857	)
BRL	3,969,852	USD	1,224,277	Goldman Sachs International	10/04/16		(5,031	)
BRL	4,221,750	USD	1,300,000	Goldman Sachs International	10/04/16		(3,390	)
BRL	6,370,389	USD	1,970,000	Goldman Sachs International	10/04/16		(13,486	)
BRL	26,703,817	USD	8,235,285	Goldman Sachs International	10/04/16		(33,842	)
BRL	3,941,790	USD	1,180,000	Royal Bank of Scotland PLC	10/04/16		30,627
MXN	194,706	USD	10,000	Bank of America N.A.	10/04/16		37
MXN	3,888,920	USD	198,333	Bank of America N.A.	10/04/16		2,136
MXN	23,435,860	USD	1,190,000	Bank of America N.A.	10/04/16		18,089
MXN	3,869,961	USD	198,333	Citibank N.A.	10/04/16		1,158
MXN	3,870,377	USD	198,333	Citibank N.A.	10/04/16		1,180
MXN	3,892,472	USD	198,333	Citibank N.A.	10/04/16		2,319
MXN	22,970,495	USD	1,190,000	JPMorgan Chase Bank N.A.	10/04/16		(5,900	)
MXN	3,872,826	USD	198,333	UBS AG	10/04/16		1,306
MXN	3,892,927	USD	198,333	UBS AG	10/04/16		2,342
USD	1,180,000	BRL	3,918,190	Goldman Sachs International	10/04/16		(23,379	)
USD	1,220,000	BRL	3,966,830	Goldman Sachs International	10/04/16		1,682
USD	1,570,000	BRL	5,137,825	Goldman Sachs International	10/04/16		(7,961	)
USD	1,624,277	BRL	5,395,847	Goldman Sachs International	10/04/16		(32,930	)
USD	2,264,000	BRL	7,351,208	Goldman Sachs International	10/04/16		6,251
USD	5,281,285	BRL	17,100,801	Royal Bank of Scotland PLC	10/04/16		29,180
USD	1,990,000	BRL	6,716,250	UBS AG	10/04/16		(72,737	)
USD	1,190,000	MXN	23,429,096	Citibank N.A.	10/04/16		(17,741	)
EUR	1,000,000	USD	1,126,081	Morgan Stanley & Co. International PLC	10/05/16		(2,457	)
USD	11,984,505	AUD	15,957,000	Commonwealth Bank of Australia	10/05/16		(226,741	)
USD	269,353	EUR	241,000	Deutsche Bank AG	10/05/16		(1,440	)
USD	23,543,389	EUR	21,105,000	Royal Bank of Scotland PLC	10/05/16		(170,694	)
USD	19,939,852	GBP	15,205,000	Royal Bank of Scotland PLC	10/05/16		229,898
USD	2,245,200	TRY	6,697,005	Bank of America N.A.	10/05/16		15,934
USD	1,417,529	TRY	4,228,088	Goldman Sachs International	10/05/16		10,103
RUB	81,032,400	USD	1,230,000	Deutsche Bank AG	10/06/16		58,519
USD	1,230,000	RUB	80,392,800	BNP Paribas S.A.	10/06/16		(48,349	)
AUD	17,210,000	NZD	17,860,469	BNP Paribas S.A.	10/07/16		168,229
CAD	17,016,552	NZD	17,770,000	BNP Paribas S.A.	10/07/16		35,724

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 81

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
NZD	17,686,373	AUD	17,210,000	BNP Paribas S.A.	10/07/16	$	(294,959	)
NZD	17,770,000	CAD	16,981,529	BNP Paribas S.A.	10/07/16		(9,029	)
SEK	112,636,017	EUR	11,760,000	BNP Paribas S.A.	10/07/16		(80,765	)
SEK	113,114,083	EUR	11,830,000	BNP Paribas S.A.	10/07/16		(103,678	)
RUB	428,795,486	USD	6,554,251	BNP Paribas S.A.	10/11/16		255,756
RUB	218,882,785	USD	3,410,000	JPMorgan Chase Bank N.A.	10/11/16		66,234
USD	2,217,251	RUB	145,496,011	Deutsche Bank AG	10/11/16		(93,475	)
TWD	37,004,800	USD	1,180,000	Bank of America N.A.	10/12/16		938
TWD	73,490,400	USD	2,360,000	BNP Paribas S.A.	10/12/16		(14,694	)
USD	1,180,000	TWD	36,981,200	Morgan Stanley & Co. International PLC	10/12/16		(185	)
INR	6,467,960	USD	97,000	Royal Bank of Scotland PLC	10/13/16		(83	)
INR	119,070,800	USD	1,790,000	Standard Chartered Bank	10/13/16		(5,823	)
INR	120,144,800	USD	1,790,000	UBS AG	10/13/16		10,270
TWD	37,394,200	USD	1,180,000	HSBC Bank PLC	10/13/16		13,398
USD	1,790,000	INR	119,983,700	BNP Paribas S.A.	10/13/16		(7,857	)
USD	1,180,000	TWD	37,358,800	HSBC Bank PLC	10/13/16		(12,268	)
EUR	955,571	USD	1,074,858	Goldman Sachs International	10/14/16		(693	)
USD	403,142	EUR	354,755	Bank of America N.A.	10/14/16		4,359
USD	662,328	EUR	593,029	Bank of America N.A.	10/14/16		(4,301	)
USD	1,027,547	EUR	904,385	Bank of America N.A.	10/14/16		10,921
USD	1,997,083	EUR	1,781,401	Bank of America N.A.	10/14/16		(5,403	)
USD	334,727	EUR	298,986	Citibank N.A.	10/14/16		(1,365	)
USD	116,610	EUR	103,643	Deutsche Bank AG	10/14/16		104
USD	428,522	EUR	381,198	Deutsche Bank AG	10/14/16		15
USD	149,980	EUR	134,037	Goldman Sachs International	10/14/16		(691	)
USD	232,556	EUR	205,684	Morgan Stanley & Co. International PLC	10/14/16		1,346
USD	683,215	EUR	604,273	Morgan Stanley & Co. International PLC	10/14/16		3,947
USD	21,000	CLP	13,881,000	Royal Bank of Scotland PLC	10/17/16		(77	)
USD	1,795,000	CLP	1,214,317,500	State Street Bank and Trust Co.	10/17/16		(48,787	)
TRY	5,600,807	USD	1,873,623	Citibank N.A.	10/18/16		(14,290	)
TRY	6,406,706	USD	2,148,127	Citibank N.A.	10/18/16		(21,256	)
TRY	4,881,474	USD	1,629,086	Deutsche Bank AG	10/18/16		(8,555	)
TRY	337,374	USD	112,820	HSBC Bank PLC	10/18/16		(819	)
TRY	2,689,792	USD	896,777	JPMorgan Chase Bank N.A.	10/18/16		(3,831	)
TRY	2,976,386	USD	991,699	JPMorgan Chase Bank N.A.	10/18/16		(3,611	)
USD	1,388,000	COP	4,129,300,000	Royal Bank of Scotland PLC	10/18/16		(38,921	)
USD	3,791,110	TRY	11,261,492	Citibank N.A.	10/18/16		52,567
USD	3,913,641	TRY	11,631,047	Morgan Stanley & Co. International PLC	10/18/16		52,415
USD	1,797,793	GBP	1,360,000	Morgan Stanley & Co. International PLC	10/19/16		34,322
KRW	1,567,746,000	USD	1,388,000	Morgan Stanley & Co. International PLC	10/20/16		35,261
RUB	84,649,566	USD	1,301,100	Deutsche Bank AG	10/20/16		40,308
USD	1,388,000	KRW	1,558,030,000	JPMorgan Chase Bank N.A.	10/20/16		(26,441	)
USD	112,678	TWD	3,530,765	JPMorgan Chase Bank N.A.	10/21/16		(28	)
USD	1,769,322	TWD	56,040,443	Morgan Stanley & Co. International PLC	10/21/16		(19,547	)

See Notes to Financial Statements.

82 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
MYR	8,190,000	USD	2,000,000	JPMorgan Chase Bank N.A.		10/24/16		$  (22,360	)
MYR	66,192	USD	16,000	Royal Bank of Scotland PLC		10/24/16		(17	)
JPY	200,328,185	USD	1,985,000	Royal Bank of Scotland PLC		10/26/16		(7,285	)
USD	595,000	ZAR	8,143,236	Goldman Sachs International		10/26/16		4,606
USD	595,000	ZAR	8,137,990	Morgan Stanley & Co. International PLC		10/26/16		4,986
RUB	76,398,000	USD	1,190,000	BNP Paribas S.A.		10/27/16		18,571
KRW	421,337,723	USD	380,956	UBS AG		10/28/16		1,527
KRW	983,548,990	USD	889,044	UBS AG		10/28/16		3,807
USD	1,270,000	KRW	1,400,175,000	Standard Chartered Bank		10/28/16		(1,057	)
BRL	1,017,126	USD	311,715	Royal Bank of Scotland PLC		11/03/16		(2,070	)
BRL	17,241,283	USD	5,281,285	Royal Bank of Scotland PLC		11/03/16		(32,504	)
USD	11,464,094	AUD	15,045,000	BNP Paribas S.A.		11/03/16		(41,305	)
USD	22,838,387	EUR	20,346,000	Royal Bank of Scotland PLC		11/03/16		(54,187	)
USD	19,684,313	GBP	15,164,000	Citibank N.A.		11/03/16		15,713
MXN	46,609,780	USD	2,390,000	Royal Bank of Scotland PLC		11/04/16		3,833
CNH	5,116,372	USD	765,000	BNP Paribas S.A.		11/07/16		(377	)
CNH	5,115,781	USD	765,000	Goldman Sachs International		11/07/16		(465	)
CNH	5,116,040	USD	765,000	Goldman Sachs International		11/07/16		(427	)
CNH	6,162,281	USD	921,600	Goldman Sachs International		11/07/16		(670	)
CNH	15,871,154	USD	2,389,000	Goldman Sachs International		11/07/16		(17,115	)
CNH	5,117,287	USD	765,000	Royal Bank of Canada		11/07/16		(240	)
USD	9,954,000	CNH	65,712,326	Deutsche Bank AG		11/07/16		133,535
USD	337,600	CNH	2,256,986	Morgan Stanley & Co. International PLC		11/07/16		302
JPY	2,689,887,597	GBP	20,420,000	BNP Paribas S.A.		11/14/16		85,432
USD	13,240,000	CAD	17,359,692	BNP Paribas S.A.		11/14/16		3,554
USD	52,704,143	JPY	5,260,000,000	Credit Suisse International		11/21/16		720,753
CAD	6,246,263	AUD	6,340,000	BNP Paribas S.A.		12/15/16		(80,069	)
CAD	11,180,894	AUD	11,370,000	JPMorgan Chase Bank N.A.		12/15/16		(159,610	)
GBP	116,520	USD	151,993	Citibank N.A.		12/21/16		(695	)
GBP	208,611	USD	273,269	Citibank N.A.		12/21/16		(2,391	)
GBP	1,350,000	USD	1,759,672	Royal Bank of Scotland PLC		12/21/16		(6,719	)
KRW	1,116,716,080	USD	1,016,000	HSBC Bank PLC		12/21/16		(2,496	)
USD	1,082,933	GBP	818,484	Bank of America N.A.		12/21/16		20,146
USD	1,786,446	GBP	1,350,000	Bank of America N.A.		12/21/16		33,493
USD	1,270,000	KRW	1,432,750,500	Deutsche Bank AG		12/21/16		(30,329	)
USD	1,741,780	MXN	33,760,744	Royal Bank of Scotland PLC		12/21/16		16,656
INR	169,675,000	USD	2,500,000	UBS AG		12/23/16		12,122
Total								$  313,104

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 83

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

OTC Barrier Options Purchased

Description

Put/ Call

Type of Option

Counterparty

Expiration Date

Strike Price

Barrier Price

Notional Amount (000)

Value

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

—

CAD

1.43

USD

200

$13,601

USD Currency

Call

One-Touch

Morgan Stanley & Co. International PLC

11/30/16

—

MXN

23.00

USD

141

10,184

Total

$23,785

OTC Options Purchased

Description

Put/Call

Counterparty

Expiration Date

Strike Price

Notional Amount (000)

Value

USD Currency

Call

Goldman Sachs International

10/07/16

TWD

31.00

USD

2,360

$

28,066

USD Currency

Call

BNP Paribas S.A.

11/23/16

TWD

32.00

USD

2,390

9,630

USD Currency

Call

Deutsche Bank AG

11/23/16

MXN

19.90

USD

2,380

50,147

AUD Currency

Call

Deutsche Bank AG

12/13/16

CAD

1.01

AUD

70,615

624,498

Morgan Stanley & Co.

USD Currency

Put

International PLC

10/18/16

MXN

19.30

USD

2,380

33,411

Morgan Stanley & Co.

USD Currency

Put

International PLC

11/10/16

INR

67.80

USD

3,880

64,521

Morgan Stanley & Co.

NOK Currency

Put

International PLC

11/11/16

SEK

1.01

NOK

437,630

8,030

Morgan Stanley & Co.

USD Currency

Put

International PLC

11/23/16

BRL

3.30

USD

1,980

55,426

USD Currency

Put

Deutsche Bank AG

12/01/16

INR

67.50

USD

2,328

30,193

Total

$

903,922

OTC Interest Rate Swaptions Purchased

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

2-Year Interest Rate Swap

Citibank N.A.

Call

1.10

%

Receive

6-Month LIBOR

7/13/18

USD

662,360

$

3,795,786

2-Year Interest Rate Swap

Citibank N.A.

Put

1.00

%

Pay

6-Month LIBOR

1/12/17

USD

264,950

704,733

Total

$

4,500,519

OTC Interest Rate Swaptions Written

Description

Counterparty

Put/ Call

Exercise Rate

Pay/Receive Exercise Rate

Floating Rate Index

Expiration Date

Notional Amount (000)

Value

2-Year Interest Rate Swap

Citibank N.A.

Call

0.41

%

Pay

6-Month LIBOR

7/13/18

USD

662,360

$

(1,040,925

)

2-Year Interest Rate Swap

Citibank N.A.

Call

0.76

%

Pay

6-Month LIBOR

7/13/18

USD

662,360

(2,140,337

)

10-Year Interest Rate Swap

Citibank N.A.

Put

1.68

%

Receive

3-Month LIBOR

1/12/17

USD

58,170

(433,600

)

Total

$

(3,614,862

)

See Notes to Financial Statements.

84 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Centrally Cleared Credit Default Swaps — Sell Protection
Index	Receive Fixed Rate		Expiration Date		Credit Rating1		Notional Amount (000)2		Unrealized Appreciation
CDX.NA.HY Series 26 Version 1		5.00%		6/20/21		B+		USD      149,550		$    4,154
CDX.NA.IG Series 26 Version 1		1.00%		6/20/21		BBB+		USD      223,860		855,448
Total										$859,602

      Centrally Cleared Interest Rate Swaps

Fixed Rate	Floating Rate	Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
0.49%1	6-month EURIBOR		7/04/19		EUR	120,000		$ 2,767,636
0.45%2	6-month EURIBOR		7/04/19		EUR	120,000		(2,610,827	)
Total								$    156,809

¹ Fund pays the floating rate and receives the fixed rate.

² Fund pays the fixed rate and receives the floating rate.

OTC Credit Default Swaps — Buy Protection
Issuer	Pay Fixed Rate			Counterparty	Expiration Date	Notional Amount (000)			Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
Genworth Holdings, Inc.		1.00	%	Credit Suisse International	6/20/18		USD	1,967	$	53,829			$    60,141			$   (6,312	)
Genworth Holdings, Inc.		1.00	%	Credit Suisse International	6/20/18		USD	1,888		51,667			54,970			(3,303	)
Genworth Holdings, Inc.		1.00	%	Credit Suisse International	6/20/18		USD	1,888		51,772			55,531			(3,759	)
Genworth Holdings, Inc.		1.00	%	Citibank N.A.	6/20/20		USD	903		119,079			78,012			41,067
Genworth Holdings, Inc.		1.00	%	Goldman Sachs Bank USA	6/20/20		USD	1,684		222,163			137,419			84,744
Genworth Holdings, Inc.		1.00	%	JPMorgan Chase Bank N.A.	6/20/20		USD	442		58,312			38,961			19,351
United Mexican States		1.00	%	JPMorgan Chase Bank N.A.	6/20/20		USD	2,086		19,928			13,643			6,285
United Mexican States		1.00	%	Bank of America N.A.	9/20/20		USD	2,086		26,664			20,813			5,851
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	1,082		2,192			5,509			(3,317	)
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	506		1,025			2,756			(1,731	)
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.	6/20/21		USD	157		318			915			(597	)
Federation of Malaysia		1.00	%	Barclays Bank PLC	12/20/21		USD	2,546		25,694			43,282			(17,588	)
Federation of Malaysia		1.00	%	Barclays Bank PLC	12/20/21		USD	203		2,021			2,293			(272	)
Republic of Argentina		5.00	%	Bank of America N.A.	12/20/21		USD	452		(23,922	)		(21,489	)		(2,433	)
Republic of Argentina		5.00	%	Citibank N.A.	12/20/21		USD	5,257		(313,669	)		(179,542	)		(134,127	)
Republic of Colombia		1.00	%	Barclays Bank PLC	12/20/21		USD	1,155		40,083			44,652			(4,569	)
Republic of Colombia		1.00	%	Barclays Bank PLC	12/20/21		USD	1,155		40,084			45,736			(5,652	)
Republic of Colombia		1.00	%	Citibank N.A.	12/20/21		USD	985		34,183			39,004			(4,821	)
				Morgan Stanley Capital
Republic of Colombia		1.00	%	Services LLC	12/20/21		USD	1,176		40,812			43,065			(2,253	)
Republic of South Africa		1.00	%	Bank of America N.A.	12/20/21		USD	1,415		101,681			108,767			(7,086	)
Republic of South Africa		1.00	%	Barclays Bank PLC	12/20/21		USD	8,520		612,245			651,140			(38,895	)
Republic of South Africa		1.00	%	BNP Paribas S.A.	12/20/21		USD	9,772		702,213			759,004			(56,791	)
Republic of South Africa		1.00	%	BNP Paribas S.A.	12/20/21		USD	865		62,158			65,341			(3,183	)
Republic of South Africa		1.00	%	Citibank N.A.	12/20/21		USD	3,470		249,353			266,730			(17,377	)
Republic of South Africa		1.00	%	HSBC Bank PLC	12/20/21		USD	1,080		77,609			83,766			(6,157	)
Republic of South Africa		1.00	%	JPMorgan Chase Bank N.A.	12/20/21		USD	3,590		257,977			275,954			(17,977	)
Republic of the Philippines		1.00	%	Bank of America N.A.	12/20/21		USD	1,702		12,673			15,152			(2,479	)
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	8,589		64,922			34,646			30,276
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	2,866		21,659			12,950			8,709
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	1,627		12,299			7,655			4,644
Republic of the Philippines		1.00	%	Barclays Bank PLC	12/20/21		USD	1,017		7,687			4,039			3,648

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 85

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Issuer	Pay Fixed Rate			Counterparty	Expiration Date		Notional Amount (000)			Value		Premiums Paid (Received)		Unrealized Appreciation (Depreciation)
Republic of the Philippines		1.00	%	Barclays Bank PLC		12/20/21		USD	814		$       6,149	$	3,231		$     2,918
Republic of the Philippines		1.00	%	Barclays Bank PLC		12/20/21		USD	407		3,075		1,616		1,459
Republic of the Philippines		1.00	%	BNP Paribas S.A.		12/20/21		USD	2,520		19,051		9,545		9,506
Republic of the Philippines		1.00	%	BNP Paribas S.A.		12/20/21		USD	602		4,549		1,838		2,711
Republic of the Philippines		1.00	%	Citibank N.A.		12/20/21		USD	2,048		15,255		16,251		(996	)
Republic of the Philippines		1.00	%	Citibank N.A.		12/20/21		USD	1,179		8,909		5,258		3,651
Republic of the Philippines		1.00	%	Citibank N.A.		12/20/21		USD	577		4,360		1,479		2,881
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.		12/20/21		USD	1,921		14,518		4,926		9,592
Republic of the Philippines		1.00	%	JPMorgan Chase Bank N.A.		12/20/21		USD	1,081		8,167		4,883		3,284
Republic of the Philippines		1.00	%	UBS AG		12/20/21		USD	1,004		7,592		3,989		3,603
Russian Federation		1.00	%	JPMorgan Chase Bank N.A.		12/20/21		USD	1,200		64,898		71,371		(6,473	)
United Mexican States		1.00	%	Barclays Bank PLC		12/20/21		USD	866		29,322		30,832		(1,510	)
United Mexican States		1.00	%	Barclays Bank PLC		12/20/21		USD	527		17,844		19,135		(1,291	)
United Mexican States		1.00	%	BNP Paribas S.A.		12/20/21		USD	2,379		80,550		79,550		1,000
United Mexican States		1.00	%	BNP Paribas S.A.		12/20/21		USD	2,379		80,551		82,357		(1,806	)
United Mexican States		1.00	%	Citibank N.A.		12/20/21		USD	1,190		40,292		42,615		(2,323	)
United Mexican States		1.00	%	Citibank N.A.		12/20/21		USD	1,189		40,258		41,458		(1,200	)
United Mexican States		1.00	%	Citibank N.A.		12/20/21		USD	1,189		40,258		42,579		(2,321	)
United Mexican States		1.00	%	Citibank N.A.		12/20/21		USD	1,189		40,258		42,579		(2,321	)
United Mexican States		1.00	%	Citibank N.A.		12/20/21		USD	518		17,539		19,296		(1,757	)
				Morgan Stanley Capital
United Mexican States		1.00	%	Services LLC		12/20/21		USD	1,242		42,052		41,964		88
				Morgan Stanley Capital
United Mexican States		1.00	%	Services LLC		12/20/21		USD	1,242		42,053		42,258		(205	)
Total										$	3,262,211	$	3,379,825		$(117,614	)

OTC Credit Default Swaps — Sell Protection
Issuer	Receive Fixed Rate			Counterparty	Expiration Date		Credit Rating1		Notional Amount (000)2			Value			Premiums Received			Unrealized Depreciation
United Mexican States		1.00	%	Bank of America N.A.		6/20/20		BBB+		USD	2,086		$(19,928	)	$	(15,814	)		$  (4,114	)
United Mexican States		1.00	%	JPMorgan Chase Bank N.A.		9/20/20		BBB+		USD	2,086		(26,665	)		(18,132	)		(8,533	)
Total													$(46,593	)	$	(33,946	)		$(12,647	)

¹  Using S&P’s rating of the issuer.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

OTC Interest Rate Swaps
Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)			Value			Premiums Paid (Received)		Unrealized Appreciation (Depreciation)
13.13%1	1-day BZDIOVER	Bank of America N.A.	7/03/17		BRL	17,950		$  (6,899	)		—		$  (6,899	)
12.93%1	1-day BZDIOVER	Citibank N.A.	7/03/17		BRL	35,888		(3,041	)		—		(3,041	)
13.11%1	1-day BZDIOVER	Citibank N.A.	7/03/17		BRL	21,543		(7,328	)		—		(7,328	)
12.85%1	1-day BZDIOVER	JPMorgan Chase Bank N.A.	7/03/17		BRL	2,108		77			—		77
1.92%2	3-month KRW Certificate of Deposit	Deutsche Bank AG	11/10/17		KRW	3,145,030		22,956			$4,606		18,350
1.69%1	3-month KRW Certificate of Deposit	Deutsche Bank AG	11/10/17		KRW	3,145,030		(14,818	)		—		(14,818	)

See Notes to Financial Statements.

86 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

Fixed Rate	Floating Rate	Counterparty	Expiration Date		Notional Amount (000)		Value			Premiums Paid (Received)			Unrealized Appreciation (Depreciation)
12.24%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	27,807		$  86,980			—			$  86,980
12.03%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	15,057		38,635			—			38,635
12.02%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	14,634		36,597			—			36,597
12.46%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	13,835		59,483			—			59,483
12.29%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	13,806		43,389			—			43,389
11.50%2	1-day BZDIOVER	Bank of America N.A.		1/02/19	BRL	12,068		(2,200	)		—			(2,200	)
12.52%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.		1/02/19	BRL	13,826		65,705			—			65,705
12.31%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.		1/02/19	BRL	7,588		27,400			—			27,400
11.68%2	1-day BZDIOVER	Bank of America N.A.		1/02/20	BRL	15,150		28,686			—			28,686
11.65%2	1-day BZDIOVER	Citibank N.A.		1/02/20	BRL	12,131		19,618			—			19,618
11.93%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.		1/02/20	BRL	11,932		51,194			—			51,194
11.88%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.		1/02/20	BRL	11,737		44,955			—			44,955
11.38%2	1-day BZDIOVER	JPMorgan Chase Bank N.A.		1/02/20	BRL	1,025		(374	)		—			(374	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21	CNY	11,450		(1,383	)		$     (16	)		(1,367	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21	CNY	11,450		(1,383	)		(16	)		(1,367	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21	CNY	9,178		(1,109	)		(51	)		(1,058	)
2.75%2	7-day China Fixing Repo Rates	Bank of America N.A.		5/12/21	CNY	5,725		(691	)		(8	)		(683	)
6.33%2	28-day MXIBTIIE	Citibank N.A.		7/17/25	MXN	10,282		(166	)		(49	)		(117	)
6.32%2	28-day MXIBTIIE	Morgan Stanley Capital Services LLC		7/17/25	MXN	20,635		(738	)		(95	)		(643	)
6.32%2	28-day MXIBTIIE	Goldman Sachs Bank USA		8/06/25	MXN	30,867		(1,477	)		(141	)		(1,336	)
6.31%1	28-day MXIBTIIE	Bank of America N.A.		8/11/25	MXN	10,120		769			45			724
6.31%1	28-day MXIBTIIE	Bank of America N.A.		8/11/25	MXN	10,120		769			45			724
6.31%1	28-day MXIBTIIE	Deutsche Bank AG		8/11/25	MXN	37,565		2,413			165			2,248
7.05%2	1-day COOIS	Credit Suisse International		7/22/26	COP	2,039,893		30,782			—			30,782
7.00%2	1-day COOIS	Credit Suisse International		7/22/26	COP	2,039,893		28,303			—			28,303
6.90%2	3-month LIBOR	JPMorgan Chase Bank N.A.		7/29/26	COP	8,559,272		95,443			8,974			86,469
Total								$642,547			$13,459			$629,088

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 87

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

    Transactions in Options Written for the Year Ended September 30, 2016

	Calls									Puts
		Notional (000)											Notional (000)
							Premiums								Premiums
	Contracts	KRW			USD		Received			Contracts			USD		Received
Outstanding options, beginning of year	—		3,145,030			—	$	1,729			8,022			—	$	2,995,335
Options written	—		—			1,324,720		4,888,217			—			58,170		592,383
Options expired	—		(3,145,030	)		—		(1,729	)		(8,022	)		—		(2,995,335	)
Outstanding options, end of year	—		—			1,324,720	$	4,888,217			—			58,170	$	592,383

    Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts		Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts	Total
Futures contracts	Net unrealized appreciation1	—		—	—		—	$	1,204,096	—	$	1,204,096
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—		—	—	$	2,381,663		—	—		2,381,663
Options purchased	Investments at value — unaffiliated2 Unrealized appreciation on OTC swaps;	—		—	—		927,707		4,500,519	—		5,428,226
Swaps — OTC	Swap premiums paid	—	$	3,826,124	—		—		684,154	—		4,510,278
Swaps — centrally cleared	Net unrealized appreciation1	—		859,602	—		—		2,767,636	—		3,627,238
Total		—	$	4,685,726	—	$	3,309,370	$	9,156,405	—	$	17,151,501
Liabilities — Derivative Financial Instruments
Futures contracts	Net unrealized depreciation1	—		—	—		—	$	1,334,959	—	$	1,334,959
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—		—	—	$	2,068,559		—	—		2,068,559
Options written	Options written at value Unrealized depreciation on OTC swaps;	—		—	—		—		3,614,862	—		3,614,862
Swaps — OTC	Swap premiums received	—	$	610,506	—		—		41,607	—		652,113
Swaps — centrally cleared	Net unrealized depreciation1	—		—	—		—		2,610,827	—		2,610,827
Total		—	$	610,506	—	$	2,068,559	$	7,602,255	—	$	10,281,320

¹  Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedule of Investments.

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follow:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts			Equity Contracts	Foreign Currency Exchange Contracts			Interest Rate Contracts			Other Contracts	Total
Futures contracts	—		—		—		—		$	(17,421,443	)	—	$	(17,421,443	)
Forward foreign currency exchange contracts	—		—		—	$	(2,463,474	)		—		—		(2,463,474	)
Options purchased1	—		—		—		(645,035	)		(3,522,540	)	—		(4,167,575	)
Options written	—		—		—		—			2,997,064		—		2,997,064
Swaps	—	$	(4,348,542	)	—		—			634,491		—		(3,714,051	)
Total	—	$	(4,348,542	)	—	$	(3,108,509	)	$	(17,312,428	)	—	$	(24,769,479	)
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	—		—		—		—		$	1,343,958		—	$	1,343,958
Forward foreign currency exchange contracts	—		—		—	$	(1,787,971	)		—		—		(1,787,971	)
Options purchased2	—		—		—		83,340			2,158,582		—		2,241,922
Options written	—		—		—		—			(1,073,671	)	—		(1,073,671	)
Swaps	—	$	(1,711,047	)	—		—			810,784		—		(900,263	)
Total	—	$	(1,711,047	)	—	$	(1,704,631	)	$	3,239,653		—	$	(176,025	)

¹  Options purchased are included in net realized gain (loss) from investments.

²  Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

See Notes to Financial Statements.

88 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

     Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts:
Average notional value of contracts — long	$	1,673,927,883
Average notional value of contracts — short	$	683,289,161
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	386,572,847
Average amounts sold — in USD	$	174,304,707
Options:
Average value of option contracts purchased	$	351,088
Average value of option contracts written	$	25,069
Average notional value of swaption contracts purchased	$	231,827,500
Average notional value of swaption contracts written	$	345,722,500
Credit default swaps:
Average notional value — buy protection	$	49,592,250
Average notional value — sell protection	$	139,884,500
Interest rate swaps:
Average notional value — pays fixed rate	$	204,933,039
Average notional value — receives fixed rate	$	202,186,822

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

     Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets			Liabilities
Derivative Financial Instruments:
Futures contracts	$	1,239,503		$	789,473
Forward foreign currency exchange contracts		2,381,663			2,068,559
Options		5,428,226	1		3,614,862
Swaps — centrally cleared		58,003			—
Swaps — OTC2		4,510,278			652,113
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	13,617,673		$	7,125,007
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(1,297,506	)		(789,473	)
Total derivative assets and liabilities subject to an MNA	$	12,320,167		$	6,335,534

¹  Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

²  Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 89

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1		Non-cash Collateral Received	Cash Collateral Received2			Net Amount of Derivative Assets3
Bank of America N.A.		$     551,944		$       (93,641)	—		—			$    458,303
Barclays Bank PLC		952,861		(69,777)	—		$   (610,000	)		273,084
BNP Paribas S.A.		1,587,748		(742,862)	—		(844,886	)		—
Citibank N.A.		5,235,934		(4,029,920)	—		(1,160,000	)		46,014
Credit Suisse International		1,056,232		(115,178)	—		(560,000	)		381,054
Deutsche Bank AG		962,688		(148,617)	—		—			814,071
Goldman Sachs Bank USA		222,163		(1,477)	—		(220,686	)		—
Goldman Sachs International		50,708		(50,708)	—		—			—
HSBC Bank PLC		97,164		(21,740)	—		—			75,424
JPMorgan Chase Bank N.A.		808,438		(278,915)	—		(529,523	)		—
Morgan Stanley & Co. International PLC		317,752		(22,189)	—		—			295,563
Morgan Stanley Capital Services LLC		127,375		(3,196)	—		—			124,179
Royal Bank of Scotland PLC		310,194		(310,194)	—		—			—
UBS AG		38,966		(38,966)	—		—			—
Total		$12,320,167		$(5,927,380)	—		$(3,925,095	)		$2,467,692
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1		Non-cash Collateral Pledged	Cash Collateral Pledged			Net Amount of Derivative Liabilities4
Bank of America N.A.		$      93,641		$     (93,641)	—		—			—
Barclays Bank PLC		69,777		(69,777)	—		—			—
BNP Paribas S.A.		742,862		(742,862)	—		—			—
Citibank N.A.		4,029,920		(4,029,920)	—		—			—
Commonwealth Bank of Australia		226,741		—	—		—			$226,741
Credit Suisse International		115,178		(115,178)	—		—			—
Deutsche Bank AG		148,617		(148,617)	—		—			—
Goldman Sachs Bank USA		1,477		(1,477)	—		—			—
Goldman Sachs International		140,080		(50,708)	—		—			89,372
HSBC Bank PLC		21,740		(21,740)	—		—			—
JPMorgan Chase Bank N.A.		278,915		(278,915)	—		—			—
Morgan Stanley & Co. International PLC		22,189		(22,189)	—		—			—
Morgan Stanley Capital Services LLC		3,196		(3,196)	—		—			—
Royal Bank of Canada		240		—	—		—			240
Royal Bank of Scotland PLC		312,557		(310,194)	—		—			2,363
Standard Chartered Bank		6,880		—	—		—			6,880
State Street Bank and Trust Co.		48,787		—	—		—			48,787
UBS AG		72,737		(38,966)	—		—			33,771
Total		$6,335,534		$(5,927,380)	—		—			$408,154

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

³  Net amount represents the net amount receivable from the counterparty in the event of default.

⁴  Net amount represents the net amount payable due to the counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities.

See Notes to Financial Statements.

90 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock Low Duration Bond Portfolio

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—		$	1,198,660,185		$	118,580,532	$	1,317,240,717
Capital Trusts1		—			1,426,326			—		1,426,326
Corporate Bonds1		—			1,486,120,908			—		1,486,120,908
Floating Rate Loan Interests1		—			4,958,904			—		4,958,904
Foreign Agency Obligations		—			135,276,679			—		135,276,679
Foreign Government Obligations		—			56,435,422			—		56,435,422
Investment Companies	$	59,224,200			—			—		59,224,200
Non-Agency Mortgage-Backed Securities		—			750,187,238			5,917,527		756,104,765
U.S. Government Sponsored Agency Securities		—			785,978,640			—		785,978,640
U.S. Treasury Obligations		—			721,126,569			—		721,126,569
Short-Term Securities:
Foreign Government Obligations		—			51,886,771			—		51,886,771
Money Market Funds		28,057,043			—			—		28,057,043
Repurchase Agreements		—			80,000,000			—		80,000,000
Options Purchased:
Foreign currency exchange contracts		—			927,707			—		927,707
Interest rate contracts		—			4,500,519			—		4,500,519
Total	$	87,281,243		$	5,277,485,868		$	124,498,059	$	5,489,265,170
Derivative Financial Instruments2
Assets:
Credit contracts		—		$	1,104,870			—	$	1,104,870
Foreign currency exchange contracts		—			2,381,663			—		2,381,663
Interest rate contracts	$	1,204,096			3,437,955			—		4,642,051
Liabilities:
Credit contracts		—			(375,529	)		—		(375,529	)
Foreign currency exchange contracts		—			(2,068,559	)		—		(2,068,559	)
Interest rate contracts		(1,334,959	)		(6,266,920	)		—		(7,601,879	)
Total	$	(130,863	)	$	(1,786,520	)		—	$	(1,917,383	)

¹  See above Schedule of Investments for values in each industry.

²  Derivative financial instruments are swaps, futures contracts, forward foreign currency exchange contracts and options written. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 91

Schedule of Investments (concluded) BlackRock Low Duration Bond Portfolio

The Fund may hold assets and/or liabilities in which the fair value, approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	215,462		—			—	$	215,462
Foreign currency at value		5,869,631		—			—		5,869,631
Cash pledged:
Futures contracts		2,829,170		—			—		2,829,170
Centrally cleared swaps		10,953,750		—			—		10,953,750
Liabilities:
Reverse repurchase agreements		—	$	(45,124,906	)		—		(45,124,906	)
Cash received:
Collateral — TBA commitments		—		(320,000	)		—		(320,000	)
Collateral — OTC derivatives		—		(4,540,000	)		—		(4,540,000	)
Total	$	19,868,013	$	(49,984,906	)		—	$	(30,116,893	)

During the year ended September 30, 2016, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Floating Rate Loan Interests			Non-Agency Mortgage- Backed Securities			Total
Assets:
Opening Balance, as of September 30, 2015	$	41,925,970		$	601,600		$	2,904,834		$	45,432,404
Transfers into Level 3		—			—			—			—
Transfers out of Level 3		(17,064,119	)		—			—			(17,064,119	)
Accrued discounts/premiums		5,777			98			242			6,117
Net realized gain (loss)		24,430			2,104			(832,470	)		(805,936	)
Net change in unrealized appreciation (depreciation)1,2		(61,806	)		36,198			(449,887	)		(475,495	)
Purchases		109,138,054			—			5,597,887			114,735,941
Sales		(15,387,774	)		(640,000	)		(1,303,079	)		(17,330,853	)
Closing Balance, as of September 30, 2016	$	118,580,532			—		$	5,917,527		$	124,498,059
Net change in unrealized appreciation (depreciation) on investments still held at September 30, 20162	$	(49,967	)		—		$	(25,494	)	$	(75,461	)

1 Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

2 Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at September 30, 2016, is generally due to investments no longer held or categorized as Level 3 at year end.

The Fund’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See Notes to Financial Statements.

92 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Assets and Liabilities

September 30, 2016	BlackRock Core Bond Portfolio			BlackRock High Yield Bond Portfolio1			BlackRock Low Duration Bond Portfolio
Assets
Investments at value — unaffiliated2,3	$	4,474,700,314		$	18,856,766,197		$	5,401,945,930
Investments at value — affiliated4		2,666,751			613,227,353			87,319,240
Cash		—			28,047,185			215,462
Cash pledged:
Collateral — OTC derivatives		1,210,000			—			—
Futures contracts		4,321,520			28,723,950			2,829,170
Centrally cleared swaps		2,830,750			39,537,000			10,953,750
Foreign currency at value5		2,235,805			1,156,530			5,869,631
Receivables:
Investments sold		64,404,068			216,244,289			319,199,517
Swaps		—			—			374,358
TBA sale commitments		598,693,404			—			—
Capital shares sold		5,577,313			66,181,395			16,961,447
Dividends — affiliated		708			14,433			8,110
Interest		16,813,373			274,543,190			21,821,556
Security lending income — affiliated		—			203,147			—
From the Manager		382,862			247,105			141,918
Principal paydown		—			—			766,112
Variation margin on futures contracts		1,375,234			4,606			1,239,503
Variation margin on centrally cleared swaps		88,142			532,490			58,003
Swap premiums paid		1,522,851			201,509			3,594,691
Unrealized appreciation on:
Forward foreign currency exchange contracts		790,919			5,307,786			2,381,663
OTC swaps		986,762			30,041,658			915,587
Prepaid expenses		52,362			269,800			105,070
Other assets		44,614			305,533			10,383
Total assets		5,178,697,752			20,161,555,156			5,876,711,101
Liabilities
Bank overdraft		38,104			—			—
Cash collateral on securities loaned at value		—			199,272,779			—
Cash received:
Collateral — reverse repurchase agreements		760,000			197,000			—
Collateral — OTC derivatives		—			26,620,000			4,540,000
Collateral — TBA commitments		17,000			—			320,000
Options written at value6		87,019			27,088			3,614,862
TBA sale commitments at value7		599,479,298			—			—
Payables:
Investments purchased		704,207,444			466,387,736			497,990,640
Reverse repurchase agreements		632,754,197			478,269,418			45,124,906
Swaps		49,896			—			—
Capital shares redeemed		5,051,361			65,416,417			15,027,010
Income dividends		1,332,771			21,035,140			1,299,086
Interest expense		—			1,343,039			—
Investment advisory fees		859,039			7,229,620			1,435,395
Officer’s and Trustees’ fees		18,878			80,978			26,873
Other accrued expenses		1,017,766			5,211,358			1,608,093
Other affiliates		210,522			947,659			229,412
Service and distribution fees		205,704			1,368,845			518,010
Variation margin on futures contracts		699,888			4,030,766			789,473
Swap premiums received		1,367,585			442,984			235,353
Unrealized depreciation on:
Forward foreign currency exchange contracts		1,751,434			5,278,408			2,068,559
OTC swaps		1,453,853			—			416,760
Total liabilities		1,951,361,759			1,283,159,235			575,244,432
Net Assets	$	3,227,335,993		$	18,878,395,921		$	5,301,466,669
Net Assets Consist of
Paid-in capital	$	3,240,368,374		$	19,755,526,977		$	5,423,325,991
Undistributed (distributions in excess of) net investment income		3,029,363			(16,133,946	)		(5,904,713	)
Accumulated net realized loss		(89,491,819	)		(1,064,687,361	)		(111,657,303	)
Net unrealized appreciation (depreciation)		73,430,075			203,690,251			(4,297,306	)
Net Assets	$	3,227,335,993		$	18,878,395,921		$	5,301,466,669
1      Consolidated Statement of Assets and Liabilities
2      Investments at cost — unaffiliated	$	4,397,655,570		$	18,666,050,624		$	5,409,961,112
3      Securities loaned at value		—		$	196,193,472			—
4      Investments at cost — affiliated	$	2,666,751		$	621,615,977		$	87,313,746
5      Foreign currency at cost	$	2,217,581		$	1,482,289		$	5,778,728
6      Premiums received	$	193,703		$	171,000		$	5,480,600
7      Proceeds from TBA sale commitments	$	598,693,404			—			—

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 93

Statements of Assets and Liabilities (continued)

September 30, 2016	BlackRock Core Bond Portfolio		BlackRock High Yield Bond Portfolio1		BlackRock Low Duration Bond Portfolio
Net Asset Value
Institutional
Net assets	$	1,853,076,576	$	9,031,924,853	$	3,020,681,440
Shares outstanding2		187,973,565		1,186,362,881		313,100,272
Net asset value	$	9.86	$	7.61	$	9.65
Service
Net assets	$	55,153,681	$	378,765,967	$	60,358,019
Shares outstanding2		5,593,361		49,736,640		6,259,241
Net asset value	$	9.86	$	7.62	$	9.64
Investor A
Net assets	$	503,639,894	$	3,733,406,367	$	875,788,478
Shares outstanding2		51,016,467		490,579,881		90,818,408
Net asset value	$	9.87	$	7.61	$	9.64
Investor A1
Net assets		—		—	$	11,892,257
Shares outstanding2		—		—		1,232,104
Net asset value		—		—	$	9.65
Investor B
Net assets		—	$	329,943		—
Shares outstanding2		—		43,315		—
Net asset value		—	$	7.62		—
Investor B1
Net assets		—	$	522,107		—
Shares outstanding2		—		68,605		—
Net asset value		—	$	7.61		—

¹ Consolidated Statement of Assets and Liabilities.

² Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.

94 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Assets and Liabilities (concluded)

September 30, 2016	BlackRock Core Bond Portfolio		BlackRock High Yield Bond Portfolio1		BlackRock Low Duration Bond Portfolio
Net asset value
Investor C
Net assets	$	110,227,050	$	539,242,748	$	372,307,370
Shares outstanding2		11,213,022		70,756,983		38,623,086
Net asset value	$	9.83	$	7.62	$	9.64
Investor C1
Net assets		—	$	52,539,358		—
Shares outstanding2		—		6,890,451		—
Net asset value		—	$	7.62		—
Investor C2
Net assets		—		—	$	6,138,857
Shares outstanding2		—		—		636,643
Net asset value		—		—	$	9.64
Investor C3
Net assets		—		—	$	18,349,636
Shares outstanding2		—		—		1,903,526
Net asset value		—		—	$	9.64
Class K
Net assets	$	701,477,955	$	5,028,654,113	$	930,769,374
Shares outstanding2		70,952,689		660,142,342		96,559,713
Net asset value	$	9.89	$	7.62	$	9.64
Class R
Net assets	$	3,760,837	$	113,010,465	$	5,181,238
Shares outstanding2		380,770		14,846,933		537,368
Net asset value	$	9.88	$	7.61	$	9.64

¹ Consolidated Statement of Assets and Liabilities.

² Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 95

Statements of Operations

Year Ended September 30, 2016	BlackRock Core Bond Portfolio			BlackRock High Yield Bond Portfolio1			BlackRock Low Duration Bond Portfolio
Investment Income
Interest — unaffiliated	$	83,499,578		$	1,036,760,835		$	108,138,923
Interest — affiliated		—			—			1,847
Dividends — unaffiliated		209,981			17,422,409			—
Dividends — affiliated		17,113			9,101,919			236,542
Securities lending — affiliated — net		—			495,663			—
Total income		83,726,672			1,063,780,826			108,377,312
Expenses
Investment advisory		10,700,046			70,378,210			16,943,014
Transfer agent — class specific		3,258,920			17,590,574			3,481,451
Service and distribution — class specific		2,469,877			14,699,737			6,264,368
Administration		1,192,192			5,659,614			1,847,359
Administration — class specific		631,302			3,429,108			1,021,362
Accounting services		475,874			1,724,340			726,231
Professional		275,787			520,539			222,870
Custodian		265,324			666,685			244,351
Registration		140,267			631,402			216,827
Printing		115,120			493,601			183,255
Officer and Trustees		67,655			269,279			95,367
Miscellaneous		135,828			605,945			192,098
Recoupment of past waived fees — class specific		35,633			1,279,721			21,044
Total expenses excluding interest expense		19,763,825			117,948,755			31,459,597
Interest expense2		1,529,182			1,186,457			785,786
Total expenses		21,293,007			119,135,212			32,245,383
Less:
Fees waived by the Manager		(752,155	)		(321,136	)		(291,773	)
Administration fees waived — class specific		(618,499	)		(108,799	)		(902,364	)
Transfer agent fees waived — class specific		(18,410	)		(11,429	)		(12,934	)
Transfer agent fees reimbursed — class specific		(1,461,058	)		(10,326	)		(262,868	)
Total expenses after fees waived and reimbursed		18,442,885			118,683,522			30,775,444
Net investment income		65,283,787			945,097,304			77,601,868
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		13,362,409			(728,381,311	)		(3,358,151	)
Investments — affiliated		808			4,584,502			(140,993	)
Payment by affiliate		—			240,022			—
Options written		902,031			3,525,802			2,997,064
Futures contracts		(9,970,871	)		(98,052,049	)		(17,421,443	)
Swaps		(3,125,552	)		51,356,838			(3,714,051	)
Foreign currency transactions		489,853			53,867,305			(2,624,066	)
		1,658,678			(712,858,891	)		(24,261,640	)
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		72,570,367			1,253,451,267			24,979,711
Investments — affiliated		—			(3,577,342	)		4,196
Options written		110,877			143,912			(1,073,671	)
Futures contracts		2,498,990			(35,327,364	)		1,343,958
Swaps		1,973,117			72,693,065			(900,263	)
Foreign currency translations		(1,979,145	)		(7,830,655	)		(1,662,808	)
		75,174,206			1,279,552,883			22,691,123
Net realized and unrealized gain (loss)		76,832,884			566,693,992			(1,570,517	)
Net Increase in Net Assets Resulting from Operations	$	142,116,671		$	1,511,791,296		$	76,031,351

¹  Consolidated Statement of Operations.

²  See Note 4 of the Notes to Financial Statements for details of short-term borrowings.

See Notes to Financial Statements.

96 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Changes in Net Assets

	BlackRock Core Bond Portfolio
	Year Ended September 30
Increase in Net Assets:	2016			2015
Operations
Net investment income	$	65,283,787		$	61,714,232
Net realized gain		1,658,678			38,164,529
Net change in unrealized appreciation (depreciation)		75,174,206			(23,653,716	)
Net increase in net assets resulting from operations		142,116,671			76,225,045
Distributions to Shareholders1
From net investment income:
Institutional		(45,396,156	)		(39,724,465	)
Service		(1,086,399	)		(1,969,592	)
Investor A		(10,701,148	)		(9,886,148	)
Investor B		—			(15,510	)
Investor C		(1,570,673	)		(1,555,210	)
Class K		(17,986,656	)		(16,596,928	)
Class R		(66,930	)		(51,752	)
Decrease in net assets resulting from distributions to shareholders		(76,807,962	)		(69,799,605	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		25,582,786			313,122,910
Net Assets
Total increase in net assets		90,891,495			319,548,350
Beginning of year		3,136,444,498			2,816,896,148
End of year	$	3,227,335,993		$	3,136,444,498
Undistributed net investment income, end of year	$	3,029,363		$	9,501,593

¹ Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 97

Statements of Changes in Net Assets (concluded)

	BlackRock High Yield Bond Portfolio1						BlackRock Low Duration Bond Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	945,097,304		$	825,356,712		$	77,601,868		$	74,978,321
Net realized gain (loss)		(712,858,891	)		(75,236,469	)		(24,261,640	)		7,324,131
Net change in unrealized appreciation (depreciation)		1,279,552,883			(1,288,260,649	)		22,691,123			(34,590,098	)
Net increase (decrease) in net assets resulting from operations		1,511,791,296			(538,140,406	)		76,031,351			47,712,354
Distributions to Shareholders2
From net investment income:
Institutional		(564,118,104	)		(571,808,572	)		(56,823,438	)		(52,142,164	)
Service		(19,585,485	)		(18,521,021	)		(941,660	)		(1,032,685	)
Investor A		(177,608,322	)		(164,495,257	)		(13,433,523	)		(12,517,576	)
Investor A1		—			—			(247,431	)		(273,110	)
Investor B		(29,096	)		(80,131	)		—			(6,849	)
Investor B1		(65,145	)		(159,857	)		—			—
Investor B3		—			—			—			(4,207	)
Investor C		(28,083,135	)		(28,431,855	)		(3,193,523	)		(2,482,730	)
Investor C1		(2,992,498	)		(3,384,359	)		—			—
Investor C2		—			—			(95,191	)		(98,669	)
Investor C3		—			—			(178,655	)		(183,347	)
Class K		(262,142,470	)		(111,411,805	)		(16,540,958	)		(15,219,208	)
Class R		(5,656,696	)		(4,271,507	)		(66,091	)		(48,711	)
From net realized gain:
Institutional		—			(137,460,906	)		—			—
Service		—			(5,143,584	)		—			—
Investor A		—			(44,376,973	)		—			—
Investor B		—			(33,834	)		—			—
Investor B1		—			(60,653	)		—			—
Investor C		—			(9,405,484	)		—			—
Investor C1		—			(1,141,650	)		—			—
Class K		—			(22,217,123	)		—			—
Class R		—			(1,171,559	)		—			—
Decrease in net assets resulting from distributions to shareholders		(1,060,280,951	)		(1,123,576,130	)		(91,520,470	)		(84,009,256	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		1,805,927,581			4,781,194,480			216,092,937			1,365,511,729
Net Assets
Total increase in net assets		2,257,437,926			3,119,477,944			200,603,818			1,329,214,827
Beginning of year		16,620,957,995			13,501,480,051			5,100,862,851			3,771,648,024
End of year	$	18,878,395,921		$	16,620,957,995		$	5,301,466,669		$	5,100,862,851
Undistributed (distributions in excess of) net investment income, end of year	$	(16,133,946	)	$	114,983,270		$	(5,904,713	)	$	10,130,299

¹ Consolidated Statement of Changes in Net Assets.

² Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

98 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights BlackRock Core Bond Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.65		$	9.63		$	9.45		$	9.78		$	9.42
Net investment income1		0.21			0.21			0.27			0.24			0.29
Net realized and unrealized gain (loss)		0.24			0.05			0.20			(0.28	)		0.39
Net increase (decrease) from investment operations		0.45			0.26			0.47			(0.04	)		0.68
Distributions:2
From net investment income		(0.24	)		(0.24	)		(0.29	)		(0.25	)		(0.32	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.24	)		(0.24	)		(0.29	)		(0.29	)		(0.32	)
Net asset value, end of year	$	9.86		$	9.65		$	9.63		$	9.45		$	9.78
Total Return3
Based on net asset value		4.78	%		2.66	%		5.05	%		(0.47	)%		7.36	%
Ratios to Average Net Assets
Total expenses		0.62	%		0.60	%4		0.75	%4		0.75	%4		0.73	%4
Total expenses after fees waived and/or reimbursed		0.50	%		0.46	%		0.57	%		0.59	%		0.58	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.45	%		0.46	%		0.56	%		0.56	%		0.56	%
Net investment income		2.16	%		2.15	%		2.78	%		2.44	%		3.03	%
Supplemental Data
Net assets, end of year (000)	$	1,853,077		$	1,774,919		$	1,361,482		$	1,307,731		$	1,457,783
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2014, the ratio would have been 0.74%. There was no financial impact to the expense ratios for the years ended September 30, 2015, September 30, 2013 and September 30, 2012.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 99

Financial Highlights (continued) BlackRock Core Bond Portfolio

	Service
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.66		$	9.63		$	9.45		$	9.79		$	9.43
Net investment income1		0.18			0.18			0.24			0.21			0.26
Net realized and unrealized gain (loss)		0.23			0.05			0.21			(0.29	)		0.39
Net increase (decrease) from investment operations		0.41			0.23			0.45			(0.08	)		0.65
Distributions:2
From net investment income		(0.21	)		(0.20	)		(0.27	)		(0.22	)		(0.29	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.21	)		(0.20	)		(0.27	)		(0.26	)		(0.29	)
Net asset value, end of year	$	9.86		$	9.66		$	9.63		$	9.45		$	9.79
Total Return3
Based on net asset value		4.32	%		2.44	%		4.78	%		(0.86	)%		7.01	%
Ratios to Average Net Assets
Total expenses		0.87	%4		0.90	%		0.95	%		1.02	%4		1.05	%
Total expenses after fees waived and/or reimbursed		0.84	%		0.80	%		0.83	%		0.92	%		0.91	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.79	%		0.80	%		0.82	%		0.88	%		0.89	%
Net investment income		1.81	%		1.86	%		2.54	%		2.13	%		2.71	%
Supplemental Data
Net assets, end of year (000)	$	55,154		$	46,481		$	191,106		$	199,772		$	238,247
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2016 and September 30, 2013, the ratio would have been 0.80% and 0.98%, respectively.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

100 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Core Bond Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.64		$	9.46		$	9.80		$	9.44
Net investment income1		0.18			0.18			0.24			0.20			0.26
Net realized and unrealized gain (loss)		0.23			0.05			0.20			(0.28	)		0.39
Net increase (decrease) from investment operations		0.41			0.23			0.44			(0.08	)		0.65
Distributions:2
From net investment income		(0.21	)		(0.20	)		(0.26	)		(0.22	)		(0.29	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.21	)		(0.20	)		(0.26	)		(0.26	)		(0.29	)
Net asset value, end of year	$	9.87		$	9.67		$	9.64		$	9.46		$	9.80
Total Return3
Based on net asset value		4.32	%		2.42	%		4.72	%		(0.89	)%		7.01	%
Ratios to Average Net Assets
Total expenses		0.91	%		0.89	%4		1.02	%4		1.03	%4		1.02	%4
Total expenses after fees waived and/or reimbursed		0.84	%		0.80	%		0.90	%		0.92	%		0.90	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.79	%		0.80	%		0.89	%		0.89	%		0.89	%
Net investment income		1.81	%		1.82	%		2.47	%		2.11	%		2.69	%
Supplemental Data
Net assets, end of year (000)	$	503,640		$	474,202		$	507,915		$	566,334		$	638,402
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2014, the ratio would have been 1.01%. There was no financial impact to the expense ratios for the years ended September 30, 2015, September 30, 2013 and September 30, 2012.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 101

Financial Highlights (continued) BlackRock Core Bond Portfolio

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.63		$	9.60		$	9.42		$	9.76		$	9.40
Net investment income1		0.10			0.10			0.17			0.13			0.19
Net realized and unrealized gain (loss)		0.24			0.06			0.20			(0.29	)		0.39
Net increase (decrease) from investment operations		0.34			0.16			0.37			(0.16	)		0.58
Distributions:2
From net investment income		(0.14	)		(0.13	)		(0.19	)		(0.14	)		(0.22	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.14	)		(0.13	)		(0.19	)		(0.18	)		(0.22	)
Net asset value, end of year	$	9.83		$	9.63		$	9.60		$	9.42		$	9.76
Total Return3
Based on net asset value		3.55	%		1.66	%		3.96	%		(1.63	)%		6.26	%
Ratios to Average Net Assets
Total expenses		1.63	%		1.62	%4		1.74	%4		1.76	%		1.74	%4
Total expenses after fees waived and/or reimbursed		1.59	%		1.55	%		1.63	%		1.66	%		1.63	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		1.54	%		1.55	%		1.62	%		1.62	%		1.61	%
Net investment income		1.06	%		1.07	%		1.75	%		1.40	%		1.97	%
Supplemental Data
Net assets, end of year (000)	$	110,227		$	109,272		$	119,113		$	147,042		$	206,568
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2015, the ratio would have been 1.61%. There was no financial impact to the expense ratios for the years ended September 30, 2014 and September 30, 2012.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

102 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Core Bond Portfolio

	Class K
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.68		$	9.65		$	9.47		$	9.81		$	9.45
Net investment income1		0.21			0.22			0.28			0.25			0.30
Net realized and unrealized gain (loss)		0.25			0.05			0.20			(0.29	)		0.39
Net increase (decrease) from investment operations		0.46			0.27			0.48			(0.04	)		0.69
Distributions:2
From net investment income		(0.25	)		(0.24	)		(0.30	)		(0.26	)		(0.33	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.25	)		(0.24	)		(0.30	)		(0.30	)		(0.33	)
Net asset value, end of year	$	9.89		$	9.68		$	9.65		$	9.47		$	9.81
Total Return3
Based on net asset value		4.83	%		2.83	%		5.16	%		(0.45	)%		7.47	%
Ratios to Average Net Assets
Total expenses		0.49	%		0.47	%4		0.60	%		0.61	%		0.60	%
Total expenses after fees waived and/or reimbursed		0.45	%		0.41	%		0.46	%		0.48	%		0.47	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.40	%		0.40	%		0.45	%		0.45	%		0.45	%
Net investment income		2.20	%		2.21	%		2.91	%		2.54	%		3.15	%
Supplemental Data
Net assets, end of year (000)	$	701,478		$	728,521		$	633,007		$	597,618		$	643,885
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 103

Financial Highlights (concluded) BlackRock Core Bond Portfolio

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.64		$	9.46		$	9.81		$	9.44
Net investment income1		0.15			0.15			0.21			0.18			0.23
Net realized and unrealized gain (loss)		0.25			0.06			0.20			(0.30	)		0.40
Net increase (decrease) from investment operations		0.40			0.21			0.41			(0.12	)		0.63
Distributions:2
From net investment income		(0.19	)		(0.18	)		(0.23	)		(0.19	)		(0.26	)
From return of capital		—			—			—			(0.04	)		—
Total distributions		(0.19	)		(0.18	)		(0.23	)		(0.23	)		(0.26	)
Net asset value, end of year	$	9.88		$	9.67		$	9.64		$	9.46		$	9.81
Total Return3
Based on net asset value		4.16	%		2.17	%		4.42	%		(1.24	)%		6.82	%
Ratios to Average Net Assets
Total expenses		1.21	%		1.17	%		1.32	%4		1.38	%4		1.34	%4
Total expenses after fees waived and/or reimbursed		1.09	%		1.05	%		1.18	%		1.18	%		1.19	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		1.04	%		1.05	%		1.17	%		1.15	%		1.17	%
Net investment income		1.56	%		1.57	%		2.20	%		1.82	%		2.40	%
Supplemental Data
Net assets, end of year (000)	$	3,761		$	3,050		$	2,550		$	2,246		$	960
Portfolio turnover rate5		594	%		863	%		702	%		805	%		739	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2014 and September 30, 2013, the ratio would have been 1.31% and 1.36%, respectively. There was no financial impact to the expense ratios for the year ended September 30, 2012.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		422	%		616	%		493	%		440	%		370	%
Portfolio turnover rate including TBA Sale Commitments, to conform to the current presentation		—			—			—			—			1,245	%
Portfolio turnover rate including TBA Sale Commitments and excluding MDRs		—			—			—			—			688	%

See Notes to Financial Statements.

104 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Financial Highlights BlackRock High Yield Bond Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.15		$	7.94		$	7.14
Net investment income1		0.41			0.40			0.46			0.49			0.49
Net realized and unrealized gain (loss)		0.24			(0.62	)		0.17			0.26			0.80
Net increase (decrease) from investment operations		0.65			(0.22	)		0.63			0.75			1.29
Distributions:2
From net investment income		(0.46	)		(0.44	)		(0.46	)		(0.52	)		(0.49	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.46	)		(0.56	)		(0.58	)		(0.54	)		(0.49	)
Net asset value, end of year	$	7.61		$	7.42		$	8.20		$	8.15		$	7.94
Total Return3
Based on net asset value		9.21	%		(2.82	)%		7.88	%		9.64	%		18.92	%
Ratios to Average Net Assets
Total expenses		0.61	%4,5		0.59	%4		0.62	%5		0.64	%		0.65	%5,6
Total expenses after fees waived and/or reimbursed		0.61	%4		0.59	%4		0.62	%		0.63	%		0.65	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		0.60	%4		0.58	%4		0.59	%		0.60	%		0.63	%
Net investment income		5.58	%4		5.08	%4		5.51	%		6.05	%		6.40	%6
Supplemental Data
Net assets, end of year (000)	$	9,031,925		$	10,926,678		$	7,898,330		$	5,923,843		$	3,989,753
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵ Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios.

⁶ Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 105

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Service
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.16		$	7.94		$	7.14
Net investment income1		0.39			0.38			0.43			0.47			0.47
Net realized and unrealized gain (loss)		0.25			(0.62	)		0.16			0.26			0.80
Net increase (decrease) from investment operations		0.64			(0.24	)		0.59			0.73			1.27
Distributions:2
From net investment income		(0.44	)		(0.42	)		(0.43	)		(0.49	)		(0.47	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.44	)		(0.54	)		(0.55	)		(0.51	)		(0.47	)
Net asset value, end of year	$	7.62		$	7.42		$	8.20		$	8.16		$	7.94
Total Return3
Based on net asset value		9.04	%		(3.13	)%		7.41	%		9.42	%		18.52	%
Ratios to Average Net Assets
Total expenses		0.90	%4,5		0.90	%4		0.94	%5		0.95	%5		0.98	%5,6
Total expenses after fees waived and/or reimbursed		0.89	%4		0.90	%4		0.94	%		0.94	%		0.98	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		0.89	%4		0.90	%4		0.91	%		0.92	%		0.96	%
Net investment income		5.32	%4		4.76	%4		5.20	%		5.73	%		6.08	%6
Supplemental Data
Net assets, end of year (000)	$	378,766		$	303,043		$	346,355		$	372,559		$	304,707
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵ Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2014 and September 30, 2012, the ratio would have been 0.93% and 0.95%, respectively. There was no financial impact to the expense ratios for the years ended September 30, 2016 and September 30, 2013.

⁶ Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

106 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.15		$	7.94		$	7.14
Net investment income1		0.39			0.38			0.43			0.47			0.47
Net realized and unrealized gain (loss)		0.24			(0.62	)		0.17			0.25			0.80
Net increase (decrease) from investment operations		0.63			(0.24	)		0.60			0.72			1.27
Distributions:2
From net investment income		(0.44	)		(0.42	)		(0.43	)		(0.49	)		(0.47	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.44	)		(0.54	)		(0.55	)		(0.51	)		(0.47	)
Net asset value, end of year	$	7.61		$	7.42		$	8.20		$	8.15		$	7.94
Total Return3
Based on net asset value		8.86	%		(3.11	)%		7.53	%		9.29	%		18.56	%
Ratios to Average Net Assets
Total expenses		0.93	%4,5		0.93	%4,5		0.97	%5		0.98	%5		1.02	%6
Total expenses after fees waived and/or reimbursed		0.93	%4		0.92	%4		0.95	%		0.95	%		0.94	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		0.92	%4		0.92	%4		0.92	%		0.92	%		0.92	%
Net investment income		5.27	%4		4.75	%4		5.21	%		5.74	%		6.10	%6
Supplemental Data
Net assets, end of year (000)	$	3,733,406		$	2,797,049		$	3,120,217		$	3,933,778		$	3,437,217
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2016 and September 30, 2015, the ratio would have been 0.90% and 0.89%, respectively. There was no financial impact to the expense ratios for the years ended September 30, 2014 and September 30, 2013.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 107

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Investor B
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.16		$	7.94		$	7.14
Net investment income1		0.31			0.31			0.36			0.40			0.40
Net realized and unrealized gain (loss)		0.26			(0.62	)		0.16			0.26			0.81
Net increase (decrease) from investment operations		0.57			(0.31	)		0.52			0.66			1.21
Distributions:2
From net investment income		(0.37	)		(0.35	)		(0.36	)		(0.42	)		(0.41	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.37	)		(0.47	)		(0.48	)		(0.44	)		(0.41	)
Net asset value, end of year	$	7.62		$	7.42		$	8.20		$	8.16		$	7.94
Total Return3
Based on net asset value		7.95	%		(3.96	)%		6.51	%		8.51	%		17.58	%
Ratios to Average Net Assets
Total expenses		1.94	%4		1.80	%4		1.80	%		1.79	%		1.78	%5
Total expenses after fees waived and/or reimbursed		1.94	%4		1.80	%4		1.80	%		1.79	%		1.78	%5
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		1.94	%4		1.80	%4		1.77	%		1.76	%		1.76	%
Net investment income		4.20	%4		3.87	%4		4.38	%		4.90	%		5.31	%5
Supplemental Data
Net assets, end of year (000)	$	330		$	1,004		$	2,489		$	4,597		$	7,472
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

108 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Investor B1
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.15		$	7.94		$	7.14
Net investment income1		0.34			0.33			0.39			0.42			0.43
Net realized and unrealized gain (loss)		0.25			(0.62	)		0.17			0.26			0.80
Net increase (decrease) from investment operations		0.59			(0.29	)		0.56			0.68			1.23
Distributions:2
From net investment income		(0.40	)		(0.37	)		(0.39	)		(0.45	)		(0.43	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.40	)		(0.49	)		(0.51	)		(0.47	)		(0.43	)
Net asset value, end of year	$	7.61		$	7.42		$	8.20		$	8.15		$	7.94
Total Return3
Based on net asset value		8.28	%		(3.65	)%		6.97	%		8.74	%		17.94	%
Ratios to Average Net Assets
Total expenses		1.77	%4		1.75	%4,5		1.64	%5		1.58	%5		1.58	%5,6
Total expenses after fees waived and/or reimbursed		1.46	%4		1.46	%4		1.49	%		1.49	%		1.48	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		1.46	%4		1.46	%4		1.46	%		1.46	%		1.46	%
Net investment income		4.67	%4		4.20	%4		4.67	%		5.20	%		5.61	%6
Supplemental Data
Net assets, end of year (000)	$	522		$	1,957		$	4,796		$	9,009		$	20,236
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2015, September 30, 2014 and September 30, 2013, the ratio would have been 1.74%, 1.63% and 1.56%, respectively. There was no financial impact to the expense ratio for the year ended September 30, 2012.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 109

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.43		$	8.21		$	8.16		$	7.95		$	7.14
Net investment income1		0.33			0.32			0.37			0.40			0.41
Net realized and unrealized gain (loss)		0.24			(0.62	)		0.17			0.26			0.81
Net increase (decrease) from investment operations		0.57			(0.30	)		0.54			0.66			1.22
Distributions:2
From net investment income		(0.38	)		(0.36	)		(0.37	)		(0.43	)		(0.41	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.38	)		(0.48	)		(0.49	)		(0.45	)		(0.41	)
Net asset value, end of year	$	7.62		$	7.43		$	8.21		$	8.16		$	7.95
Total Return3
Based on net asset value		8.04	%		(3.85	)%		6.73	%		8.45	%		17.77	%
Ratios to Average Net Assets
Total expenses		1.69	%4		1.67	%4,5		1.70	%5		1.72	%5		1.75	%5,6
Total expenses after fees waived and/or reimbursed		1.69	%4		1.67	%4		1.70	%		1.72	%		1.74	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		1.68	%4		1.66	%4		1.67	%		1.69	%		1.72	%
Net investment income		4.51	%4		4.00	%4		4.44	%		4.97	%		5.31	%6
Supplemental Data
Net assets, end of year (000)	$	539,243		$	578,935		$	624,573		$	535,426		$	498,541
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2013, the ratio would have been 1.71%. There was no financial impact to the expense ratios for the years ended September 30, 2015, September 30, 2014 and September 30, 2012.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

110 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Investor C1
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.43		$	8.21		$	8.17		$	7.95		$	7.15
Net investment income1		0.34			0.33			0.39			0.42			0.42
Net realized and unrealized gain (loss)		0.25			(0.62	)		0.16			0.27			0.80
Net increase (decrease) from investment operations		0.59			(0.29	)		0.55			0.69			1.22
Distributions:2
From net investment income		(0.40	)		(0.37	)		(0.39	)		(0.45	)		(0.42	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.40	)		(0.49	)		(0.51	)		(0.47	)		(0.42	)
Net asset value, end of year	$	7.62		$	7.43		$	8.21		$	8.17		$	7.95
Total Return3
Based on net asset value		8.23	%		(3.68	)%		6.78	%		8.79	%		17.83	%
Ratios to Average Net Assets
Total expenses		1.51	%4		1.49	%4		1.52	%		1.55	%5		1.59	%5,6
Total expenses after fees waived and/or reimbursed		1.51	%4		1.49	%4		1.52	%		1.55	%		1.56	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		1.50	%4		1.49	%4		1.50	%		1.52	%		1.54	%
Net investment income		4.69	%4		4.19	%4		4.63	%		5.15	%		5.53	%6
Supplemental Data
Net assets, end of year (000)	$	52,539		$	61,492		$	79,613		$	88,458		$	100,404
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2013 and September 30, 2012, the ratio would have been 1.52% and 1.57%, respectively.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 111

Consolidated Financial Highlights (continued) BlackRock High Yield Bond Portfolio

	Class K
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.16		$	7.94		$	7.14
Net investment income1		0.42			0.41			0.47			0.50			0.50
Net realized and unrealized gain (loss)		0.25			(0.62	)		0.16			0.26			0.80
Net increase (decrease) from investment operations		0.67			(0.21	)		0.63			0.76			1.30
Distributions:2
From net investment income		(0.47	)		(0.45	)		(0.47	)		(0.52	)		(0.50	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.47	)		(0.57	)		(0.59	)		(0.54	)		(0.50	)
Net asset value, end of year	$	7.62		$	7.42		$	8.20		$	8.16		$	7.94
Total Return3
Based on net asset value		9.44	%		(2.76	)%		7.82	%		9.84	%		18.99	%
Ratios to Average Net Assets
Total expenses		0.53	%4,5		0.53	%4		0.56	%5		0.56	%5		0.60	%5,6
Total expenses after fees waived and/or reimbursed		0.53	%4		0.51	%4		0.55	%		0.56	%		0.58	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		0.52	%4		0.51	%4		0.53	%		0.54	%		0.56	%
Net investment income		5.71	%4		5.17	%4		5.59	%		6.13	%		6.48	%6
5.71%Supplemental Data
Net assets, end of year (000)	$	5,028,654		$	1,853,500		$	1,352,840		$	934,195		$	897,435
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2012, the ratio would have been 0.58%. There was no financial impact to the expense ratios for the years ended September 30, 2016, September 30, 2014 and September 30, 2013.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

112 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Consolidated Financial Highlights (concluded) BlackRock High Yield Bond Portfolio

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	7.42		$	8.20		$	8.15		$	7.94		$	7.13
Net investment income1		0.36			0.35			0.41			0.44			0.44
Net realized and unrealized gain (loss)		0.24			(0.62	)		0.17			0.25			0.81
Net increase (decrease) from investment operations		0.60			(0.27	)		0.58			0.69			1.25
Distributions:2
From net investment income		(0.41	)		(0.39	)		(0.41	)		(0.46	)		(0.44	)
From net realized gain		—			(0.12	)		(0.12	)		(0.02	)		—
Total distributions		(0.41	)		(0.51	)		(0.53	)		(0.48	)		(0.44	)
Net asset value, end of year	$	7.61		$	7.42		$	8.20		$	8.15		$	7.94
Total Return3
Based on net asset value		8.51	%		(3.43	)%		7.19	%		8.92	%		18.31	%
Ratios to Average Net Assets
Total expenses		1.26	%4,5		1.23	%4,5		1.28	%		1.31	%		1.36	%6
Total expenses after fees waived and/or reimbursed		1.26	%4		1.23	%4		1.27	%		1.29	%		1.30	%6
Total expenses after fees waived and/or reimbursed and excluding interest expense and income tax		1.25	%4		1.22	%4		1.24	%		1.26	%		1.28	%
Net investment income		4.95	%4		4.46	%4		4.90	%		5.41	%		5.77	%6
Supplemental Data
Net assets, end of year (000)	$	113,010		$	97,300		$	72,267		$	47,906		$	32,159
Portfolio turnover rate		90	%		70	%		87	%		84	%		69	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014		2013		2012
Investments in underlying funds		0.01	%		0.01	%		N/A		N/A		N/A

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2015, the ratio would have been 1.22%. There was no financial impact to the expense ratio for the year ended September 30, 2016.

⁶  Restated to include income taxes for the consolidated entity.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 113

Financial Highlights BlackRock Low Duration Bond Portfolio

	Institutional
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.68		$	9.74		$	9.71		$	9.83		$	9.57
Net investment income1		0.16			0.16			0.22			0.22			0.25
Net realized and unrealized gain (loss)		—			(0.04	)		0.02			(0.12	)		0.26
Net increase from investment operations		0.16			0.12			0.24			0.10			0.51
Distributions:2
From net investment income		(0.19	)		(0.18	)		(0.21	)		(0.21	)		(0.25	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.19	)		(0.18	)		(0.21	)		(0.22	)		(0.25	)
Net asset value, end of year	$	9.65		$	9.68		$	9.74		$	9.71		$	9.83
Total Return3
Based on net asset value		1.63	%		1.19	%		2.52	%		1.06	%		5.43	%
Ratios to Average Net Assets
Total expenses		0.50	%		0.52	%4		0.66	%4		0.70	%		0.72	%
Total expenses after fees waived and/or reimbursed		0.47	%		0.45	%		0.46	%		0.48	%		0.47	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.45	%		0.45	%		0.45	%		0.45	%		0.45	%
Net investment income		1.66	%		1.61	%		2.26	%		2.25	%		2.61	%
Supplemental Data
Net assets, end of year (000)	$	3,020,681		$	2,885,841		$	1,134,331		$	849,700		$	762,769
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

114 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Service
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.74		$	9.71		$	9.82		$	9.57
Net investment income1		0.13			0.13			0.19			0.19			0.22
Net realized and unrealized gain (loss)		(0.01	)		(0.05	)		0.02			(0.11	)		0.24
Net increase from investment operations		0.12			0.08			0.21			0.08			0.46
Distributions:2
From net investment income		(0.15	)		(0.15	)		(0.18	)		(0.18	)		(0.21	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.15	)		(0.15	)		(0.18	)		(0.19	)		(0.21	)
Net asset value, end of year	$	9.64		$	9.67		$	9.74		$	9.71		$	9.82
Total Return3
Based on net asset value		1.29	%		0.78	%		2.16	%		0.79	%		4.93	%
Ratios to Average Net Assets
Total expenses		0.81	%4		0.88	%4		0.94	%4		1.00	%4		1.01	%4
Total expenses after fees waived and/or reimbursed		0.81	%		0.77	%		0.82	%		0.86	%		0.85	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.79	%		0.77	%		0.81	%		0.82	%		0.83	%
Net investment income		1.32	%		1.31	%		1.92	%		1.90	%		2.24	%
Supplemental Data
Net assets, end of year (000)	$	60,358		$	56,550		$	217,127		$	231,914		$	263,552
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2016 the ratio would have been 0.78%. There was no financial impact to the expense ratios for the years ended September 30, 2015, September 30, 2014, September 30, 2013 and September 30, 2012.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 115

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Investor A
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.74		$	9.71		$	9.82		$	9.57
Net investment income1		0.13			0.12			0.19			0.18			0.22
Net realized and unrealized gain (loss)		(0.01	)		(0.04	)		0.02			(0.10	)		0.24
Net increase from investment operations		0.12			0.08			0.21			0.08			0.46
Distributions:2
From net investment income		(0.15	)		(0.15	)		(0.18	)		(0.18	)		(0.21	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.15	)		(0.15	)		(0.18	)		(0.19	)		(0.21	)
Net asset value, end of year	$	9.64		$	9.67		$	9.74		$	9.71		$	9.82
Total Return3
Based on net asset value		1.29	%		0.75	%		2.16	%		0.83	%		4.94	%
Ratios to Average Net Assets
Total expenses		0.83	%		0.86	%4		0.96	%4		0.97	%4		1.02	%4
Total expenses after fees waived and/or reimbursed		0.81	%		0.79	%		0.81	%		0.83	%		0.83	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.79	%		0.79	%		0.80	%		0.79	%		0.81	%
Net investment income		1.32	%		1.29	%		1.93	%		1.82	%		2.25	%
Supplemental Data
Net assets, end of year (000)	$	875,788		$	822,299		$	1,472,352		$	1,523,705		$	546,318
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2015 and September 30, 2013, the ratios would have been 0.85% and 0.95%, respectively. There was no financial impact to the expense ratios for the years ended September 30, 2014 and September 30, 2012.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

116 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Investor A1
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.68		$	9.75		$	9.72		$	9.83		$	9.58
Net investment income1		0.15			0.14			0.20			0.20			0.23
Net realized and unrealized gain (loss)		(0.01	)		(0.05	)		0.02			(0.10	)		0.25
Net increase from investment operations		0.14			0.09			0.22			0.10			0.48
Distributions:2
From net investment income		(0.17	)		(0.16	)		(0.19	)		(0.20	)		(0.23	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.17	)		(0.16	)		(0.19	)		(0.21	)		(0.23	)
Net asset value, end of year	$	9.65		$	9.68		$	9.75		$	9.72		$	9.83
Total Return3
Based on net asset value		1.48	%		0.94	%		2.33	%		0.98	%		5.12	%
Ratios to Average Net Assets
Total expenses		0.68	%		0.69	%		0.81	%4		0.85	%		0.86	%
Total expenses after fees waived and/or reimbursed		0.62	%		0.60	%		0.65	%		0.67	%		0.66	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.60	%		0.60	%		0.64	%		0.64	%		0.64	%
Net investment income		1.51	%		1.47	%		2.09	%		2.08	%		2.43	%
Supplemental Data
Net assets, end of year (000)	$	11,892		$	14,742		$	18,617		$	20,196		$	22,846
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 117

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Investor C
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.73		$	9.71		$	9.82		$	9.56
Net investment income1		0.06			0.05			0.12			0.12			0.15
Net realized and unrealized gain (loss)		(0.01	)		(0.04	)		0.01			(0.11	)		0.25
Net increase from investment operations		0.05			0.01			0.13			0.01			0.40
Distributions:2
From net investment income		(0.08	)		(0.07	)		(0.11	)		(0.11	)		(0.14	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.08	)		(0.07	)		(0.11	)		(0.12	)		(0.14	)
Net asset value, end of year	$	9.64		$	9.67		$	9.73		$	9.71		$	9.82
Total Return3
Based on net asset value		0.55	%		0.11	%		1.31	%		0.08	%		4.31	%
Ratios to Average Net Assets
Total expenses		1.59	%		1.59	%		1.71	%4		1.74	%		1.76	%
Total expenses after fees waived and/or reimbursed		1.55	%		1.53	%		1.54	%		1.56	%		1.55	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		1.53	%		1.53	%		1.53	%		1.53	%		1.53	%
Net investment income		0.58	%		0.54	%		1.19	%		1.18	%		1.53	%
Supplemental Data
Net assets, end of year (000)	$	372,307		$	361,424		$	331,179		$	293,864		$	268,261
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios.

⁵  Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

118 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Investor C2
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.74		$	9.71		$	9.82		$	9.57
Net investment income1		0.11			0.11			0.17			0.17			0.21
Net realized and unrealized gain (loss)		—			(0.05	)		0.02			(0.10	)		0.24
Net increase from investment operations		0.11			0.06			0.19			0.07			0.45
Distributions:2
From net investment income		(0.14	)		(0.13	)		(0.16	)		(0.17	)		(0.20	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.14	)		(0.13	)		(0.16	)		(0.18	)		(0.20	)
Net asset value, end of year	$	9.64		$	9.67		$	9.74		$	9.71		$	9.82
Total Return3
Based on net asset value		1.14	%		0.60	%		2.00	%		0.67	%		4.81	%
Ratios to Average Net Assets
Total expenses		0.98	%		0.99	%		1.11	%4		1.12	%		1.12	%
Total expenses after fees waived and/or reimbursed		0.96	%		0.94	%		0.97	%		0.98	%		0.96	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.94	%		0.94	%		0.96	%		0.94	%		0.94	%
Net investment income		1.17	%		1.14	%		1.77	%		1.78	%		2.13	%
Supplemental Data
Net assets, end of year (000)	$	6,139		$	6,938		$	7,939		$	11,905		$	13,838
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 119

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Investor C3
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.73		$	9.71		$	9.82		$	9.56
Net investment income1		0.06			0.06			0.12			0.12			0.14
Net realized and unrealized gain (loss)		(0.01	)		(0.06	)		0.01			(0.11	)		0.25
Net increase from investment operations		0.05			0.00			0.13			0.01			0.39
Distributions:2
From net investment income		(0.08	)		(0.06	)		(0.11	)		(0.11	)		(0.13	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.08	)		(0.06	)		(0.11	)		(0.12	)		(0.13	)
Net asset value, end of year	$	9.64		$	9.67		$	9.73		$	9.71		$	9.82
Total Return3
Based on net asset value		0.57	%		0.14	%		1.30	%		0.09	%		4.23	%
Ratios to Average Net Assets
Total expenses		1.57	%		1.57	%		1.69	%4		1.70	%		1.77	%
Total expenses after fees waived and/or reimbursed		1.52	%		1.50	%		1.56	%		1.56	%		1.61	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		1.50	%		1.50	%		1.55	%		1.52	%		1.60	%
Net investment income		0.61	%		0.57	%		1.18	%		1.20	%		1.46	%
Supplemental Data
Net assets, end of year (000)	$	18,350		$	21,631		$	26,209		$	30,075		$	35,383
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

120 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock Low Duration Bond Portfolio

	Class K
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.73		$	9.71		$	9.82		$	9.56
Net investment income1		0.16			0.16			0.23			0.23			0.26
Net realized and unrealized gain (loss)		—			(0.04	)		0.01			(0.11	)		0.25
Net increase from investment operations		0.16			0.12			0.24			0.12			0.51
Distributions:2
From net investment income		(0.19	)		(0.18	)		(0.22	)		(0.22	)		(0.25	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.19	)		(0.18	)		(0.22	)		(0.23	)		(0.25	)
Net asset value, end of year	$	9.64		$	9.67		$	9.73		$	9.71		$	9.82
Total Return3
Based on net asset value		1.69	%		1.24	%		2.46	%		1.21	%		5.48	%
Ratios to Average Net Assets
Total expenses		0.44	%		0.44	%4		0.58	%4		0.62	%		0.61	%
Total expenses after fees waived and/or reimbursed		0.41	%		0.40	%		0.42	%		0.45	%		0.43	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		0.40	%		0.40	%		0.41	%		0.41	%		0.41	%
Net investment income		1.71	%		1.67	%		2.30	%		2.30	%		2.65	%
Supplemental Data
Net assets, end of year (000)	$	930,769		$	927,190		$	557,690		$	319,318		$	310,879
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 121

Financial Highlights (concluded) BlackRock Low Duration Bond Portfolio

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	9.67		$	9.74		$	9.71		$	9.82		$	9.57
Net investment income1		0.10			0.10			0.15			0.15			0.18
Net realized and unrealized gain (loss)		—			(0.05	)		0.02			(0.11	)		0.24
Net increase from investment operations		0.10			0.05			0.17			0.04			0.42
Distributions:2
From net investment income		(0.13	)		(0.12	)		(0.14	)		(0.14	)		(0.17	)
From return of capital		—			—			—			(0.01	)		—
Total distributions		(0.13	)		(0.12	)		(0.14	)		(0.15	)		(0.17	)
Net asset value, end of year	$	9.64		$	9.67		$	9.74		$	9.71		$	9.82
Total Return3
Based on net asset value		1.04	%		0.48	%		1.81	%		0.43	%		4.48	%
Ratios to Average Net Assets
Total expenses		1.24	%		1.16	%		1.29	%4		1.36	%		1.43	%
Total expenses after fees waived and/or reimbursed		1.06	%		1.05	%		1.16	%		1.22	%		1.27	%
Total expenses after fees waived and/or reimbursed and excluding interest expense		1.04	%		1.05	%		1.15	%		1.19	%		1.26	%
Net investment income		1.07	%		1.02	%		1.57	%		1.54	%		1.81	%
Supplemental Data
Net assets, end of year (000)	$	5,181		$	4,247		$	3,860		$	4,529		$	6,573
Portfolio turnover rate5		316	%		289	%		269	%		301	%		203	%

¹ Based on average shares outstanding.

² Distributions for annual periods determined in accordance with federal income tax regulations.

³ Where applicable, assumes the reinvestment of distributions.

⁴ Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratio.

⁵ Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Portfolio turnover rate (excluding MDRs)		246	%		231	%		194	%		239	%		172	%

See Notes to Financial Statements.

122 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements

1. Organization:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. The following are referred to herein collectively as the “Funds” or individually, a “Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock Core Bond Portfolio	Core Bond	Diversified
BlackRock High Yield Bond Portfolio	High Yield Bond	Diversified
BlackRock Low Duration Bond Portfolio	Low Duration Bond	Diversified

Each Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional, Service and Class K Shares are sold only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Class R Shares are available only to certain employer-sponsored retirement plans. Investor B Shares are available only through exchanges and dividend and capital gain reinvestments by existing shareholders, and for purchase by certain employer-sponsored retirement plans. Investor A1, B1, C1, C2 and C3 Shares are only available for dividend and capital gain reinvestment by existing shareholders, and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B and Investor B1 shareholders may vote on material changes to the Investor A distribution and service plan).

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Service, Class K and Class R Shares	No	No	None
Investor A Shares	Yes	No1	None
Investor A1 Shares	No2	No3	None
Investor B Shares	No	Yes	To Investor A Shares after 7 years
Investor B1 Shares	No	Yes	To Investor A Shares after 10 years
Investor C Shares	No	Yes	None
Investor C1, Investor C2 and Investor C3 Shares	No	No4	None

¹ Investor A Shares may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase.

² Investor A1 Shares are subject to a maximum sales charge on purchases of 1.00%. The sales charge does not apply to dividend and capital gain reinvestments by existing shareholders and new purchases for certain employer-sponsored retirement plans, which are currently the only investors who may invest in Investor A1 Shares.

³ Investor A1 Shares may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. However, the CDSC does not apply to redemptions by certain employer-sponsored retirement plans, or to redemptions of shares acquired through reinvestments of dividends and capital gains by existing shareholders.

⁴ A CDSC of 1.00% is assessed on certain redemptions of Investor C1, C2 and C3 Shares made within one year after purchase. The CDSC does not apply to redemptions by certain employer-sponsored retirement plans or to redemptions of shares acquired through reinvestment of dividends and capital gains by existing shareholders.

On June 23, 2015, certain of the Funds’ share classes converted into other existing share classes, with the same relative aggregate net asset value as the original shares held immediately prior to the conversion, as follows:

	Original Shares	New Shares
Core Bond.	Investor B		Investor A
Low Duration Bond	Investor B		Investor A
Low Duration Bond	Investor B3		Investor A

The Funds, together with certain other registered investment companies advised by BlackRock Advisor, LLC (the “Manager”) or its affiliates, are included in a complex of open-end funds referred to as the Equity-Bond Complex.

Basis of Consolidation: The accompanying consolidated financial statements of High Yield Bond include the accounts of BLK BR HY (Luxembourg) Investments, S.a.r.l. (the “Luxembourg Subsidiary”) and BR-HIYLD Subsidiary, LLC (the “U.S. Subsidiary”), both of which are wholly owned taxable subsidiaries of High Yield Bond (the “Taxable Subsidiaries”). The U.S. Subsidiary enables High Yield Bond to hold investments in operating companies and still satisfy regulated investment company tax requirements. Income earned and gains realized on the investments held by the U.S. Subsidiary are taxable to such subsidiary. The Luxembourg Subsidiary holds shares of private Canadian companies. Gains on the sale of such shares will generally not be subject to capital gains taxes in Canada. Income earned on the investments held by the Taxable Subsidiaries may be taxable to such subsidiaries in Luxembourg. A tax provision for income, if any, is shown as income tax in the Consolidated Statements of Operations for High Yield Bond. A tax provision for realized and unrealized gains, if any, is included as a reduction of realized and/or unrealized gain (loss) in the Consolidated Statements of Operations for High Yield Bond. High Yield Bond may invest up to 25% of its total assets in the U.S. Subsidiary. Intercompany accounts and transactions have been eliminated. Both the U.S. and Luxembourg Subsidiaries are subject to the same investment policies and restrictions that apply to High Yield Bond.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 123

Notes to Financial Statements (continued)

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Foreign Currency: Each Fund’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

Each Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., dollar rolls, TBA sale commitments, futures contracts, forward foreign currency exchange contracts, options written and swaps), or certain borrowings (e.g., reverse repurchase agreements) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Recent Accounting Standard: In April 2015, the Financial Accounting Standards Board issued “Disclosures for Investments in Certain Entities that Calculate Net Asset Value (”NAV“) per Share” which eliminates the requirement to categorize investments within the fair value hierarchy when fair value is based on the NAV per share and no quoted market value is available. As of September 30, 2016, certain investments of High Yield Bond were valued using NAV per share or its equivalent as no quoted market value is available and have been excluded from the fair value hierarchy.

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on their relative net assets or other appropriate methods.

The Funds have an arrangement with their custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Funds may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

124 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but the Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements,news, and other relevant information. Certain fixed-income securities including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

• Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Funds’ net assets. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

• Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

• Investments in open-end U.S. mutual funds are valued at net asset value each business day.

• High Yield Bond values its investment in BlackRock Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act. High Yield Bond may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 125

Notes to Financial Statements (continued)

• Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

• To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Fund’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately-held companies or funds (“Private Company” or collectively, the “Private Companies”), and other Fair Valued Investments, the fair valuation methodologies that are used by third party pricing services include the market approach, income approach and the cost approach, using one or a combination of, but not limited to, the following inputs.

Standard Inputs Generally Considered By Third Party Pricing Services

Market approach	(i	)	recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers;
	(ii	)	recapitalizations and other transactions across the capital structure; and
	(iii	)	market multiples of comparable issuers.

Income approach	(i	)	future cash flows discounted to present and adjusted as appropriate for liquidity, credit and/or market risks;
	(ii	)	quoted prices for similar investments or assets in active markets; and
	(iii	)	other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.

Cost approach	(i	)	audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company;
	(ii	)	changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company;
	(iii	)	relevant news and other public sources; and
	(iv	)	known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

For investments in series of preferred stock that often contain rights and preferences that differ from other series of preferred stock and common stock issued by a private company, fair value is allocated among the various classes of preferred and common stock. The allocation of equity value may utilize an option pricing model “OPM”, a probability weighted expected return model “PWERM”, or a hybrid approach which combines the use of the OPM, the PWERM and/or other allocation methodologies.

The private companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Fund. Typically, the most recently available information by a private company is as of a date that is earlier than the date a Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Fund could receive upon the sale of the investment.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation methodologies are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access

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• Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 Investments include equity or debt issued by privately-held companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation methodologies may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

As of September 30, 2016, certain of the High Yield Bond’s investments were valued using NAV per share (or its equivalent) as a practical expedient for fair value and have been excluded from the fair value hierarchy.

4. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a Fund may subsequently have to reinvest the proceeds at lower interest rates. If a Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment

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grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, a pool of residential or commercial mortgage loans or Mortgage Assets. The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, a Fund’s initial investment in the IOs may not fully recoup.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are typically issued by the U.S. Government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. Stripped mortgage-backed securities may be privately issued.

Zero-Coupon Bonds: Zero-coupon bonds, are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of the these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stock: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Warrants: Warrants entitle a Fund to purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. If the price of the underlying

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stock does not rise above the strike price before the warrant expires, the warrant generally expires without any value and a Fund will lose any amount it paid for the warrant. Thus, investments in warrants may involve more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result to proceeds from the sale to not be readily available for a Fund to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the net asset value of the Fund to the extent that it invests in floating rate debt securities. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of the Funds to the extent they invest in floating rate loan interest. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a Fund’s investment policies.

When a Fund purchases a floating rate loan interest, it may receive a facility fee, and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a Fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A Fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A Fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a Fund having a contractual relationship only with the lender, not with the borrower. A Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a Fund assumes the credit risk of both the borrower and the lender that is selling the Participation. A Fund’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a Fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a Fund having a direct contractual relationship with the borrower, and a Fund may enforce compliance by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Fund may be required to pay more at settlement than the security is worth. In addition, a Fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. When entering into TBA commitments, a Fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

In order to better define contractual rights and to secure rights that will help a Fund mitigate its counterparty risk, TBA commitments may be entered into by a Fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a Fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a Fund and cash collateral received from the

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counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a Fund, if any, is noted in the Schedules of Investments. Typically, a Fund is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a Fund are not fully collateralized, contractually or otherwise, a Fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: Certain Funds may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a Fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realizes gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a Fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Repurchase Agreements: Repurchase agreements are commitments to purchase a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain eligible collateral subject to the agreement and in value no less than the agreed upon repurchase amount. Pursuant to the custodial undertaking associated with a tri-party repurchase arrangement, an unaffiliated third party custodian maintains accounts to hold collateral for a Fund and its counterparties. Typically, a Fund and counterparty are not permitted to sell, re-pledge or use the collateral absent a default by the counterparty or a Fund, respectively. A Fund, along with other registered investment companies advised by the Manager, may transfer uninvested cash into a single joint trading account which is then invested in one or more repurchase agreements. As of period end, there were no joint trading accounts invested in repurchase agreements.

In the event the counterparty defaults and the fair value of the collateral declines, a Fund could experience losses, delays and costs in liquidating the collateral.

Repurchase agreements are entered into by a Fund under Master Repurchase Agreements (each, an “MRA”). The MRA permits the a Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, a Fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, a Fund would recognize a liability with respect to such excess collateral. The liability reflects a Fund’s obligation under bankruptcy law to return the excess to the counterparty.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a Fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A Fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a Fund continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A Fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a Fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a Fund would still be required to pay the full repurchase price. Further, a Fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a Fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a Fund to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to a Fund.

For the year ended September 30, 2016, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rates were as follows:

	Average Borrowings		Daily Weighted Average Interest Rate
Core Bond	$	456,419,289	0.30%
High Yield Bond	$	178,287,980	(0.59)%
Low Duration Bond	$	222,143,747	0.30%

Reverse repurchase transactions are entered into by a Fund under MRA, which permit a Fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under an MRA with collateral held and/or posted to the counterparty

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and create one single net payment due to or from a Fund. With reverse repurchase transactions, typically a Fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a Fund receives or posts securities as collateral with a market value in excess of the repurchase price to be paid or received by a Fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a Fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

As of period end, the following tables are summaries of the Funds’ open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

	Reverse Repurchase Agreements		Fair Value of Non-cash Collateral Received/(Pledged) Including Accrued Interest1			Cash Collateral Received1		Net Amount2
Core Bond
Counterparty
Amherst Pierpont Securities LLC		$  21,556,990		$  (21,267,777	)		—		$   289,213
Barclays Capital, Inc.		133,505,232		(133,333,963	)		—		171,269
Citigroup Global Markets, Inc.		69,914,248		(69,887,190	)		—		27,058
Credit Agricole Corporate and Investment Bank		130,430,432		(130,507,416	)		$760,000		683,016
Credit Suisse Securities (USA) LLC		73,986,477		(73,954,208	)		—		32,269
Deutsche Bank Securities, Inc.		153,319,793		(153,049,342	)		—		270,451
Merrill Lynch, Pierce, Fenner & Smith, Inc.		50,041,025		(49,940,520	)		—		100,505
Total		$632,754,197		$(631,940,416	)		$760,000		$1,573,781
High Yield Bond
Counterparty
Barclays Capital, Inc.		$  16,177,057		$  (16,374,057	)		$197,000		—
Deutsche Bank Securities, Inc.		156,334,863		(156,334,863	)		—		—
HSBC Securities (USA), Inc.		106,994,664		(106,994,664	)		—		—
RBC Capital Markets, LLC		198,762,834		(198,762,834	)		—		—
Total		$478,269,418		$(478,466,418	)		$197,000		—
Low Duration Bond
Counterparty
Bank of Montreal		$  45,124,906		$  (45,124,906	)		—		—

¹  Net collateral with a value of $631,180,416 for Core Bond, $559,056,088 for High Yield Bond and $45,173,725 for Low Duration has been pledged/received in connection with open reverse repurchase agreements. Excess of collateral received/pledged to the individual counterparty is not shown for financial reporting purposes.

²  Net amount represents the net amount payable due to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a Fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a Fund’s obligation to repurchase the securities.

Securities Lending: Certain Funds may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Funds collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Funds are entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as investment companies in the Funds’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value — unaffiliated, and

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collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Funds, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following table is a summary of the Funds’ securities lending agreements by counterparty which are subject to offset under an MSLA:

High Yield Bond
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets, Inc.		$       293,760		$       (293,760	)	—
Credit Suisse Securities (USA) LLC		16,096,416		(16,096,416	)	—
Deutsche Bank Securities, Inc.		3,846,000		(3,846,000	)	—
Goldman Sachs & Co.		164,684,256		(164,684,256	)	—
Morgan Stanley		11,273,040		(11,273,040	)	—
Total		$196,193,472		$(196,193,472	)	—

¹  Cash collateral with a value of $199,272,779 has been received in connection with securities lending agreements. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the table above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each Fund could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g. inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Certain Funds invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value of the contract at the time it was

132 BLACKROCK FUNDS II SEPTEMBER 30, 2016

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opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Certain Funds enter into forward foreign currency exchange contracts to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to the risks of underlying instruments (including equity risk, interest rate risk and/or commodity price risk) and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Funds write a call option, such option is typically “covered,” meaning that they hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

• Swaptions — Certain Funds purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Funds’ holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

• Foreign currency options — Certain Funds purchase and write foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

• Barrier options — Certain Funds may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

The Funds may invest in various types of barrier options, including down-and-out options, down-and-in options, double no-touch options, one-touch options and up-and-out options. Down-and-out options expire worthless to the purchaser if the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Down-and-in options expire worthless to the purchaser unless the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Double no-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument reaches or surpasses predetermined barrier price levels prior to the expiration date. Up-and-out options expire worthless if the price of the underlying instrument increases beyond a predetermined barrier price level prior to the expiration date.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that they may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

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Swaps: Certain Funds enter into swap contracts to manage exposure to issuers, markets and securities. Such contracts are agreements between the Funds and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statements of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Funds’ counterparty on the swap agreement becomes the CCP. The Funds are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.

• Credit default swaps — Certain Funds enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk).

The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Funds will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps — Certain Funds enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. If the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Funds receive payment from or make a payment to the counterparty.

• Interest rate swaps — Certain Funds enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

• Forward swaps — Certain Funds enter into forward interest rate swaps and forward total return swaps. In a forward swap, each Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with

134 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

their counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements. The result would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Funds. Any additional required collateral is delivered to/pledged by the Funds on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Funds from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the Funds have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:

	Core Bond	High Yield Bond	Low Duration Bond
Average Daily Net Assets	Investment Advisory Fee
First $1 Billion	0.350%	0.500%	0.350%
$1 Billion — $2 Billion	0.340%	0.450%	0.340%
$2 Billion — $3 Billion	0.330%	0.425%	0.330%
$3 Billion — $25 Billion	0.320%	0.400%	0.320%
$25 Billion — $30 Billion	0.320%	0.375%1	0.320%
Greater than $30 Billion	0.320%	0.350%1	0.320%

¹ Prior to June 15, 2016, High Yield Bond paid the Manager a monthly fee of 0.40% based on average daily net assets greater than $3 billion.

The Manager provides investment management and other services to the U.S. and Luxembourg Subsidiaries. The Manager does not receive separate compensation from the U.S. and Luxembourg Subsidiaries for providing investment management or administrative services. However, High Yield Bond pays the Manager based on the Fund’s net assets, which includes the assets of U.S. and Luxembourg Subsidiaries.

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Notes to Financial Statements (continued)

Service and Distribution Fees The Trust, on behalf of the Funds, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of each Fund as follows:

	Service	Investor A	Investor A1	Investor B	Investor B1	Investor C	Investor C1	Investor C2	Investor C3	Class R
Service Fee	0.25%	0.25%	0.10%	0.25%	0.25%	0.25%	0.25%	0.10%	0.25%	0.25%
Distribution Fee	—	—	—	0.75%	0.50%	0.75%	0.55%	0.30%	0.65%	0.25%

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Funds. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to the shareholders.

For the year ended September 30, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each Fund:

	Service			Investor A			Investor A1			Investor B			Investor B1			Investor C			Investor C1			Investor C2			Investor C3			Class R			Total
Core Bond		$	124,963		$	1,229,113			—			—			—		$	1,098,383			—			—			—		$	17,418		$	2,469,877
High Yield Bond		$	826,323		$	7,521,335			—		$	5,713		$	8,775		$	5,392,309		$	442,326			—			—		$	502,956		$	14,699,737
Low Duration Bond		$	148,066		$	2,113,455		$	13,820			—			—		$	3,757,660			—		$	26,269		$	180,082		$	25,016		$	6,264,368

Administration: The Trust, on behalf of the Funds, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The administration fee, which is shown as administration in the Statements of Operations, is paid at the annual rates below.

Average Daily Net Assets	Administration Fee
First $500 Million		0.0425	%
$500 Million — $1 Billion		0.0400	%
$1 Billion — $2 Billion		0.0375	%
$2 Billion — $4 Billion		0.0350	%
$4 Billion — $13 Billion		0.0325	%
Greater than $13 Billion		0.0300	%

In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statements of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.

For the year ended September 30, 2016, the following table shows the class specific administration fees borne directly by each share class of each Fund:

	Institutional			Service			Investor A			Investor A1		Investor B		Investor B1		Investor C			Investor C1			Investor C2		Investor C3		Class K			Class R			Total
Core Bond		$	360,505		$	9,997		$	98,329		—		—		—		$	21,968			—		—		—		$	139,806		$	697		$	631,302
High Yield Bond		$	1,794,378		$	66,106		$	601,707		—		$114		$234		$	107,846		$	11,058		—		—		$	827,547		$	20,118		$	3,429,108
Low Duration Bond		$	589,809		$	11,845		$	169,076		$2,764		—		—		$	75,153			—		$1,313		$4,002		$	166,399		$	1,001		$	1,021,362

The Manager may have, at its discretion, voluntarily waived all or any portion of its administration fees for a Fund or a share class, which are included in administration fees waived — class specific in the Statements of Operations.

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended September 30, 2016, the Funds paid the following amounts to affiliates of BlackRock in return for these services, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional			Service			Investor A			Investor C		Total
Core Bond		$	577,176		$	9,524		$	6,351		—		$	593,051
High Yield Bond		$	494,471		$	9,423		$	14,860		$ 3		$	518,757
Low Duration Bond		$	223,181		$	3,663		$	5,901		—		$	232,745

136 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

The Manager maintains a call center that is responsible for providing certain shareholder services to the Funds. Shareholder services include responding to inquiries and processing subscriptions and redemptions based upon instructions from shareholders. For the year ended September 30, 2016, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional		Service			Investor A			Investor A1		Investor B			Investor C			Investor C2			Class K			Class R			Total
Core Bond		$  5,429			—		$	10,804		—			—		$	1,672			—		$	1,092		$	18	$  19,015
High Yield Bond		$60,464		$	1,545		$	71,307		—		$	94		$	9,930			—		$	51,374		$	2,375	$197,089
Low Duration Bond		$11,838		$	415		$	4,701		$368			—		$	3,282		$	87		$	1,606		$	61	$  22,358

For the year ended September 30, 2016, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

	Institutional			Service			Investor A			Investor A1			Investor B		Investor B1		Investor C			Investor C1			Investor C2		Investor C3			Class K			Class R			Total
Core Bond		$	2,224,438		$	30,670		$	839,805			—		—		—		$	155,089			—		—			—		$	1,504		$	7,414	$  3,258,920
High Yield Bond		$	9,931,007		$	484,170		$	4,646,358			—		$2,533		$6,009		$	1,019,114		$	115,468		—			—		$	1,127,291		$	258,624	$17,590,574
Low Duration Bond		$	1,628,869		$	51,563		$	1,141,971		$	19,830		—		—		$	565,681			—		$9,076		$	44,763		$	4,650		$	15,048	$  3,481,451

Other Fees: For the year ended September 30, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

Core Bond	$  28,937
High Yield Bond	$111,308
Low Duration Bond	$  63,293

For the year ended September 30, 2016, affiliates received CDSCs as follows:

	Investor A	Investor B	Investor C
Core Bond	$  4,065	—	$20,215
High Yield Bond	$25,956	$357	$75,055
Low Duration Bond	$80,892	—	$64,983

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to each Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

	Core Bond	High Yield Bond	Low Duration Bond
Institutional	0.45%	0.67%	0.45%
Service	0.79%	1.02%	0.79%
Investor A	0.79%	0.92%	0.79%
Investor A1	N/A	N/A	0.60%
Investor B1	N/A	1.46%	N/A
Investor C	1.54%	1.72%	1.53%
Investor C1	N/A	1.56%	N/A
Investor C2	N/A	N/A	0.94%
Investor C3	N/A	N/A	1.50%
Class K	0.40%	0.58%	0.40%
Class R	1.04%	1.28%	1.04%

The Manager has agreed not to reduce or discontinue these contractual expense limitations prior to February 1, 2017, unless approved by the Board, including a majority of the Independent Trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”) or by a vote of a majority of the outstanding voting securities of the Funds.

With respect to each Fund, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. These amounts are included in fees waived by the Manager in the Statements of Operations. For the year ended September 30, 2016, the amounts waived were as follows:

Core Bond	$    8,927
High Yield Bond	$267,682
Low Duration Bond	$  38,353

BLACKROCK FUNDS II SEPTEMBER 30, 2016 137

Notes to Financial Statements (continued)

Effective September 1, 2016, the Manager has voluntarily agreed to waive the investment advisory fee payable by a fund with respect to any portion of such Fund’s assets estimated to be attributable to investments in other equity and fixed-income funds and exchange-traded funds funds managed by the Manager or its affiliates. This voluntary waiver may be reduced or discontinued at any time without notice. These amounts are included in fees waived by the Manager in the Statements of Operations. For the year ended September 30, 2016, the amounts waived were as follows:

High Yield Bond	$53,454
Low Duration Bond	$12,559

These amounts waived and/or reimbursed are included in fees waived by the Manager, and shown as administration fees waived — class specific, transfer agent fees waived — class specific and transfer agent fees reimbursed — class specific, respectively, in the Statements of Operations. For the year ended September 30, 2016, the amounts included in fees waived by the Manager were as follows:

Core Bond	$743,228
Low Duration Bond	$240,861

Class specific expense waivers or reimbursements are as follows:

Administration Fees Waived	Institutional			Service			Investor A			Investor A1			Investor B1		Investor C			Investor C2			Investor C3			Class K			Class R			Total
Core Bond		$	360,505		$	1,098		$	98,051			—		—		$	18,821			—			—		$	139,327		$	697		$	618,499
High Yield Bond			—			—		$	26,880			—		$224			—			—			—		$	81,666		$	29		$	108,799
Low Duration Bond		$	538,027			—		$	121,296		$	2,690		—		$	75,143		$	1,168		$	3,698		$	159,341		$	1,001		$	902,364

Transfer Agent Fees Waived	Institutional		Investor A			Investor A1		Investor C			Investor C2			Class K			Class R			Total
Core Bond		$5,429		$	10,777		—		$	1,118			—		$	1,068		$	18		$	18,410
High Yield Bond		—			—		—			—			—		$	11,429			—		$	11,429
Low Duration Bond		$7,367		$	308		$345		$	3,274		$	55		$	1,524		$	61		$	12,934

Transfer Agent Fees Reimbursed	Institutional			Service			Investor A			Investor A1		Investor B1		Investor C			Investor C2		Investor C3			Class K			Class R			Total
Core Bond		$	1,312,688		$	2,323		$	138,412		—		—		$	4,730		—			—		$	405		$	2,500		$	1,461,058
High Yield Bond			—			—			—		—		$3,341			—		—			—		$	6,985			—		$	10,326
Low Duration Bond		$	165,552			—		$	927		$5,683		—		$	73,827		$151		$	5,989		$	2,813		$	7,926		$	262,868

With respect to the contractual expense caps, if during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the expense cap for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• The Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year.

• The Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense cap for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense cap for that share class.

For the year ended September 30, 2016, the Manager recouped the following class specific waivers and/or reimbursements previously recorded by the Funds:

Recoupment of Past Waived Fees	Institutional			Service			Investor A			Investor B1			Investor C			Investor C1		Investor C2			Investor C3			Class K			Class R			Total
Core Bond			—		$	32,866		$	500			—		$	1,150		—			—			—		$	1,117			—		$	35,633
High Yield Bond		$	136,344		$	274		$	898,498		$	107			—		—			—			—		$	242,887		$	1,611		$	1,279,721
Low Duration Bond			—		$	20,070		$	28			—			—		—		$	175		$	771			—			—		$	21,044

138 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

On September 30, 2016, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring September 30,
	2017		2018
Core Bond
Fund Level	$	1,200,606	$	743,228
Institutional	$	1,625,227	$	1,678,622
Service	$	9,899	$	3,421
Investor A	$	217,310	$	247,240
Investor C	$	25,081	$	24,669
Class K	$	167,162	$	140,800
Class R	$	2,244	$	3,215
High Yield Bond
Investor A	$	158,347	$	26,880
Investor B1	$	9,613	$	3,565
Class K		—	$	100,080
Class R		—	$	29
Low Duration Bond
Fund Level	$	1,036,500	$	240,861
Institutional	$	1,424,437	$	710,946
Service	$	21,891		—
Investor A	$	300,952	$	122,531
Investor A1	$	9,403	$	8,718
Investor C	$	122,243	$	152,244
Investor C2	$	1,290	$	1,374
Investor C3	$	9,114	$	9,687
Class K	$	197,411	$	163,678
Class R	$	3,201	$	8,988

The following fund level and class specific waivers and/or reimbursements previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2016:

	Core Bond		High Yield Bond		Low Duration Bond
Fund Level	$	2,799,209		—		$4,497,528
Institutional	$	664,154		—		—
Investor A	$	30,622				$   282,950
Investor B1		—		$10,661		—
Investor C		—		—		$   145,600
Class K	$	162,821		—		$   124,109
Class R	$	532		—		—

Securities Lending: The U.S. Securities and Exchange Commission has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. High Yield Bond is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by High Yield Bond.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. High Yield Bond retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, High Yield Bond retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, High Yield Bond, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by High Yield Bond is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended September 30, 2016, High Yield Bond paid BIM $90,330 for securities lending agent services.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 139

Notes to Financial Statements (continued)

Officers and Trustees: Certain officers and/or trustees of the Trust are officers and/or trustees of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer, which is included in Officer and Trustees in the Statements of Operations.

Other Transactions: The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended September 30, 2016, the purchase and sale transactions which resulted in net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

	Purchases		Sales		Realized Gain (Loss)
Core Bond	$	3,772,615		—		—
High Yield Bond	$	68,623,851	$	345,760,479		$(20,765,002	)
Low Duration Bond	$	26,159,251	$	1,531,972		$        54,071

During the year ended September 30, 2016, High Yield Bond received a reimbursement of $240,022 from an affiliate, which is included in payment by affiliate in the Statements of Operations, relating to an operational error.

7. Purchases and Sales:

For the year ended September 30, 2016, purchases and sales of investments, including mortgage dollar rolls and excluding short-term securities, were as follows:

Purchases	Core Bond		High Yield Bond		Low Duration Bond
Non-U.S. Government Securities		$13,711,995,110		$17,823,622,426		$10,536,529,006
U.S. Government Securities		6,837,511,285		—		5,933,396,678
Total Purchases		$20,549,506,395		$17,823,622,426		$16,469,925,684
Sales	Core Bond		High Yield Bond		Low Duration Bond
Non-U.S. Government Securities (includes paydowns)		$14,127,351,898		$15,304,738,648		$10,085,483,919
U.S. Government Securities		6,647,293,654		—		6,336,605,937
Total Sales		$20,774,645,552		$15,304,738,648		$16,422,089,856

For the year ended September 30, 2016, purchases and sales related to mortgage dollar rolls were as follows:

	Core Bond	Low Duration Bond
Purchases	$5,954,203,877	$3,654,970,528
Sales	$5,952,415,088	$3,659,959,495

8. Income Tax Information:

It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required, except with respect to any taxes related to the Taxable Subsidiaries.

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended September 30, 2016. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of September 30, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the accounting for swap agreements, the classification of investements, the expiration of capital loss carryforwards, limitations on the utilization of capital loss carryforwards, amortization methods on fixed income securities, net paydown losses, distributions received from a regulated investment company, fees paid on trade settlements and foreign currency transactions were reclassified to the following accounts:

	Core Bond	High Yield Bond	Low Duration Bond
Paid-in capital	—	$(15,806,964)	$(1,475,016)
Undistributed (distributions in excess of) net investment income	$ 5,051,945	$(15,933,569)	$(2,116,410)
Accumulated net realized loss	$(5,051,945)	$ 31,740,533	$ 3,591,426

140 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

The tax character of distributions paid was as follows:

	Core Bond	High Yield Bond	Low Duration Bond
Ordinary income
9/30/16	$76,807,962	$1,060,280,951	$91,520,470
9/30/15	$69,799,605	$1,048,464,134	$84,009,256
Long-term capital gains
9/30/16	—	—	—
9/30/15	—	75,111,996	—
Total
9/30/16	$76,807,962	$1,060,280,951	$91,520,470
9/30/15	$69,799,605	$1,123,576,130	$84,009,256

As of period end, the tax components of accumulated losses were as follows:

	Core Bond		High Yield Bond		Low Duration Bond
Undistributed ordinary income	$   3,796,073		$      62,016,676		—
Capital loss carryforwards	(83,940,639	)	(1,038,690,353	)	$(110,753,877)
Net unrealized gains (losses)1	72,802,910		99,542,621		(7,290,481)
Qualified late-year losses2	(5,690,725	)	—		(3,814,964)
Total	$(13,032,381	)	$   (877,131,056	)	$(121,859,322)

¹  The differences between book-basis and tax-basis net unrealized gains (losses) were attributable primarily to the tax deferral of losses on wash sales and straddles, the timing and recognition of partnership income, amortization methods for premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency contracts, unrealized gain on stock of passive foreign investment companies, the classification of investments, investments in wholly owned subsidiaries, the accrual of income on securities in default and the accounting for swap agreements.

²  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

As of September 30, 2016, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires September 30,	Core Bond		High Yield Bond		Low Duration Bond
No expiration date1		—		$   966,024,995		$  44,443,641
2017		—		43,174,584		41,571,660
2018		$79,463,626		29,490,774		24,738,576
2019		4,477,013		—		—
Total		$83,940,639		$1,038,690,353		$110,753,877

¹  Must be utilized prior to losses subject to expiration.

During the year ended September 30, 2016, Core Bond utilized $1,178,237 of its respective capital loss carryforward.

As of September 30, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	Core Bond			High Yield Bond			Low Duration Bond
Tax cost		$4,401,944,180			$19,358,263,296			$5,497,390,033
Gross unrealized appreciation		$     84,967,836			$     650,312,038			$     27,031,470
Gross unrealized depreciation		(9,544,951	)		(538,581,784	)		(35,156,333)
Net unrealized appreciation (depreciation)		$     75,422,885			$     111,730,254			$      (8,124,863)

9. Bank Borrowings:

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Funds may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended September 30, 2016, the Funds did not borrow under the credit agreement.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 141

Notes to Financial Statements (continued)

10. Principal Risks:

In the normal course of business, certain Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers of securities owned by the Funds. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

Each Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below each Fund portfolio’s current earnings rate

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Funds may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that they believe the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

The price a Fund could receive upon the sale of any particular portfolio investment may differ from a Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by a Fund, and a Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Fund.

For OTC options purchased, each Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Fund should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform. The Funds may be exposed to counterparty credit risk with respect to options written to the extent the Funds deposits collateral with its counterparty to a written option.

With exchange-traded options purchased and futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing

142 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Concentration Risk: Certain Funds invest a significant portion of their assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

Certain Funds invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedule of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

11. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended September 30, 2016					Year Ended September 30, 2015
Core Bond	Shares			Amount		Shares			Amount
Institutional
Shares sold		65,800,479			$ 641,371,607		82,483,805			$ 800,762,203
Shares issued in reinvestment of distributions		3,970,886			38,573,556		3,355,060			32,646,989
Shares redeemed		(65,640,640	)		(639,219,821)		(43,427,910	)		(422,070,281)
Net increase		4,130,725			$   40,725,342		42,410,955			$ 411,338,911
Service
Shares sold		1,721,238			$  16,771,432		2,106,768			$   20,461,587
Shares issued in reinvestment of distributions		111,207			1,081,003		200,697			1,955,065
Shares redeemed		(1,052,100	)		(10,197,677)		(17,338,999	)		(168,103,473)
Net increase (decrease)		780,345			$    7,654,758		(15,031,534	)		$(145,686,821)
Investor A
Shares received from conversion1		—			—		48,969			$        470,592
Shares sold and automatic conversion of shares		10,559,323			$102,576,049		12,761,491			123,902,246
Shares issued in reinvestment of distributions		1,060,566			10,319,415		971,805			9,471,327
Shares redeemed		(9,649,578	)		(94,017,363)		(17,427,233	)		(169,203,194)
Net increase (decrease)		1,970,311			$  18,878,101		(3,644,968	)		$  (35,359,029)
Investor B
Shares sold							12,697			$    124,535
Shares issued in reinvestment of distributions							1,357			13,270
Shares converted1							(49,030	)		(470,592)
Shares redeemed and automatic conversion of shares							(143,966	)		(1,392,444)
Net decrease							(178,942	)		$(1,725,231)
Investor C
Shares sold		2,626,012			$ 25,410,342		1,684,327			$ 16,339,848
Shares issued in reinvestment of distributions		142,626			1,379,984		139,515			1,354,476
Shares redeemed		(2,905,665	)		(28,132,504)		(2,882,772	)		(27,956,117)
Net decrease		(137,027	)		$  (1,342,178)		(1,058,930	)		$(10,261,793)

¹  On the close of business on June 23, 2015, Investor B Shares converted to Investor A Shares.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 143

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
Core Bond (concluded)	Shares			Amount			Shares			Amount
Class K
Shares sold		13,578,751			$ 132,719,054			16,545,366			$161,249,787
Shares issued in reinvestment of distributions		1,680,990			16,378,928			1,525,287			14,885,326
Shares redeemed		(19,549,697	)		(190,067,394	)		(8,402,868	)		(81,815,037	)
Net increase (decrease)		(4,289,956	)		$  (40,969,412	)		9,667,785			$  94,320,076
Class R
Shares sold		153,937			$  1,499,450			121,999			$    1,190,141
Shares issued in reinvestment of distributions		6,875			66,915			5,301			51,668
Shares redeemed		(95,324	)		(930,190	)		(76,436	)		(745,012	)
Net increase		65,488			$     636,175			50,864			$       496,797
Total Net Increase		2,519,886			$25,582,786			32,215,230			$313,122,910
High Yield Bond
Institutional
Shares sold		822,914,688			$ 5,998,077,162			1,045,949,201			$ 8,328,910,544
Shares issued in reinvestment of distributions		68,665,016			501,753,235			65,725,898			518,443,983
Shares redeemed		(1,178,115,935	)		(8,597,393,630	)		(602,306,625	)		(4,759,942,936	)
Net increase (decrease)		(286,536,231	)		$(2,097,563,233	)		509,368,474			$ 4,087,411,591
Service
Shares sold		30,878,972			$ 224,380,276			33,998,211			$ 270,547,828
Shares issued in reinvestment of distributions		2,573,406			18,863,340			2,815,360			22,267,661
Shares redeemed		(24,555,296	)		(179,829,449	)		(38,210,825	)		(302,771,876	)
Net increase (decrease)		8,897,082			$   63,414,167			(1,397,254	)		$    (9,956,387	)
Investor A
Shares sold and automatic conversion of shares		330,420,810			$ 2,439,217,265			219,147,084			$ 1,745,159,968
Shares issued in reinvestment of distributions		22,872,862			167,505,852			24,613,223			194,557,243
Shares redeemed		(239,908,775	)		(1,756,259,208	)		(247,190,709	)		(1,964,890,851	)
Net increase (decrease)		113,384,897			$    850,463,909			(3,430,402	)		$     (25,173,640	)
Investor B
Shares sold		5,072			$   35,388			15,955			$    126,053
Shares issued in reinvestment of distributions		3,617			26,332			12,902			102,310
Shares redeemed and automatic conversion of shares		(100,712	)		(728,591	)		(197,102	)		(1,564,273	)
Net decrease		(92,023	)		$(666,871	)		(168,245	)		$(1,335,910	)
Investor B1
Shares sold		772			$        5,509			506			$        4,245
Shares issued in reinvestment of distributions		5,243			38,142			13,942			110,498
Shares redeemed		(201,369	)		(1,466,472	)		(335,609	)		(2,669,386	)
Net decrease		(195,354	)		$(1,422,821	)		(321,161	)		$(2,554,643	)

144 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
High Yield Bond (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		16,816,847			$ 122,984,882			21,576,280			$ 172,137,412
Shares issued in reinvestment of distributions		3,396,754			24,840,193			4,223,325			33,413,667
Shares redeemed		(27,414,519	)		(200,052,765	)		(23,955,129	)		(189,565,476	)
Net increase (decrease)		(7,200,918	)		$  (52,227,690	)		1,844,476			$   15,985,603
Investor C1
Shares sold		22,716			$      165,495			42,959			$      344,135
Shares issued in reinvestment of distributions		267,842			1,958,236			373,622			2,958,584
Shares redeemed		(1,676,590	)		(12,226,819	)		(1,837,587	)		(14,601,863	)
Net decrease		(1,386,032	)		$(10,103,088	)		(1,421,006	)		$(11,299,144	)
Class K
Shares sold		655,368,476			$ 4,805,645,369			234,894,383			$ 1,861,716,137
Shares issued in reinvestment of distributions		18,252,146			133,671,181			15,517,077			122,551,968
Shares redeemed		(263,208,942	)		(1,898,171,143	)		(165,635,232	)		(1,290,289,490	)
Net increase		410,411,680			$ 3,041,145,407			84,776,228			$    693,978,615
Class R
Shares sold		5,628,718			$     41,187,423			6,986,537			$     55,442,066
Shares issued in reinvestment of distributions		771,403			5,640,513			688,964			5,434,676
Shares redeemed		(4,672,222	)		(33,940,135	)		(3,373,916	)		(26,738,347	)
Net increase		1,727,899			$     12,887,801			4,301,585			$34,138,395
Total Net Increase		239,011,000			$1,805,927,581			593,552,695			$4,781,194,480
Low Duration Bond
Institutional
Shares sold		135,685,844			$ 1,305,592,826			307,201,744			$ 2,991,055,223
Shares issued in reinvestment of distributions		5,544,093			53,350,981			4,994,650			48,485,913
Shares redeemed		(126,344,019	)		(1,215,710,033	)		(130,424,665	)		(1,265,627,585	)
Net increase		14,885,918			$    143,233,774			181,771,729			$ 1,773,913,551
Service
Shares sold		2,127,311			$ 20,488,507			2,867,281			$   27,783,237
Shares issued in reinvestment of distributions		97,670			939,192			105,794			1,027,291
Shares redeemed		(1,812,297	)		(17,436,212	)		(19,424,259	)		(188,975,624	)
Net increase (decrease)		412,684			$   3,991,487			(16,451,184	)		$(160,165,096	)
Investor A
Shares received from conversion1		—			—			45,700			$        443,289
Shares sold and automatic conversion of shares		36,113,698			$ 347,382,274			30,122,957			292,422,147
Shares issued in reinvestment of distributions		1,309,171			12,589,246			1,213,165			11,775,370
Shares redeemed		(31,617,378	)		(304,133,113	)		(97,594,569	)		(949,067,681	)
Net increase (decrease)		5,805,491			$   55,838,407			(66,212,747	)		$(644,426,875	)

¹   On the close of business on June 23, 2015, Investor B and Investor B3 Shares converted to Investor A Shares.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 145

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
Low Duration Bond (continued)	Shares			Amount			Shares			Amount
Investor A1
Shares sold		15,088			$    145,510			30,023			$    292,333
Shares issued in reinvestment of distributions		18,755			180,543			20,353			197,690
Shares redeemed		(324,486	)		(3,124,421	)		(437,667	)		(4,253,370	)
Net decrease		(290,643	)		$(2,798,368	)		(387,291	)		$(3,763,347	)
Investor B
Shares sold								19,255			$    187,308
Shares issued in reinvestment of distributions								578			5,615
Shares converted1								(20,125	)		(195,288	)
Shares redeemed and automatic conversion of shares								(152,960	)		(1,485,482	)
Net decrease								(153,252	)		$(1,487,847	)
Investor B3
Shares sold								235			$     2,290
Shares issued in reinvestment of distributions								351			3,414
Shares converted1								(25,555	)		(248,001	)
Shares redeemed and automatic conversion of shares								(62,384	)		(606,225	)
Net decrease								(87,353	)		$(848,522	)
Investor C
Shares sold		13,695,578			$ 131,698,050			13,153,047			$127,639,876
Shares issued in reinvestment of distributions		290,762			2,793,441			224,156			2,173,315
Shares redeemed		(12,742,753	)		(122,548,097	)		(10,019,514	)		(97,241,861	)
Net increase		1,243,587			$   11,943,394			3,357,689			$  32,571,330
Investor C2
Shares sold		51			$        486			65			$           768
Shares issued in reinvestment of distributions		7,451			71,647			7,684			74,563
Shares redeemed		(88,161	)		(847,612	)		(105,760	)		(1,026,182	)
Net decrease		(80,659	)		$(775,479	)		(98,011	)		$   (950,851	)
Investor C3
Shares sold		10,277			$    97,848			26,316			$    255,588
Shares issued in reinvestment of distributions		10,386			99,785			10,468			101,500
Shares redeemed		(354,116	)		(3,405,462	)		(492,025	)		(4,775,975	)
Net decrease		(333,453	)		$(3,207,829	)		(455,241	)		$(4,418,887	)
Class K
Shares sold		36,742,137			$ 353,754,258			63,408,230			$ 615,231,618
Shares issued in reinvestment of distributions		1,678,160			16,133,613			1,558,016			15,113,072
Shares redeemed		(37,756,299	)		(362,963,909	)		(26,366,539	)		(255,671,861	)
Net increase		663,998			$     6,923,962			38,599,707			$ 374,672,829

¹  On the close of business on June 23, 2015, Investor B and Investor B3 Shares converted to Investor A Shares.

146 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (concluded)

	Year Ended September 30, 2016						Year Ended September 30, 2015
Low Duration Bond (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		291,199		$	2,800,308			227,375		$	2,207,284
Shares issued in reinvestment of distributions		6,827			65,647			5,016			48,657
Shares redeemed		(199,829	)		(1,922,366	)		(189,640	)		(1,840,497	)
Net increase		98,197		$	943,589			42,751		$	415,444
Total Net Increase		22,405,120		$	216,092,937			139,926,797		$	1,365,511,729

12. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 147

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of BlackRock Funds II and Shareholders of BlackRock Core Bond Portfolio, BlackRock High Yield Bond Portfolio, BlackRock Low Duration Bond Portfolio:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Core Bond Portfolio and BlackRock Low Duration Bond Portfolio, as of September 30, 2016, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. We have also audited the consolidated statement of assets and liabilities, including the consolidated schedule of investments of BlackRock High Yield Bond Portfolio (collectively with BlackRock Core Bond Portfolio and BlackRock Low Duration Bond Portfolio, the “Funds”, each a series of BlackRock Funds II) as of September 30, 2016, and the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2016, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Core Bond Portfolio and BlackRock Low Duration Bond Portfolio as of September 30, 2016, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, and the consolidated financial position of BlackRock High Yield Bond Portfolio, the consolidated results of its operations for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 23, 2016

Important Tax Information (Unaudited)

During the fiscal year ended September 30, 2016, the following information is provided with respect to the ordinary income distributions paid:

	Payable Dates	Core Bond			High Yield Bond			Low Duration Bond
Qualified Dividend Income for Individuals1	October 2015		—			2.59	%		—
	November 2015		—			3.11	%		—
	December 2015		—			4.60	%		—
	January 2016 — September 2016		—			—			—
Dividends Qualifying for the Dividends Received Deduction for Corporations1	October 2015		—			2.47	%		—
	November 2015		—			2.90	%		—
	December 2015		—			4.12	%		—
	January 2016 — September 2016		—			—			—
Interest-Related Dividends for Non-U.S. Residents2	October 2015 — December 2015		75.72	%		59.30	%		71.18	%
	January 2016 — September 2016		97.83	%		68.93	%		81.07	%
Federal Obligation Interest3	October 2015 — September 2016		18.41	%		—			6.68	%

¹  The Funds hereby designate the percentage indicated above or the maximum amount allowable by law.

²  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

³  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

148 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds II (the “Trust”) met in person on April 12, 2016 (the “April Meeting”) and May 10-11, 2016 (the “May Meeting”) to consider the approval of the investment advisory agreement (the “Advisory Agreement” or the “Agreement”) between the Trust, on behalf of BlackRock Core Bond Portfolio (the “Core Bond Portfolio”), BlackRock High Yield Bond Portfolio (the “High Yield Portfolio”), and BlackRock Low Duration Bond Portfolio (the “Low Duration Portfolio”) (each, a “Fund,” and collectively, the “Funds”), and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), each Fund’s investment advisor.

Activities and Composition of the Board

On the date of the May Meeting, the Board consisted of thirteen individuals, ten of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). One of the Board Members is a non-management interested Board Member by virtue of his former positions with BlackRock, Inc. and its affiliates. The Board Members are responsible for the oversight of the operations of each Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreement

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, the Board assessed, among other things, the nature, extent and quality of the services provided to each Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; administrative and shareholder services; the oversight of fund service providers; marketing; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmark, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) each Fund’s compliance with its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, exchange-traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to each Fund; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreement

The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreement. The Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) on Fund fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of each Fund as compared with a peer group of funds as determined by Broadridge¹; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, sub-advised mutual funds, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock; and (g) sales and redemption data regarding each Fund’s shares.

¹  Funds are ranked by Broadridge in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 149

Disclosure of Investment Advisory Agreement (continued)

At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May Meeting.

At the May Meeting, the Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) each Fund’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance metrics as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with each Fund; and (g) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates, securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds, a relevant benchmark, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing each Fund’s performance and each Fund’s investment objective(s), strategies and outlook.

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, the Board considered the quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to each Fund by third parties) and officers and other personnel as are necessary for the operations of each Fund. In particular, BlackRock and its affiliates provide each Fund with administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) preparing periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers; (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 such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing other administrative functions necessary for the operation of each Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Broadridge data that was prepared by BlackRock. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to other funds in its applicable Broadridge category. The Board was provided with a description of the methodology used by Broadridge to select peer funds and periodically meets with Broadridge representatives to review its methodology. The Board was provided with information on the composition of the Broadridge performance universes and expense universes. The Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

In evaluating performance, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Board recognized that it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

150 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Disclosure of Investment Advisory Agreement (continued)

The Board noted that for the one-, three- and five-year periods reported, the Core Bond Portfolio ranked in the second, first and second quartiles, respectively, against its Broadridge Performance Universe.

The Board noted that for the one-, three- and five-year periods reported, the High Yield Portfolio ranked in the third, first and first quartiles, respectively, against its Broadridge Performance Universe. The Board and BlackRock reviewed and discussed the reasons for the High Yield Portfolio’s underperformance during the one-year period.

The Board noted that for the one-, three- and five-year periods reported, the Low Duration Portfolio ranked in the second, first and first quartiles, respectively, against its Broadridge Performance Universe.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Broadridge category. 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. The Board also compared each Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Broadridge category. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered 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 received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed BlackRock’s profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2015 compared to available aggregate profitability data provided for the prior two years. The Board reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund level is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs of managing the Funds, to each Fund. The Board may receive and review information from independent third parties as part of its annual evaluation. 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 Agreement and to continue 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, assumption of risk, and liability profile in servicing each Fund 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 and institutional account product channels, as applicable.

The Board noted that the Core Bond Portfolio’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers. The Board also noted that the Core Bond Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to a cap on the Core Bond Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis.

The Board noted that the High Yield Portfolio’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers. The Board also noted that the High Yield Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to a cap on the High Yield Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis, as applicable. After discussion between the Board, including the independent Board Members, and BlackRock, the Board and BlackRock agreed to a contractual adjustment to reduce specified levels within the breakpoint schedule. This adjustment was implemented on June 15, 2016.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 151

Disclosure of Investment Advisory Agreement (concluded)

The Board noted that the Low Duration Portfolio’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the second and first quartiles, respectively, relative to the Fund’s Expense Peers. The Board also noted that the Low Duration Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to a cap on the Low Duration Portfolio’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps, as applicable. The Board also considered the extent to which each Fund benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable each Fund to more fully participate in these economies of scale. The Board considered each Fund’s asset levels and whether the current fee schedule was appropriate. In its consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

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 their respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and 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 each Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in affiliated ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that each Fund’s fees and expenses are too high or if they are dissatisfied with the performance of each Fund.

Conclusion

The Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

152 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees2
Robert M. Hernandez 1944	Chair of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, RTI International Metals, Inc. from 1990 to 2015; Director, TE Connectivity (electronics) from 2006 to 2012.	28 RICs consisting of 98 Portfolios	Chubb Limited (insurance company); Eastman Chemical Company
Fred G. Weiss 1941	Vice Chair of the Board and Trustee	Since 2007	Managing Director, FGW Consultancy LLC (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000.	28 RICs consisting of 98 Portfolios	Allergan plc (pharmaceuticals)
James H. Bodurtha 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting and investing firm) from 1996 to 2013 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980; Director, ICI Mutual since 2010.	28 RICs consisting of 98 Portfolios	None
Bruce R. Bond 1946	Trustee	Since 2007	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	28 RICs consisting of 98 Portfolios	None
Donald W. Burton 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The Burton Partnership (QP), LP (an investment partnership) since 2000; Managing General Partner, The South Atlantic Venture Funds from 1983 to 2012; Director, IDology, Inc. (technology solutions) since 2006; Director, Knology, Inc. (telecommunications) from 1996 to 2012; Director, Capital Southwest (financial) from 2006 to 2012; Director, Besito (restaurant) since 2013; Director, PDQ South Texas (restaurant) since 2013; Director, ITC/Talon (data) since 2015.	28 RICs consisting of 98 Portfolios	None
Honorable Stuart E. Eizenstat 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca-Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide, LLC (risk management) from 2007 to 2012; Member of the International Advisory Board GML Ltd. (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) from 2004 to 2009.	28 RICs consisting of 98 Portfolios	Alcatel-Lucent (telecom-munications); Global Specialty Metallurgical; UPS Corporation (delivery service)
John F. O’Brien 1943	Trustee	Since 2007	Trustee, Woods Hole Oceanographic Institute since 2003 and Chairman thereof from 2009 to 2015; Co-Founder and Managing Director, Board Leaders LLC (director education) since 2005.	28 RICs consisting of 98 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)

BLACKROCK FUNDS II SEPTEMBER 30, 2016 153

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees2 (concluded)
Donald C. Opatrny 1952	Trustee	Since 2015	Trustee, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; Member of the Board and Investment Committee, University School since 2007; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; President and Trustee, the Center for the Arts, Jackson Hole since 2011; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014.	28 RICs consisting of 98 Portfolios	None
Roberta Cooper Ramo 1942	Trustee	Since 2007	Shareholder and Attorney, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Director, ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; Vice President, Santa Fe Opera (non-profit) since 2011; Chair, Think New Mexico (non-profit) since 2013; Chairman of the Board, Cooper’s Inc. (retail) from 1999 to 2011.	28 RICs consisting of 98 Portfolios	None
David H. Walsh 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation from 2008 to 2012; Director, The American Museum of Fly Fishing since 1997.	28 RICs consisting of 98 Portfolios	None

154 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Interested Trustees4
Robert Fairbairn 1965	Trustee	Since 2015	Senior Managing Director of BlackRock, Inc. since 2010; Global Head of BlackRock’s Retail and iShares® businesses since 2012; Member of BlackRock’s Global Executive and Global Operating Committees; Head of BlackRock’s Global Client Group from 2009 to 2012; Chairman of BlackRock’s international businesses from 2007 to 2010.	28 RICs consisting of 98 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2007	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	28 RICs consisting of 98 Portfolios	None
Henry R. Keizer 1956	Trustee	Since 2016	Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, Montpelier Re Holdings, Ltd. (publicly held property and casual reinsurance) from 2013 to 2015; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) in 2004 to 2005 and 2010 to 2012; Director KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010.	28 RICs consisting of 98 Portfolios	Hertz Global Holdings (car rental); WABCO (commercial vehicle safety systems)
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 to present (Trustee); Since 2010 to present (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 315 Portfolios	None

1 2	The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. The Board has unanimously approved extending the mandatory retirement age for Messrs. Walsh and Weiss until January 31, 2017, which the Board believes to be in the best interests of shareholders of the Trust. Interested Trustees serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or statute, or until December 31 of the year in which they turn 72.
3	Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Honorable Stuart E. Eizenstat, 2001; Robert M. Hernandez, 1996; John F. O’Brien, 2005; Roberta Cooper Ramo, 1999; David H. Walsh, 2003; and Fred G. Weiss, 1998.
4	Messrs. Fairbairn and Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Perlowski is also a board member of the BlackRock Closed-End Complex and the BlackRock Equity-Liquidity Complex. Mr. Gabbay may be deemed an “interested person” of the Trust based on his former positions with BlackRock, Inc. and its affiliates. Mr. Keizer may be deemed an “interested person” of the Trust based on his former directorship at another company which is not an affiliate of BlackRock, Inc. It is anticipated that Mr. Keizer will become an Independent Trustee effective January 31, 2017. Messrs. Gabbay and Keizer do not currently serve as officers or employees of BlackRock, Inc. or its affiliates or own any securities of BlackRock, Inc. or The PNC Financial Services Group, Inc. Each of Messrs. Gabbay and Keizer is a non-management Interested Trustee.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 155

Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1   The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. 2   Officers of the Trust serve at the pleasure of the Board.
	Further information about the Trust’s Officers and Trustees is available in the Fund’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

    On June 2, 2016, the Board appointed Henry R. Keizer as a Trustee of the Trust, effective July 28, 2016.

    On September 26, 2016, the Board appointed Lena G. Goldberg as a Trustee of the Trust, effective November 4, 2016.

Investment Adviser and Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Accounting Agent and Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm Deloitte & Touche LLP Philadelphia, PA 19103	Address of the Trust 100 Bellevue Parkway Wilmington, DE 19809
Custodian The Bank of New York Mellon New York, NY 10286	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Willkie Farr & Gallagher LLP New York, NY 10019

156 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Additional Information

    General Information

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

    Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 157

Additional Information (concluded)

    BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

158 BLACKROCK FUNDS II SEPTEMBER 30, 2016

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless preceded or accompanied by the Funds’ current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

    Taxable3-9/16-AR

SEPTEMBER 30, 2016        

  ANNUAL REPORT BLACKROCK^®

BlackRock Funds II

▶   BlackRock 20/80 Target Allocation Fund

▶   BlackRock 40/60 Target Allocation Fund

▶   BlackRock 60/40 Target Allocation Fund

▶   BlackRock 80/20 Target Allocation Fund

Not FDIC Insured ¡ May Lose Value ¡ No Bank Guarantee

Table of Contents

	Page
The Markets in Review	3
Annual Report:
Funds’ Summary	4
About Fund Performance	11
Derivative Financial Instruments	11
Disclosure of Expenses	11
Financial Statements:
Schedules of Investments	13
Statements of Assets and Liabilities	37
Statements of Operations	39
Statements of Changes in Net Assets	40
Financial Highlights	42
Notes to Financial Statements	54
Report of Independent Registered Public Accounting Firm	69
Important Tax Information	69
Disclosure of Investment Advisory Agreement	70
Officers and Trustees	74
Additional Information	78

    Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports and prospectuses by enrolling in the electronic delivery program. Electronic copies of shareholder reports and prospectuses are also available on BlackRock’s website.   TO ENROLL IN ELECTRONIC DELIVERY:   Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages: Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.   Shareholders Who Hold Accounts Directly with BlackRock: 1. Access the BlackRock website at blackrock.com 2. Select “Access Your Account” 3. Next, select “eDelivery” in the “Related Resources” box and follow the sign-up instructions

2 BLACKROCK FUNDS II SEPTEMBER 30, 2016

The Markets in Review

Dear Shareholder,

Most asset classes produced strong returns over the past year, particularly risk assets such as equities and high yield bonds. Central bank policy decisions continued to provide support to financial markets, while changing economic outlooks and geopolitical risks have been major drivers of investor sentiment.

The Federal Reserve (the “Fed”) has long been in the spotlight, particularly leading up to the decision to end its near-zero interest rate policy at the end of 2015, and after, as investors remained focused on the anticipated pace of future rate hikes. With the European Central Bank and the Bank of Japan having moved into stimulus mode, the divergence in global monetary policies drove heightened market volatility heading into 2016 and caused the U.S. dollar to strengthen considerably. The year had a rough start as the strong dollar challenged U.S. companies that generate revenues overseas, and pressured emerging market currencies and commodities prices. Low and volatile oil prices and signs of slowing growth in China were also meaningful factors behind the decline in risk assets early in the year. However, as the first quarter wore on, these pressures abated and a more tempered outlook for U.S. rate hikes helped financial markets rebound.

Volatility spiked in late June when the United Kingdom shocked investors with its vote to leave the European Union. Uncertainty around how the British exit might affect the global economy and political landscape drove investors to high-quality assets, pushing already low global yields to even lower levels. However, risk assets recovered swiftly in July as economic data suggested that the consequences had thus far been contained to the United Kingdom.

With a number of factors holding global interest rates down — central bank accommodation, an aging population, and weak productivity growth — assets offering decent yield have become increasingly scarce. As a result, income-seeking investors have stretched into riskier assets despite high valuations in many sectors. History implies that high valuations and low growth results in lower returns for risk assets. Still, perceived safe havens have their own risks, and investors are wise to carefully assess risk and potential reward.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to adjust accordingly as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2016
	6-month			12-month
U.S. large cap equities (S&P 500® Index)		6.40	%		15.43	%
U.S. small cap equities (Russell 2000® Index)		13.18			15.47
International equities (MSCI Europe, Australasia, Far East Index)		4.88			6.52
Emerging market equities (MSCI Emerging Markets Index)		9.75			16.78
3-month Treasury bills (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.17			0.27
U.S. Treasury securities (BofA Merrill Lynch 10- Year U.S. Treasury Index)		2.25			5.59
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)		2.68			5.19
Tax-exempt municipal bonds (S&P Municipal Bond Index)		2.53			5.84
U.S. high yield bonds (Bloomberg Barclays U.S.     Corporate High Yield 2% Issuer Capped Index)		11.38			12.74
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

Funds’ Summary as of September 30, 2016 BlackRock Target Allocation Funds

      Portfolio Management Commentary

How did the Funds perform?

20/80 Target Allocation

• For the 12-month period ended September 30, 2016, all of the Fund’s share classes underperformed the reference benchmark (MSCI ACWI Index (14%)/MSCI USA Index (6%)/Bloomberg Barclays U.S. Universal Index (80%)) and the fixed income benchmark, the Bloomberg Barclays U.S. Universal Index.

40/60 Target Allocation

• For the 12-month period ended September 30, 2016, all of the Fund’s share classes underperformed the reference benchmark (MSCI ACWI Index (28%)/MSCI USA Index (12%)/Bloomberg Barclays U.S. Universal Index (60%)) and the global MSCI ACWI Index.

60/40 Target Allocation

• For the 12-month period ended September 30, 2016, all of the Fund’s share classes underperformed the reference benchmark (MSCI ACWI Index (42%)/MSCI USA Index (18%)/Bloomberg Barclays U.S. Universal Index (40%)) and the global MSCI ACWI Index.

80/20 Target Allocation

• For the 12-month period ended September 30, 2016, all of the Fund’s share classes underperformed the reference benchmark (MSCI ACWI Index (56%)/MSCI USA Index (24%)/Bloomberg Barclays U.S. Universal Index (20%)) and the global MSCI ACWI Index.

What factors influenced performance?

• Despite providing positive returns, the Funds underperformed their benchmarks, driven primarily by exposure to liquid alternative and unconstrained mutual funds, including the BlackRock Global Long/Short Equity Fund, BlackRock Global Long/Short Credit Fund and BlackRock Strategic Income Opportunities Portfolio. Over the 12 months, shareholders benefited from having a higher market exposure (beta) and more interest rate risk (duration), and as a result, exposure to certain alternative strategies lagged.

• For the 12-month period, global risk assets performed strongly, in part due to a depressed starting point. Most equity markets generated meaningful returns, with U.S. indices seeing double-digit performance and Europe lagging but still in positive territory. All of the Target Allocation Funds benefited from this strong equity market performance, with broad exposure to U.S. equities via the iShares Core S&P Total U.S. Stock Market ETF — the primary contributor to performance. In addition, the Funds benefited from U.S. large cap value exposure via the BlackRock Basic Value Fund, Inc. Over the period, interest rates declined materially to historically low levels. The Funds’ exposure to interest rate risk via core investment grade bonds (iShares Core U.S. Aggregate Bond ETF and Master Total Return Portfolio), and to long-term U.S. Treasuries via the iShares 20+ Year Treasury Bond ETF, aided returns. Lastly, exposure to the BlackRock Global Allocation Fund, Inc. contributed positively to results.

Describe recent portfolio activity.

• Early in the first quarter of 2016, the Funds took steps to mitigate portfolio risk given heightened global uncertainty. The Funds reduced exposure to high yield bonds, equities and non-U.S.-dollar assets. These shifts were implemented on concern that global disinflationary pressures arising from China’s economic slowdown and transition would continue to impact commodity markets, lower-rated bonds and global equities, particularly those in emerging markets. As the macroeconomic backdrop and sentiment improved over the first quarter, the Funds returned to a less defensive risk posture. In this vein, the Funds’ cash positions in the form of money market holdings were eliminated and redeployed into European equities, where the investment adviser saw attractive relative value.

• In the third quarter of 2016, amid uncertainties surrounding the U.K. vote to leave the European Union, the Funds’ risk exposures were adjusted to reflect increased caution with respect to corporate earnings worldwide, and in Europe in particular. Within equities, the Funds’ allocation to non-U.S. developed markets was reduced, and exposure to U.S. and emerging markets was increased. The larger U.S. exposure came via a higher allocation to “smart beta” factors such as minimum volatility and momentum that have long-term potential to deliver solid returns over market-cap-weighted indices, and which can help to diversify portfolio risk. In the equity-heavy funds, the Funds introduced a new allocation to U.S. mid-cap equities and sold out of the BlackRock Global SmallCap Fund, Inc. on the view that mid-cap stocks have better risk/return characteristics compared with small-cap issues in the current environment. The allocation to BlackRock Global Dividend Portfolio was increased on a preference for dividend stocks in a low yield and low return environment.

• Within fixed income, some duration was added to the portfolios to mitigate the potential for downside risk within credit and equity markets. The allocation to the Master Total Return Portfolio was increased, while allocations to shorter duration assets such as BlackRock Global Long/Short Credit Fund, iShares Floating Rate Bond ETF and BlackRock Strategic Income Opportunities Portfolio were reduced. The Funds also added new holdings in dollar-denominated emerging market debt and intermediate-maturity U.S. investment grade credit, as these provide reasonable levels of incremental income relative to their credit quality and duration. Within multi-asset funds, holdings in the BlackRock Global Allocation Fund, Inc. were reduced, and in turn, exposure to BlackRock Total Emerging Markets Fund was increased on a more favorable outlook for emerging markets versus non-U.S. developed markets.

Describe the Funds’ positioning at period end.

• At period end, the Funds maintained a neutral asset allocation in terms of equities versus fixed income, with a defensive bias toward lower volatility assets and longer duration investment grade bonds. Within equities, the Funds were overweight mid-cap equities and smart beta factor exposures such as minimum volatility and momentum, and underweight in non-U.S. developed equities. Within fixed income, the Funds were generally neutral on duration, with less interest rate risk in the lower risk funds and more interest rate risk in the higher risk funds. The Funds were also overweight in investment grade credit and U.S. dollar-denominated emerging market debt, and underweight in high quality sovereign bonds.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

4 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock 20/80 Target Allocation Fund

      Investment Objective

BlackRock 20/80 Target Allocation Fund’s (the “Fund”) investment objective is to seek a balance between long term capital appreciation and high current income, with an emphasis on income.

      Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge.

²  The Fund, which is a fund of funds, normally intends to obtain exposure to equity securities in an amount equal to 20% of its assets and exposure to fixed-income securities in an amount equal to 80% of its assets.

³  A customized weighted index comprised of the returns of the MSCI ACWI Index (14%), MSCI USA Index (6%) and Bloomberg Barclays U.S. Universal Index (80%).

⁴  An unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt with maturities of at least one year.

⁵  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

				Average Annual Total Returns6
				1 Year						5 Years						Since Inception7
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		3.19	%		4.76	%		N/A			8.21	%		N/A			5.63	%		N/A
Investor A		2.95			4.35			(1.13	)%		7.79			6.64	%		5.21			4.63	%
Investor C		2.61			3.64			2.66			7.01			7.01			4.46			4.46
Class K		3.19			4.77			N/A			8.23			N/A			5.65			N/A
Class R		2.87			4.11			N/A			7.53			N/A			4.97			N/A
MSCI ACWI Index (14%)/MSCI USA Index (6%)/Bloomberg Barclays U.S. Universal Index (80%)		4.09			7.44			N/A			5.36			N/A			5.07			N/A
Bloomberg Barclays U.S. Universal Index		3.51			6.11			N/A			3.62			N/A			4.91			N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 5

BlackRock 40/60 Target Allocation Fund

      Investment Objective

BlackRock 40/60 Target Allocation Fund’s (the “Fund”) investment objective is to seek a balance between long term capital appreciation and high current income, with an emphasis on income.

      Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge.

²  The Fund, which is a fund of funds, normally intends to obtain exposure to equity securities in an amount equal to 40% of its assets and exposure to fixed-income securities in an amount equal to 60% of its assets.

³ A customized weighted index comprised of the returns of the MSCI ACWI Index (28%), MSCI USA Index (12%) and Bloomberg Barclays U.S. Universal Index (60%).

⁴  A free float-adjusted market capitalization index designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

⁵  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

				Average Annual Total Returns6
				1 Year						5 Years						Since Inception7
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		4.00	%		6.31	%		N/A			9.89	%		N/A			5.73	%		N/A
Investor A		3.75			5.89			0.33	%		9.51			8.34	%		5.35			4.77	%
Investor C		3.51			5.18			4.22			8.68			8.68			4.56			4.56
Class K		4.09			6.42			N/A			9.93			N/A			5.76			N/A
Class R		3.76			5.80			N/A			9.38			N/A			5.21			N/A
MSCI ACWI Index (28%)/MSCI USA Index (12%)/Bloomberg Barclays U.S. Universal Index (60%)		4.67			8.77			N/A			7.08			N/A			5.10			N/A
MSCI ACWI Index		6.34			11.96			N/A			10.63			N/A			3.57			N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

6 BLACKROCK FUNDS II SEPTEMBER 30, 2016

BlackRock 60/40 Target Allocation Fund

      Investment Objective

BlackRock 60/40 Target Allocation Fund’s (the “Fund”) investment objective is to seek long term capital appreciation. Current income is also a consideration.

      Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge.

²  The Fund, which is a fund of funds, normally intends to obtain exposure to equity securities in an amount equal to 60% of its assets and exposure to fixed-income securities in an amount equal to 40% of its assets.

³  A customized weighted index comprised of the returns of the MSCI ACWI Index (42%), MSCI USA Index (18%) and Bloomberg Barclays U.S. Universal Index (40%).

⁴  A free float-adjusted market capitalization index designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

⁵  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

				Average Annual Total Returns6
				1 Year						5 Years						Since Inception7
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		4.59	%		7.10	%		N/A			11.35	%		N/A			5.73	%		N/A
Investor A		4.39			6.77			1.17	%		10.93			9.74	%		5.34			4.76	%
Investor C		3.94			5.89			4.92			10.12			10.12			4.58			4.58
Class K		4.59			7.11			N/A			11.35			N/A			5.74			N/A
Class R		4.31			6.63			N/A			10.75			N/A			5.16			N/A
MSCI ACWI Index (42%)/MSCI USA Index (18%)/Bloomberg Barclays U.S. Universal Index (40%)		5.24			10.08			N/A			8.78			N/A			4.99			N/A
MSCI ACWI Index		6.34			11.96			N/A			10.63			N/A			3.57			N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 7

BlackRock 80/20 Target Allocation Fund

      Investment Objective

BlackRock 80/20 Target Allocation Fund’s (the “Fund”) investment objective is to seek long term capital appreciation. Current income is not a consideration.

      Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge.

²  The Fund, which is a fund of funds, normally intends to obtain exposure to equity securities in an amount equal to 80% of its assets and exposure to fixed-income securities in an amount equal to 20% of its assets.

³  A customized weighted index comprised of the returns of the MSCI ACWI Index (56%), MSCI USA Index (24%) and Bloomberg Barclays U.S. Universal Index (20%).

⁴  A free float-adjusted market capitalization index designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.

⁵  Commencement of operations.

      Performance Summary for the Period Ended September 30, 2016

		Average Annual Total Returns6
		1 Year		5 Years		Since Inception7
	6-Month Total Returns	w/o sales charge	w/ sales charge	w/o sales charge	w/ sales charge	w/o sales charge	w/ sales charge
Institutional	5.61%	8.32%	N/A	12.76%	N/A	5.46%	N/A
Investor A	5.41	8.01	2.34%	12.35	11.15%	5.11	4.53%
Investor C	4.97	7.13	6.18	11.50	11.50	4.32	4.32
Class K	5.70	8.43	N/A	12.80	N/A	5.49	N/A
Class R	5.35	7.81	N/A	12.18	N/A	4.92	N/A
MSCI ACWI Index (56%)/MSCI USA Index (24%)/Bloomberg Barclays U.S. Universal Index (20%)	5.81	11.39	N/A	10.46	N/A	4.75	N/A
MSCI ACWI Index	6.34	11.96	N/A	10.63	N/A	3.57	N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A—Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

8 BLACKROCK FUNDS II SEPTEMBER 30, 2016

      BlackRock 20/80 Target Allocation Fund

Portfolio Composition	Percent of Affiliated Investment     Companies
Fixed Income Funds	71%
Equity Funds	21
Short-Term Securities	8

Ten Largest Holdings	Percent of Affiliated Investment     Companies
Master Total Return Portfolio	17%
iShares Core U.S. Aggregate Bond ETF	15
BlackRock Strategic Income Opportunities Portfolio, Class K	10
iShares Core S&P Total U.S. Stock Market ETF	8
BlackRock Liquidity Series, LLC, Money Market Series	7
iShares J.P. Morgan USD Emerging Markets Bond ETF	6
iShares TIPS Bond ETF	5
BlackRock Global Allocation Fund, Inc., Class K	5
iShares iBoxx $ Investment Grade Corporate Bond ETF	4
iShares MBS ETF	4

      BlackRock 40/60 Target Allocation Fund

Portfolio Composition	Percent of Affiliated Investment     Companies
Fixed Income Funds	51%
Equity Funds	46
Short-Term Securities	3

Ten Largest Holdings	Percent of Affiliated Investment     Companies
iShares Core S&P Total U.S. Stock Market ETF	17%
Master Total Return Portfolio	14
BlackRock Global Allocation Fund, Inc., Class K	9
BlackRock Strategic Income Opportunities Portfolio, Class K	9
BlackRock Total Emerging Markets Fund, Institutional Class	6
iShares J.P. Morgan USD Emerging Markets Bond ETF	6
iShares Short Maturity Bond ETF	5
iShares TIPS Bond ETF	5
iShares Edge MSCI Min Vol USA ETF	5
iShares Core MSCI EAFE ETF	4

The Funds’ allocation and holdings listed above are current as of the report date. However, the Funds are regularly monitored and their composition may vary throughout various periods.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 9

      BlackRock 60/40 Target Allocation Fund

Portfolio Composition	Percent of Affiliated Investment     Companies
Equity Funds	62%
Fixed Income Funds	28
Short-Term Securities	10

Ten Largest Holdings	Percent of Affiliated Investment     Companies
iShares Core S&P Total U.S. Stock Market ETF	18%
Master Total Return Portfolio	10
BlackRock Liquidity Series, LLC, Money Market Series	9
iShares Core MSCI EAFE ETF	7
BlackRock Total Emerging Markets Fund, Institutional Class	6
BlackRock Global Allocation Fund, Inc., Class K	6
iShares Edge MSCI Min Vol USA ETF	6
BlackRock Strategic Income Opportunities Portfolio, Class K	5
BlackRock Global Long/Short Equity Fund, Class K	5
BlackRock Basic Value Fund, Inc., Class K	5

      BlackRock 80/20 Target Allocation Fund

Portfolio Composition	Percent of Affiliated Investment     Companies
Equity Funds	83%
Fixed Income Funds	13
Short-Term Securities	4

Ten Largest Holdings	Percent of Affiliated Investment     Companies
iShares Core S&P Total U.S. Stock Market ETF	23%
iShares Core MSCI EAFE ETF	12
BlackRock Basic Value Fund, Inc., Class K	8
iShares Edge MSCI USA Momentum Factor ETF	7
iShares Edge MSCI Min Vol USA ETF	6
BlackRock Global Allocation Fund, Inc., Class K	6
iShares Core S&P Mid-Cap ETF	6
BlackRock Global Dividend Portfolio, Institutional Class	5
iShares Edge MSCI Min Vol Emerging Markets ETF	4
BlackRock Total Emerging Markets Fund, Institutional Class	4

The Funds’ allocation and holdings listed above are current as of the report date. However, the Funds are regularly monitored and their composition may vary throughout various periods.

10 BLACKROCK FUNDS II SEPTEMBER 30, 2016

About Fund Performance

• Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Prior to March 28, 2016 (commencement of operations) Class K Shares performance results are those of Institutional Shares, restated to reflect Class K Share fees.

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

• Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries.

• Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the

performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Manager”), each Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Funds’ expenses. Without such waiver and/or reimbursement, the Funds’ performance would have been lower. The Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 6 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction

or illiquidity of the instrument. The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense examples shown on the next page (which are based on a hypothetical investment of $1,000 invested on April 1, 2016 and held through September 30, 2016) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 11

Expense Examples
	Actual			Hypothetical1
	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period2	Beginning Account Value April 1, 2016	Ending Account Value September 30, 2016	Expenses Paid During the Period2	Annualized Expense Ratio
BlackRock 20/80 Target Allocation Fund
Institutional	$1,000.00	$1,031.90	$0.66	$1,000.00	$1,024.35	$0.66	0.13%
Investor A	$1,000.00	$1,029.50	$2.38	$1,000.00	$1,022.65	$2.38	0.47%
Investor C	$1,000.00	$1,026.10	$6.18	$1,000.00	$1,018.90	$6.16	1.22%
Class K	$1,000.00	$1,031.90	$0.36	$1,000.00	$1,024.65	$0.35	0.07%
Class R	$1,000.00	$1,028.70	$3.96	$1,000.00	$1,021.10	$3.94	0.78%
BlackRock 40/60 Target Allocation Fund
Institutional	$1,000.00	$1,040.00	$0.61	$1,000.00	$1,024.40	$0.61	0.12%
Investor A	$1,000.00	$1,037.50	$2.34	$1,000.00	$1,022.70	$2.33	0.46%
Investor C	$1,000.00	$1,035.10	$6.16	$1,000.00	$1,018.95	$6.11	1.21%
Class K	$1,000.00	$1,040.90	$0.36	$1,000.00	$1,024.65	$0.35	0.07%
Class R	$1,000.00	$1,037.60	$3.16	$1,000.00	$1,021.90	$3.13	0.62%
BlackRock 60/40 Target Allocation Fund
Institutional	$1,000.00	$1,045.90	$0.56	$1,000.00	$1,024.45	$0.56	0.11%
Investor A	$1,000.00	$1,043.90	$2.30	$1,000.00	$1,022.75	$2.28	0.45%
Investor C	$1,000.00	$1,039.40	$6.12	$1,000.00	$1,019.00	$6.06	1.20%
Class K	$1,000.00	$1,045.90	$0.36	$1,000.00	$1,024.65	$0.35	0.07%
Class R	$1,000.00	$1,043.10	$3.27	$1,000.00	$1,021.80	$3.23	0.64%
BlackRock 80/20 Target Allocation Fund
Institutional	$1,000.00	$1,056.10	$0.51	$1,000.00	$1,024.50	$0.51	0.10%
Investor A	$1,000.00	$1,054.10	$2.26	$1,000.00	$1,022.80	$2.23	0.44%
Investor C	$1,000.00	$1,049.70	$6.10	$1,000.00	$1,019.05	$6.01	1.19%
Class K	$1,000.00	$1,057.00	$0.36	$1,000.00	$1,024.65	$0.35	0.07%
Class R	$1,000.00	$1,053.50	$3.08	$1,000.00	$1,022.00	$3.03	0.60%

¹  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366.

²  Expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

Because the Funds invest in Master Portfolios that are managed by subsidiaries of BlackRock, Inc. (the “Master Portfolios”), the expense examples reflect the expenses of both the Funds and the Master Portfolios in which they invest. The fees and expenses of the underlying funds in which the Funds invest are not included in the Funds’ annualized expense ratios.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

12 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock 20/80 Target Allocation Fund
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares		Value
Equity Funds — 23.0%
BlackRock Global Allocation Fund, Inc., Class K		1,044,347	$	19,508,397
BlackRock Global Long/Short Equity Fund, Class K (b)		772,809		8,191,780
BlackRock Total Emerging Markets Fund, Institutional Class		788,903		7,794,362
iShares Core MSCI EAFE ETF		135,533		7,473,290
iShares Core S&P Total U.S. Stock Market ETF		633,937		31,398,900
iShares Edge MSCI Min Vol USA ETF		316,090		14,359,969
				88,726,698

Affiliated Investment Companies (a)	Shares/   Beneficial Interest		Value
Fixed Income Funds — 76.7%
BlackRock Global Long/Short Credit Fund, Class K		1,180,647	$	11,794,665
BlackRock Strategic Income Opportunities Portfolio, Class K		4,338,806		42,563,686
iShares 20+ Year Treasury Bond ETF (c)		55,766		7,668,383
iShares Core U.S. Aggregate Bond ETF		543,912		61,146,587
iShares Floating Rate Bond ETF		154,513		7,841,535
iShares iBoxx $ Investment Grade Corporate Bond ETF		125,193		15,421,274
iShares J.P. Morgan USD Emerging Markets Bond ETF (c)		197,149		23,107,834
iShares MBS ETF		139,192		15,323,647
iShares Short Maturity Bond ETF		304,934		15,304,637
iShares TIPS Bond ETF		193,356		22,524,040
Master Total Return Portfolio	$	72,498,043		72,498,043
				295,194,331
Short-Term Securities — 8.1%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (d)		1,478,046		1,478,046
BlackRock Liquidity Series, LLC, Money Market Series, 0.51% (d)(e)	$	29,604,881		29,604,881
				31,082,927
Total Affiliated Investment Companies (Cost — $407,645,848) — 107.8%				415,003,956
Liabilities in Excess of Other Assets — (7.8)%				(30,012,984	)
Net Assets — 100.0%			$	384,990,972

Portfolio Abbreviations
AUD	Australian Dollar	GBP	British Pound	NZD	New Zealand Dollar
CHF	Swiss Franc	HKD	Hong Kong Dollar	SEK	Swedish Krona
DKK	Danish Krone	ILS	Israel Shekel	SGD	Singapore Dollar
ETF	Exchange-Traded Fund	JPY	Japanese Yen	USD	US Dollar
EUR	Euro	NOK	Norwegian Krone

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 13

Schedule of Investments (continued) BlackRock 20/80 Target Allocation Fund

      Notes to Schedule of Investments

(a) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September  30, 2015		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September  30, 2016		Value at September 30, 2016		Income			Realized Gain (Loss)
BlackRock Global Allocation Fund, Inc., Class K		—		2,098,585			1,054,238			1,044,347		$  19,508,397		—			$   (127,797	)
BlackRock Global Allocation Fund, Inc., Institutional Class		906,972		1,024,254			1,931,226			—		—		$   155,882			(800,378	)
BlackRock Global Long/Short Credit Fund, Class K		—		2,463,177			1,282,530			1,180,647		11,794,665		—			191,620
BlackRock Global Long/Short Credit Fund, Institutional Class		1,123,650		809,211			1,932,861			—		—		726,175			(1,224,466	)
BlackRock Global Long/Short Equity Fund, Class K		—		1,231,487			458,678			772,809		8,191,780		—			(226,475	)
BlackRock Global Long/Short Equity Fund, Institutional Class		549,179		390,920			940,099			—		—		—			(389,614	)
BlackRock High Yield Bond Portfolio, Class K		464,755		383,163			847,918			—		—		211,370			(79,200	)
BlackRock Liquidity Funds, TempFund, Institutional Class		1,418,598		—			1,418,598	1		—		—		7,586			45
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		1,478,046	2		—			1,478,046		1,478,046		1,265			—
BlackRock Liquidity Series, LLC, Money Market Series		$  6,717,542		$22,887,339	2		—			$29,604,881		29,604,881		37,459	3		—
BlackRock Low Duration Bond Portfolio, Class K		308,768		86,881			395,649			—		—		19,502			(27,366	)
BlackRock Strategic Income Opportunities Portfolio, Class K		—		7,266,796			2,927,990			4,338,806		42,563,686		761,310			131,164
BlackRock Strategic Income Opportunities Portfolio, Institutional Class		3,348,752		2,253,379			5,602,131			—		—		500,832			(1,455,505	)
BlackRock Total Emerging Markets Fund, Institutional Class		—		788,903			—			788,903		7,794,362		—			—
iShares 20+ Year Treasury Bond ETF		55,738		78,978			78,950			55,766		7,668,383		254,082			844,820
iShares Core MSCI EAFE ETF		55,015		180,268			99,750			135,533		7,473,290		92,451			(586,349	)
iShares Core S&P Total U.S. Stock Market ETF		140,416		519,501	4		25,980			633,937		31,398,900		476,638			(69,416	)
iShares Core U.S. Aggregate Bond ETF		178,598		395,404			30,090			543,912		61,146,587		906,365			25,043
iShares Edge MSCI Min Vol USA ETF		—		316,090			—			316,090		14,359,969		76,619			—
iShares Floating Rate Bond ETF		233,282		258,401			337,170			154,513		7,841,535		112,602			(24,783	)
iShares iBoxx $ Investment Grade Corporate Bond ETF		27,053		207,535			109,395			125,193		15,421,274		173,218			(18,647	)
iShares J.P. Morgan USD Emerging Markets Bond ETF		—		197,149			—			197,149		23,107,834		177,263			—
iShares MBS ETF		—		139,192			—			139,192		15,323,647		43,847			—
iShares MSCI ACWI ETF		53,713		39,681			93,394			—		—		110,415			(191,229	)
iShares Short Maturity Bond ETF		—		304,934			—			304,934		15,304,637		28,611			—
iShares TIPS Bond ETF		74,153		125,973			6,770			193,356		22,524,040		234,122			(8,844	)
Master Total Return Portfolio		$20,382,280		$52,115,763	2,5		—			$72,498,043		72,498,043		1,186,158			(61,137	)
Total												$415,003,956		$6,293,772			$(4,098,514	)

¹  Represents net shares sold.

²  Represents net shares/beneficial interest purchased.

³  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

⁴  Includes 276,098 shares received from a two-for-one stock split.

⁵  Inclusive of income, expense, realized and unrealized gains and losses allocated from the Master Portfolio.

(b) Non-income producing security.

(c) Security, or a portion of security, is on loan.

(d) Current yield as of period end.

(e) Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

See Notes to Financial Statements.

14 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 20/80 Target Allocation Fund

      Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
AUD	665,771	USD	508,906	Royal Bank of Canada	10/05/16		$                  582
CHF	594,668	USD	615,239	Royal Bank of Canada	10/05/16		(2,936	)
DKK	863,220	USD	130,115	Bank of America N.A.	10/05/16		158
EUR	1,871,080	USD	2,102,785	BNP Paribas S.A.	10/05/16		(395	)
GBP	1,023,616	USD	1,340,318	Royal Bank of Scotland PLC	10/05/16		(13,425	)
HKD	1,792,313	USD	231,105	Morgan Stanley & Co. International PLC	10/05/16		(18	)
ILS	183,771	USD	48,917	HSBC Bank PLC	10/05/16		140
JPY	184,073,814	USD	1,827,632	Westpac Banking Corp.	10/05/16		(12,012	)
NOK	440,693	USD	54,359	Royal Bank of Scotland PLC	10/05/16		766
NZD	33,766	USD	24,683	Royal Bank of Scotland PLC	10/05/16		(102	)
SEK	1,946,059	USD	228,191	BNP Paribas S.A.	10/05/16		(1,287	)
SGD	132,391	USD	97,673	Morgan Stanley & Co. International PLC	10/05/16		(587	)
USD	34,657	AUD	46,221	Northern Trust Corp.	10/05/16		(714	)
USD	471,027	AUD	619,551	Westpac Banking Corp.	10/05/16		(3,090	)
USD	88,376	CHF	85,874	BNP Paribas S.A.	10/05/16		(45	)
USD	527,427	CHF	508,794	Morgan Stanley & Co. International PLC	10/05/16		3,545
USD	116,912	DKK	770,087	BNP Paribas S.A.	10/05/16		693
USD	14,072	DKK	93,133	Morgan Stanley & Co. International PLC	10/05/16		17
USD	142,877	EUR	128,158	BNP Paribas S.A.	10/05/16		(1,124	)
USD	1,866,350	EUR	1,651,115	Citibank N.A.	10/05/16		11,118
USD	103,305	EUR	91,808	Northern Trust Corp.	10/05/16		148
USD	49,584	GBP	37,560	Goldman Sachs International	10/05/16		896
USD	105,270	GBP	80,182	Morgan Stanley & Co. International PLC	10/05/16		1,331
USD	1,196,873	GBP	905,874	Morgan Stanley & Co. International PLC	10/05/16		22,609
USD	30,217	HKD	234,416	Royal Bank of Scotland PLC	10/05/16		(7	)
USD	200,970	HKD	1,557,897	Royal Bank of Scotland PLC	10/05/16		107
USD	5,537	ILS	20,875	Bank of America N.A.	10/05/16		(35	)
USD	43,373	ILS	162,896	Royal Bank of Scotland PLC	10/05/16		(112	)
USD	1,626,874	JPY	163,272,450	Bank of America N.A.	10/05/16		16,429
USD	86,376	JPY	8,915,935	BNP Paribas S.A.	10/05/16		(1,566	)
USD	116,139	JPY	11,885,429	Royal Bank of Scotland PLC	10/05/16		(1,093	)
USD	5,710	NOK	47,038	Bank of America N.A.	10/05/16		(174	)
USD	47,935	NOK	393,656	BNP Paribas S.A.	10/05/16		(1,306	)
USD	3,357	NZD	4,607	Royal Bank of Canada	10/05/16		3
USD	21,248	NZD	29,158	Westpac Banking Corp.	10/05/16		20
USD	37,799	SEK	320,070	BNP Paribas S.A.	10/05/16		480
USD	193,778	SEK	1,625,988	BNP Paribas S.A.	10/05/16		4,194
USD	11,008	SGD	15,012	Morgan Stanley & Co. International PLC	10/05/16		(1	)
USD	86,715	SGD	117,379	Morgan Stanley & Co. International PLC	10/05/16		638
USD	49,689	JPY	5,027,880	Morgan Stanley & Co. International PLC	11/02/16		37
USD	1,829,500	JPY	184,073,814	Westpac Banking Corp.	11/02/16		11,725
USD	28,463	AUD	37,205	BNP Paribas S.A.	11/03/16		11
USD	508,515	AUD	665,771	Royal Bank of Canada	11/03/16		(622	)
USD	616,125	CHF	594,668	Royal Bank of Canada	11/03/16		2,730
USD	130,282	DKK	863,220	Bank of America N.A.	11/03/16		(182	)

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 15

Schedule of Investments (continued) BlackRock 20/80 Target Allocation Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
USD	2,105,133	EUR	1,871,080	BNP Paribas S.A.	11/03/16		$     (137	)
USD	38,052	EUR	33,838	Goldman Sachs International	11/03/16		(22	)
USD	54,117	GBP	41,628	Royal Bank of Scotland PLC	11/03/16		123
USD	1,340,851	GBP	1,023,616	Royal Bank of Scotland PLC	11/03/16		13,161
USD	231,176	HKD	1,792,313	Morgan Stanley & Co. International PLC	11/03/16		20
USD	48,947	ILS	183,771	HSBC Bank PLC	11/03/16		(140	)
USD	54,361	NOK	440,693	Royal Bank of Scotland PLC	11/03/16		(770	)
USD	24,653	NZD	33,766	Royal Bank of Scotland PLC	11/03/16		102
USD	228,476	SEK	1,946,059	BNP Paribas S.A.	11/03/16		1,235
USD	97,682	SGD	132,391	Morgan Stanley & Co. International PLC	11/03/16		577
Total							$51,693

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets - Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts	Interest Rate Contracts	Other Contracts	Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—	—	$93,595	—	—		$93,595
Liabilities - Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—	—	$41,902	—	—		$41,902

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts	Interest Rate Contracts	Other Contracts	Total
Forward foreign currency exchange contracts	—	—	—	$(122,016)	—	—		$(122,016)
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts	—	—	—	$   51,693	—	—		$    51,693

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	3,654,947
Average amounts sold — in USD	$	1,802,481

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

See Notes to Financial Statements.

16 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 20/80 Target Allocation Fund

    Derivative Financial Instruments - Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:
	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts		$93,595		$41,902
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA		$93,595		$41,902

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.		$16,587		$    (391	)	—	—		$16,196
BNP Paribas S.A.		6,613		(5,860	)	—	—		753
Citibank N.A.		11,118		—		—	—		11,118
Goldman Sachs International		896		(22	)	—	—		874
HSBC Bank PLC		140		(140	)	—	—		—
Morgan Stanley & Co. International PLC		28,774		(606	)	—	—		28,168
Northern Trust Corp.		148		(148	)	—	—		—
Royal Bank of Canada		3,315		(3,315	)	—	—		—
Royal Bank of Scotland PLC		14,259		(14,259	)	—	—		—
Westpac Banking Corp.		11,745		(11,745	)	—	—		—
Total		$93,595		$(36,486	)	—	—		$57,109

Counterparty	Derivative Liabilities Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities3
Bank of America N.A.		$    391		$    (391	)	—	—		—
BNP Paribas S.A.		5,860		(5,860	)	—	—		—
Goldman Sachs International		22		(22	)	—	—		—
HSBC Bank PLC		140		(140	)	—	—		—
Morgan Stanley & Co. International PLC		606		(606	)	—	—		—
Northern Trust Corp.		714		(148	)	—	—		$   566
Royal Bank of Canada		3,558		(3,315	)	—	—		243
Royal Bank of Scotland PLC		15,509		(14,259	)	—	—		1,250
Westpac Banking Corp.		15,102		(11,745	)	—	—		3,357
Total		$41,902		$(36,486	)	—	—		$5,416

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

² Net amount represents the net amount receivable from the counterparty in the event of default.

³  Net amount represents the net amount payable due to the counterparty in the event of default.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 17

Schedule of Investments (concluded) BlackRock 20/80 Target Allocation Fund

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds1	$	88,726,698		—			—	$	88,726,698
Fixed Income Funds1		222,696,288	$	72,498,043			—		295,194,331
Short-Term Securities		1,478,046		29,604,881			—		31,082,927
Total	$	312,901,032	$	102,102,924			—	$	415,003,956
Derivative Financial Instruments2
Assets:
Foreign currency exchange contracts		—	$	93,595			—	$	93,595
Liabilities:
Foreign currency exchange contracts		—		(41,902	)		—		(41,902	)
Total		—	$	51,693			—	$	51,693
1     See above Schedule of Investments for values in each security type. 2     Derivative financial instruments are forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such liabilities are categorized within the disclosure hierarchy as follows:
	Level 1		Level 2			Level 3		Total
Liabilities:
Foreign bank overdraft		—	$	(215	)		—	$	(215	)
Cash collateral on securities loaned at value		—		(29,604,881	)		—		(29,604,881	)
Total		—	$	(29,605,096	)		—	$	(29,605,096	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

18 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock 40/60 Target Allocation Fund
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares		Value
Equity Funds — 46.9%
BlackRock Global Allocation Fund, Inc., Class K		2,024,497	$	37,817,597
BlackRock Global Long/Short Equity Fund, Class K (b)		1,528,605		16,203,211
BlackRock Total Emerging Markets Fund, Institutional Class		2,550,176		25,195,737
iShares Core MSCI EAFE ETF		304,345		16,781,583
iShares Core S&P Total U.S. Stock Market ETF		1,437,663		71,207,448
iShares Edge MSCI Min Vol USA ETF		431,178		19,588,416
iShares Edge MSCI USA Momentum Factor ETF		114,107		8,828,459
				195,622,451

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds — 52.7%
BlackRock Global Long/Short Credit Fund, Class K		1,280,941	$	12,796,600
BlackRock Strategic Income Opportunities Portfolio, Class K		3,839,383		37,664,349
iShares 20+ Year Treasury Bond ETF (c)		60,027		8,254,313
iShares Core U.S. Aggregate Bond ETF		75,731		8,513,679
iShares Floating Rate Bond ETF		168,416		8,547,112
iShares iBoxx $ Investment Grade Corporate Bond ETF		135,559		16,698,158
iShares J.P. Morgan USD Emerging Markets Bond ETF (c)		209,205		24,520,918
iShares Short Maturity Bond ETF		410,619		20,608,968
iShares TIPS Bond ETF		174,176		20,289,762
Master Total Return Portfolio	$	61,747,798		61,747,798
				219,641,657
Short-Term Securities — 2.7%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (d)		1,111,293		1,111,293
BlackRock Liquidity Series, LLC, Money Market Series, 0.51% (d)(e)	$	10,172,983		10,172,983
				11,284,276
Total Affiliated Investment Companies (Cost — $416,261,272) — 102.3%				426,548,384
Liabilities in Excess of Other Assets — (2.3)%				(9,497,238	)
Net Assets — 100.0%			$	417,051,146

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 19

Schedule of Investments (continued) BlackRock 40/60 Target Allocation Fund

      Notes to Schedule of Investments

(a) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2015		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2016		Value at September 30, 2016		Income			Realized Gain (Loss)
BlackRock Basic Value Fund, Inc., Class K		265,482		181,051			446,533			—		—		$   158,491			$(1,399,488	)
BlackRock Global Allocation Fund, Inc., Class K		—		3,597,279			1,572,782			2,024,497		$  37,817,597		—			(26,470	)
BlackRock Global Allocation Fund, Inc., Institutional Class		1,589,455		1,588,350			3,177,805			—		—		261,723			(1,518,473	)
BlackRock Global Long/Short Credit Fund, Class K		—		1,978,237			697,296			1,280,941		12,796,600		—			92,243
BlackRock Global Long/Short Credit Fund, Institutional Class		891,082		583,888			1,474,970			—		—		554,804			(988,740	)
BlackRock Global Long/Short Equity Fund, Class K		—		1,584,117			55,512			1,528,605		16,203,211		—			(23,354	)
BlackRock Global Long/Short Equity Fund, Institutional Class		634,380		361,734			996,114			—		—		—			(496,256	)
BlackRock High Yield Bond Portfolio, Class K		113,818		175,658			289,476			—		—		68,603			44,114
BlackRock Liquidity Funds, TempFund, Institutional Class		1,662,173		—			1,662,173	1		—		—		7,534			71
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		1,111,293	2		—			1,111,293		1,111,293		1,339			—
BlackRock Liquidity Series, LLC, Money Market Series		$  5,755,810		$  4,417,173	2		—			$10,172,983		10,172,983		105,594	3		—
BlackRock Strategic Income Opportunities Portfolio, Class K		—		7,464,824			3,625,441			3,839,383		37,664,349		754,630			210,047
BlackRock Strategic Income Opportunities Portfolio, Institutional Class		3,223,000		2,444,704			5,667,704			—		—		489,011			(1,377,329	)
BlackRock Total Emerging Markets Fund, Institutional Class		—		2,578,738			28,562			2,550,176		25,195,737		—			(5,855	)
iShares 20+ Year Treasury Bond ETF		64,721		85,133			89,827			60,027		8,254,313		279,994			1,017,888
iShares Core MSCI EAFE ETF		96,282		325,920			117,857			304,345		16,781,583		249,125			(976,546	)
iShares Core MSCI Emerging Markets ETF		102,396		91,912			194,308			—		—		72,973			(1,181,122	)
iShares Core S&P Total U.S. Stock Market ETF		355,179		1,204,880	4		122,396			1,437,663		71,207,448		1,150,381			(88,445	)
iShares Core U.S. Aggregate Bond ETF		27,935		94,059			46,263			75,731		8,513,679		155,220			59,540
iShares Edge MSCI Min Vol Emerging Markets ETF		—		192,547			192,547			—		—		115,913			798,960
iShares Edge MSCI Min Vol USA ETF		—		438,598			7,420			431,178		19,588,416		104,660			(5,656	)
iShares Edge MSCI USA Momentum Factor ETF		—		117,936			3,829			114,107		8,828,459		69,095			(1,630	)
iShares Floating Rate Bond ETF		150,623		175,527			157,734			168,416		8,547,112		74,583			(16,769	)
iShares iBoxx $ Investment Grade Corporate Bond ETF		—		191,002			55,443			135,559		16,698,158		133,924			27,229
iShares J.P. Morgan USD Emerging Markets Bond ETF		24,410		188,350			3,555			209,205		24,520,918		332,723			(1,073	)
iShares MSCI ACWI ETF		53,074		25,428			78,502			—		—		89,808			(300,328	)
iShares Short Maturity Bond ETF		—		415,279			4,660			410,619		20,608,968		38,585			(245	)
iShares TIPS Bond ETF		68,127		161,484			55,435			174,176		20,289,762		176,055			(109,513	)
Master Total Return Portfolio		$22,990,720		$  38,757,078	2,5		—			$61,747,798		61,747,798		1,197,281			42,039
Total												$426,548,384		$6,642,049			$(6,225,161	)

¹  Represents net shares sold.

²  Represents net shares/beneficial interest purchased.

³  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

⁴  Includes 633,705 shares received from a two-for-one stock split.

⁵  Inclusive of income, expense, realized and unrealized gains and losses allocated from the Master Portfolio.

(b) Non-income producing security.

(c) Security, or a portion of security, is on loan. (d) Current yield as of period end.

(e) Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

See Notes to Financial Statements.

20 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 40/60 Target Allocation Fund

      Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	1,496,827		USD	1,144,377	Royal Bank of Canada		10/05/16	$	1,085
CHF	1,336,968		USD	1,383,217	Royal Bank of Canada		10/05/16		(6,601	)
DKK	1,940,743		USD	292,535	Bank of America N.A.		10/05/16		354
EUR	4,206,675		USD	4,727,609	BNP Paribas S.A.		10/05/16		(888	)
GBP	2,301,355		USD	3,013,339	Royal Bank of Scotland PLC		10/05/16		(30,136	)
HKD	4,029,588		USD	519,584	Morgan Stanley & Co. International PLC		10/05/16		(40	)
ILS	413,164		USD	109,979	HSBC Bank PLC		10/05/16		316
JPY	413,845,931		USD	4,109,130	Morgan Stanley & Co. International PLC		10/05/16		(27,142	)
NOK	990,794		USD	122,214	Royal Bank of Scotland PLC		10/05/16		1,722
NZD	75,914		USD	55,500	Royal Bank of Scotland PLC		10/05/16		(235	)
SEK	4,375,248		USD	513,022	BNP Paribas S.A.		10/05/16		(2,883	)
SGD	297,651		USD	219,585	Morgan Stanley & Co. International PLC		10/05/16		(1,310	)
USD	64,518		AUD	86,051	Bank of America N.A.		10/05/16		(1,334	)
USD	1,072,574		AUD	1,410,776	Westpac Banking Corp.		10/05/16		(7,036	)
USD	74,584		CHF	72,478	Goldman Sachs International		10/05/16		(43	)
USD	1,207,167		CHF	1,164,519	Morgan Stanley & Co. International PLC		10/05/16		8,113
USD	101,818		CHF	99,970	Royal Bank of Canada		10/05/16		(1,117	)
USD	267,585		DKK	1,762,562	BNP Paribas S.A.		10/05/16		1,587
USD	26,923		DKK	178,181	Morgan Stanley & Co. International PLC		10/05/16		32
USD	228,079		EUR	202,714	BNP Paribas S.A.		10/05/16		305
USD	273,575		EUR	245,390	BNP Paribas S.A.		10/05/16		(2,152	)
USD	4,248,531		EUR	3,758,571	Citibank N.A.		10/05/16		25,310
USD	108,775		GBP	82,397	Goldman Sachs International		10/05/16		1,965
USD	2,722,512		GBP	2,060,580	Morgan Stanley & Co. International PLC		10/05/16		51,421
USD	207,935		GBP	158,378	Royal Bank of Canada		10/05/16		2,632
USD	62,217		HKD	482,672	Royal Bank of Canada		10/05/16		(15	)
USD	457,555		HKD	3,546,916	Royal Bank of Scotland PLC		10/05/16		243
USD	10,698		ILS	40,331	Bank of America N.A.		10/05/16		(68	)
USD	99,272		ILS	372,833	Royal Bank of Scotland PLC		10/05/16		(256	)
USD	3,703,391		JPY	371,670,816	Bank of America N.A.		10/05/16		37,398
USD	153,178		JPY	15,811,032	BNP Paribas S.A.		10/05/16		(2,775	)
USD	257,683		JPY	26,364,083	UBS AG		10/05/16		(2,360	)
USD	109,713		NOK	900,993	BNP Paribas S.A.		10/05/16		(2,989	)
USD	10,897		NOK	89,801	Royal Bank of Scotland PLC		10/05/16		(336	)
USD	6,687		NZD	9,176	Royal Bank of Scotland PLC		10/05/16		6
USD	48,631		NZD	66,737	Westpac Banking Corp.		10/05/16		47
USD	63,727		SEK	539,625	BNP Paribas S.A.		10/05/16		808
USD	457,113		SEK	3,835,622	BNP Paribas S.A.		10/05/16		9,893
USD	21,261		SGD	28,995	Morgan Stanley & Co. International PLC		10/05/16		(1	)
USD	198,471		SGD	268,656	Morgan Stanley & Co. International PLC		10/05/16		1,459
USD	106,632		JPY	10,789,804	Morgan Stanley & Co. International PLC		11/02/16		80
USD	4,113,319		JPY	413,845,931	Morgan Stanley & Co. International PLC		11/02/16		26,488
USD	62,530		AUD	81,735	BNP Paribas S.A.		11/03/16		24
USD	1,143,498		AUD	1,496,827	Royal Bank of Canada		11/03/16		(1,174	)
USD	1,385,211		CHF	1,336,968	Royal Bank of Canada		11/03/16		6,138

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 21

Schedule of Investments (continued) BlackRock 40/60 Target Allocation Fund

Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	292,910		DKK	1,940,743	Bank of America N.A.		11/03/16		$      (406	)
USD	4,732,889		EUR	4,206,675	BNP Paribas S.A.		11/03/16		(308	)
USD	79,726		EUR	70,898	Goldman Sachs International		11/03/16		(46	)
USD	117,903		GBP	90,694	Royal Bank of Scotland PLC		11/03/16		268
USD	3,014,536		GBP	2,301,355	Royal Bank of Scotland PLC		11/03/16		29,543
USD	519,743		HKD	4,029,588	Morgan Stanley & Co. International PLC		11/03/16		45
USD	13,985		HKD	108,429	Royal Bank of Scotland PLC		11/03/16		—
USD	110,046		ILS	413,164	HSBC Bank PLC		11/03/16		(316	)
USD	122,217		NOK	990,794	Royal Bank of Scotland PLC		11/03/16		(1,731	)
USD	55,433		NZD	75,914	Royal Bank of Scotland PLC		11/03/16		235
USD	513,664		SEK	4,375,248	BNP Paribas S.A.		11/03/16		2,767
USD	13,400		SEK	114,723	Citibank N.A.		11/03/16		4
USD	219,605		SGD	297,651	Morgan Stanley & Co. International PLC		11/03/16		1,287
Total									$117,877

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—	—		$211,575	—	—	$	211,575
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—	—		$93,698	—	—	$	93,698

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized      Gain (Loss)          from:	Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts	Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	—	$  (13,532)	—	—	$	(13,532	)
Forward foreign currency exchange contracts	—	—	—	(279,022)	—	—		(279,022	)
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts	—	—	—	$117,877	—	—	$	117,877

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Future contracts:
Average notional value of contracts — long	$	2,433,677
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	8,220,579
Average amounts sold — in USD	$	4,052,523

See Notes to Financial Statements.

22 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 40/60 Target Allocation Fund

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

    Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:
	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts		$211,575		$93,698
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA		$211,575		$93,698

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets2
Bank of America N.A.		$  37,752		$  (1,808	)		—		—		$  35,944
BNP Paribas S.A.		15,384		(11,995	)		—		—		3,389
Citibank N.A.		25,314		—			—		—		25,314
Goldman Sachs International		1,965		(89	)		—		—		1,876
HSBC Bank PLC		316		(316	)		—		—		—
Morgan Stanley & Co. International PLC		88,925		(28,493	)		—		—		60,432
Royal Bank of Canada		9,855		(8,907	)		—		—		948
Royal Bank of Scotland PLC		32,017		(32,017	)		—		—		—
Westpac Banking Corp.		47		(47	)		—		—		—
Total		$211,575		$(83,672	)		—		—		$127,903
Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities3
Bank of America N.A.		$    1,808		$  (1,808	)		—		—		—
BNP Paribas S.A.		11,995		(11,995	)		—		—		—
Goldman Sachs International		89		(89	)		—		—		—
HSBC Bank PLC		316		(316	)		—		—		—
Morgan Stanley & Co. International PLC		28,493		(28,493	)		—		—		—
Royal Bank of Canada		8,907		(8,907	)		—		—		—
Royal Bank of Scotland PLC		32,694		(32,017	)		—		—		$       677
UBS AG		2,360		—			—		—		2,360
Westpac Banking Corp.		7,036		(47	)		—		—		6,989
Total		$  93,698		$(83,672	)		—		—		$  10,026

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

³  Net amount represents the net amount payable due to the counterparty in the event of default.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 23

Schedule of Investments (concluded) BlackRock 40/60 Target Allocation Fund

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2				Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds1		$	195,622,451			—			—		$	195,622,451
Fixed Income Funds1			157,893,859		$	61,747,798			—			219,641,657
Short-Term Securities			1,111,293			10,172,983			—			11,284,276
Total		$	354,627,603		$	71,920,781			—		$	426,548,384
Derivative Financial Instruments2
Assets:
Foreign currency exchange contracts			—		$	211,575			—		$	211,575
Liabilities:
Foreign currency exchange contracts			—			(93,698	)		—			(93,698	)
Total			—		$	117,877			—		$	117,877
1     See above Schedule of Investments for values in each security type. 2     Derivative financial instruments are forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such liabilities are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2				Level 3		Total
Liabilities:
Foreign bank overdraft			—		$	(368	)		—		$	(368	)
Cash collateral on securities loaned at value			—			(10,172,983	)		—			(10,172,983	)
Total			—		$	(10,173,351	)		—		$	(10,173,351	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

24 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock 60/40 Target Allocation Fund
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares		Value
Equity Funds — 69.0%
BlackRock Basic Value Fund, Inc., Class K		995,176	$	24,590,802
BlackRock Global Allocation Fund, Inc., Class K		1,787,898		33,397,933
BlackRock Global Dividend Portfolio, Institutional Class		1,512,560		18,649,861
BlackRock Global Long/Short Equity Fund, Class K (b)		2,650,367		28,093,894
BlackRock Total Emerging Markets Fund, Institutional Class		3,394,777		33,540,397
iShares Core MSCI EAFE ETF (c)		713,046		39,317,356
iShares Core S&P Mid-Cap ETF		61,070		9,448,140
iShares Core S&P Total U.S. Stock Market ETF		1,915,069		94,853,367
iShares Edge MSCI Min Vol USA ETF		700,433		31,820,671
iShares Edge MSCI USA Momentum Factor ETF (c)		177,050		13,698,359
				327,410,780

Affiliated Investment Companies (a)	Shares/   Beneficial Interest		Value
Fixed Income Funds — 30.8%
BlackRock Strategic Income Opportunities Portfolio, Class K		2,932,069	$	28,763,602
iShares 20+ Year Treasury Bond ETF (c)		69,994		9,624,875
iShares Core U.S. Aggregate Bond ETF		82,948		9,325,014
iShares Floating Rate Bond ETF		195,472		9,920,204
iShares J.P. Morgan USD Emerging Markets Bond ETF (c)		159,190		18,658,660
iShares TIPS Bond ETF		158,928		18,513,523
Master Total Return Portfolio	$	51,619,092		51,619,092
				146,424,970
Short-Term Securities — 10.7%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (d)		2,053,091		2,053,091
BlackRock Liquidity Series, LLC, Money Market Series, 0.51% (d)(e)	$	48,772,673		48,772,673
				50,825,764
Total Affiliated Investment Companies (Cost — $512,595,440) — 110.5%				524,661,514
Liabilities in Excess of Other Assets — (10.5)%				(49,978,959	)
Net Assets — 100.0%			$	474,682,555

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 25

Schedule of Investments (continued) BlackRock 60/40 Target Allocation Fund

      Notes to Schedule of Investments

(a) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September  30, 2015		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September  30, 2016		Value at September 30, 2016		Income			Realized Gain (Loss)
BlackRock Basic Value Fund, Inc., Class K		481,180		1,349,896			835,900			995,176		$  24,590,802		$   308,662			$    248,447
BlackRock Global Allocation Fund, Inc., Class K		—		3,453,765			1,665,867			1,787,898		33,397,933		—			25,125
BlackRock Global Allocation Fund, Inc., Institutional Class		1,119,311		1,763,949			2,883,260			—		—		204,446			(953,152	)
BlackRock Global Dividend Portfolio, Institutional Class		—		1,516,002			3,442			1,512,560		18,649,861		95,529			(1,249	)
BlackRock Global Long/Short Credit Fund, Class K		—		705,519			705,519			—		—		—			109,240
BlackRock Global Long/Short Credit Fund, Institutional Class		238,706		247,171			485,877			—		—		163,119			(276,464	)
BlackRock Global Long/Short Equity Fund, Class K		—		3,235,307			584,940			2,650,367		28,093,894		—			(305,226	)
BlackRock Global Long/Short Equity Fund, Institutional Class		673,616		663,320			1,336,936			—		—		—			(604,477	)
BlackRock Liquidity Funds, TempFund, Institutional Class		1,374,481		—			1,374,481	1		—		—		9,903			63
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		2,053,091	2		—			2,053,091		2,053,091		1,484			—
BlackRock Liquidity Series, LLC, Money Market Series		$  3,316,362		$45,456,311	2		—			$48,772,673		48,772,673		127,291	3		—
BlackRock Strategic Income Opportunities Portfolio, Class K		—		4,878,652			1,946,583			2,932,069		28,763,602		465,958			46,743
BlackRock Strategic Income Opportunities Portfolio, Institutional Class		1,600,263		1,565,624			3,165,887			—		—		257,193			(708,180	)
BlackRock Total Emerging Markets Fund, Institutional Class		—		3,402,350			7,573			3,394,777		33,540,397		—			(3,029	)
iShares 20+ Year Treasury Bond ETF		—		70,594			600			69,994		9,624,875		93,486			(2,894	)
iShares Core MSCI EAFE ETF		274,121		646,055			207,130			713,046		39,317,356		763,724			(1,886,163	)
iShares Core MSCI Emerging Markets ETF		90,739		70,634			161,373			—		—		70,612			(1,050,672	)
iShares Core S&P Mid-Cap ETF		—		61,270			200			61,070		9,448,140		43,026			(1,004	)
iShares Core S&P Total U.S. Stock Market ETF		294,837		1,664,782	4		44,550			1,915,069		94,853,367		1,221,453			(229,438	)
iShares Core U.S. Aggregate Bond ETF		10,864		88,563			16,479			82,948		9,325,014		93,172			3,046
iShares Edge MSCI Min Vol Emerging Markets ETF		—		185,484			185,484			—		—		107,556			713,817
iShares Edge MSCI Min Vol USA ETF		—		702,033			1,600			700,433		31,820,671		169,313			(3,125	)
iShares Edge MSCI USA Momentum Factor ETF		—		178,250			1,200			177,050		13,698,359		83,041			(1,423	)
iShares Floating Rate Bond ETF		49,456		274,916			128,900			195,472		9,920,204		61,615			(3,744	)
iShares iBoxx $ Investment Grade Corporate Bond ETF		—		168,087			168,087			—		—		52,866			104,671
iShares J.P. Morgan USD Emerging Markets Bond ETF		21,598		146,892			9,300			159,190		18,658,660		273,904			(54,846	)
iShares MSCI ACWI ETF		19,579		13,310			32,889			—		—		20,664			(246,903	)
iShares TIPS Bond ETF		36,047		146,521			23,640			158,928		18,513,523		153,044			(48,669	)
Master Total Return Portfolio		$10,762,947		$40,856,145	2,5		—			$51,619,092		51,619,092		756,066			92,834
Total												$524,661,514		$5,597,127			$(5,036,672	)

¹  Represents net shares sold.

²  Represents net shares/beneficial interest purchased.

³  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

⁴  Includes 765,359 shares received from a two-for-one stock split.

⁵  Inclusive of income, expense, realized and unrealized gains and losses allocated from the Master Portfolio.

(b) Non-income producing security.

(c) Security, or a portion of security, is on loan. (d) Current yield as of period end.

(e) Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

See Notes to Financial Statements.

26 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 60/40 Target Allocation Fund

      Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
AUD	2,192,297	USD	1,676,199	Commonwealth Bank of Australia	10/05/16		$   1,477
CHF	1,958,212	USD	2,025,951	Royal Bank of Canada	10/05/16		(9,668	)
DKK	2,840,675	USD	428,186	Bank of America N.A.	10/05/16		517
EUR	6,167,140	USD	6,931,057	Westpac Banking Corp.	10/05/16		(1,512	)
GBP	3,388,173	USD	4,436,459	Royal Bank of Scotland PLC	10/05/16		(44,435	)
HKD	5,951,044	USD	767,340	Morgan Stanley & Co. International PLC	10/05/16		(59	)
ILS	587,245	USD	156,317	HSBC Bank PLC	10/05/16		449
JPY	598,399,656	USD	5,941,450	Westpac Banking Corp.	10/05/16		(39,107	)
NOK	1,408,251	USD	173,722	Royal Bank of Scotland PLC	10/05/16		2,432
NZD	107,899	USD	78,877	Royal Bank of Scotland PLC	10/05/16		(327	)
SEK	6,430,475	USD	754,008	BNP Paribas S.A.	10/05/16		(4,238	)
SGD	423,062	USD	312,105	Morgan Stanley & Co. International PLC	10/05/16		(1,863	)
USD	41,515	AUD	55,371	Bank of America N.A.	10/05/16		(859	)
USD	122,776	AUD	163,735	Goldman Sachs International	10/05/16		(2,523	)
USD	48,470	AUD	64,801	Morgan Stanley & Co. International PLC	10/05/16		(1,120	)
USD	1,450,895	AUD	1,908,390	Westpac Banking Corp.	10/05/16		(9,518	)
USD	59,216	CHF	57,930	Goldman Sachs International	10/05/16		(433	)
USD	119,989	CHF	116,593	Goldman Sachs International	10/05/16		(61	)
USD	1,637,708	CHF	1,579,850	Morgan Stanley & Co. International PLC	10/05/16		11,007
USD	207,602	CHF	203,838	Royal Bank of Scotland PLC	10/05/16		(2,281	)
USD	375,656	DKK	2,474,412	BNP Paribas S.A.	10/05/16		2,228
USD	42,917	DKK	284,037	Morgan Stanley & Co. International PLC	10/05/16		51
USD	12,326	DKK	82,226	Royal Bank of Scotland PLC	10/05/16		(83	)
USD	372,572	EUR	331,114	Bank of America N.A.	10/05/16		524
USD	605,853	EUR	543,436	BNP Paribas S.A.	10/05/16		(4,765	)
USD	5,769,969	EUR	5,104,551	Citibank N.A.	10/05/16		34,374
USD	209,976	EUR	188,039	Royal Bank of Canada	10/05/16		(1,308	)
USD	449,293	GBP	342,218	Morgan Stanley & Co. International PLC	10/05/16		5,683
USD	3,683,399	GBP	2,787,844	Morgan Stanley & Co. International PLC	10/05/16		69,572
USD	153,323	GBP	117,173	Northern Trust Corp.	10/05/16		1,434
USD	186,065	GBP	140,939	Royal Bank of Canada	10/05/16		3,369
USD	28,827	HKD	223,643	Royal Bank of Scotland PLC	10/05/16		(8	)
USD	119,895	HKD	930,123	Royal Bank of Scotland PLC	10/05/16		(28	)
USD	618,853	HKD	4,797,278	Royal Bank of Scotland PLC	10/05/16		329
USD	23,978	ILS	90,395	Bank of America N.A.	10/05/16		(153	)
USD	132,294	ILS	496,851	Royal Bank of Scotland PLC	10/05/16		(341	)
USD	99,702	JPY	10,185,344	Bank of America N.A.	10/05/16		(762	)
USD	5,029,609	JPY	504,769,590	Bank of America N.A.	10/05/16		50,791
USD	405,079	JPY	41,812,159	BNP Paribas S.A.	10/05/16		(7,337	)
USD	406,885	JPY	41,632,563	Northern Trust Corp.	10/05/16		(3,760	)
USD	146,208	NOK	1,200,695	BNP Paribas S.A.	10/05/16		(3,983	)
USD	25,196	NOK	207,556	Royal Bank of Scotland PLC	10/05/16		(766	)
USD	13,815	NZD	18,962	Citibank N.A.	10/05/16		11
USD	64,808	NZD	88,937	Westpac Banking Corp.	10/05/16		62
USD	618,547	SEK	5,190,215	BNP Paribas S.A.	10/05/16		13,387

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 27

Schedule of Investments (continued) BlackRock 60/40 Target Allocation Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	24,720	SEK	211,776	Morgan Stanley & Co. International PLC		10/05/16		$         28
USD	121,472	SEK	1,028,484	Royal Bank of Canada		10/05/16		1,554
USD	47,694	SGD	65,041	Bank of America N.A.		10/05/16		(2	)
USD	264,490	SGD	358,020	Morgan Stanley & Co. International PLC		10/05/16		1,944
USD	231,218	JPY	23,396,357	Morgan Stanley & Co. International PLC		11/02/16		173
USD	5,947,520	JPY	598,399,656	Westpac Banking Corp.		11/02/16		38,175
USD	91,191	AUD	119,199	BNP Paribas S.A.		11/03/16		35
USD	1,674,917	AUD	2,192,297	Commonwealth Bank of Australia		11/03/16		(1,604	)
USD	2,028,871	CHF	1,958,212	Royal Bank of Canada		11/03/16		8,990
USD	428,734	DKK	2,840,675	Bank of America N.A.		11/03/16		(594	)
USD	108,550	EUR	96,530	Goldman Sachs International		11/03/16		(62	)
USD	6,939,833	EUR	6,167,140	Westpac Banking Corp.		11/03/16		793
USD	148,871	GBP	114,516	Royal Bank of Scotland PLC		11/03/16		338
USD	4,438,221	GBP	3,388,173	Royal Bank of Scotland PLC		11/03/16		43,562
USD	767,576	HKD	5,951,044	Morgan Stanley & Co. International PLC		11/03/16		67
USD	13,965	HKD	108,274	Royal Bank of Scotland PLC		11/03/16		—
USD	156,413	ILS	587,245	HSBC Bank PLC		11/03/16		(448	)
USD	13,042	NOK	104,131	Citibank N.A.		11/03/16		15
USD	173,731	NOK	1,408,251	Royal Bank of Scotland PLC		11/03/16		(2,441	)
USD	78,781	NZD	107,899	Royal Bank of Scotland PLC		11/03/16		327
USD	754,952	SEK	6,430,475	BNP Paribas S.A.		11/03/16		4,066
USD	16,844	SEK	144,210	Citibank N.A.		11/03/16		5
USD	18,968	SGD	25,857	Morgan Stanley & Co. International PLC		11/03/16		3
USD	312,132	SGD	423,061	Morgan Stanley & Co. International PLC		11/03/16		1,830
Total								$153,153

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—	—		$299,602	—	—		$299,602
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—	—		$146,449	—	—		$146,449

See Notes to Financial Statements.

28 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 60/40 Target Allocation Fund

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts			Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	—		$  20,011		—	—		$  20,011
Forward foreign currency exchange contracts	—	—	—		(374,183	)	—	—		(374,183	)
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts	—	—	—		$153,153		—	—		$153,153

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Future contracts:
Average notional value of contracts — long	$  7,256,178
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$12,021,481
Average amounts sold — in USD	$  5,920,418

For more information about the Fund investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

      Derivative Financial Instruments - Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts		$299,602		$146,449
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA		$299,602		$146,449

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A		$  51,832		$    (2,370	)	—	—		$  49,462
BNP Paribas S.A		19,716		(19,716	)	—	—		—
Citibank N.A		34,405		—		—	—		34,405
Commonwealth Bank of Australia		1,477		(1,477	)	—	—		—
HSBC Bank PLC		449		(448	)	—	—		1
Morgan Stanley & Co. International PLC		90,358		(3,042	)	—	—		87,316
Northern Trust Corp		1,434		(1,434	)	—	—		—
Royal Bank of Canada		13,913		(10,976	)	—	—		2,937
Royal Bank of Scotland PLC		46,988		(46,988	)	—	—		—
Westpac Banking Corp		39,030		(39,030	)	—	—		—
Total		$299,602		$(125,481	)	—	—		$174,121

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 29

Schedule of Investments (concluded) BlackRock 60/40 Target Allocation Fund

Counterparty	Derivative Liabilities Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged	Cash Collateral Pledged	Net Amount of Derivative Liabilities2
Bank of America N.A.		$    2,370		$    (2,370	)	—	—		—
BNP Paribas S.A.		20,323		(19,716	)	—	—		$     607
Commonwealth Bank of Australia		1,604		(1,477	)	—	—		127
Goldman Sachs International		3,079		—		—	—		3,079
HSBC Bank PLC		448		(448	)	—	—		—
Morgan Stanley & Co. International PLC		3,042		(3,042	)	—	—		—
Northern Trust Corp		3,760		(1,434	)	—	—		2,326
Royal Bank of Canada		10,976		(10,976	)	—	—		—
Royal Bank of Scotland PLC.		50,710		(46,988	)	—	—		3,722
Westpac Banking Corp.		50,137		(39,030	)	—	—		11,107
Total		$146,449		$(125,481	)	—	—		$20,968

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount payable due to the counterparty in the event of default.

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds1	$	327,410,780		—			—	$	327,410,780
Fixed Income Funds1		94,805,878	$	51,619,092			—		146,424,970
Short-Term Securities		2,053,091		48,772,673			—		50,825,764
Total	$	424,269,749	$	100,391,765			—	$	524,661,514
Derivative Financial Instruments2
Assets:
Foreign currency exchange contracts		—	$	299,602			—	$	299,602
Liabilities:
Foreign currency exchange contracts		—		(146,449	)		—		(146,449	)
Total		—	$	153,153			—	$	153,153
1     See above Schedule of Investments for values in each security type. 2     Derivative financial instruments are forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such liabilities are categorized within the disclosure hierarchy as follows:
	Level 1		Level 2			Level 3		Total
Liabilities:
Foreign bank overdraft		—	$	(676	)		—	$	(676	)
Cash collateral on securities loaned at value		—		(48,772,673	)		—		(48,772,673	)
Total		—	$	(48,773,349	)		—	$	(48,773,349	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

30 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments September 30, 2016	BlackRock 80/20 Target Allocation Fund
	(Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares		Value
Equity Funds — 85.8%
BlackRock Basic Value Fund, Inc., Class K		669,030	$	16,531,727
BlackRock Global Allocation Fund, Inc., Class K		652,083		12,180,914
BlackRock Global Dividend Portfolio, Institutional Class		806,997		9,950,271
BlackRock Global Long/Short Equity Fund, Class K (b)		372,836		3,952,057
BlackRock Total Emerging Markets Fund, Institutional Class		825,836		8,159,259
iShares Core MSCI EAFE ETF		452,292		24,939,381
iShares Core S&P Mid-Cap ETF		77,930		12,056,550
iShares Core S&P Total U.S. Stock Market ETF		973,353		48,210,174
iShares Edge MSCI Min Vol Emerging Markets ETF		154,769		8,366,812
iShares Edge MSCI Min Vol USA ETF		298,346		13,553,859
iShares Edge MSCI USA Momentum Factor ETF		204,605		15,830,289
				173,731,293

Affiliated Investment Companies (a)	Shares/   Beneficial Interest		Value
Fixed Income Funds — 13.9%
iShares Core U.S. Aggregate Bond ETF		36,537	$	4,107,490
iShares J.P. Morgan USD Emerging Markets Bond ETF (c)		68,537		8,033,222
iShares TIPS Bond ETF		68,830		8,018,007
Master Total Return Portfolio	$	8,019,681		8,019,681
				28,178,400
Short-Term Securities — 4.1%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.20% (d)		1,199,838		1,199,838
BlackRock Liquidity Series, LLC, Money Market Series, 0.51% (d)(e)	$	6,980,234		6,980,234
				8,180,072
Total Affiliated Investment Companies (Cost — $204,598,403) — 103.8%				210,089,765
Liabilities in Excess of Other Assets — (3.8)%				(7,636,681	)
Net Assets — 100.0%			$	202,453,084

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 31

Schedule of Investments (continued) BlackRock 80/20 Target Allocation Fund

      Notes to Schedule of Investments

(a) During the year ended September 30, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2015		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2016		Value at September 30, 2016		Income			Realized Gain (Loss)
BlackRock Basic Value Fund, Inc., Class K		229,584		584,768			145,322			669,030	$	16,531,727	$	129,673		$	353,602
BlackRock Global Allocation Fund, Inc., Class K		—		1,301,456			649,373			652,083		12,180,914		—			7,683
BlackRock Global Allocation Fund, Inc., Institutional Class		473,301		585,361			1,058,662			—		—		75,680			(380,001	)
BlackRock Global Dividend Portfolio, Institutional Class		—		813,390			6,393			806,997		9,950,271		46,316			(2,384	)
BlackRock Global Long/Short Credit Fund, Class K		—		275,225			275,225			—		—		—			43,519
BlackRock Global Long/Short Credit Fund, Institutional Class		116,108		87,971			204,079			—		—		68,688			(116,191	)
BlackRock Global Long/Short Equity Fund, Class K		—		608,844			236,008			372,836		3,952,057		—			(123,656	)
BlackRock Global Long/Short Equity Fund, Institutional Class		213,799		158,095			371,894			—		—		—			(178,511	)
BlackRock Global SmallCap Fund, Inc., Institutional Class		275,969		432,375			708,344			—		—		—			153,901
BlackRock Liquidity Funds, TempFund, Institutional Class		578,878		—			578,878	1		—		—		4,460			23
BlackRock Liquidity Funds, T-Fund, Institutional Class		—		1,199,838	2		—			1,199,838		1,199,838		1,087			—
BlackRock Liquidity Series, LLC, Money Market Series		$1,274,821	$	5,705,413	2		—			$6,980,234		6,980,234		42,070	3		—
BlackRock Total Emerging Markets Fund, Institutional Class		—		832,276			6,440			825,836		8,159,259		—			(2,546	)
iShares 20+ Year Treasury Bond ETF		—		22,158			22,158			—		—		25,383			218,957
iShares Core MSCI EAFE ETF		218,916		419,141			185,765			452,292		24,939,381		531,175			(1,532,859	)
iShares Core MSCI Emerging Markets ETF		63,172		46,288			109,460			—		—		43,993			(652,169	)
iShares Core S&P Mid-Cap ETF		—		78,530			600			77,930		12,056,550		54,850			(3,334	)
iShares Core S&P Total U.S. Stock Market ETF		154,657		865,126	4		46,430			973,353		48,210,174		548,273			(361,626	)
iShares Core U.S. Aggregate Bond ETF		5,945		39,572			8,980			36,537		4,107,490		39,555			625
iShares Edge MSCI Min Vol Emerging Markets ETF		—		169,439			14,670			154,769		8,366,812		72,616			7,438
iShares Edge MSCI Min Vol USA ETF		—		300,646			2,300			298,346		13,553,859		72,087			(4,635	)
iShares Edge MSCI USA Momentum Factor ETF		—		207,105			2,500			204,605		15,830,289		84,118			(5,023	)
iShares iBoxx $ Investment Grade Corporate Bond ETF		—		21,676			21,676			—		—		6,795			13,326
iShares J.P. Morgan USD Emerging Markets Bond ETF		8,396		60,966			825			68,537		8,033,222		107,344			(1,819	)
iShares MSCI ACWI ETF		9,928		1,869			11,797			—		—		7,600			(93,554	)
iShares TIPS Bond ETF		17,256		62,509			10,935			68,830		8,018,007		62,125			(20,705	)
Master Total Return Portfolio		$2,573,555	$	5,446,126	2,5		—			$8,019,681		8,019,681		139,065			29,883
Total												$210,089,765	$	2,162,953		$	(2,650,056	)

¹  Represents net shares sold.

²  Represents net shares/beneficial interest purchased.

³  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

⁴  Includes 354,879 shares received from a two-for-one stock split.

⁵  Inclusive of income, expense, realized and unrealized gains and losses allocated from the Master Portfolio.

(b) Non-income producing security.

(c) Security, or a portion of security, is on loan.

(d) Current yield as of period end.

(e) Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

See Notes to Financial Statements.

32 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 80/20 Target Allocation Fund

      Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts
Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	1,116,692	USD	853,806	Royal Bank of Canada		10/05/16		$      753
CHF	997,456	USD	1,031,960	Royal Bank of Canada		10/05/16		(4,925	)
DKK	1,446,957	USD	218,105	Bank of America N.A.		10/05/16		264
EUR	3,141,361	USD	3,530,371	BNP Paribas S.A.		10/05/16		(663	)
GBP	1,725,836	USD	2,259,803	Royal Bank of Scotland PLC		10/05/16		(22,634	)
HKD	3,031,288	USD	390,861	Morgan Stanley & Co. International PLC		10/05/16		(30	)
ILS	291,966	USD	77,718	HSBC Bank PLC		10/05/16		223
JPY	304,807,291	USD	3,026,471	Morgan Stanley & Co. International PLC		10/05/16		(19,990	)
NOK	700,153	USD	86,371	Royal Bank of Scotland PLC		10/05/16		1,209
NZD	53,645	USD	39,216	Royal Bank of Scotland PLC		10/05/16		(162	)
SEK	3,275,496	USD	384,078	BNP Paribas S.A.		10/05/16		(2,167	)
SGD	221,063	USD	163,084	Morgan Stanley & Co. International PLC		10/05/16		(973	)
USD	44,535	AUD	59,399	Bank of America N.A.		10/05/16		(921	)
USD	77,083	AUD	102,796	Goldman Sachs International		10/05/16		(1,583	)
USD	44,091	AUD	58,946	Morgan Stanley & Co. International PLC		10/05/16		(1,018	)
USD	680,862	AUD	895,551	Westpac Banking Corp.		10/05/16		(4,467	)
USD	87,888	CHF	85,401	Goldman Sachs International		10/05/16		(46	)
USD	769,113	CHF	741,941	Morgan Stanley & Co. International PLC		10/05/16		5,169
USD	53,846	CHF	52,676	Nomura International PLC		10/05/16		(393	)
USD	119,606	CHF	117,438	Royal Bank of Scotland PLC		10/05/16		(1,314	)
USD	176,368	DKK	1,161,720	BNP Paribas S.A.		10/05/16		1,046
USD	11,320	DKK	75,514	Morgan Stanley & Co. International PLC		10/05/16		(76	)
USD	31,688	DKK	209,723	Morgan Stanley & Co. International PLC		10/05/16		38
USD	131,055	EUR	117,555	BNP Paribas S.A.		10/05/16		(1,032	)
USD	2,943,043	EUR	2,603,638	Citibank N.A.		10/05/16		17,533
USD	282,988	EUR	251,490	Northern Trust Corp.		10/05/16		408
USD	188,358	EUR	168,678	Royal Bank of Scotland PLC		10/05/16		(1,173	)
USD	59,243	GBP	45,124	Morgan Stanley & Co. International PLC		10/05/16		749
USD	1,932,882	GBP	1,462,935	Morgan Stanley & Co. International PLC		10/05/16		36,510
USD	130,281	GBP	99,564	Northern Trust Corp.		10/05/16		1,218
USD	156,058	GBP	118,213	Royal Bank of Scotland PLC		10/05/16		2,821
USD	23,684	HKD	183,745	Royal Bank of Scotland PLC		10/05/16		(6	)
USD	76,831	HKD	596,038	Royal Bank of Scotland PLC		10/05/16		(18	)
USD	290,446	HKD	2,251,504	Royal Bank of Scotland PLC		10/05/16		154
USD	16,276	ILS	61,359	Bank of America N.A.		10/05/16		(104	)
USD	61,403	ILS	230,607	Royal Bank of Scotland PLC		10/05/16		(158	)
USD	120,985	JPY	12,359,571	Bank of America N.A.		10/05/16		(924	)
USD	2,488,950	JPY	249,790,013	Bank of America N.A.		10/05/16		25,134
USD	131,294	JPY	13,552,368	BNP Paribas S.A.		10/05/16		(2,381	)
USD	284,478	JPY	29,105,339	Royal Bank of Scotland PLC		10/05/16		(2,604	)
USD	67,861	NOK	557,289	BNP Paribas S.A.		10/05/16		(1,849	)
USD	17,343	NOK	142,864	Royal Bank of Scotland PLC		10/05/16		(527	)
USD	9,013	NZD	12,366	Royal Bank of Scotland PLC		10/05/16		10
USD	30,080	NZD	41,279	Westpac Banking Corp.		10/05/16		29
USD	290,355	SEK	2,436,358	BNP Paribas S.A.		10/05/16		6,284

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 33

Schedule of Investments (continued) BlackRock 80/20 Target Allocation Fund

Currency Purchased		Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	77,415	SEK	655,448	Royal Bank of Canada		10/05/16		$      992
USD	21,443	SEK	183,690	Royal Bank of Scotland PLC		10/05/16		25
USD	7,841	SGD	10,726	Bank of America N.A.		10/05/16		(25	)
USD	32,388	SGD	44,166	Morgan Stanley & Co. International PLC		10/05/16		(1	)
USD	122,760	SGD	166,171	Morgan Stanley & Co. International PLC		10/05/16		902
USD	105,959	JPY	10,721,707	Morgan Stanley & Co. International PLC		11/02/16		79
USD	3,029,557	JPY	304,807,291	Morgan Stanley & Co. International PLC		11/02/16		19,509
USD	43,050	AUD	56,272	BNP Paribas S.A.		11/03/16		17
USD	853,150	AUD	1,116,692	Royal Bank of Canada		11/03/16		(820	)
USD	1,033,448	CHF	997,456	Royal Bank of Canada		11/03/16		4,579
USD	218,385	DKK	1,446,957	Bank of America N.A.		11/03/16		(302	)
USD	3,534,314	EUR	3,141,361	BNP Paribas S.A.		11/03/16		(230	)
USD	41,747	EUR	37,124	Goldman Sachs International		11/03/16		(24	)
USD	67,074	GBP	51,595	Royal Bank of Scotland PLC		11/03/16		152
USD	2,260,700	GBP	1,725,836	Royal Bank of Scotland PLC		11/03/16		22,189
USD	390,981	HKD	3,031,288	Morgan Stanley & Co. International PLC		11/03/16		34
USD	5,610	HKD	43,499	Royal Bank of Scotland PLC		11/03/16		—
USD	77,765	ILS	291,966	HSBC Bank PLC		11/03/16		(223	)
USD	8,429	NOK	67,302	Citibank N.A.		11/03/16		10
USD	86,376	NOK	700,153	Royal Bank of Scotland PLC		11/03/16		(1,214	)
USD	39,168	NZD	53,645	Royal Bank of Scotland PLC		11/03/16		162
USD	384,559	SEK	3,275,496	BNP Paribas S.A.		11/03/16		2,079
USD	7,103	SEK	60,813	Citibank N.A.		11/03/16		2
USD	163,099	SGD	221,063	Morgan Stanley & Co. International PLC		11/03/16		956
Total								$76,262

      Derivative Financial Instruments Categorized by Risk Exposure

As of period end, fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts		Interest Rate Contracts	Other Contracts	Total
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	—	—	—		$151,239	—	—	$	151,239
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	—	—	—		$  74,977	—	—	$	74,977

See Notes to Financial Statements.

34 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Schedule of Investments (continued) BlackRock 80/20 Target Allocation Fund

For the year ended September 30, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts	Credit Contracts	Equity Contracts	Foreign Currency Exchange Contracts			Interest Rate Contracts	Other Contracts	Total
Futures contracts	—	—	—		$     9,500		—	—	$	9,500
Forward foreign currency exchange contracts	—	—	—		(175,066	)	—	—		(175,066	)
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts	—	—	—		$   76,262		—	—	$	76,262

      Average Quarterly Balances of Outstanding Derivative Financial Instruments

Future contracts:
Average notional value of contracts — long	$	5,107,048
Forward foreign currency exchange contracts:
Average amounts purchased — in USD	$	6,110,407
Average amounts sold — in USD	$	3,015,461

For more information about the Fund investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

      Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	151,239	$	74,977
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA	$	151,239	$	74,977

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Received	Cash Collateral Received	Net Amount of Derivative Assets2
Bank of America N.A.		$  25,398		$  (2,276	)	—	—		$23,122
BNP Paribas S.A.		9,426		(8,322	)	—	—		1,104
Citibank N.A.		17,545		—		—	—		17,545
HSBC Bank PLC		223		(223	)	—	—		—
Morgan Stanley & Co. International PLC		63,946		(22,088	)	—	—		41,858
Northern Trust Corp		1,626		—		—	—		1,626
Royal Bank of Canada		6,324		(5,745	)	—	—		579
Royal Bank of Scotland PLC.		26,722		(26,722	)	—	—		—
Westpac Banking Corp.		29		(29	)	—	—		—
Total		$151,239		$(65,405	)	—	—		$85,834

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount receivable from the counterparty in the event of default.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 35

Schedule of Investments (concluded) BlackRock 80/20 Target Allocation Fund

Counterparty	Derivative Liabilities Subject to an MNA  by Counterparty		Derivatives Available for Offset1			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities2
Bank of America N.A.		$  2,276		$  (2,276	)		—		—		—
BNP Paribas S.A.		8,322		(8,322	)		—		—		—
Goldman Sachs International		1,653		—			—		—		$1,653
HSBC Bank PLC		223		(223	)		—		—		—
Morgan Stanley & Co. International PLC		22,088		(22,088	)		—		—		—
Nomura International PLC.		393		—			—		—		393
Royal Bank of Canada		5,745		(5,745	)		—		—		—
Royal Bank of Scotland PLC.		29,810		(26,722	)		—		—		3,088
Westpac Banking Corp.		4,467		(29	)		—		—		4,438
Total		$74,977		$(65,405	)		—		—		$9,572

¹  The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²  Net amount represents the net amount payable due to the counterparty in the event of default.

      Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1			Level 2				Level  3		Total
Assets:
Investments:
Affiliated Investment Companies:
Equity Funds1		$	173,731,293			—			—		$	173,731,293
Fixed Income Funds1			20,158,719		$	8,019,681			—			28,178,400
Short-Term Securities			1,199,838			6,980,234			—			8,180,072
Total		$	195,089,850		$	14,999,915			—		$	210,089,765
Derivative Financial Instruments2
Assets:
Foreign currency exchange contracts			—		$	151,239			—		$	151,239
Liabilities:
Foreign currency exchange contracts			—			(74,977	)		—			(74,977	)
Total			—		$	76,262			—		$	76,262
1     See above Schedule of Investments for values in each security type. 2     Derivative financial instruments are forward foreign currency exchange contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such liabilities are categorized within the disclosure hierarchy as follows:
	Level 1			Level 2				Level 3		Total
Liabilities:
Foreign bank overdraft			—		$	(236	)		—		$	(236	)
Cash collateral on securities loaned at value			—			(6,980,234	)		—			(6,980,234	)
Total			—		$	(6,980,470	)		—		$	(6,980,470	)

During the year ended September 30, 2016, there were no transfers between levels.

See Notes to Financial Statements.

36 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Assets and Liabilities

September 30, 2016	BlackRock 20/80 Target Allocation Fund			BlackRock 40/60 Target Allocation Fund			BlackRock 60/40 Target Allocation Fund			BlackRock 80/20 Target Allocation Fund
Assets
Investments at value — affiliated1,2	$	415,003,956		$	426,548,384		$	524,661,514		$	210,089,765
Receivables:
Securities lending income — affiliated.		8,848			10,319			47,370			3,792
Capital shares sold		1,200,367			1,633,612			671,700			253,487
Dividends — affiliated		1,376			1,448			1,841			823
From the Manager		58,246			63,315			75,703			67,182
Unrealized appreciation on forward foreign currency exchange contracts		93,595			211,575			299,602			151,239
Prepaid expenses		18,249			16,500			25,651			18,089
Total assets		416,384,637			428,485,153			525,783,381			210,584,377
Liabilities
Foreign bank overdraft3		215			368			676			236
Cash collateral on securities loaned at value		29,604,881			10,172,983			48,772,673			6,980,234
Payables:
Investments purchased — affiliated		734,271			339,581			502,334			408,532
Capital shares redeemed		683,205			457,918			1,345,591			504,751
Officer’s and Trustees’ fees		5,136			5,277			5,164			4,435
Other accrued expenses		170,128			196,525			170,177			102,590
Other affiliates		1,347			2,491			3,006			—
Service and distribution fees		152,580			165,166			154,756			55,538
Unrealized depreciation on forward foreign currency exchange contracts		41,902			93,698			146,449			74,977
Total liabilities		31,393,665			11,434,007			51,100,826			8,131,293
Net Assets	$	384,990,972		$	417,051,146		$	474,682,555		$	202,453,084
Net Assets Consist of
Paid-in capital	$	379,854,413		$	411,603,246		$	465,952,519		$	198,877,087
Undistributed net investment income		2,561,961			2,487,928			2,212,901			860,810
Accumulated net realized loss		(4,835,203	)		(7,445,017	)		(5,702,086	)		(2,852,437	)
Net unrealized appreciation (depreciation)		7,409,801			10,404,989			12,219,221			5,567,624
Net Assets	$	384,990,972		$	417,051,146		$	474,682,555		$	202,453,084
1       Investments at cost — affiliated	$	407,645,848		$	416,261,272		$	512,595,440		$	204,598,403
2       Securities loaned at value	$	28,955,371		$	9,888,673		$	47,858,705		$	6,846,471
3       Foreign bank overdraft at cost	$	215		$	368		$	670		$	236

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 37

Statements of Assets and Liabilities (concluded)

September 30, 2016	BlackRock 20/80 Target Allocation Fund		BlackRock 40/60 Target Allocation Fund		BlackRock 60/40 Target Allocation Fund		BlackRock 80/20 Target Allocation Fund
Net Asset Value
Institutional
Net assets	$	49,937,372	$	45,376,387	$	61,600,683	$	33,056,186
Shares outstanding1		4,416,031		4,058,293		5,100,898		2,974,163
Net asset value	$	11.31	$	11.18	$	12.08	$	11.11
Investor A
Net assets	$	171,823,958	$	195,864,755	$	269,174,778	$	120,612,726
Shares outstanding1		15,389,941		17,673,054		22,635,496		11,046,561
Net asset value	$	11.16	$	11.08	$	11.89	$	10.92
Investor C
Net assets	$	147,046,444	$	153,937,458	$	125,370,911	$	38,988,134
Shares outstanding1		13,352,762		14,115,256		10,794,769		3,687,456
Net asset value	$	11.01	$	10.91	$	11.61	$	10.57
Class K
Net assets	$	207,463	$	253,169	$	276,289	$	222,375
Shares outstanding1		18,349		22,635		22,888		20,004
Net asset value	$	11.31	$	11.19	$	12.07	$	11.12
Class R
Net assets	$	15,975,735	$	21,619,377	$	18,259,894	$	9,573,663
Shares outstanding1		1,439,182		1,959,086		1,541,555		883,635
Net asset value	$	11.10	$	11.04	$	11.85	$	10.83

¹  Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.

38 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Operations

Year Ended September 30, 2016	BlackRock 20/80 Target Allocation Fund			BlackRock 40/60 Target Allocation Fund			BlackRock 60/40 Target Allocation Fund			BlackRock 80/20 Target Allocation Fund
Investment Income
Dividends — affiliated	$	5,070,155		$	5,339,174		$	4,713,770		$	1,981,818
Securities lending — affiliated — net		37,459			105,594			127,291			42,070
Net investment income allocated from the affiliated Master Portfolios:
Income		1,186,158			1,197,281			756,066			139,065
Expenses		(83,121	)		(81,696	)		(54,034	)		(9,565	)
Total income		6,210,651			6,560,353			5,543,093			2,153,388
Fund Expenses
Service and distribution — class specific		1,329,184			1,502,638			1,247,960			449,807
Transfer agent — class specific		271,616			290,225			269,583			150,795
Professional		103,527			117,852			92,524			72,350
Administration		114,347			125,008			114,148			46,590
Registration		102,162			105,539			107,741			83,658
Accounting services		61,052			66,069			60,958			29,166
Administration — class specific		53,587			58,602			53,521			21,843
Printing		35,770			42,267			31,436			21,099
Officer and Trustees		23,372			23,714			23,306			20,880
Custodian		23,237			24,545			24,768			22,734
Offering		33,088			33,015			33,015			33,015
Miscellaneous		15,589			15,799			15,316			14,238
Recoupment of past waived and/or reimbursed fees — class specific		3,825			8,865			3,789			—
Total expenses		2,170,356			2,414,138			2,078,065			966,175
Less:
Administration fees waived		(114,347	)		(125,008	)		(114,148	)		(46,590	)
Administration fees waived — class specific		(36,983	)		(30,702	)		(28,028	)		(21,777	)
Transfer agent fees waived — class specific		(1,903	)		(1,411	)		(1,879	)		(4,920	)
Transfer agent fees reimbursed — class specific		(41,493	)		(64,788	)		(54,932	)		(54,580	)
Expenses reimbursed by the Manager		(186,560	)		(198,830	)		(182,277	)		(212,231	)
Total expenses after fees waived and/or reimbursed		1,789,070			1,993,399			1,696,801			626,077
Net investment income		4,421,581			4,566,954			3,846,292			1,527,311
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — affiliated		(6,399,786	)		(10,776,002	)		(9,775,645	)		(4,770,103	)
Capital gain distributions received from affiliated investment companies		2,362,409			4,508,802			4,646,139			2,090,164
Allocation from the affiliated Master Portfolios		(61,137	)		42,039			92,834			29,883
Futures contracts		—			(13,532	)		20,011			9,500
Foreign currency transactions		(122,016	)		(279,022	)		(374,183	)		(175,066	)
		(4,220,530	)		(6,517,715	)		(5,390,844	)		(2,815,622	)
Net change in unrealized appreciation (depreciation) on:
Investments — affiliated		10,874,749			18,070,212			19,649,214			10,634,571
Allocation from the affiliated Master Portfolios		1,020,883			1,031,058			568,327			99,154
Foreign currency translations		51,693			117,877			153,147			76,262
		11,947,325			19,219,147			20,370,688			10,809,987
Net realized and unrealized gain		7,726,795			12,701,432			14,979,844			7,994,365
Net Increase in Net Assets Resulting from Operations	$	12,148,376		$	17,268,386		$	18,826,136		$	9,521,676

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 39

Statements of Changes in Net Assets

	BlackRock 20/80 Target Allocation Fund						BlackRock 40/60 Target Allocation Fund
	Year Ended September 30,						Year Ended September 30,
Increase in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	4,421,581		$	1,423,630		$	4,566,954		$	1,651,653
Net realized gain (loss)		(4,220,530	)		9,074,052			(6,7517,715	)		15,752,743
Net change in unrealized appreciation (depreciation)		11,947,325			(8,806,114	)		19,219,147			(16,792,873	)
Net increase in net assets resulting from operations		12,148,376			1,691,568			17,268,386			611,523
Distributions to Shareholders1
From net investment income:
Institutional		(815,547	)		(322,047	)		(563,604	)		(404,952	)
Investor A		(1,616,591	)		(1,384,971	)		(1,970,466	)		(1,623,169	)
Investor C		(919,307	)		(964,456	)		(1,042,141	)		(879,253	)
Class R		(148,561	)		(238,533	)		(223,795	)		(342,631	)
From net realized gain:
Institutional		(1,692,614	)		(510,018	)		(1,981,706	)		(1,177,292	)
Investor A		(3,848,926	)		(2,463,808	)		(7,945,747	)		(5,344,632	)
Investor C		(3,122,503	)		(2,208,218	)		(6,056,344	)		(4,159,710	)
Class R		(434,439	)		(465,991	)		(1,068,464	)		(1,249,769	)
Decrease in net assets resulting from distributions to shareholders		(12,598,488	)		(8,558,042	)		(20,852,267	)		(15,181,408	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		220,557,207			68,656,167			237,809,617			52,273,899
Net Assets
Total increase in net assets		220,107,095			61,789,693			234,225,736			37,704,014
Beginning of year		164,883,877			103,094,184			182,825,410			145,121,396
End of year	$	384,990,972		$	164,883,877		$	417,051,146		$	182,825,410
Undistributed net investment income, end of year	$	2,561,961		$	1,071,844		$	2,487,928		$	1,190,274

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

40 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Statements of Changes in Net Assets (concluded)

	BlackRock 60/40 Target Allocation Fund						BlackRock 80/20 Target Allocation Fund
	Year Ended September 30,						Year Ended September 30,
Increase in Net Assets:	2016			2015			2016			2015
Operations
Net investment income	$	3,846,292		$	920,286		$	1,527,311		$	366,161
Net realized gain (loss)		(5,390,844	)		11,948,590			(2,815,622	)		6,875,893
Net change in unrealized appreciation (depreciation)		20,370,688			(14,229,263	)		10,809,987			(8,785,501	)
Net increase (decrease) in net assets resulting from operations		18,826,136			(1,360,387	)		9,521,676			(1,543,447	)
Distributions to Shareholders1
From net investment income:
Institutional		(393,874	)		(165,406	)		(148,820	)		(71,762	)
Investor A		(1,418,225	)		(1,323,558	)		(568,641	)		(619,203	)
Investor C		(690,704	)		(873,119	)		(164,526	)		(300,518	)
Class R		(122,200	)		(197,922	)		(68,015	)		(188,519	)
From net realized gain:
Institutional		(1,645,600	)		(302,877	)		(1,011,561	)		(257,292	)
Investor A		(6,775,976	)		(2,810,721	)		(4,460,139	)		(2,517,576	)
Investor C		(4,896,175	)		(2,463,423	)		(2,303,172	)		(1,828,425	)
Class R		(686,810	)		(456,001	)		(684,454	)		(834,388	)
Decrease in net assets resulting from distributions to shareholders		(16,629,564	)		(8,593,027	)		(9,409,328	)		(6,617,683	)
Capital Share Transactions
Net increase in net assets derived from capital share transactions		346,337,011			47,582,709			143,240,427			23,003,424
Net Assets
Total increase in net assets		348,533,583			37,629,295			143,352,775			14,842,294
Beginning of year		126,148,972			88,519,677			59,100,309			44,258,015
End of year	$	474,682,555		$	126,148,972		$	202,453,084		$	59,100,309
Undistributed net investment income, end of year	$	2,212,901		$	691,502		$	860,810		$	274,984

¹  Distributions for annual periods determined in accordance with federal income tax regulations.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 41

Financial Highlights BlackRock 20/80 Target Allocation Fund

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2016			2015			2014			2013			2012			2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$  11.50			$  12.15			$11.78			$11.31			$10.14			$    11.37			$  12.02			$  11.67			$  11.21			$  10.06
Net investment income1		0.25			0.21			0.25			0.29			0.32			0.21			0.16			0.20			0.25			0.27
Net realized and unrealized gain		0.27			0.17			0.79			0.68			1.23			0.26			0.17			0.77			0.68			1.22
Net increase from investment operations		0.52			0.38			1.04			0.97			1.55			0.47			0.33			0.97			0.93			1.49
Distributions:2
From net investment income		(0.23	)		(0.40	)		(0.31	)		(0.29	)		(0.31	)		(0.20	)		(0.35	)		(0.26	)		(0.26	)		(0.27	)
From net realized gain		(0.48	)		(0.63	)		(0.36	)		(0.21	)		(0.07	)		(0.48	)		(0.63	)		(0.36	)		(0.21	)		(0.07	)
Total distributions		(0.71	)		(1.03	)		(0.67	)		(0.50	)		(0.38	)		(0.68	)		(0.98	)		(0.62	)		(0.47	)		(0.34	)
Net asset value, end of year		$  11.31			$  11.50			$12.15			$11.78			$11.31			$    11.16			$  11.37			$  12.02			$  11.67			$  11.21
Total Return3
Based on net asset value		4.76	%		3.12	%		9.04	%		8.92	%		15.66	%		4.35	%		2.77	%		8.54	%		8.55	%		15.19	%
Ratios to Average Net Assets
Total expenses4		0.33	%		0.41	%		0.47	%		0.63	%		0.84	%		0.60	%		0.71	%5		0.79	%5		0.97	%5		1.15	%5
Total expenses after fees waived and/or reimbursed4		0.12	%		0.16	%		0.27	%		0.35	%		0.47	%		0.46	%		0.54	%		0.67	%		0.75	%		0.87	%
Net investment income4		2.25	%		1.80	%		2.05	%		2.55	%		3.00	%		1.88	%		1.37	%		1.66	%		2.17	%		2.56	%
Supplemental Data
Net assets, end of year (000)		$49,937			$22,738			$9,571			$5,252			$1,692			$171,824			$75,293			$45,095			$34,939			$26,058
Portfolio turnover rate		95	%		99	%		46	%		45	%		48	%		95	%		99	%		46	%		45	%		48	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.45	%		0.46	%		0.37	%		0.24	%		0.26	%

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2015, the ratio would have been 0.70%. There was no financial impact to the expense ratios for the years ended September 30, 2014, September 30, 2013 and September 30, 2012.

See Notes to Financial Statements.

42 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock 20/80 Target Allocation Fund

	Investor C															Class K
																Period March 28, 20161 to September  30,
	Year Ended September 30,
	2016			2015			2014			2013			2012			2016
Per Share Operating Performance
Net asset value, beginning of period		$    11.24			$  11.91			$  11.57			$  11.12			$    9.97			$10.90
Net investment income2		0.12			0.07			0.11			0.16			0.20			0.12
Net realized and unrealized gain		0.27			0.16			0.77			0.68			1.21			0.29
Net increase from investment operations		0.39			0.23			0.88			0.84			1.41			0.41
Distributions:3
From net investment income		(0.14	)		(0.27	)		(0.18	)		(0.18	)		(0.19	)		—
From net realized gain		(0.48	)		(0.63	)		(0.36	)		(0.21	)		(0.07	)		—
Total distributions		(0.62	)		(0.90	)		(0.54	)		(0.39	)		(0.26	)		—
Net asset value, end of period		$    11.01			$  11.24			$  11.91			$  11.57			$  11.12			$11.31
Total Return4
Based on net asset value		3.64	%		1.92	%		7.80	%		7.74	%		14.40	%		3.76	%5
Ratios to Average Net Assets
Total expenses6		1.33	%7		1.44	%7		1.54	%		1.73	%		1.95	%		0.24	%8
Total expenses after fees waived and/or reimbursed6		1.21	%		1.27	%		1.39	%		1.47	%		1.59	%		0.10	%8
Net investment income6		1.11	%		0.62	%		0.94	%		1.46	%		1.89	%		2.03	%8
Supplemental Data
Net assets, end of period (000)		$147,046			$57,521			$39,413			$32,357			$28,169			$  207
Portfolio turnover rate		95	%		99	%		46	%		45	%		48	%		95	%9

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.45	%		0.46	%		0.37	%		0.24	%		0.26	%

⁷  Includes recoupment of past waived and/or reimbursed fees. There was no financial impact to the expense ratios for the years ended September 30, 2016 and September 30, 2015.

⁸  Annualized.

⁹  Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 43

Financial Highlights (concluded) BlackRock 20/80 Target Allocation Fund

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$  11.30			$11.96			$11.60			$11.15			$10.00
Net investment income1		0.17			0.12			0.17			0.22			0.25
Net realized and unrealized gain		0.27			0.17			0.78			0.67			1.21
Net increase from investment operations		0.44			0.29			0.95			0.89			1.46
Distributions:2
From net investment income		(0.16	)		(0.32	)		(0.23	)		(0.23	)		(0.24	)
From net realized gain		(0.48	)		(0.63	)		(0.36	)		(0.21	)		(0.07	)
Total distributions		(0.64	)		(0.95	)		(0.59	)		(0.44	)		(0.31	)
Net asset value, end of year		$  11.10			$11.30			$11.96			$11.60			$11.15
Total Return3
Based on net asset value		4.11	%		2.41	%		8.40	%		8.22	%		14.94	%
Ratios to Average Net Assets
Total expenses4		0.91	%5		1.01	%		1.13	%		1.30	%		1.56	%
Total expenses after fees waived and/or reimbursed4		0.77	%		0.79	%		0.88	%		0.96	%		1.08	%
Net investment income4		1.58	%		1.05	%		1.45	%		1.96	%		2.40	%
Supplemental Data
Net assets, end of year (000)		$15,976			$9,331			$9,016			$8,247			$7,911
Portfolio turnover rate		95	%		99	%		46	%		45	%		48	%
1    Based on average shares outstanding.
2    Distributions for annual periods determined in accordance with federal income tax regulations.
3    Where applicable, assumes the reinvestment of distributions.
4    Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:
	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.45	%		0.46	%		0.37	%		0.24	%		0.26	%

⁵  Includes recoupment of past waived and/or reimbursed fees. There was no financial impact to the expense ratio for the year ended September 30, 2016.

See Notes to Financial Statements.

44 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights BlackRock 40/60 Target Allocation Fund

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2016			2015			2014			2013			2012			2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$  11.54			$  12.64			$  12.15			$  10.96			$    9.48			$    11.46			$  12.56			$  12.06			$  10.90			$    9.43
Net investment income1		0.23			0.20			0.20			0.26			0.26			0.20			0.15			0.17			0.21			0.22
Net realized and unrealized gain		0.45			0.03			1.06			1.11			1.50			0.43			0.04			1.05			1.11			1.49
Net increase from investment operations		0.68			0.23			1.26			1.37			1.76			0.63			0.19			1.22			1.32			1.71
Distributions:2
From net investment income		(0.23	)		(0.34	)		(0.43	)		(0.18	)		(0.28	)		(0.20	)		(0.30	)		(0.38	)		(0.16	)		(0.24	)
From net realized gain		(0.81	)		(0.99	)		(0.34	)		—			—			(0.81	)		(0.99	)		(0.34	)		—			—
Total distributions		(1.04	)		(1.33	)		(0.77	)		(0.18	)		(0.28	)		(1.01	)		(1.29	)		(0.72	)		(0.16	)		(0.24	)
Net asset value, end of year		$  11.18			$  11.54			$  12.64			$  12.15			$  10.96			$    11.08			$  11.46			$  12.56			$  12.06			$  10.90
Total Return3
Based on net asset value		6.31	%		1.66	%		10.73	%		12.72	%		18.90	%		5.89	%		1.33	%		10.41	%		12.25	%		18.45	%
Ratios to Average Net Assets
Total expenses4		0.35	%		0.43	%		0.45	%		0.54	%		0.70	%		0.58	%5		0.68	%5		0.73	%		0.81	%		0.96	%
Total expenses after fees waived and/or reimbursed4		0.12	%		0.14	%		0.23	%		0.27	%		0.37	%		0.46	%		0.50	%		0.60	%		0.62	%		0.74	%
Net investment income4		2.12	%		1.67	%		1.61	%		2.22	%		2.49	%		1.81	%		1.24	%		1.33	%		1.88	%		2.12	%
Supplemental Data
Net assets, end of year (000)		$45,376			$22,581			$14,627			$4,948			$2,141			$195,865			$86,088			$63,500			$49,473			$39,411
Portfolio turnover rate		103	%		117	%		60	%		51	%		57	%		103	%		117	%		60	%		51	%		57	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.46	%		0.46	%		0.43	%		0.36	%		0.37	%

⁵  Includes recoupment of past waived and/or reimbursed fees. There was no financial impact to the expense ratios for the years ended September 30, 2016 and September 30, 2015.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 45

Financial Highlights (continued) BlackRock 40/60 Target Allocation Fund

																Class K
	Investor C
	Year Ended September 30,															Period March 28, 20161 to September 30,
	2016			2015			2014			2013			2012			2016
Per Share Operating Performance
Net asset value, beginning of period	$	11.31		$	12.41		$	11.91		$	10.78		$	9.32			$10.68
Net investment income2		0.11			0.06			0.07			0.12			0.14			0.11
Net realized and unrealized gain		0.44			0.04			1.04			1.10			1.48			0.40
Net increase from investment operations		0.55			0.10			1.11			1.22			1.62			0.51
Distributions:3
From net investment income		(0.14	)		(0.21	)		(0.27	)		(0.09	)		(0.16	)		—
From net realized gain		(0.81	)		(0.99	)		(0.34	)		—			—			—
Total distributions		(0.95	)		(1.20	)		(0.61	)		(0.09	)		(0.16	)		—
Net asset value, end of period	$	10.91		$	11.31		$	12.41		$	11.91		$	10.78			$11.19
Total Return4
Based on net asset value		5.18	%		0.57	%		9.52	%		11.39	%		17.51	%		4.78	%5
Ratios to Average Net Assets
Total expenses6		1.33	%7		1.44	%7		1.50	%7		1.62	%7		1.77	%7		0.23	%8
Total expenses after fees waived and/or reimbursed6		1.21	%		1.27	%		1.38	%		1.42	%		1.52	%		0.10	%8
Net investment income6		1.04	%		0.47	%		0.56	%		1.11	%		1.41	%		1.94	%8
Supplemental Data
Net assets, end of period (000)	$	153,937		$	59,026		$	50,554		$	41,748		$	39,805			$    253
Portfolio turnover rate		103	%		117	%		60	%		51	%		57	%		103	%9

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.46	%		0.46	%		0.43	%		0.36	%		0.37	%

⁷  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the years ended September 30, 2016, Sep-tember 30, 2015 and September 30, 2014, the ratio would have been 1.32%, 1.43% and 1.49%, respectively. There was no financial impact to the expense ratios for the years ended September 30, 2013 and September 30, 2012.

⁸  Annualized.

⁹  Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.

46 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (concluded) BlackRock 40/60 Target Allocation Fund

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	11.40		$	12.49		$	12.00		$	10.84		$	9.38
Net investment income1		0.18			0.13			0.15			0.20			0.21
Net realized and unrealized gain		0.44			0.04			1.04			1.11			1.47
Net increase from investment operations		0.62			0.17			1.19			1.31			1.68
Distributions:2
From net investment income		(0.17	)		(0.27	)		(0.36	)		(0.15	)		(0.22	)
From net realized gain		(0.81	)		(0.99	)		(0.34	)		—			—
Total distributions		(0.98	)		(1.26	)		(0.70	)		(0.15	)		(0.22	)
Net asset value, end of year	$	11.04		$	11.40		$	12.49		$	12.00		$	10.84
Total Return3
Based on net asset value		5.80	%		1.18	%		10.21	%		12.19	%		18.16	%
Ratios to Average Net Assets
Total expenses4		0.89	%		0.96	%		1.01	%		1.12	%5		1.26	%
Total expenses after fees waived and/or reimbursed4		0.62	%		0.64	%		0.73	%		0.77	%		0.87	%
Net investment income4		1.65	%		1.06	%		1.22	%		1.76	%		2.04	%
Supplemental Data
Net assets, end of year (000)	$	21,619		$	15,130		$	16,440		$	15,707		$	14,881
Portfolio turnover rate		103	%		117	%		60	%		51	%		57	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.46	%		0.46	%		0.43	%		0.36	%		0.37	%

⁵  Includes recoupment of past waived and/or reimbursed fees. There was no financial impact to the expense ratio for the year ended September 30, 2013.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 47

Financial Highlights BlackRock 60/40 Target Allocation Fund

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2016			2015			2014			2013			2012			2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$12.39		$	13.64		$	12.32		$	10.77		$	9.04		$	12.22		$	13.46		$	12.18		$	10.65		$	8.95
Net investment income1		0.23			0.21			0.17			0.21			0.22			0.19			0.16			0.11			0.16			0.16
Net realized and unrealized gain (loss)		0.60			(0.10	)		1.35			1.55			1.70			0.59			(0.11	)		1.34			1.54			1.70
Net increase from investment operations		0.83			0.11			1.52			1.76			1.92			0.78			0.05			1.45			1.70			1.86
Distributions:2
From net investment income		(0.22	)		(0.48	)		(0.20	)		(0.21	)		(0.19	)		(0.19	)		(0.41	)		(0.17	)		(0.17	)		(0.16	)
From net realized gain		(0.92	)		(0.88	)		—			—			—			(0.92	)		(0.88	)		—			—			—
Total dividends and distributions		(1.14	)		(1.36	)		(0.20	)		(0.21	)		(0.19	)		(1.11	)		(1.29	)		(0.17	)		(0.17	)		(0.16	)
Net asset value, end of year		$12.08		$	12.39		$	13.64		$	12.32		$	10.77		$	11.89		$	12.22		$	13.46		$	12.18		$	10.65
Total Return3
Based on net asset value		7.10	%		0.43	%		12.43	%		16.62	%		21.49	%		6.77	%		0.00	%		11.95	%		16.20	%		20.94	%
Ratios to Average Net Assets
Total expenses4		0.31	%		0.55	%		0.56	%		0.65	%		0.75	%		0.57	%5		0.76	%5		0.81	%5		0.86	%5		1.00	%
Total expenses after fees waived and/or reimbursed4		0.11	%		0.13	%		0.21	%		0.20	%		0.29	%		0.45	%		0.49	%		0.59	%		0.58	%		0.67	%
Net investment income4		1.95	%		1.60	%		1.25	%		1.80	%		2.20	%		1.64	%		1.20	%		0.86	%		1.42	%		1.59	%
Supplemental Data
Net assets, end of year (000)		$61,601		$	8,755		$	4,242		$	3,116		$	2,415		$	269,175		$	64,012		$	40,375		$	42,946		$	24,239
Portfolio turnover rate		94	%		118	%		69	%		65	%		46	%		94	%		118	%		69	%		65	%		46	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.42	%		0.46	%		0.49	%		0.48	%		0.49	%

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2014, the ratio would have been 0.80%. There was no financial impact to the expense ratios for the years ended September 30, 2016, September 30, 2015 and September 30, 2013.

See Notes to Financial Statements.

48 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (continued) BlackRock 60/40 Target Allocation Fund

	Investor C															Class K
	Year Ended September 30,															Period March 28, 20161 to September 30,
	2016			2015			2014			2013			2012			2016
Per Share Operating Performance
Net asset value, beginning of period	$	11.99		$	13.21		$	11.96		$	10.46		$	8.77			$11.45
Net investment income2		0.10			0.06			0.02			0.09			0.09			0.11
Net realized and unrealized gain (loss)		0.57			(0.09	)		1.31			1.50			1.67			0.51
Net increase (decrease) from investment operations		0.67			(0.03	)		1.33			1.59			1.76			0.62
Distributions:3
From net investment income		(0.13	)		(0.31	)		(0.08	)		(0.09	)		(0.07	)		—
From net realized gain		(0.92	)		(0.88	)		—			—			—			—
Total dividends and distributions		(1.05	)		(1.19	)		(0.08	)		(0.09	)		(0.07	)		—
Net asset value, end of period	$	11.61		$	11.99		$	13.21		$	11.96		$	10.46			$12.07
Total Return4
Based on net asset value		5.89	%		(0.63	)%		11.14	%		15.30	%		20.12	%		5.42	%5
Ratios to Average Net Assets
Total expenses6		1.33	%7		1.51	%		1.57	%		1.67	%		1.80	%		0.22	%8
Total expenses after fees waived and/or reimbursed6		1.20	%		1.22	%		1.31	%		1.30	%		1.39	%		0.09	%8
Net investment income6		0.88	%		0.45	%		0.14	%		0.77	%		0.89	%		1.81	%8
Supplemental Data
Net assets, end of period (000)	$	125,371		$	45,308		$	36,037		$	29,793		$	27,761			$  276
Portfolio turnover rate		94	%		118	%		69	%		65	%		46	%		94	%9

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.42	%		0.46	%		0.49	%		0.48	%		0.49	%

⁷  Includes recoupment of past waived and/or reimbursed fees. There was no financial impact to the expense ratio for the year ended September 30, 2016.

⁸  Annualized.

⁹  Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 49

Financial Highlights (concluded) BlackRock 60/40 Target Allocation Fund

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year	$	12.17		$	13.40		$	12.11		$	10.58		$	8.88
Net investment income1		0.17			0.13			0.09			0.15			0.14
Net realized and unrealized gain (loss)		0.59			(0.10	)		1.33			1.52			1.69
Net increase from investment operations		0.76			0.03			1.42			1.67			1.83
Distributions:2
From net investment income		(0.16	)		(0.38	)		(0.13	)		(0.14	)		(0.13	)
From net realized gain		(0.92	)		(0.88	)		—			—			—
Total dividends and distributions		(1.08	)		(1.26	)		(0.13	)		(0.14	)		(0.13	)
Net asset value, end of year	$	11.85		$	12.17		$	13.40		$	12.11		$	10.58
Total Return3
Based on net asset value		6.63	%		(0.16	)%		11.75	%		16.03	%		20.73	%
Ratios to Average Net Assets
Total expenses4		0.90	%		1.03	%		1.12	%5		1.16	%		1.29	%
Total expenses after fees waived and/or reimbursed4		0.64	%		0.67	%		0.76	%		0.75	%		0.84	%
Net investment income4		1.48	%		0.99	%		0.69	%		1.32	%		1.44	%
Supplemental Data
Net assets, end of year (000)	$	18,260		$	8,074		$	7,866		$	7,171		$	8,131
Portfolio turnover rate		94	%		118	%		69	%		65	%		46	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.42	%		0.46	%		0.49	%		0.48	%		0.49	%

⁵  Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees for the year ended September 30, 2014, the ratio would have been 1.11%.

See Notes to Financial Statements.

50 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights BlackRock 80/20 Target Allocation Fund

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2016			2015			2014			2013			2012			2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$  11.67			$13.84			$12.36			$10.44			$  8.45			$    11.50			$  13.66			$  12.20			$  10.32			$    8.35
Net investment income1		0.20			0.19			0.14			0.16			0.14			0.17			0.13			0.09			0.12			0.09
Net realized and unrealized gain (loss)		0.71			(0.25	)		1.56			1.89			1.96			0.69			(0.23	)		1.54			1.86			1.96
Net increase (decrease) from investment operations		0.91			(0.06	)		1.70			2.05			2.10			0.86			(0.10	)		1.63			1.98			2.05
Distributions:2
From net investment income		(0.19	)		(0.46	)		(0.22	)		(0.13	)		(0.11	)		(0.16	)		(0.41	)		(0.17	)		(0.10	)		(0.08	)
From net realized gain		(1.28	)		(1.65	)		—			—			—			(1.28	)		(1.65	)		—			—			—
Total dividends and distributions		(1.47	)		(2.11	)		(0.22	)		(0.13	)		(0.11	)		(1.44	)		(2.06	)		(0.17	)		(0.10	)		(0.08	)
Net asset value, end of year		$  11.11			$11.67			$13.84			$12.36			$10.44			$    10.92			$  11.50			$  13.66			$  12.20			$10.32
Total Return3
Based on net asset value		8.32	%		(1.34	)%		13.79	%		19.86	%		25.05	%		8.01	%		(1.70	)%		13.37	%		19.39	%		24.72	%
Ratios to Average Net Assets
Total expenses4		0.43	%		0.72	%		0.75	%		0.81	%		0.92	%		0.73	%		0.99	%		1.05	%		1.09	%		1.18	%
Total expenses after fees waived and/or reimbursed4		0.10	%		0.14	%		0.25	%		0.22	%		0.26	%		0.44	%		0.47	%		0.59	%		0.56	%		0.60	%
Net investment income4		1.79	%		1.51	%		1.01	%		1.45	%		1.41	%		1.57	%		0.99	%		0.66	%		1.09	%		0.96	%
Supplemental Data
Net assets, end of year (000)		$33,056			$7,436			$2,164			$1,564			$1,754			$120,613			$29,595			$19,697			$22,356			$17,299
Portfolio turnover rate		81	%		125	%		56	%		59	%		61	%		81	%		125	%		56	%		59	%		61	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.39	%		0.41	%		0.47	%		0.54	%		0.57	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 51

Financial Highlights (continued) BlackRock 80/20 Target Allocation Fund

	Investor C															Class K
																Period March 28, 20161 to September 30,
	Year Ended September 30,
	2016			2015			2014			2013			2012			2016
Per Share Operating Performance
Net asset value, beginning of period		$  11.19			$  13.30			$  11.90			$   10.05			$    8.12			$  10.40
Net investment income2		0.08			0.03			(0.01	)		0.04			0.03			0.10
Net realized and unrealized gain (loss)		0.67			(0.22	)		1.49			1.82			1.90			0.62
Net increase (decrease) from investment operations		0.75			(0.19	)		1.48			1.86			1.93			0.72
Distributions:3
From net investment income		(0.09	)		(0.27	)		(0.08	)		(0.01	)		—			—
From net realized gain		(1.28	)		(1.65	)		—			—			—			—
Total dividends and distributions		(1.37	)		(1.92	)		(0.08	)		(0.01	)		—			—
Net asset value, end of period		$  10.57			$  11.19			$  13.30			$   11.90			$  10.05			$  11.12
Total Return4
Based on net asset value		7.13	%		(2.39	)%		12.50	%		18.54	%		23.77	%		6.92	%5
Ratios to Average Net Assets
Total expenses6		1.49	%		1.77	%		1.80	%		1.89	%		2.04	%		0.33	%7
Total expenses after fees waived and/or reimbursed6		1.19	%		1.22	%		1.34	%		1.31	%		1.35	%		0.08	%7
Net investment income6		0.77	%		0.22	%		(0.07	)%		0.38	%		0.28	%		1.81	%7
Supplemental Data
Net assets, end of period (000)		$38,988			$16,280			$ 14,902			$  15,000			$  14,704			$     222
Portfolio turnover rate		81	%		125	%		56	%		59	%		61	%		81	%8

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Distributions for annual periods determined in accordance with federal income tax regulations.

⁴  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

⁵  Aggregate total return.

⁶  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.39	%		0.41	%		0.47	%		0.54	%		0.57	%

⁷  Annualized.

⁸  Portfolio turnover is representative of the Fund for the entire year.

See Notes to Financial Statements.

52 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Financial Highlights (concluded) BlackRock 80/20 Target Allocation Fund

	Class R
	Year Ended September 30,
	2016			2015			2014			2013			2012
Per Share Operating Performance
Net asset value, beginning of year		$  11.40			$13.55			$12.12			$10.24			$  8.29
Net investment income1		0.15			0.10			0.07			0.11			0.08
Net realized and unrealized gain (loss)		0.69			(0.23	)		1.52			1.85			1.92
Net increase (decrease) from investment operations		0.84			(0.13	)		1.59			1.96			2.00
Distributions:2
From net investment income		(0.13	)		(0.37	)		(0.16	)		(0.08	)		(0.05	)
From net realized gain		(1.28	)		(1.65	)		—			—			—
Total dividends and distributions		(1.41	)		(2.02	)		(0.16	)		(0.08	)		(0.05	)
Net asset value, end of year		$  10.83			$11.40			$13.55			$12.12			$10.24
Total Return3
Based on net asset value		7.81	%		(1.89	)%		13.16	%		19.29	%		24.26	%
Ratios to Average Net Assets
Total expenses4		1.05	%		1.25	%		1.30	%		1.39	%		1.50	%
Total expenses after fees waived and/or reimbursed4		0.60	%		0.63	%		0.75	%		0.72	%		0.76	%
Net investment income4		1.40	%		0.80	%		0.50	%		0.98	%		0.87	%
Supplemental Data
Net assets, end of year (000)		$  9,574			$5,789			$7,496			$6,044			$5,501
Portfolio turnover rate		81	%		125	%		56	%		59	%		61	%

¹  Based on average shares outstanding.

²  Distributions for annual periods determined in accordance with federal income tax regulations.

³  Where applicable, assumes the reinvestment of distributions.

⁴  Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:

	Year Ended September 30,
	2016			2015			2014			2013			2012
Investments in underlying funds		0.39	%		0.41	%		0.47	%		0.54	%		0.57	%

See Notes to Financial Statements.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 53

Notes to Financial Statements

1. Organization:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. The Funds will generally invest in other registered investment companies, including exchange-traded funds (“ETFs”), (each an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the Funds. The Funds may also invest in Master Portfolios that are managed by subsidiaries of BlackRock (the “Master Portfolios”). The following are referred to herein collectively as the “Funds” or individually, a “Fund”:

Fund Name	Herein Referred To As	Diversification Classification
BlackRock 20/80 Target Allocation Fund	20/80 Target Allocation	Non-diversified
BlackRock 40/60 Target Allocation Fund	40/60 Target Allocation	Non-diversified
BlackRock 60/40 Target Allocation Fund	60/40 Target Allocation	Non-diversified
BlackRock 80/20 Target Allocation Fund	80/20 Target Allocation	Non-diversified

By owning shares of the Underlying Funds and investing in the Master Portfolios, each of the Funds indirectly invests, to varying degrees, in securities of U.S. and non-U.S. companies, including small and medium sized companies, and in fixed income securities. Equity Underlying Funds may also include funds that invest in real estate-related securities or instruments and commodity-related securities or instruments. Fixed income Underlying Funds may include funds that invest in, among other things, domestic and non-U.S. bonds, U.S. Government securities, mortgage-backed securities, high yield (or junk) bonds, and cash or money market instruments. In addition, the Underlying Funds and Master Portfolios may invest in derivatives.

Each Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold only to certain eligible investors. Investor A and Investor C Shares are generally available through financial intermediaries. Class R Shares are available only to certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional, Class K and Class R Shares	No	No	None
Investor A Shares	Yes	No1	None
Investor C Shares	No	Yes	None

¹ Investor A Shares may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase.

The Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of open-end funds referred to as the Equity-Bond Complex.

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Foreign Currency: Each Fund’s books and records are maintained in U.S. dollars. Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

Each Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., futures contracts and forward foreign currency exchange contracts) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

54 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. The Funds record daily their proportionate share of the Master Portfolios’ income, expenses and realized and unrealized gains and losses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. In addition to the direct expenses borne by the shareholders of the Funds, the shareholders also bear indirectly a proportionate share of the expenses of the Underlying Funds in which the Funds invest. Capital gain distributions from the Underlying Funds are recorded as realized gains.

Distributions: Distributions paid by the Funds are recorded on the ex-dividend date. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Offering Costs: Offering costs are amortized over a 12-month period beginning with the commencement of operations.

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on their relative net assets or other appropriate methods.

The Funds have an arrangement with their custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Funds may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

• The Funds value their investment in BlackRock Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon their pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act. The Funds may withdraw up to 25% of their investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

• Futures contracts traded on exchanges are valued at their last sale price.

• Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

• The market value of the Funds’ investments in the Underlying Funds is based on the published net asset value (“NAV”) of each Underlying Fund computed as of the close of regular trading on the NYSE on days when the NYSE is open.

• The Funds record their proportionate investment in the Master Portfolios at fair value, which is based upon their pro rata ownership in the net assets of the Master Portfolios.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 55

Notes to Financial Statements (continued)

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation methodologies are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access

• Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 Investments include equity or debt issued by privately-held companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation methodologies may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. Securities and Other Investments:

Securities Lending: Certain Funds may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Funds collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Funds are entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of any securities on loan, all of which were classified as affiliated investment companies in the Funds’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value —affiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Funds, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may

56 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.

As of period end, the following tables are a summary of the Funds’ securities lending agreements by counterparty which are subject to offset under an MSLA:

20/80 Target Allocation
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC		$21,537,806		$(21,537,806	)	—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		1,456,506		(1,456,506	)	—
National Financial Services LLC		5,961,059		(5,961,059	)	—
Total		$28,955,371		$(28,955,371	)	—
40/60 Target Allocation
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC		$1,823,436		$(1,823,436	)	—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		1,347,598		(1,347,598	)	—
National Financial Services LLC		6,717,639		(6,717,639	)	—
Total		$9,888,673		$(9,888,673	)	—
60/40 Target Allocation
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC		$16,676,287		$(16,676,287	)	—
Goldman Sachs & Co.		22,055,604		(22,055,604	)	—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		2,279,091		(2,279,091	)	—
National Financial Services LLC		6,847,723		(6,847,723	)	—
Total		$47,858,705		$(47,858,705	)	—
80/20 Target Allocation
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA) LLC		$6,846,471		$(6,846,471	)	—

¹ Collateral with a value of $29,604,881, $10,172,983, $48,772,673 and $6,980,234 has been received in connection with securities lending agreements for 20/80 Target Allocation, 40/60 Target Allocation, 60/40 Target Allocation and 80/20 Target Allocation, respectively. Collateral received in excess of the value of securities loaned from the individual counterparty is not shown for financial reporting purposes in the tables above.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned if the collateral received does not cover the value on the securities loaned in the event of borrower default. Each Fund could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

5. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter.

Futures Contracts: Certain Funds invest in long and/or short positions in futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

BLACKROCK FUNDS II SEPTEMBER 30, 2016 57

Notes to Financial Statements (continued)

Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Certain Funds enter into forward foreign currency exchange contracts to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked to market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements. The result would cause the Funds to accelerate payment of any net liability owed to the counterparty.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock for 1940 Act purposes.

Investment Advisory: The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager does not receive any management fees from the Funds for its investment advisory services.

Service and Distributions Fees: The Trust, on behalf of the Funds, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based

58 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

upon the average daily net assets of the relevant share class of each Fund as follows:

	Investor A	Investor C	Class R
Service Fee	0.25%	0.25%		0.25%
Distribution Fee	—	0.75%		0.25%

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Funds. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to the shareholders.

For the year ended September 30, 2016, the following table shows the class specific service and distribution fees borne directly by each share class of each Fund:

	Investor A			Investor C			Class R			Total
20/80 Target Allocation		$	282,334		$	983,880		$	62,970		$	1,329,184
40/60 Target Allocation		$	331,245		$	1,083,671		$	87,722		$	1,502,638
60/40 Target Allocation		$	333,670		$	850,403		$	63,887		$	1,247,960
80/20 Target Allocation		$	139,676		$	272,625		$	37,506		$	449,807

Administration: The Trust, on behalf of the Funds, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The administration fee, which is shown as administration in the Statements of Operations, is paid at the annual rates below.

Average Daily Net Assets	Administration Fee
First $500 Million	0.0425%
$500 Million - $1 Billion	0.0400%
$1 Billion - $2 Billion	0.0375%
$2 Billion - $4 Billion	0.0350%
$4 Billion - $13 Billion	0.0325%
Greater than $13 Billion	0.0300%

In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statements of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.

For the year ended September 30, 2016, the following table shows the class specific administration fees borne directly by each share class of each Fund:

	Institutional		Investor A		Investor C		Class K		Class R		Total
20/80 Target Allocation		$8,783		$22,587		$19,678		$20		$2,519		$53,587
40/60 Target Allocation		$6,898		$26,500		$21,673		$22		$3,509		$58,602
60/40 Target Allocation		$7,241		$26,693		$17,008		$24		$2,555		$53,521
80/20 Target Allocation		$3,695		$11,174		$  5,453		$21		$1,500		$21,843

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets.

The Manager maintains a call center, that is responsible for providing certain shareholder services to the Funds. Shareholder services include responding to inquiries and processing subscriptions and redemptions based upon instructions from shareholders. For the year ended September 30, 2016, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:

	Institutional			Investor A			Investor C			Class R		Total
20/80 Target Allocation		$	211		$	2,497		$	1,830		$  98		$	4,636
40/60 Target Allocation		$	171		$	3,390		$	2,028		$129		$	5,718
60/40 Target Allocation		$	143		$	4,092		$	3,103		$136		$	7,474
80/20 Target Allocation		$	190		$	3,507		$	1,369		$  47		$	5,113

BLACKROCK FUNDS II SEPTEMBER 30, 2016 59

Notes to Financial Statements (continued)

For the year ended September 30, 2016, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

	Institutional		Investor A		Investor C		Class R		Total
20/80 Target Allocation		$39,095		$118,624		$92,296		$21,601		$271,616
40/60 Target Allocation		$38,016		$127,555		$98,220		$26,434		$290,225
60/40 Target Allocation		$30,536		$128,809		$88,527		$21,711		$269,583
80/20 Target Allocation		$16,462		$  77,678		$41,559		$15,096		$150,795

Other Fees: For the year ended September 30, 2016, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

20/80 Target Allocation	$	57,743
40/60 Target Allocation	$	67,639
60/40 Target Allocation	$	82,067
80/20 Target Allocation	$	38,192

For the year ended September 30, 2016, affiliates received CDSCs as follows:

	Investor A		Investor C
20/80 Target Allocation		$2,243		$46,870
40/60 Target Allocation		$8,589		$33,598
60/40 Target Allocation		$   679		$20,405
80/20 Target Allocation		$   733		$10,898

Expense Limitations, Waivers, Reimbursements and Recoupments: With respect to each Fund, the Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

	Institutional			Investor A			Investor C			Class R
20/80 Target Allocation		1.13	%		1.53	%		2.25	%		1.74	%
40/60 Target Allocation		1.09	%		1.51	%		2.24	%		1.59	%
60/40 Target Allocation		1.07	%		1.45	%		2.17	%		1.62	%
80/20 Target Allocation		1.09	%		1.43	%		2.18	%		1.59	%

These contractual expense limitations are perpetual and have no effective termination date, but may be terminated by the Board, including a majority of the Independent Trustees who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Funds.

In addition, with respect to each Fund, the Manager agreed to further waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

	Institutional			Investor A			Investor C			Class K			Class R
20/80 Target Allocation		0.09	%		0.43	%		1.18	%		0.07	%		0.74	%
40/60 Target Allocation		0.09	%		0.43	%		1.18	%		0.07	%		0.59	%
60/40 Target Allocation		0.09	%		0.43	%		1.18	%		0.07	%		0.62	%
80/20 Target Allocation		0.09	%		0.43	%		1.18	%		0.07	%		0.59	%

The Manager has agreed not to reduce or discontinue these contractual expense limitations prior to February 1, 2018 (March 26, 2017 for Class K), unless approved by the Board, including a majority of the Independent Trustees who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Funds. The contractual expense limitations exclude expenses allocated from the Master Portfolios in which the Funds invest.

These amounts waived and/or reimbursed are shown as administration fees waived, administration fees waived — class specific, transfer agent fees waived — class specific, transfer agent fees reimbursed — class specific and expenses reimbursed by the Manager, respectively, in the Statements of Operations.

60 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Class specific expense waivers or reimbursements are as follows:

Administration Fees Waived	Institutional		Investor A			Investor C			Class K		Class R			Total
20/80 Target Allocation		$8,783		$	20,519		$	5,471		$20		$	2,190		$	36,983
40/60 Target Allocation		$6,898		$	15,925		$	4,348		$22		$	3,509		$	30,702
60/40 Target Allocation		$7,241		$	10,804		$	7,404		$24		$	2,555		$	28,028
80/20 Target Allocation		$3,695		$	11,121		$	5,440		$21		$	1,500		$	21,777

Transfer Agent Fees Waived	Institutional		Investor A			Investor C			Class R			Total
20/80 Target Allocation		$211			$1,388			$   237			$  67			$1,903
40/60 Target Allocation		$171			$   761			$   350			$129			$1,411
60/40 Target Allocation		$143			$1,043			$   557			$136			$1,879
80/20 Target Allocation		$190			$3,339			$1,344			$  47			$4,920
Transfer Agent Fees Reimbursed	Institutional		Investor A			Investor C			Class R			Total
20/80 Target Allocation		$34,168		$	3,543		$	2,275		$	1,507		$	41,493
40/60 Target Allocation		$33,770		$	2,021		$	4,687		$	24,310		$	64,788
60/40 Target Allocation		$25,352		$	7,159		$	6,347		$	16,074		$	54,932
80/20 Target Allocation		$13,654		$	16,575		$	10,186		$	14,165		$	54,580

With respect to the contractual expense caps, if during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the expense cap for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of the following expenses:

(a) The amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement.

(b) The amount by which the expense cap for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that:

• The Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year.

• The Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.

In the event the expense cap for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived and/or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense cap for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense cap for that share class.

For the year ended September 30, 2016, the Manager recouped the following class specific waivers and/or reimbursements previously recorded by the Funds:

Recoupment of Past Waived Fees	Investor A			Investor C			Class R			Total
20/80 Target Allocation			—		$	3,821		$	4		$	3,825
40/60 Target Allocation		$	196		$	8,669			—		$	8,865
60/40 Target Allocation		$	2,329		$	1,460			—		$	3,789

On September 30, 2016, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

	Expires September 30,
	2017		2018
20/80 Target Allocation
Fund Level		$181,944		$300,907
Institutional		$  14,160		$  43,162
Investor A		$  12,579		$  25,450
Investor C		$  11,499		$    7,983
Class K		—		$         20
Class R		$    8,077		$    3,764
40/60 Target Allocation
Fund Level		$223,720		$323,838
Institutional		$  24,413		$  40,839
Investor A		$  21,414		$  18,707
Investor C		$    4,153		$    9,385
Class K		—		$         22
Class R		$  28,714		$  27,948
60/40 Target Allocation
Fund Level		$219,168		$296,425
Institutional		$  10,735		$  32,736

BLACKROCK FUNDS II SEPTEMBER 30, 2016 61

Notes to Financial Statements (continued)

	Expires September 30,
		2017		2018
Investor A			$  13,124		$  19,006
Investor C			$  22,387		$  14,308
Class K			—		$         24
Class R			$    9,892		$  18,765
80/20 Target Allocation
Fund Level			$186,524		$258,821
Institutional			$    6,327		$  17,539
Investor A			$  23,249		$  31,035
Investor C			$  20,003		$  16,970
Class K			—		$         21
Class R			$  14,453		$  15,712

The following fund level and class specific waivers and/or reimbursements previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2016:

20/80 Target Allocation
Fund Level	$	115,728
Institutional	$	6,312
Investor A	$	376
Investor C	$	7,508
Class R	$	11,794
40/60 Target Allocation
Fund Level	$	157,225
Institutional	$	12,953
Class R	$	27,767
60/40 Target Allocation
Fund Level	$	184,878
Institutional	$	5,478
Investor A	$	5,584
Investor C	$	16,370
Class R	$	11,263
80/20 Target Allocation
Fund Level	$	144,558
Institutional	$	3,164
Investor A	$	24,726
Investor C	$	19,882
Class R	$	15,297

Securities Lending: The U.S. Securities and Exchange Commission has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Funds are responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Funds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. Each Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Bond Complex in a calendar year exceeds a specified threshold, each Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income as follows: 85% of securities lending income, and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by each Fund is shown as securities lending — affiliated — net in the Statements of Operations. For the year ended September 30, 2016, each Fund paid BIM the following amounts for securities lending agent services:

20/80 Target Allocation	$	7,256
40/60 Target Allocation	$	21,550
60/40 Target Allocation	$	24,646
80/20 Target Allocation	$	7,824

62 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

Officers and Trustees: Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer, which is included in Officer and Trustees in the Statements of Operations.

7. Purchases and Sales:

For the year ended September 30, 2016, purchases and sales of investments in the Underlying Funds and Master Portfolios, excluding short-term securities, were as follows:

	Purchases			Sales
20/80 Target Allocation		$	467,753,944		$	253,450,823
40/60 Target Allocation		$	527,024,074		$	302,545,870
60/40 Target Allocation		$	588,281,108		$	250,910,196
80/20 Target Allocation		$	226,715,458		$	89,787,263

8. Income Tax Information:

It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended September 30, 2016. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of September 30, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or NAVs per share. As of period end, the following permanent differences attributable to foreign currency transactions, non-deductible expenses, the recognition of partnership income and distributions received from a regulated investment company were reclassified to the following accounts:

	20/80 Target Allocation				40/60 Target Allocation				60/40 Target Allocation				80/20 Target Allocation
Paid-in capital		$	(33,088	)		$	(33,015	)		$	(33,015	)		$	(33,015	)
Undistributed net investment income		$	568,542			$	530,706			$	300,110			$	8,517
Accumulated net realized loss		$	(535,454	)		$	(497,691	)		$	(267,095	)		$	24,498

The tax character of distributions paid was as follows:

	20/80 Target Allocation			40/60 Target Allocation			60/40 Target Allocation			80/20 Target Allocation
Ordinary income
9/30/16		$	5,103,481		$	6,060,249		$	3,646,061		$	1,374,912
9/30/15		$	3,636,940		$	4,968,191		$	2,560,005		$	1,180,002
Long-term capital gains
9/30/16			7,495,007			14,792,018			12,983,503			8,034,416
9/30/15			4,921,102			10,213,217			6,033,022			5,437,681
Total
9/30/16		$	12,598,488		$	20,852,267		$	16,629,564		$	9,409,328
9/30/15		$	8,558,042		$	15,181,408		$	8,593,027		$	6,617,683

As of period end, the tax components of accumulated net earnings were as follows:

	20/80 Target Allocation				40/60 Target Allocation				60/40 Target Allocation				80/20 Target Allocation
Undistributed ordinary income		$	2,612,239			$	2,602,570			$	2,361,722			$	935,108
Capital loss carryforwards			(4,561,632	)			—				—				(694,999	)
Net unrealized gains1			7,085,952				9,375,711				8,727,862				3,335,888
Qualified late-year losses2			—				(6,530,381	)			(2,359,548	)			—
Total		$	5,136,559			$	5,447,900			$	8,730,036			$	3,575,997

¹ The difference between book-basis and tax-basis net unrealized gains were attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain foreign currency contracts and the timing and recognition of partnership income.

² The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 63

Notes to Financial Statements (continued)

As of September 31, 2016, the Funds had capital loss carryforwards, with no expiration dates, available to offset future realized capital gains as follows:

	20/80 Target Allocation			80/20 Target Allocation
No expiration date		$	4,561,632		$	694,999

As of September 30, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

	20/80 Target Allocation				40/60 Target Allocation				60/40 Target Allocation				80/20 Target Allocation
Tax cost		$	407,919,420			$	417,175,908			$	515,937,979			$	206,755,840
Gross unrealized appreciation		$	12,703,211			$	14,811,674			$	10,787,888			$	3,674,836
Gross unrealized depreciation			(5,618,675	)			(5,439,198	)			(2,064,353	)			(340,911	)
Net unrealized appreciation		$	7,084,536			$	9,372,476			$	8,723,535			$	3,333,925

9. Bank Borrowings:

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.1 billion credit agreement with a group of lenders. Under this agreement, the Funds may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.12% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2017 unless extended or renewed. Prior to April 21, 2016, the credit agreement had a fee per annum of 0.06% on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which, if applicable, are included in miscellaneous expenses in the Statements of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended September 30, 2016, the Funds did not borrow under the credit agreement.

10. Principal Risks:

In the normal course of business, through their investments in the Underlying Funds and Master Portfolios, certain Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers of securities owned by the Funds. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

On October 11, 2016, BlackRock implemented certain changes required by amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. The Funds may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00 and which may be subject to redemption gates or liquidity fees under certain circumstances.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that they believe the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

Counterparty Credit Risk: Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

64 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right to offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Certain Funds invest a significant portion of their assets in fixed income securities and/or use derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

11. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended September 30, 2016						Year Ended September 30, 2015
20/80 Target Allocation	Shares			Amount			Shares			Amount
Institutional
Shares sold		4,176,939			$46,852,039			1,623,650			$19,013,150
Shares issued in reinvestment of distributions		170,841			1,855,330			66,976			768,219
Shares redeemed		(1,909,802	)		(21,172,231	)		(500,360	)		(5,893,532	)
Net increase		2,437,978			$27,535,138			1,190,266			$13,887,837
Investor A
Shares sold		12,795,391			$140,907,373			4,256,699			$49,443,197
Shares issued in reinvestment of distributions		491,378			5,282,308			327,499			3,723,665
Shares redeemed		(4,520,760	)		(49,544,272	)		(1,710,673	)		(19,947,756	)
Net increase		8,766,009			$  96,645,409			2,873,525			$33,219,106
Investor C
Shares sold		9,877,864			$107,366,347			2,657,154			$30,626,765
Shares issued in reinvestment of distributions		364,582			3,886,438			266,978			3,019,544
Shares redeemed		(2,006,625	)		(21,747,846	)		(1,117,238	)		(12,880,547	)
Net increase		8,235,821			$  89,504,939			1,806,894			$20,765,762
	Period March 28, 20161 to September 30, 2016
	Shares			Amount
Class K
Shares sold		18,349			$200,000
Shares issued in reinvestment of distributions		—			—
Shares redeemed		—			—
Net increase		18,349			$200,000

¹ Commencement of operations.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 65

Notes to Financial Statements (continued)

	Year Ended September 30, 2016							Year Ended September 30, 2015
20/80 Target Allocation (concluded)	Shares			Amount				Shares			Amount
Class R
Shares sold		930,166			$	10,154,945			456,805			$	5,287,345
Shares issued in reinvestment of distributions		54,435				583,000			62,182				704,524
Shares redeemed		(371,068	)			(4,066,224	)		(447,376	)			(5,208,407	)
Net increase		613,533			$	6,671,721			71,611			$	783,462
Total Net Increase		20,071,690			$	220,557,207			5,942,296			$	68,656,167
40/60 Target Allocation
Institutional
Shares sold		3,700,711			$	40,405,290			1,154,511			$	13,895,553
Shares issued in reinvestment of distributions		187,558				2,010,616			127,536				1,497,263
Shares redeemed		(1,786,566	)			(19,381,928	)		(482,530	)			(5,782,595	)
Net increase		2,101,703			$	23,033,978			799,517			$	9,610,221
Investor A
Shares sold		14,594,730			$	160,054,328			3,581,477			$	42,625,440
Shares issued in reinvestment of distributions		904,164				9,629,341			585,356				6,842,828
Shares redeemed		(5,339,762	)			(57,905,490	)		(1,708,558	)			(20,354,918	)
Net increase		10,159,132			$	111,778,179			2,458,275			$	29,113,350
Investor C
Shares sold		10,577,193			$	114,196,566			2,237,943			$	26,517,594
Shares issued in reinvestment of distributions		640,770				6,753,718			405,354				4,702,139
Shares redeemed		(2,322,227	)			(24,941,525	)		(1,495,929	)			(17,717,691	)
Net increase		8,895,736			$	96,008,759			1,147,368			$	13,502,042
	Period March 28, 20161 to September 30, 2016
	Shares			Amount
Class K
Shares sold		22,635			$	243,638
Shares issued in reinvestment of distributions		—				—
Shares redeemed		—				—
Net increase		22,635			$	243,638
	Year Ended September 30, 2016
	Shares			Amount
Class R
Shares sold		1,021,976			$	11,083,624			429,206			$	5,086,160
Shares issued in reinvestment of distributions		121,682				1,292,257			136,804				1,592,398
Shares redeemed		(512,061	)			(5,630,818	)		(554,704	)			(6,630,272	)
Net increase		631,597			$	6,745,063			11,306			$	48,286
Total Net Increase		21,810,803			$	237,809,617			4,416,466			$	52,273,899
1 Commencement of operations.

66 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Notes to Financial Statements (continued)

	Year Ended September 30, 2016						Year Ended September 30, 2015
60/40 Target Allocation	Shares			Amount			Shares			Amount
Institutional
Shares sold		5,696,944		$	67,410,669			640,616			$ 8,286,007
Shares issued in reinvestment of distributions		162,731			1,889,379			23,167			297,696
Shares redeemed		(1,465,669	)		(17,161,652	)		(267,994	)		(3,486,458	)
Net increase		4,394,006		$	52,138,396			395,789			$ 5,097,245
Investor A
Shares sold		19,929,915		$	233,437,895			2,816,163			$ 35,923,382
Shares issued in reinvestment of distributions		678,487			7,775,460			311,802			3,966,142
Shares redeemed		(3,209,119	)		(37,541,849	)		(891,706	)		(11,523,287	)
Net increase		17,399,283		$	203,671,506			2,236,259			$ 28,366,237
Investor C
Shares sold		8,468,368		$	96,760,612			1,505,983			$18,987,797
Shares issued in reinvestment of distributions		466,288			5,246,129			244,331			3,063,920
Shares redeemed		(1,919,281	)		(21,863,111	)		(698,184	)		(8,841,526	)
Net increase		7,015,375		$	80,143,630			1,052,130			$13,210,191
	Period March 28, 20161 to September 30, 2016
	Shares			Amount
Class K
Shares sold		22,888		$	264,800
Shares issued in reinvestment of distributions		—			—
Shares redeemed		—			—
Net increase		22,888		$	264,800
	Year Ended September 30, 2016
	Shares			Amount
Class R
Shares sold		1,040,558		$	12,013,081			258,670			$  3,309,951
Shares issued in reinvestment of distributions		70,779			809,008			51,571			653,921
Shares redeemed		(233,068	)		(2,703,410	)		(234,024	)		(3,054,836	)
Net increase		878,269		$	10,118,679			76,217			$     909,036
Total Net Increase		29,709,821		$	346,337,011			3,760,395			$47,582,709
80/20 Target Allocation
Institutional
Shares sold		3,030,535			$32,534,504			623,736			$ 7,803,114
Shares issued in reinvestment of distributions		104,529			1,113,235			21,170			262,502
Shares redeemed		(798,096	)		(8,694,312	)		(164,043	)		(2,042,616	)
Net increase		2,336,968			$24,953,427			480,863			$ 6,023,000
1 Commencement of operations.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 67

Notes to Financial Statements (concluded)

	Year Ended September 30, 2016							Year Ended September 30, 2015
80/20 Target Allocation (concluded)	Shares			Amount				Shares			Amount
Investor A
Shares sold		10,107,290			$	108,833,049			1,738,837			$	21,401,923
Shares issued in reinvestment of distributions		471,920				4,950,443			251,516				3,083,588
Shares redeemed		(2,105,772	)			(22,650,717	)		(858,959	)			(10,807,374	)
Net increase		8,473,438			$	91,132,775			1,131,394			$	13,678,137
Investor C
Shares sold		2,711,047			$	28,010,194			580,599			$	6,919,593
Shares issued in reinvestment of distributions		233,284				2,384,193			166,551				1,996,982
Shares redeemed		(712,018	)			(7,372,090	)		(412,224	)			(5,022,523	)
Net increase		2,232,313			$	23,022,297			334,926			$	3,894,052
	Period March 28, 20161 to September 30, 2016
	Shares			Amount
Class K
Shares sold		20,004			$	208,501
Shares issued in reinvestment of distributions		—				—
Shares redeemed		—				—
Net increase		20,004			$	208,501
	Year Ended September 30, 2016
	Shares			Amount
Class R
Shares sold		574,060			$	6,023,865			159,182			$	2,002,312
Shares issued in reinvestment of distributions		72,144				752,466			84,051				1,022,903
Shares redeemed		(270,194	)			(2,852,904	)		(288,802	)			(3,616,980	)
Net increase (decrease)		376,010			$	3,923,427			(45,569	)		$	(591,765	)
Total Net Increase		13,438,733			$	143,240,427			1,901,614			$	23,003,424
1 Commencement of operations.

At September 30, 2016, shares owned by BlackRock HoldCo 2, Inc., an affiliate of the Funds, were as follows:    

Shares	20/80 Target Allocation		40/60 Target Allocation		60/40 Target Allocation		80/20 Target Allocation
Class K		18,349		18,727		17,467		19,231

12. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

68 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of BlackRock Funds II and Shareholders of BlackRock 20/80 Target Allocation Fund, BlackRock 40/60 Target Allocation Fund, BlackRock 60/40 Target Allocation Fund and BlackRock 80/20 Target Allocation Fund:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock 20/80 Target Allocation Fund, BlackRock 40/60 Target Allocation Fund, BlackRock 60/40 Target Allocation Fund and BlackRock 80/20 Target Allocation Fund (collectively the “Funds”), each a series of BlackRock Funds II, as of September 30, 2016 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2016, by correspondence with the custodian, transfer agent and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of BlackRock 20/80 Target Allocation Fund, BlackRock 40/60 Target Allocation Fund, BlackRock 60/40 Target Allocation Fund and BlackRock 80/20 Target Allocation Fund, each of BlackRock Funds II as of September 30, 2016, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 23, 2016

Important Tax Information (Unaudited)

During the fiscal year ended September 30, 2016, the following information is provided with respect to distributions paid:

	Payable Dates		Qualified Dividend Income for Individuals1,2			Dividends Qualifying for the Dividends Received Deduction for Corporations1,2			Foreign Source Income1,2			Foreign Taxes Paid Per Share3			Federal Obligation Interest2,4			Interest-Related Dividends and Qualified Short- Term Capital Gains for non- U.S. Residents5			Long Term Capital Gain Per Share
20/80 Target Allocation		12/31/15		15.36	%		8.89	%		1.67	%		$	0.000585		5.37	%		60.85	%		$	0.393612
40/60 Target Allocation		12/31/15		26.90	%		17.75	%		2.26	%		$	0.000885		3.92	%		56.37	%		$	0.704934
60/40 Target Allocation		12/31/15		46.40	%		28.15	%		2.11	%		$	0.000795		2.11	%		41.21	%		$	0.855299
80/20 Target Allocation		12/31/15		63.56	%		34.36	%		3.62	%		$	0.001031		0.82	%		33.81	%		$	1.215119

¹ The Funds hereby designate the percentage indicated above or the maximum amount allowable by law.

² Expressed as a percentage of the ordinary income cash distribution grossed-up for foreign taxes.

³ The foreign taxes paid represent taxes incurred by the Funds on income received by the Funds from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid.

⁴ The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

⁵ Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 69

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds II (the “Trust”) met in person on April 12, 2016 (the “April Meeting”) and May 10-11, 2016 (the “May Meeting”) to consider the approval of the investment advisory agreement (the “Advisory Agreement” or the “Agreement”) between the Trust, on behalf of BlackRock 20/80 Target Allocation Fund (the “20/80 Fund”), BlackRock 40/60 Target Allocation Fund (the “40/60 Fund”), BlackRock 60/40 Target Allocation Fund (the “60/40 Fund”) and BlackRock 80/20 Target Allocation Fund (the “80/20 Fund”) (each, a “Fund,” and collectively, the “Funds”), and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), each Fund’s investment advisor.

Activities and Composition of the Board

On the date of the May Meeting, the Board consisted of thirteen individuals, ten of whom were not “interested persons” of each Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). One of the Board Members is a non-management interested Board Member by virtue of his former positions with BlackRock, Inc. and its affiliates. The Board Members are responsible for the oversight of the operations of each Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreement

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, the Board assessed, among other things, the nature, extent and quality of the services provided to each Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; administrative and shareholder services; the oversight of fund service providers; marketing; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmark, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) each Fund’s compliance with its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, exchange-traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to each Fund; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreement

The Approval Process: Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreement. The Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) on Fund fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of each Fund as compared with a peer group of funds as determined by Broadridge¹; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, sub-advised mutual funds, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock; and (g) sales and redemption data regarding each Fund’s shares.

¹  Funds are ranked by Broadridge in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

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Disclosure of Investment Advisory Agreement (continued)

At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May Meeting.

At the May Meeting, the Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) each Fund’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance metrics as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with each Fund; and (g) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates, securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds, a relevant benchmark, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing each Fund’s performance and each Fund’s investment objective(s), strategies and outlook.

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, the Board considered the quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide each Fund with administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) preparing periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers; (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 such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing other administrative functions necessary for the operation of the Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Broadridge data that was prepared by BlackRock. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to other funds in its applicable Broadridge category. The Board was provided with a description of the methodology used by Broadridge to select peer funds and periodically meets with Broadridge representatives to review its methodology. The Board was provided with information on the composition of the Broadridge performance universes and expense universes. The Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

In evaluating performance, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, the Board recognized that it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

The Board noted that for each of the one-, three- and five-year periods reported, the 20/80 Fund ranked in the first quartile against its Broadridge Performance Universe. The Board noted that effective June 3, 2015, the 20/80 Fund had undergone a change in its investment strategy as well as

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Disclosure of Investment Advisory Agreement (continued)

changes within the portfolio management team, and in that connection had changed its name from BlackRock Conservative Prepared Portfolio to BlackRock 20/80 Target Allocation Fund.

The Board noted that for each of the one-, three- and five-year periods reported, the 40/60 Fund ranked in the first quartile against its Broadridge Performance Universe. The Board noted that effective June 3, 2015, the 40/60 Fund had undergone a change in its investment strategy as well as changes within the portfolio management team, and in that connection had changed its name from BlackRock Moderate Prepared Portfolio to BlackRock 40/60 Target Allocation Fund.

The Board noted that for the one-, three- and five-year periods reported, the 60/40 Fund ranked in the first, first and second quartiles, respectively, against its Broadridge Performance Universe. The Board noted that effective June 3, 2015, the 60/40 Fund had undergone a change in its investment strategy as well as changes within the portfolio management team, and in that connection had changed its name from BlackRock Growth Prepared Portfolio to BlackRock 60/40 Target Allocation Fund.

The Board noted that for the one-, three- and five-year periods reported, the 80/20 Fund ranked in the third, first and first quartiles, respectively, against its Broadridge Performance Universe. The Board and BlackRock reviewed and discussed the reasons for the 80/20 Fund’s underperformance during the one-year period. The Board noted that effective June 3, 2015, the 80/20 Fund had undergone a change in its investment strategy as well as changes within the portfolio management team, and in that connection had changed its name from BlackRock Aggressive Growth Prepared Portfolio to BlackRock 80/20 Target Allocation Fund.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Broadridge category. 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. The Board also compared each Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Broadridge category. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non 12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered 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 received and reviewed statements relating to BlackRock’s financial condition. The Board noted that BlackRock does not charge the Funds an advisory fee. The Board reviewed BlackRock’s profitability with respect to other funds the Board currently oversees for the year ended December 31, 2015 compared to available aggregate profitability data provided for the prior two years. The Board reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund level is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs of managing the Funds, to each Fund. The Board may receive and review information from independent third parties as part of its annual evaluation. 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 Agreement and to continue 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, assumption of risk, and liability profile in servicing each Fund 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 and institutional account product channels, as applicable.

The Board noted that BlackRock will not receive any advisory fees from the 20/80 Fund for its investment advisory service, and that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board also noted that the 20/80 Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board further noted that BlackRock has contractually agreed to a cap on the 20/80 Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis. The contractual expense cap reduction was implemented on June 3, 2015.

The Board noted that BlackRock will not receive any advisory fees from the 40/60 Fund for its investment advisory service, and that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board also noted that the 40/60 Fund’s contractual management

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Disclosure of Investment Advisory Agreement (concluded)

fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board further noted that BlackRock has contractually agreed to a cap on the 40/60 Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class-by-class basis, as applicable. The contractual expense cap reduction was implemented on June 3, 2015.

The Board noted that BlackRock will not receive any advisory fees from the 60/40 Fund for its investment advisory service, and that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board also noted that the 60/40 Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board further noted that BlackRock has contractually agreed to a cap on the 60/40 Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. The Board noted that BlackRock proposed, and the Board agreed to, changes to the contractual expense cap on a class-by-class basis. The contractual expense cap reduction was implemented on June 3, 2015.

The Board noted that BlackRock will not receive any advisory fees from the 80/20 Fund for its investment advisory service, and that the varying fee structure for fund of funds can limit the value of management fee comparisons. The Board also noted that the 80/20 Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers. The Board further noted that BlackRock has contractually agreed to a cap on the 80/20 Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps, as applicable. The Board also considered the extent to which each Fund benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable each Fund to more fully participate in these economies of scale. The Board considered each Fund’s asset levels and whether the current fee schedule was appropriate. In its consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

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 their respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and 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 each Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in affiliated ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that a Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2017. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 73

Officers and Trustees

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees2
Robert M. Hernandez 1944	Chair of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, RTI International Metals, Inc. from 1990 to 2015; Director, TE Connectivity (electronics) from 2006 to 2012.	28 RICs consisting of 98 Portfolios	Chubb Limited (insurance company); Eastman Chemical Company
Fred G. Weiss 1941	Vice Chair of the Board and Trustee	Since 2007	Managing Director, FGW Consultancy LLC (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000.	28 RICs consisting of 98 Portfolios	Allergan plc (pharmaceuticals)
James H. Bodurtha 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting and investing firm) from 1996 to 2013 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980; Director, ICI Mutual since 2010.	28 RICs consisting of 98 Portfolios	None
Bruce R. Bond 1946	Trustee	Since 2007	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	28 RICs consisting of 98 Portfolios	None
Donald W. Burton 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The Burton Partnership (QP), LP (an investment partnership) since 2000; Managing General Partner, The South Atlantic Venture Funds from 1983 to 2012; Director, IDology, Inc. (technology solutions) since 2006; Director, Knology, Inc. (telecommunications) from 1996 to 2012; Director, Capital Southwest (financial) from 2006 to 2012; Director, Besito (restaurant) since 2013; Director, PDQ South Texas (restaurant) since 2013; Director, ITC/Talon (data) since 2015.	28 RICs consisting of 98 Portfolios	None
Honorable Stuart E. Eizenstat 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca-Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide, LLC (risk management) from 2007 to 2012; Member of the International Advisory Board GML Ltd. (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) from 2004 to 2009.	28 RICs consisting of 98 Portfolios	Alcatel-Lucent (telecommunications); Global Specialty Metallurgical; UPS Corporation (delivery service)
John F. O’Brien 1943	Trustee	Since 2007	Trustee, Woods Hole Oceanographic Institute since 2003 and Chairman thereof from 2009 to 2015; Co-Founder and Managing Director, Board Leaders LLC (director education) since 2005.	28 RICs consisting of 98 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)

74 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Independent Trustees2 (concluded)
Donald C. Opatrny 1952	Trustee	Since 2015	Trustee, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; Member of the Board and Investment Committee, University School since 2007; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; President and Trustee, the Center for the Arts, Jackson Hole since 2011; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014.	28 RICs consisting of 98 Portfolios	None
Roberta Cooper Ramo 1942	Trustee	Since 2007	Shareholder and Attorney, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Director, ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; Vice President, Santa Fe Opera (non-profit) since 2011; Chair, Think New Mexico (non-profit) since 2013; Chairman of the Board, Cooper’s Inc. (retail) from 1999 to 2011.	28 RICs consisting of 98 Portfolios	None
David H. Walsh 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation from 2008 to 2012; Director, The American Museum of Fly Fishing since 1997.	28 RICs consisting of 98 Portfolios	None

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Officers and Trustees (continued)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served3	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Company and Other Investment Company Directorships Held During Past Five Years
Interested Trustees4
Robert Fairbairn 1965	Trustee	Since 2015	Senior Managing Director of BlackRock, Inc. since 2010; Global Head of BlackRock’s Retail and iShares® businesses since 2012; Member of BlackRock’s Global Executive and Global Operating Committees; Head of BlackRock’s Global Client Group from 2009 to 2012; Chairman of BlackRock’s international businesses from 2007 to 2010.	28 RICs consisting of 98 Portfolios	None
Henry Gabbay 1947	Trustee	Since 2007	Consultant, BlackRock, Inc. from 2007 to 2008; Managing Director, BlackRock, Inc. from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly, BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	28 RICs consisting of 98 Portfolios	None
Henry R. Keizer 1956	Trustee	Since 2016	Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, Montpelier Re Holdings, Ltd. (publicly held property and casual reinsurance) from 2013 to 2015; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) in 2004 to 2005 and 2010 to 2012; Director KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010.	28 RICs consisting of 98 Portfolios	Hertz Global Holdings (car rental); WABCO (commercial vehicle safety systems)
John M. Perlowski 1964	Trustee, President and Chief Executive Officer	Since 2015 (Trustee); Since 2010 (President and Chief Executive Officer)	Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.	128 RICs consisting of 315 Portfolios	None
	1  The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. 2  Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or charter or statute, or until December 31 of the year in which he or she turns 75. The Board has determined to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. The Board has unanimously approved extending the mandatory retirement age for Messrs. Walsh and Weiss until January 31, 2017, which the Board believes to be in the best interests of shareholders of the Trust. Interested Trustees serve until their successor is duly elected and qualifies or until their earlier death, resignation, retirement or removal as provided by the Trust’s by-laws or statute, or until December 31 of the year in which they turn 72. 3  Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, those Trustees first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Honorable Stuart E. Eizenstat, 2001; Robert M. Hernandez, 1996; John F. O’Brien, 2005; Roberta Cooper Ramo, 1999; David H. Walsh, 2003; and Fred G. Weiss, 1998. 4  Messrs. Fairbairn and Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Perlowski is also a board member of the BlackRock Closed-End Complex and the BlackRock Equity-Liquidity Complex. Mr. Gabbay may be deemed an “interested person” of the Trust based on his former positions with BlackRock, Inc. and its affiliates. Mr. Keizer may be deemed an “interested person” of the Trust based on his former directorship at another company which is not an affiliate of BlackRock, Inc. It is anticipated that Mr. Keizer will become an Independent Trustee effective January 31, 2017. Messrs. Gabbay and Keizer do not currently serve as officers or employees of BlackRock, Inc. or its affiliates or own any securities of BlackRock, Inc. or The PNC Financial Services Group, Inc. Each of Messrs. Gabbay and Keizer is a non-management Interested Trustee.

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Officers and Trustees (concluded)

Name, Address1 and Year of Birth	Position(s) Held with the Trust	Length of Time Served as an Officer	Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2
Jennifer McGovern 1977	Vice President	Since 2014	Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010.
Neal J. Andrews 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay M. Fife 1970	Treasurer	Since 2007	Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Charles Park 1967	Chief Compliance Officer	Since 2014	Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Fernanda Piedra 1969	Anti-Money Laundering Compliance Officer	Since 2015	Director of BlackRock, Inc. since 2014; Anti-Money Laundering Compliance Officer and Regional Head of Financial Crime for the Americas at BlackRock, Inc. since 2014; Head of Regulatory Changes and Remediation for the Asset Wealth Management Division of Deutsche Bank from 2010 to 2014; Vice President of Goldman Sachs (Anti-Money Laundering/Suspicious Activities Group) from 2004 to 2010.
Benjamin Archibald 1975	Secretary	Since 2012	Managing Director of BlackRock, Inc. since 2014; Director of BlackRock, Inc. from 2010 to 2013; Secretary of the iShares® exchange traded funds since 2015; Secretary of the BlackRock-advised mutual funds since 2012.
	1     The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. 2     Officers of the Trust serve at the pleasure of the Board.
	Further information about the Trust’s Officers and Trustees is available in the Fund’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.

On June 2, 2016, the Board appointed Henry R. Keizer as a Trustee of the Trust, effective July 28, 2016.

On September 26, 2016, the Board appointed Lena G. Goldberg as a Trustee of the Trust, effective November 4, 2016.

Investment Adviser and	Accounting Agent and	Independent Registered	Address of the Trust
Administrator	Transfer Agent	Public Accounting Firm	100 Bellevue Parkway
BlackRock Advisors, LLC	BNY Mellon Investment	Deloitte & Touche LLP	Wilmington, DE 19809
Wilmington, DE 19809	Servicing (US) Inc.	Philadelphia, PA 19103
	Wilmington, DE 19809
Custodian	Distributor	Legal Counsel
The Bank of New York Mellon	BlackRock Investments, LLC	Willkie Farr & Gallagher LLP
New York, NY 10286	New York, NY 10022	New York, NY 10019

BLACKROCK FUNDS II SEPTEMBER 30, 2016 77

Additional Information

      General Information

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling
(800) 441- 7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge, (1) by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Visit http://www.blackrock.com for more information.

      Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal Plans

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.

78 BLACKROCK FUNDS II SEPTEMBER 30, 2016

Additional Information (concluded)

      BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

BLACKROCK FUNDS II SEPTEMBER 30, 2016 79

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless preceded or accompanied by the Funds’ current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

TARGET-9/16-AR

Item 2 –	Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, by calling 1-800-441-7762.
Item 3 –	Audit Committee Financial Expert – The registrant’s board of trustees (the “board of trustees”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:
	Robert M. Hernandez
	Fred G. Weiss
	Stuart E. Eizenstat
	Bruce R. Bond
	Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of trustees in the absence of such designation or identification.
Item 4 –	Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees3
Entity Name	Current     Fiscal Year      End	Previous     Fiscal Year      End	Current     Fiscal Year      End	Previous     Fiscal Year      End	Current     Fiscal Year      End	Previous     Fiscal Year      End	Current     Fiscal Year      End	Previous     Fiscal Year     End
BlackRock 20/80 Target Allocation Fund	$24,713	$24,713	$0	$0	$15,000	$15,000	$0	$0
BlackRock 40/60 Target Allocation Fund	$24,713	$24,713	$0	$0	$15,000	$15,000	$0	$0
BlackRock 60/40 Target Allocation Fund	$24,713	$24,713	$0	$0	$15,000	$15,000	$0	$0
BlackRock 80/20 Target Allocation Fund	$24,713	$24,713	$0	$0	$15,000	$15,000	$0	$0
BlackRock Core Bond Portfolio	$56,738	$56,738	$0	$0	$20,000	$20,000	$0	$0
BlackRock Credit Strategies Income Fund (Formerly BlackRock Secured Credit Portfolio)	$53,888	$53,888	$0	$0	$15,402	$15,402	$0	$0

2

BlackRock GNMA Portfolio	$42,413	$42,413	$0	$0	$15,402	$15,402	$0	$0
BlackRock High Yield Bond Portfolio	$62,413	$62,413	$0	$0	$20,000	$20,000	$0	$0
BlackRock Inflation Protected Bond Portfolio	$33,488	$33,488	$0	$0	$20,000	$20,000	$0	$0
BlackRock Investment Grade Bond Portfolio	$40,063	$40,063	$0	$0	$15,402	$15,402	$0	$0
BlackRock Low Duration Bond Portfolio	$47,638	$47,638	$0	$0	$20,000	$20,000	$0	$0
BlackRock U.S. Government Bond Portfolio	$43,063	$43,063	$0	$0	$15,402	$15,402	$0	$0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$0	$0
(c) Tax Fees2	$0	$0
(d) All Other Fees3	$2,129,000	$2,391,000

¹ The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

² The nature of the services includes tax compliance, tax advice and tax planning.

³ Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or

3

$50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

Entity Name	Current Fiscal Year End	Previous Fiscal Year    End
BlackRock 20/80 Target Allocation Fund	$15,000	$15,000
BlackRock 40/60 Target Allocation Fund	$15,000	$15,000
BlackRock 60/40 Target Allocation Fund	$15,000	$15,000
BlackRock 80/20 Target Allocation Fund	$15,000	$15,000
BlackRock Core Bond Portfolio	$20,000	$20,000
BlackRock Credit Strategies Income Fund (Formerly BlackRock Secured Credit Portfolio)	$15,402	$15,402
BlackRock GNMA Portfolio	$15,402	$15,402
BlackRock High Yield Bond Portfolio	$20,000	$20,000
BlackRock Inflation Protected Bond Portfolio	$20,000	$20,000
BlackRock Investment Grade Bond Portfolio	$15,402	$15,402
BlackRock Low Duration Bond Portfolio	$20,000	$20,000
BlackRock U.S. Government Bond Portfolio	$15,402	$15,402

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,129,000 and $2,391,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Fund Service Providers that were not pre-approved

4

	pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5 –	Audit Committee of Listed Registrants – Not Applicable
Item 6 –	Investments
	(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
	(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
Item 7 –	Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable
Item 8 –	Portfolio Managers of Closed-End Management Investment Companies – Not Applicable
Item 9 –	Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable
Item 10 –	Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 –	Controls and Procedures
	(a) –   The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.
	(b) –   There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12 –	Exhibits attached hereto
	(a)(1) – Code of Ethics – See Item 2
	(a)(2) – Certifications – Attached hereto
	(a)(3) – Not Applicable
	(b) –   Certifications – Attached hereto

5

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Funds II

By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds II

Date: December 2, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds II
Date: December 2, 2016
By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds II

Date: December 2, 2016

6