|
Prospectus
| • | BlackRock LifePath® Dynamic Retirement Fund |
Investor A: LPRAX • Investor
C: LPCRX • Institutional:
STLAX •
Class R: LPRRX
| • | BlackRock LifePath® Dynamic 2025 Fund |
Investor A: LPBAX • Investor
C: LPBCX • Institutional:
LPBIX •
Class R: LPBRX
| • | BlackRock LifePath® Dynamic 2030 Fund |
Investor A: LPRDX • Investor
C: LPCNX • Institutional:
STLDX •
Class R: LPRNX
| • | BlackRock LifePath® Dynamic 2035 Fund |
Investor A: LPJAX • Investor
C: LPJCX • Institutional:
LPJIX •
Class R: LPJRX
| • | BlackRock LifePath® Dynamic 2040 Fund |
Investor A: LPREX • Investor
C: LPCKX • Institutional:
STLEX •
Class R: LPRKX
| • | BlackRock LifePath® Dynamic 2045 Fund |
Investor A: LPHAX • Investor
C: LPHCX • Institutional:
LPHIX •
Class R: LPHRX
| • | BlackRock LifePath® Dynamic 2050 Fund |
Investor A: LPRFX • Investor
C: LPCPX • Institutional:
STLFX •
Class R: LPRPX
| • | BlackRock LifePath® Dynamic 2055 Fund |
Investor A: LPVAX • Investor
C: LPVCX • Institutional:
LPVIX •
Class R: LPVRX
| • | BlackRock LifePath® Dynamic 2060 Fund |
Investor A: LPDAX • Investor
C: LPDCX • Institutional:
LPDIX •
Class R: LPDRX
| • | BlackRock LifePath® Dynamic 2065 Fund |
Investor A: LPWAX • Investor
C: LPWCX • Institutional:
LPWIX •
Class R: LPWRX
This Prospectus contains information you should know
before investing, including information about risks. Please read it before you
invest and keep it for future reference.
The Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
Table
of Contents
| For More Information | Funds and Service Providers | Inside Back Cover | ||||
| Additional Information | Back Cover | |||||
LifePath® is a registered service mark
of BlackRock Institutional Trust Company, N.A. and the LifePath products are
covered by U.S. Patents 5,812,987 and 6,336,102.
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic Retirement
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic Retirement Fund
(“LifePath Dynamic Retirement Fund” or the “Fund”), a series of BlackRock Funds
III (the “Trust”), is to seek to provide for retirement outcomes based on
quantitatively measured risk. In pursuit of this objective, the Fund will be
broadly diversified across global asset
classes.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic Retirement Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
1 | |||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
3
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 53 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic Retirement Fund allocates and reallocates its assets among a combination
of equity, bond and money market funds (the “Underlying Funds”) and derivatives
in proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund seeks to provide for retirement outcomes based on quantitatively measured
risk. BFA employs a multi-dimensional approach to assess risk for the Fund and
to determine the Fund’s allocation across asset classes. As part of this
multi-dimensional approach, BFA aims to quantify risk using proprietary risk
measurement tools that, among other things, analyze historical and
forward-looking securities market data, including risk, asset class
correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 46% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 57% of its assets (including notional exposure through
derivatives) in fixed income Underlying Funds and fixed income related
derivatives and approximately -3% of its assets in cash (including cash offsets
from derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the
value of which is derived from another security, a commodity, a currency or an
index. Because the Fund is in its most conservative phase, its allocation
generally does not become more conservative over time, although its
allocation may change to maintain the Fund’s risk
profile.
Factors
such as fund classifications, historical risk and performance, and the
relationship to other Underlying Funds in the Fund are considered when selecting
Underlying Funds. The specific Underlying Funds selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective. See the “Details About the Funds —
Information About the Underlying Funds” section of the prospectus for a list of
the Underlying Funds, their classification into equity, fixed income,
multi-asset or money market funds and a brief description of their investment
objectives and primary investment strategies.
4
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
Retirement Fund, as well as the amount of return you receive on your investment,
may fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk, interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
A
general rise in interest rates has the potential to cause investors to move out
of fixed-income securities on a large scale, which may increase redemptions from
funds that hold large amounts of fixed-income securities. Heavy redemptions
could cause the Fund to sell assets at inopportune times or at a loss or
depressed value and could hurt the Fund’s
performance.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to
fall.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields.
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
5
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and other securities in which it
invests. An investment in the Fund will entail more direct and indirect
costs and expenses than a direct investment in the Underlying Funds. For
example, the Fund indirectly pays a portion of the expenses (including
operating expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses; this will depend on the amount of money you have invested in the
Fund, the length of time you have held your investment, the returns of the
markets over time, the amount you spend in retirement, and your other
assets and income sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities markets.
6
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform
poorly. |
| ∎ |
Commodities
Related Investments Risk— Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
7
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
| ∎ |
Dollar Rolls
Risk — Dollar rolls involve the risk that the market value
of the securities that the Fund is committed to buy may decline below the
price of the securities the Fund has sold. These transactions may involve
leverage. |
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
8
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risk — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected
composition. |
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be
reduced.
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
value.
9
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until
maturity.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of
capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
Mortgage- and
Asset-Backed Securities Risks — Mortgage- and asset-backed
securities represent interests in “pools” of mortgages or other assets,
including consumer loans or receivables held in trust. Mortgage- and
asset-backed securities are subject to credit, interest rate, prepayment
and extension risks. These securities also are subject to risk of default
on the underlying mortgage or asset, particularly during periods of
economic downturn. Small movements in interest rates (both increases and
decreases) may quickly and significantly reduce the value of certain
mortgage-backed securities. |
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax
base.
Revenue Bonds Risks — These payments depend on
the money earned by the particular facility or class of facilities, or the
amount of revenues derived from another
source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for
repayment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
10
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose
money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. Although the issuer does not pledge its unlimited taxing power
for payment of the lease obligation, the lease obligation is secured by the
leased property.
Tax‑Exempt Status Risk — The Fund and its
investment manager will rely on the opinion of issuers’ bond counsel and, in the
case of derivative securities, sponsors’ counsel, on the tax‑exempt status of
interest on municipal bonds and payments under derivative securities. Neither
the Fund nor its investment manager will independently review the bases for
those tax opinions, which may ultimately be determined to be incorrect and
subject the Fund and its shareholders to substantial tax
liabilities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
11
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured obligations of the
borrower. |
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. An economic downturn generally leads to a higher non‑payment
rate, and a senior loan may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a senior loan may
decline in value or become illiquid, which would adversely affect the
senior loan’s value. No active trading market may exist for certain senior
loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it
difficult to value senior loans. Although senior loans in which the Fund
will invest generally will be secured by specific collateral, there can be
no assurance that liquidation of such collateral would satisfy the
borrower’s obligation in the event of non‑payment of scheduled interest or
principal or that such collateral could be readily liquidated. To the
extent that a senior loan is collateralized by stock in the borrower or
its subsidiaries, such stock may lose all of its value in the event of the
bankruptcy of the borrower. Uncollateralized senior loans involve a
greater risk of loss. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While
the |
12
|
creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral
agencies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, index or reference obligation and will also be subject to
counterparty risk. The Fund may have the right to receive payments only
from the structured security, and generally does not have direct rights
against the issuer or the entity that sold the assets to be securitized.
In addition to the general risks associated with debt securities discussed
herein, structured securities carry additional risks, including, but not
limited to: the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; the quality of
the collateral may decline in value or default; and the possibility that
the structured securities are subordinate to other classes. The Fund is
permitted to invest in a class of structured securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities.
Structured securities are typically sold in private placement
transactions, and there currently is no active trading market for
structured securities. Structured securities are based upon the movement
of one or more factors, including currency exchange rates, interest rates,
reference bonds and stock indices, and changes in interest rates and
impact of these factors may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause
the interest rate on the structured security to be reduced to zero.
Certain issuers of such structured securities may be deemed to be
“investment companies” as defined in the Investment Company Act. As a
result, the Fund’s investment in such securities may be limited by certain
investment restrictions contained in the Investment Company
Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
13
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. The Fund may invest in beneficial interests in
a special purpose trust formed for the purpose of holding Municipal Bonds
contributed by one or more funds (a “TOB Trust”) on either a non‑recourse
or recourse basis. If the Fund invests in a TOB Trust on a recourse basis,
it could suffer losses in excess of the value of its TOB
Residuals. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given
time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject
to |
14
|
substantially
greater price fluctuations during periods of changing market interest
rates than are comparable securities that pay interest currently. Longer
term zero coupon bonds are more exposed to interest rate risk than shorter
term zero coupon bonds. These investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of
return to attract investors who are willing to defer receipt of
cash. |
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic Retirement Fund
As
of 12/31
15
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 11.67 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –10.24 % (quarter
ended March 31,
2020 ).
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic Retirement Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic Retirement Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic Retirement Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic Retirement Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic Retirement Fund Custom Benchmark (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Bloomberg
U.S. Aggregate Bond Index (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
16
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic Retirement Fund each day the
New York Stock Exchange is open. To purchase or sell shares you should contact
your Financial Intermediary, or, if you hold your shares through BlackRock, Inc.
or its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee-based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis.
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares. |
$100 for all accounts. |
17
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic Retirement Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
18
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2025
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2025 Fund (“LifePath
Dynamic 2025 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2025 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R
Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
19
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 49 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2025 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2025. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund
held approximately 48% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 55% of its assets (including notional exposure through
derivatives) in fixed income Underlying Funds and fixed income related
derivatives and approximately -3% of its assets in cash (including cash offsets
from derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
20
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target
date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. BFA may determine, in light of market conditions or
other factors, that a greater variation is warranted to protect the Fund or
achieve its investment objective. Investments in Underlying Funds will be
allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
21
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2025 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk, interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
22
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
A
general rise in interest rates has the potential to cause investors to move out
of fixed-income securities on a large scale, which may increase redemptions from
funds that hold large amounts of fixed-income securities. Heavy redemptions
could cause the Fund to sell assets at inopportune times or at a loss or
depressed value and could hurt the Fund’s
performance.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to
fall.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields.
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and other securities in which it
invests. An investment in the Fund will entail more direct and indirect
costs and expenses than a direct investment in the Underlying Funds. For
example, the Fund indirectly pays a portion of the expenses (including
operating expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
23
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform
poorly. |
24
| ∎ |
Commodities
Related Investments Risk— Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
| ∎ |
Dollar Rolls
Risk — Dollar rolls involve the risk that the market value
of the securities that the Fund is committed to buy may decline below the
price of the securities the Fund has sold. These transactions may involve
leverage. |
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
25
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory
oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments
position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other
assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities
laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risk — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected composition. |
26
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be
reduced.
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
value.
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until
maturity.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of
capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
Mortgage- and
Asset-Backed Securities Risks — Mortgage- and asset-backed
securities represent interests in “pools” of mortgages or other assets,
including consumer loans or receivables held in trust. Mortgage- and
asset-backed securities are subject to credit, interest rate, prepayment
and extension risks. These securities also are subject to risk of default
on the underlying mortgage or asset, particularly during periods of
economic downturn. Small movements in interest rates (both increases and
decreases) may quickly and significantly reduce the value of certain
mortgage-backed securities. |
27
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax
base.
Revenue Bonds Risks — These payments depend on
the money earned by the particular facility or class of facilities, or the
amount of revenues derived from another
source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for
repayment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose
money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. Although the issuer does not pledge its unlimited taxing power
for payment of the lease obligation, the lease obligation is secured by the
leased property.
Tax‑Exempt Status Risk — The Fund and its
investment manager will rely on the opinion of issuers’ bond counsel and, in the
case of derivative securities, sponsors’ counsel, on the tax‑exempt status of
interest on municipal bonds and payments under derivative securities. Neither
the Fund nor its investment manager will independently review the bases for
those tax opinions, which may ultimately be determined to be incorrect and
subject the Fund and its shareholders to substantial tax
liabilities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
28
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured obligations of the
borrower. |
29
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. An economic downturn generally leads to a higher non‑payment
rate, and a senior loan may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a senior loan may
decline in value or become illiquid, which would adversely affect the
senior loan’s value. No active trading market may exist for certain senior
loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it
difficult to value senior loans. Although senior loans in which the Fund
will invest generally will be secured by specific collateral, there can be
no assurance that liquidation of such collateral would satisfy the
borrower’s obligation in the event of non‑payment of scheduled interest or
principal or that such collateral could be readily liquidated. To the
extent that a senior loan is collateralized by stock in the borrower or
its subsidiaries, such stock may lose all of its value in the event of the
bankruptcy of the borrower. Uncollateralized senior loans involve a
greater risk of loss. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral
agencies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
30
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, index or reference obligation and will also be subject to
counterparty risk. The Fund may have the right to receive payments only
from the structured security, and generally does not have direct rights
against the issuer or the entity that sold the assets to be securitized.
In addition to the general risks associated with debt securities discussed
herein, structured securities carry additional risks, including, but not
limited to: the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; the quality of
the collateral may decline in value or default; and the possibility that
the structured securities are subordinate to other classes. The Fund is
permitted to invest in a class of structured securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities.
Structured securities are typically sold in private placement
transactions, and there currently is no active trading market for
structured securities. Structured securities are based upon the movement
of one or more factors, including currency exchange rates, interest rates,
reference bonds and stock indices, and changes in interest rates and
impact of these factors may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause
the interest rate on the structured security to be reduced to zero.
Certain issuers of such structured securities may be deemed to be
“investment companies” as defined in the Investment Company Act. As a
result, the Fund’s investment in such securities may be limited by certain
investment restrictions contained in the Investment Company
Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. The Fund may invest in beneficial interests in
a special purpose trust formed for the purpose of holding Municipal Bonds
contributed by one or more funds (a “TOB Trust”) on either a non‑recourse
or recourse basis. If the Fund invests in a TOB Trust on a recourse basis,
it could suffer losses in excess of the value of its TOB
Residuals. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
31
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given
time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject to substantially greater
price fluctuations during periods of changing market interest rates than
are comparable securities that pay interest currently. Longer term zero
coupon bonds are more exposed to interest rate risk than shorter term zero
coupon bonds. These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of
cash. |
32
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2025 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 13.57 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –13.55 % (quarter
ended March 31,
2020 ).
33
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2025 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2025 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2025 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2025 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2025 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
34
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2025 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee-based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record‑keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
35
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2025 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
36
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2030
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2030 Fund (“LifePath
Dynamic 2030 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2030 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such
contractual arrangements, Independent Expenses will be 0.00%. Such
contractual arrangements may not be terminated prior to July 1, 2034
without the consent of the Board of Trustees of the
Trust. |
37
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 33 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2030 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2030. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 61% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 44% of its assets (including notional exposure through
derivatives) in fixed income Underlying Funds and fixed income related
derivatives and approximately -5% of its assets in cash (including cash offsets
from derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
38
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target
date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. BFA may determine, in light of market conditions or
other factors, that a greater variation is warranted to protect the Fund or
achieve its investment objective. Investments in Underlying Funds will be
allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
39
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2030 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk, interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
40
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
A
general rise in interest rates has the potential to cause investors to move out
of fixed-income securities on a large scale, which may increase redemptions from
funds that hold large amounts of fixed-income securities. Heavy redemptions
could cause the Fund to sell assets at inopportune times or at a loss or
depressed value and could hurt the Fund’s
performance.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to
fall.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields.
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and other securities in which it
invests. An investment in the Fund will entail more direct and indirect
costs and expenses than a direct investment in the Underlying Funds. For
example, the Fund indirectly pays a portion of the expenses (including
operating expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
41
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
42
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform
poorly. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
43
| ∎ |
Dollar Rolls
Risk — Dollar rolls involve the risk that the market value
of the securities that the Fund is committed to buy may decline below the
price of the securities the Fund has sold. These transactions may involve
leverage. |
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory
oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments
position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other
assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities
laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risk — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
44
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected
composition. |
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be
reduced.
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
value.
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until
maturity.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of
capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
45
| ∎ |
Mortgage- and
Asset-Backed Securities Risks — Mortgage- and asset-backed
securities represent interests in “pools” of mortgages or other assets,
including consumer loans or receivables held in trust. Mortgage- and
asset-backed securities are subject to credit, interest rate, prepayment
and extension risks. These securities also are subject to risk of default
on the underlying mortgage or asset, particularly during periods of
economic downturn. Small movements in interest rates (both increases and
decreases) may quickly and significantly reduce the value of certain
mortgage-backed securities. |
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax
base.
Revenue Bonds Risks — These payments depend on
the money earned by the particular facility or class of facilities, or the
amount of revenues derived from another
source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for
repayment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose
money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. Although the issuer does not pledge its unlimited taxing power
for payment of the lease obligation, the lease obligation is secured by the
leased property.
Tax‑Exempt Status Risk — The Fund and its
investment manager will rely on the opinion of issuers’ bond counsel and, in the
case of derivative securities, sponsors’ counsel, on the tax‑exempt status of
interest on municipal bonds and payments under derivative securities. Neither
the Fund nor its investment manager will independently review the bases for
those tax opinions, which may ultimately be determined to be incorrect and
subject the Fund and its shareholders to substantial tax
liabilities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
46
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured obligations of the
borrower. |
47
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. An economic downturn generally leads to a higher non‑payment
rate, and a senior loan may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a senior loan may
decline in value or become illiquid, which would adversely affect the
senior loan’s value. No active trading market may exist for certain senior
loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it
difficult to value senior loans. Although senior loans in which the Fund
will invest generally will be secured by specific collateral, there can be
no assurance that liquidation of such collateral would satisfy the
borrower’s obligation in the event of non‑payment of scheduled interest or
principal or that such collateral could be readily liquidated. To the
extent that a senior loan is collateralized by stock in the borrower or
its subsidiaries, such stock may lose all of its value in the event of the
bankruptcy of the borrower. Uncollateralized senior loans involve a
greater risk of loss. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral
agencies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
48
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, index or reference obligation and will also be subject to
counterparty risk. The Fund may have the right to receive payments only
from the structured security, and generally does not have direct rights
against the issuer or the entity that sold the assets to be securitized.
In addition to the general risks associated with debt securities discussed
herein, structured securities carry additional risks, including, but not
limited to: the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; the quality of
the collateral may decline in value or default; and the possibility that
the structured securities are subordinate to other classes. The Fund is
permitted to invest in a class of structured securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities.
Structured securities are typically sold in private placement
transactions, and there currently is no active trading market for
structured securities. Structured securities are based upon the movement
of one or more factors, including currency exchange rates, interest rates,
reference bonds and stock indices, and changes in interest rates and
impact of these factors may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause
the interest rate on the structured security to be reduced to zero.
Certain issuers of such structured securities may be deemed to be
“investment companies” as defined in the Investment Company Act. As a
result, the Fund’s investment in such securities may be limited by certain
investment restrictions contained in the Investment Company
Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. The Fund may invest in beneficial interests in
a special purpose trust formed for the purpose of holding Municipal Bonds
contributed by one or more funds (a “TOB Trust”) on either a non‑recourse
or recourse basis. If the Fund invests in a TOB Trust on a recourse basis,
it could suffer losses in excess of the value of its TOB
Residuals. |
| ∎ |
Tracking Error Risk — The Fund may be subject to tracking
error, which is the divergence of an Underlying Fund’s performance from
that of its underlying index. Tracking error may occur because of
differences between the securities (including shares of the Underlying
Funds) and other instruments held in an Underlying Fund’s portfolio and
those included in its underlying index, pricing differences (including, as
applicable, differences between a security’s price at the local market
close and an Underlying Fund’s valuation of a security at the time of
calculation of an Underlying Fund’s NAV, differences in transaction costs,
an Underlying Fund’s holding of uninvested cash, differences in timing of
the accrual of or the valuation of dividends or other distributions,
interest, the requirements to maintain pass-through tax treatment,
portfolio transactions carried out to minimize the distribution of capital
gains to shareholders, changes to an underlying index and the cost to an
Underlying Fund of complying with various new or existing regulatory
requirements, among other reasons. These risks may be heightened during
times of increased market volatility or other unusual market conditions.
In addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
49
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given
time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject to substantially greater
price fluctuations during periods of changing market interest rates than
are comparable securities that pay interest currently. Longer term zero
coupon bonds are more exposed to interest rate risk than shorter term zero
coupon bonds. These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of
cash. |
50
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2030 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 15.30 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –16.62 % (quarter
ended March 31,
2020 ).
51
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2030 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2030 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2030 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2030 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2030 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
52
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2030 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform. |
$100 for all accounts. |
53
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis.
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2030 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
54
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2035
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2035 Fund (“LifePath
Dynamic 2035 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2035 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
55
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 19 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2035 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2035. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 72% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 28% of its assets (including notional exposure through
derivatives) in fixed income Underlying Funds and fixed income related
derivatives and approximately 0% of its assets in cash (including cash offsets
from derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
56
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. BFA may determine, in light of market conditions or
other factors, that a greater variation is warranted to protect the Fund or
achieve its investment objective. Investments in Underlying Funds will be
allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
57
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2035 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk, interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
58
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
A
general rise in interest rates has the potential to cause investors to move out
of fixed-income securities on a large scale, which may increase redemptions from
funds that hold large amounts of fixed-income securities. Heavy redemptions
could cause the Fund to sell assets at inopportune times or at a loss or
depressed value and could hurt the Fund’s
performance.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to
fall.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields.
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and other securities in which it
invests. An investment in the Fund will entail more direct and indirect
costs and expenses than a direct investment in the Underlying Funds. For
example, the Fund indirectly pays a portion of the expenses (including
operating expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
59
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform
poorly. |
60
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
| ∎ |
Dollar Rolls
Risk — Dollar rolls involve the risk that the market value
of the securities that the Fund is committed to buy may decline below the
price of the securities the Fund has sold. These transactions may involve
leverage. |
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
61
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risk — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected composition. |
62
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be
reduced.
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
value.
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until
maturity.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of
capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
Mortgage- and
Asset-Backed Securities Risks — Mortgage- and asset-backed
securities represent interests in “pools” of mortgages or other assets,
including consumer loans or receivables held in trust. Mortgage- and
asset-backed securities are subject to credit, interest rate, prepayment
and extension risks. These securities also are subject to risk of default
on the underlying mortgage or asset, particularly during periods of
economic downturn. Small movements in interest rates (both increases and
decreases) may quickly and significantly reduce the value of certain
mortgage-backed securities. |
63
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax
base.
Revenue Bonds Risks — These payments depend on
the money earned by the particular facility or class of facilities, or the
amount of revenues derived from another
source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for
repayment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose
money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. Although the issuer does not pledge its unlimited taxing power
for payment of the lease obligation, the lease obligation is secured by the
leased property.
Tax‑Exempt Status Risk — The Fund and its
investment manager will rely on the opinion of issuers’ bond counsel and, in the
case of derivative securities, sponsors’ counsel, on the tax‑exempt status of
interest on municipal bonds and payments under derivative securities. Neither
the Fund nor its investment manager will independently review the bases for
those tax opinions, which may ultimately be determined to be incorrect and
subject the Fund and its shareholders to substantial tax
liabilities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
64
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured obligations of the
borrower. |
65
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. An economic downturn generally leads to a higher non‑payment
rate, and a senior loan may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a senior loan may
decline in value or become illiquid, which would adversely affect the
senior loan’s value. No active trading market may exist for certain senior
loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it
difficult to value senior loans. Although senior loans in which the Fund
will invest generally will be secured by specific collateral, there can be
no assurance that liquidation of such collateral would satisfy the
borrower’s obligation in the event of non‑payment of scheduled interest or
principal or that such collateral could be readily liquidated. To the
extent that a senior loan is collateralized by stock in the borrower or
its subsidiaries, such stock may lose all of its value in the event of the
bankruptcy of the borrower. Uncollateralized senior loans involve a
greater risk of loss. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral
agencies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
66
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, index or reference obligation and will also be subject to
counterparty risk. The Fund may have the right to receive payments only
from the structured security, and generally does not have direct rights
against the issuer or the entity that sold the assets to be securitized.
In addition to the general risks associated with debt securities discussed
herein, structured securities carry additional risks, including, but not
limited to: the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; the quality of
the collateral may decline in value or default; and the possibility that
the structured securities are subordinate to other classes. The Fund is
permitted to invest in a class of structured securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities.
Structured securities are typically sold in private placement
transactions, and there currently is no active trading market for
structured securities. Structured securities are based upon the movement
of one or more factors, including currency exchange rates, interest rates,
reference bonds and stock indices, and changes in interest rates and
impact of these factors may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause
the interest rate on the structured security to be reduced to zero.
Certain issuers of such structured securities may be deemed to be
“investment companies” as defined in the Investment Company Act. As a
result, the Fund’s investment in such securities may be limited by certain
investment restrictions contained in the Investment Company
Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. The Fund may invest in beneficial interests in
a special purpose trust formed for the purpose of holding Municipal Bonds
contributed by one or more funds (a “TOB Trust”) on either a non‑recourse
or recourse basis. If the Fund invests in a TOB Trust on a recourse basis,
it could suffer losses in excess of the value of its TOB
Residuals. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV), differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
67
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given
time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject to substantially greater
price fluctuations during periods of changing market interest rates than
are comparable securities that pay interest currently. Longer term zero
coupon bonds are more exposed to interest rate risk than shorter term zero
coupon bonds. These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of
cash. |
68
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2035 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 17.01 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –18.79 % (quarter
ended March 31,
2020 ).
69
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2035 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2035 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2035 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2035 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2035 Fund Custom Benchmark (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000®
Index (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
70
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2035 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
71
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2035 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
72
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2040
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2040 Fund (“LifePath
Dynamic 2040 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2040 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218
and A-1, respectively, of the prospectus and in the “Purchase of Shares” section
on page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
73
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 11 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2040 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2040. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 83% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 19% of its assets (including notional exposure through
derivatives) in fixed income Underlying Funds and fixed income related
derivatives and approximately -2% of its assets in cash (including cash offsets
from derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
74
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. BFA may determine, in light of market conditions or
other factors, that a greater variation is warranted to protect the Fund or
achieve its investment objective. Investments in Underlying Funds will be
allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
75
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2040 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
76
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
A
general rise in interest rates has the potential to cause investors to move out
of fixed-income securities on a large scale, which may increase redemptions from
funds that hold large amounts of fixed-income securities. Heavy redemptions
could cause the Fund to sell assets at inopportune times or at a loss or
depressed value and could hurt the Fund’s
performance.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to
fall.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields.
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and other securities in which it
invests. An investment in the Fund will entail more direct and indirect
costs and expenses than a direct investment in the Underlying Funds. For
example, the Fund indirectly pays a portion of the expenses (including
operating expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
77
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform
poorly. |
78
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
| ∎ |
Dollar Rolls
Risk — Dollar rolls involve the risk that the market value
of the securities that the Fund is committed to buy may decline below the
price of the securities the Fund has sold. These transactions may involve
leverage. |
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
79
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risk — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected composition. |
80
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be
reduced.
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
value.
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until
maturity.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of
capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
Mortgage- and
Asset-Backed Securities Risks — Mortgage- and asset-backed
securities represent interests in “pools” of mortgages or other assets,
including consumer loans or receivables held in trust. Mortgage- and
asset-backed securities are subject to credit, interest rate, prepayment
and extension risks. These securities also are subject to risk of default
on the underlying mortgage or asset, particularly during periods of
economic downturn. Small movements in interest rates (both increases and
decreases) may quickly and significantly reduce the value of certain
mortgage-backed securities. |
81
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax
base.
Revenue Bonds Risks — These payments depend on
the money earned by the particular facility or class of facilities, or the
amount of revenues derived from another
source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for
repayment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose
money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. Although the issuer does not pledge its unlimited taxing power
for payment of the lease obligation, the lease obligation is secured by the
leased property.
Tax‑Exempt Status Risk — The Fund and its
investment manager will rely on the opinion of issuers’ bond counsel and, in the
case of derivative securities, sponsors’ counsel, on the tax‑exempt status of
interest on municipal bonds and payments under derivative securities. Neither
the Fund nor its investment manager will independently review the bases for
those tax opinions, which may ultimately be determined to be incorrect and
subject the Fund and its shareholders to substantial tax
liabilities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
82
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior secured obligations of the
borrower. |
83
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. An economic downturn generally leads to a higher non‑payment
rate, and a senior loan may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a senior loan may
decline in value or become illiquid, which would adversely affect the
senior loan’s value. No active trading market may exist for certain senior
loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it
difficult to value senior loans. Although senior loans in which the Fund
will invest generally will be secured by specific collateral, there can be
no assurance that liquidation of such collateral would satisfy the
borrower’s obligation in the event of non‑payment of scheduled interest or
principal or that such collateral could be readily liquidated. To the
extent that a senior loan is collateralized by stock in the borrower or
its subsidiaries, such stock may lose all of its value in the event of the
bankruptcy of the borrower. Uncollateralized senior loans involve a
greater risk of loss. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral
agencies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
84
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, index or reference obligation and will also be subject to
counterparty risk. The Fund may have the right to receive payments only
from the structured security, and generally does not have direct rights
against the issuer or the entity that sold the assets to be securitized.
In addition to the general risks associated with debt securities discussed
herein, structured securities carry additional risks, including, but not
limited to: the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; the quality of
the collateral may decline in value or default; and the possibility that
the structured securities are subordinate to other classes. The Fund is
permitted to invest in a class of structured securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured securities typically have higher yields and
present greater risks than unsubordinated structured securities.
Structured securities are typically sold in private placement
transactions, and there currently is no active trading market for
structured securities. Structured securities are based upon the movement
of one or more factors, including currency exchange rates, interest rates,
reference bonds and stock indices, and changes in interest rates and
impact of these factors may cause significant price fluctuations.
Additionally, changes in the reference instrument or security may cause
the interest rate on the structured security to be reduced to zero.
Certain issuers of such structured securities may be deemed to be
“investment companies” as defined in the Investment Company Act. As a
result, the Fund’s investment in such securities may be limited by certain
investment restrictions contained in the Investment Company
Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. The Fund may invest in beneficial interests in
a special purpose trust formed for the purpose of holding Municipal Bonds
contributed by one or more funds (a “TOB Trust”) on either a non‑recourse
or recourse basis. If the Fund invests in a TOB Trust on a recourse basis,
it could suffer losses in excess of the value of its TOB
Residuals. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
85
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given
time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject to substantially greater
price fluctuations during periods of changing market interest rates than
are comparable securities that pay interest currently. Longer term zero
coupon bonds are more exposed to interest rate risk than shorter term zero
coupon bonds. These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of
cash. |
86
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2040 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 18.61 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –21.49 % (quarter
ended March 31,
2020 ).
87
Average Annual Total Returns |
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2040 Fund — Institutional Shares
Return
Before Taxes |
||||||||||||
|
Return
After Taxes on Distributions |
||||||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
||||||||||||
|
LifePath
Dynamic 2040 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
||||||||||||
|
LifePath
Dynamic 2040 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
||||||||||||
|
LifePath
Dynamic 2040 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
||||||||||||
|
LifePath
Dynamic 2040 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
||||||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
||||||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio
Manager of the
Fund
Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
88
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2040 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
89
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2040 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
90
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2045
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2045 Fund (“LifePath
Dynamic 2045 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2045 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
91
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 2 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2045 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2045. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 94% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 9% of its assets (including notional exposure through derivatives)
in fixed income Underlying Funds and fixed income related derivatives and
approximately ‑3% of its assets in cash (including cash offsets from
derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
92
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. BFA may determine, in light of market
conditions or other factors, that a greater variation is warranted to protect
the Fund or achieve its investment objective. Investments in Underlying Funds
will be allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
93
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2045 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset |
94
|
value
will change with changes in the equity and bond markets and the value of
the Underlying Funds and other securities in which it invests. An
investment in the Fund will entail more direct and indirect costs and
expenses than a direct investment in the Underlying Funds. For example,
the Fund indirectly pays a portion of the expenses (including operating
expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
95
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loan
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
96
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected composition. |
97
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk —Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind Bonds Risk
— Similar to zero coupon obligations, pay-in-kind bonds also carry
additional risk as holders of these types of securities realize no cash
until the cash payment date unless a portion of such securities is sold
and, if the issuer defaults, the Fund may obtain no return at all on its
investment. The market price of pay-in-kind bonds is affected by interest
rate changes to a greater extent, and therefore tends to be more volatile,
than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
98
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
99
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
100
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2045 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 19.57 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –22.57 % (quarter
ended March 31,
2020 ).
101
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2045 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2045 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2045 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2045 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2045 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
102
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2045 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
103
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
|
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
| |||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2045 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
104
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2050
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2050 Fund (“LifePath
Dynamic 2050 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2050 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
105
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 7 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2050 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2050. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund
held approximately 101% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 9% of its assets (including notional exposure through derivatives)
in fixed income Underlying Funds and fixed income related derivatives and
approximately -10% of its assets in cash (including cash offsets from
derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
106
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. BFA may determine, in light of market
conditions or other factors, that a greater variation is warranted to protect
the Fund or achieve its investment objective. Investments in Underlying Funds
will be allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
107
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non-investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2050 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and
other |
108
|
securities
in which it invests. An investment in the Fund will entail more direct and
indirect costs and expenses than a direct investment in the Underlying
Funds. For example, the Fund indirectly pays a portion of the expenses
(including operating expenses and management fees) incurred by the
Underlying Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
109
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loan
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
110
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market |
111
|
conditions
or other unforeseen circumstances (such as natural disasters, political
unrest or war) may impact the index provider or a third-party data
provider and could cause the index provider to postpone a scheduled
rebalance. This could cause an underlying index to vary from its normal or
expected
composition. |
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
112
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
113
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
114
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2050 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 19.75 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –22.61 % (quarter
ended March 31,
2020 ).
115
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2050 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2050 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2050 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2050 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2050 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
116
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2050 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
117
| Investor A and Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2050 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
118
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2055
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2055 Fund (“LifePath
Dynamic 2055 Fund” or the “Fund”), a series of BlackRock Funds III (the
“Trust”), is to seek to provide for retirement outcomes based on quantitatively
measured risk. In pursuit of this objective, the Fund will be broadly
diversified across global asset classes, with asset allocations becoming more
conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2055 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A-1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
||||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
||||||||||||||||||||
(expenses that you pay each year as a percentage of the value of your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b-1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
119
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class
R Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 3 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2055 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in affiliated open-end funds
and affiliated exchange-traded funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2055. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund
held approximately 103% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 5% of its assets (including notional exposure through derivatives)
in fixed income Underlying Funds and fixed income related derivatives and
approximately -8% of its assets in cash (including cash offsets from
derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
120
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. BFA may determine, in light of market
conditions or other factors, that a greater variation is warranted to protect
the Fund or achieve its investment objective. Investments in Underlying Funds
will be allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
121
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non-investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2055 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the equity and bond markets
and the value of the Underlying Funds and
other |
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|
securities
in which it invests. An investment in the Fund will entail more direct and
indirect costs and expenses than a direct investment in the Underlying
Funds. For example, the Fund indirectly pays a portion of the expenses
(including operating expenses and management fees) incurred by the
Underlying Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
123
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loan
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
124
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market |
125
|
conditions
or other unforeseen circumstances (such as natural disasters, political
unrest or war) may impact the index provider or a third-party data
provider and could cause the index provider to postpone a scheduled
rebalance. This could cause an underlying index to vary from its normal or
expected
composition. |
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
126
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
127
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
128
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2055 Fund
As
of 12/31
During
the ten-year period shown in the bar chart, the highest
return for a quarter was 19.79 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –22.36 % (quarter
ended March 31,
2020 ).
129
|
|
1 Year | 5 Years | 10 Years | |||||||||
|
LifePath
Dynamic 2055 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2055 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2055 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2055 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2055 Fund Custom Benchmark
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000® Index
(Reflects
no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub-advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub-advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2016 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
130
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2055 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441-7762, by mail (c/o BlackRock Funds III, P.O. Box 534429,
Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com. The Fund’s
initial and subsequent investment minimums generally are as follows, although
the Fund may reduce or waive the minimums in some cases:
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have
entered into an agreement with the Fund’s distributor to offer
Institutional Shares through a no-load program or investment
platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
131
| Investor A and Investor C Shares | Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
|
$2 million
for individuals and “Institutional Investors,” which include, but are not
limited to, endowments, foundations, family offices, local, city, and
state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified accounts
for insurance agents that are registered representatives of an insurance
company’s broker-dealer that has entered into an agreement with the Fund’s
distributor to offer Institutional Shares, and the family members of such
persons. |
| |||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2055 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
132
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2060
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2060 Fund
(“LifePath Dynamic 2060 Fund” or the “Fund”), a series of BlackRock Funds III
(the “Trust”), is to seek to provide for retirement outcomes based on
quantitatively measured risk. In pursuit of this objective, the Fund will be
broadly diversified across global asset classes, with asset allocations becoming
more conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2060 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A‑1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II-89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
% | |||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
%2 | |||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b‑1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such
contractual arrangements, Independent Expenses will be 0.00%. Such
contractual arrangements may not be terminated prior to July 1, 2034
without the consent of the Board of Trustees of the
Trust. |
133
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class R
Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 3 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2060 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily in
affiliated open‑end funds and affiliated exchange-traded funds
(“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2060. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 104% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 5% of its assets (including notional exposure through derivatives)
in fixed income Underlying Funds and fixed income related derivatives and
approximately -9% of its assets in cash (including cash offsets from
derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
134
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target
date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/- 10% relative to
the target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. BFA may determine, in light of market
conditions or other factors, that a greater variation is warranted to protect
the Fund or achieve its investment objective. Investments in Underlying Funds
will be allocated towards the equity and fixed income percentages based on their
classification. The Fund may also seek asset allocation to equity and fixed
income by investing in funds that invest in a mix of equity and fixed income
instruments (“multi-asset funds”). Investments in multi-asset funds will be
allocated towards the equity and fixed income percentages listed for the glide
path based on the multi-asset fund’s underlying investments in equity and fixed
income instruments.
135
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non-investment grade
debt or junk bonds), geographic location (including U.S. and foreign-issued
securities), or other factors. Though BFA seeks to diversify the Fund, certain
Underlying Funds may concentrate their investments in specific sectors or
geographic regions or countries. The percentage allocation to the various styles
of equity and fixed-income are determined at the discretion of the investment
team and can be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2060 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset |
136
|
value
will change with changes in the equity and bond markets and the value of
the Underlying Funds and other securities in which it invests. An
investment in the Fund will entail more direct and indirect costs and
expenses than a direct investment in the Underlying Funds. For example,
the Fund indirectly pays a portion of the expenses (including operating
expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
137
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loan
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
138
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory
oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments
position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other
assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities
laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market |
139
|
conditions
or other unforeseen circumstances (such as natural disasters, political
unrest or war) may impact the index provider or a third-party data
provider and could cause the index provider to postpone a scheduled
rebalance. This could cause an underlying index to vary from its normal or
expected
composition. |
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
140
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
141
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
142
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2060 Fund
As
of 12/31
During
the periods shown in the bar chart, the highest
return for a quarter was 19.59 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –22.74 % (quarter
ended March 31,
2020 ).
143
For
the periods ended 12/31/23
Average
Annual Total Returns |
1 Year | 5 Years |
Since
Inception
( |
|||||||||
|
LifePath
Dynamic 2060 Fund — Institutional Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
Return
After Taxes on Distributions |
% | % | % | |||||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | % | |||||||||
|
LifePath
Dynamic 2060 Fund — Investor A Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2060 Fund — Investor C Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2060 Fund — Class R Shares |
||||||||||||
|
Return
Before Taxes |
% | % | % | |||||||||
|
LifePath
Dynamic 2060 Fund Custom Benchmark (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
|
Russell
1000®
Index (Reflects no deduction for fees, expenses or taxes) |
% | % | % | |||||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub‑advisers are BlackRock International Limited and
BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the Fund’s
sub‑advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2017 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
144
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2060 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441‑7762, by mail (c/o BlackRock Funds III, P.O. Box
534429, Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com.
The Fund’s initial and subsequent investment minimums generally are as follows,
although the Fund may reduce or waive the minimums in some cases:
|
Investor A and
Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Fund’s distributor to offer Institutional
Shares through a no-load program or investment platform
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
$100 for all accounts. |
145
|
Investor A and
Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
|
$2
million for individuals and “Institutional Investors,” which include, but
are not limited to, endowments, foundations, family offices, local, city,
and state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares.
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
| |||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax-exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax-exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2060 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
146
Fund
Overview
Key
Facts About BlackRock LifePath® Dynamic 2065
Fund
Investment Objective
The
investment objective of BlackRock LifePath® Dynamic 2065 Fund
(“LifePath Dynamic 2065 Fund” or the “Fund”), a series of BlackRock Funds III
(the “Trust”), is to seek to provide for retirement outcomes based on
quantitatively measured risk. In pursuit of this objective, the Fund will be
broadly diversified across global asset classes, with asset allocations becoming
more conservative over time.
Fees and Expenses of the Fund
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of LifePath Dynamic 2065 Fund. You may pay other fees, such as brokerage commissions
and other fees to your financial professional or your selected securities
dealer, broker, investment adviser, service provider or industry professional
(including BlackRock Fund Advisors (“BFA”) and its affiliates) (each, a
“Financial Intermediary”), which are not reflected in the table and example
below. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $25,000
in the fund complex advised by BFA or its affiliates. More
information about these and other discounts is available from your Financial
Intermediary and in the “Details About the Share Classes” and the
“Intermediary-Defined Sales Charge Waiver Policies” sections on pages 218 and
A‑1, respectively, of the prospectus and in the “Purchase of Shares” section on
page II‑89 of the Statement of Additional Information.
Shareholder
Fees
(fees
paid directly from your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
% | |||||||||||||||||||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of offering price or
redemption proceeds, whichever is lower) |
%2 | |||||||||||||||||||
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of
your investment) |
Investor A Shares |
Investor C Shares |
Institutional Shares |
Class R Shares | ||||||||||||||||
|
Management
Fee3 |
||||||||||||||||||||
|
Distribution
and/or Service (12b‑1) Fees |
||||||||||||||||||||
|
Other
Expenses3,4,5,6 |
||||||||||||||||||||
|
Administration
Fees3 |
||||||||||||||||||||
|
Independent
Expenses4,5,6 |
||||||||||||||||||||
|
Acquired
Fund Fees and Expenses3,5 |
||||||||||||||||||||
|
Total
Annual Fund Operating Expenses5 |
||||||||||||||||||||
|
Fee
Waivers and/or Expense Reimbursements3,6 |
( |
( |
( |
( |
||||||||||||||||
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements3,6 |
||||||||||||||||||||
| 1 |
| 2 | There
is no CDSC on Investor C Shares after one
year. |
| 3 | As
described in the “Management of the Funds” section of the Fund’s
prospectus beginning on page 234, BlackRock Advisors, LLC (“BAL”) and BFA
have contractually agreed to reimburse the Fund for Acquired Fund Fees and
Expenses up to a maximum amount equal to the combined Management Fee and
Administration Fee of each share class of the Fund, through |
| 4 |
| 5 |
| 6 | Independent
Expenses consist of the Fund’s allocable portion of the fees and expenses
of the independent trustees of the Trust, counsel to such independent
trustees and the independent registered public accounting firm that
provides audit services to the Fund. BAL and BFA have contractually agreed
to reimburse, or provide offsetting credits to, the Fund for Independent
Expenses through June 30, 2034. After giving effect to such contractual
arrangements, Independent Expenses will be 0.00%. Such contractual
arrangements may not be terminated prior to July 1, 2034 without the
consent of the Board of Trustees of the
Trust. |
147
Example:
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in shares of the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
A Shares |
$ | $ | $ | $ | ||||||||||||
|
Investor
C Shares |
$ | $ | $ | $ | ||||||||||||
|
Institutional
Shares |
$ | |
$ | $ | $ | |||||||||||
|
Class R
Shares |
$ | $ | $ | $ | ||||||||||||
You
would pay the following expenses if you did not redeem your
shares:
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
|
Investor
C Shares |
$ | $ | $ | |
$ | |||||||||||
Portfolio
Turnover:
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 4 % of the average value of its
portfolio.
Principal Investment Strategies of the Fund
LifePath
Dynamic 2065 Fund allocates and reallocates its assets among a combination of
equity, bond and money market funds (the “Underlying Funds”) and derivatives in
proportions based on its own comprehensive investment strategy. Under normal
circumstances, the Fund intends to invest primarily
in affiliated open‑end funds and affiliated exchange-traded
funds (“ETFs”), some of which may be index
funds.
The
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). The Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). The Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. The Fund may also use
derivatives to enhance return, in which case their use may involve leveraging
risk. Derivatives that are used as a substitute for taking a position in an
Underlying Fund, to reduce exposure to risks (other than duration or currency
risk) or to enhance return will increase or decrease the Fund’s equity or fixed
income allocations for purposes of the glide path by the notional amount of such
derivatives. Derivatives that are used to manage duration or hedge currency risk
will not be allocated to the Fund’s equity or fixed income allocations for
purposes of the glide path.
The
Fund is designed for investors expecting to retire or to begin withdrawing
assets around the year 2065. The Fund seeks to provide for retirement outcomes
based on quantitatively measured risk. BFA employs a multi-dimensional approach
to assess risk for the Fund and to determine the Fund’s allocation across asset
classes. As part of this multi-dimensional approach, BFA aims to quantify risk
using proprietary risk measurement tools that, among other things, analyze
historical and forward-looking securities market data, including risk, asset
class correlations, and expected returns. As of March 31, 2024, the Fund held
approximately 103% of its assets (including notional exposure through
derivatives) in equity Underlying Funds and equity related derivatives,
approximately 5% of its assets (including notional exposure through derivatives)
in fixed income Underlying Funds and fixed income related derivatives and
approximately -8% of its assets in cash (including cash offsets from
derivatives) and Underlying Funds that invest primarily in money market
instruments. Certain Underlying Funds may invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign securities, emerging market
securities, below investment-grade bonds, commodity-related instruments and
derivative securities or instruments, such as options and futures, the value of
which is derived from another security, a commodity, a currency or an
index.
Under
normal circumstances, the asset allocation will change over time according to a
“glide path” as the Fund approaches its target date. The glide path below
represents the shifting of asset classes over time. As the glide path shows, the
Fund’s asset mix becomes more conservative — prior to retirement — as time
elapses. This reflects the need for reduced investment risks as retirement
approaches and the need for lower volatility of the Fund, which may be a primary
source of income after retirement.
148
The
following chart illustrates the glide path — the target allocation among asset
classes as the Fund approaches its target
date.
The
following table lists the target allocation by years until
retirement:
| Years Until Retirement | Equity Funds (includes REITs)1 |
Fixed‑Income Funds1 | ||||||||
|
45 |
99 | % | 1 | % | ||||||
|
40 |
99 | % | 1 | % | ||||||
|
35 |
99 | % | 1 | % | ||||||
|
30 |
96 | % | 4 | % | ||||||
|
25 |
89 | % | 11 | % | ||||||
|
20 |
79 | % | 21 | % | ||||||
|
15 |
68 | % | 32 | % | ||||||
|
10 |
56 | % | 44 | % | ||||||
|
5 |
43 | % | 57 | % | ||||||
|
0 |
40 | % | 60 | % | ||||||
|
1 BFA may adjust the
allocation to equity and fixed-income in the Fund, based on an assessment
of the current market conditions and the potential contribution of each
asset class to the expected risk and return characteristics of the Fund.
In general, the adjustments will be limited to +/- 10% relative to the
target allocations. At notional value after such adjustments, the Fund’s
equity allocation could exceed 100%. |
| |||||||||
The
asset allocation targets are established by the portfolio managers. The
investment team, including the portfolio managers, meets regularly to assess
market conditions, review the asset allocation targets of the Fund, and
determine whether any changes are required to enable the Fund to achieve its
investment objective.
Although
the asset allocation targets listed for the glide path are general, long-term
targets, BFA may adjust the allocation to equity and fixed-income in the Fund,
based on an assessment of the current market conditions and the potential
contribution of each asset class to the expected risk and return characteristics
of the Fund. In general, the adjustments will be limited to +/‑ 10%
relative to the target allocations. At notional value after such adjustments,
the Fund’s equity allocation could exceed 100%. BFA may determine, in light of
market conditions or other factors, that a greater variation is warranted to
protect the Fund or achieve its investment objective. Investments in Underlying
Funds will be allocated towards the equity and fixed income percentages based on
their classification. The Fund may also seek asset allocation to equity and
fixed income by investing in funds that invest in a mix of equity and fixed
income instruments (“multi-asset funds”). Investments in multi-asset funds will
be allocated towards the equity and fixed income percentages listed for the
glide path based on the multi-asset fund’s underlying investments in equity and
fixed income instruments.
149
BFA’s
second step in the structuring of the Fund is the selection of the Underlying
Funds, equity securities and derivatives. Factors such as fund classifications,
historical risk and performance, and the relationship to other Underlying Funds
in the Fund are considered when selecting Underlying Funds. The specific
Underlying Funds selected for the Fund are determined at BFA’s discretion and
may change as deemed appropriate to allow the Fund to meet its investment
objective. See the “Details About the Funds — Information About the Underlying
Funds” section of the prospectus for a list of the Underlying Funds, their
classification into equity, fixed income, multi-asset or money market funds and
a brief description of their investment objectives and primary investment
strategies. The specific securities or derivatives selected for the Fund are
determined at BFA’s discretion and may change as deemed appropriate to allow the
Fund to meet its investment objective.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Fund. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade debt or
junk bonds), geographic location (including U.S. and foreign-issued securities),
or other factors. Though BFA seeks to diversify the Fund, certain Underlying
Funds may concentrate their investments in specific sectors or geographic
regions or countries. The percentage allocation to the various styles of equity
and fixed-income are determined at the discretion of the investment team and can
be changed to reflect the current market
environment.
Principal Risks of Investing in the Fund
Risk
is inherent in all investing. The value of your investment in LifePath Dynamic
2065 Fund, as well as the amount of return you receive on your investment, may
fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your
investment may not perform as well as other similar investments.
An investment in the Fund is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The following is a summary description of the
principal risks of investing in the Fund and/or the Underlying Funds. The Fund
allocates and reallocates its assets among a combination of Underlying Funds and
derivatives. Therefore, references to the Fund in the description of risks below
may include the Underlying Funds in which the Fund invests, as applicable. The
relative significance of each risk factor below may change over time and you
should review each risk factor carefully.
Principal
Risks of the Fund’s Investment Strategies
| ∎ |
Equity
Securities Risk — Stock markets are volatile. The price of
equity securities fluctuates based on changes in a company’s financial
condition and overall market and economic
conditions. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’S skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, the asset allocation or
the combination of Underlying Funds determined by BFA could result in
underperformance as compared to funds with similar investment objectives
and strategies. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or issuers, exchange, country, group of
countries, region, market, industry, group of industries, sector or asset
class. Local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues like
pandemics or epidemics, recessions, or other events could have a
significant impact on the Fund and its investments. Selection risk is the
risk that the securities selected by Fund management will underperform the
markets, the relevant indices or the securities selected by other funds
with similar investment objectives and investment strategies. This means
you may lose
money. |
An
outbreak of an infectious coronavirus (COVID‑19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Investments in
Underlying Funds Risk — The Fund’s investments are
concentrated in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset |
150
|
value
will change with changes in the equity and bond markets and the value of
the Underlying Funds and other securities in which it invests. An
investment in the Fund will entail more direct and indirect costs and
expenses than a direct investment in the Underlying Funds. For example,
the Fund indirectly pays a portion of the expenses (including operating
expenses and management fees) incurred by the Underlying
Funds. |
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name; this will depend on the amount
of money you have invested in the Fund, the length of time you have held
your investment, the returns of the markets over time, the amount you
spend in retirement, and your other assets and income
sources. |
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks,
including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally
invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose
value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk — The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — Volatility
is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities
markets.
Valuation Risk — Valuation for derivatives may
not be readily available in the market. Valuation may be more difficult in times
of market turmoil since many investors and market makers may be reluctant to
purchase complex instruments or quote prices for
them.
Hedging Risk — Hedges are sometimes subject to
imperfect matching between the derivative and the underlying security, and there
can be no assurance that the Fund’s hedging transactions will be effective. The
use of hedging may result in certain adverse tax
consequences.
Tax Risk — Certain aspects of the tax
treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be
affected by changes in legislation, regulations or other legally binding
authority. Such treatment may be less favorable than that given to a direct
investment in an underlying asset and may adversely affect the timing, character
and amount of income the Fund realizes from its
investments.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. The use of
leverage may cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so to satisfy its obligations or to meet the
applicable requirements of the Investment Company Act of 1940, as amended,
and the rules thereunder. Increases and decreases in the value of the
Fund’s portfolio will be magnified when the Fund uses
leverage. |
151
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — Securities and other
assets or financial instruments in the Underlying Index of an Underlying
Fund or in an Underlying Fund’s portfolio may underperform in comparison
to the general financial markets, a particular financial market or other
asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
for ETFs that invest in securities issued by non‑U.S. issuers or other
securities or instruments that have lower trading
volumes. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loan
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. The market for corporate
loans may be subject to irregular trading activity and wide bid/ask
spreads. In addition, transactions in corporate loans may settle on a
delayed basis. As a result, the proceeds from the sale of corporate loans
may not be readily available to make additional investments or to meet the
Fund’s redemption obligations. To the extent the extended settlement
process gives rise to short-term liquidity needs, the Fund may hold
additional cash, sell investments or temporarily borrow from banks and
other lenders. |
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
152
| ∎ |
Emerging
Markets Risk — Emerging markets are riskier than more
developed markets because they tend to develop unevenly and may never
fully develop. Investments in emerging markets may be considered
speculative. Emerging markets are more likely to experience hyperinflation
and currency devaluations, which adversely affect returns to U.S.
investors. In addition, many emerging securities markets have far lower
trading volumes and less liquidity than developed
markets. |
| ∎ |
Foreign
Securities Risk — Foreign investments often involve special
risks not present in U.S. investments that can increase the chances that
the Fund will lose money. These risks
include: |
| ∎ |
The
Fund generally holds its foreign securities and cash in foreign banks and
securities depositories, which may be recently organized or new to the
foreign custody business and may be subject to only limited or no
regulatory oversight. |
| ∎ |
Changes
in foreign currency exchange rates can affect the value of the Fund’s
portfolio. |
| ∎ |
The
economies of certain foreign markets may not compare favorably with the
economy of the United States with respect to such issues as growth of
gross national product, reinvestment of capital, resources and balance of
payments position. |
| ∎ |
The
governments of certain countries, or the U.S. Government with respect to
certain countries, may prohibit or impose substantial restrictions through
capital controls and/or sanctions on foreign investments in the capital
markets or certain industries in those countries, which may prohibit or
restrict the ability to own or transfer currency, securities, derivatives
or other assets. |
| ∎ |
Many
foreign governments do not supervise and regulate stock exchanges, brokers
and the sale of securities to the same extent as does the United States
and may not have laws to protect investors that are comparable to U.S.
securities laws. |
| ∎ |
Settlement
and clearance procedures in certain foreign markets may result in delays
in payment for or delivery of securities not typically associated with
settlement and clearance of U.S.
investments. |
| ∎ |
The
Fund’s claims to recover foreign withholding taxes may not be successful,
and if the likelihood of recovery of foreign withholding taxes materially
decreases, due to, for example, a change in tax regulation or approach in
the foreign country, accruals in the Fund’s net asset value for such
refunds may be written down partially or in full, which will adversely
affect the Fund’s net asset
value. |
| ∎ |
The
European financial markets have recently experienced volatility and
adverse trends due to concerns about economic downturns in, or rising
government debt levels of, several European countries as well as acts of
war in the region. These events may spread to other countries in Europe
and may affect the value and liquidity of certain of the Fund’s
investments. |
| ∎ |
Geographic
Risk — A natural disaster could occur in a geographic region
in which the Fund invests, which could adversely affect the economy or the
business operations of companies in the specific geographic region,
causing an adverse impact on the Fund’s investments in, or which are
exposed to, the affected region. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
Income
Risk — Income risk is the risk that the Fund’s yield will
vary as short-term securities in its portfolio mature and the proceeds are
reinvested in securities with different interest
rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — There is no guarantee that an Underlying Fund’s
investment results will have a high degree of correlation to those of its
underlying index or that the Underlying Fund will achieve its investment
objective. Market disruptions or high volatility, other unusual market
circumstances and regulatory restrictions could have an adverse effect on
an Underlying Fund’s ability to adjust its exposure to the required levels
in order to track its underlying index. Errors in index data, index
computations or the construction of an underlying index in accordance with
its methodology may occur from time to time and may not be identified and
corrected by the index provider for a period of time or at all, which may
have an adverse impact on an Underlying Fund and its shareholders. Unusual
market conditions or other unforeseen circumstances (such as natural
disasters, political unrest or war) may impact the index provider or a
third-party data provider and could cause the index provider to postpone a
scheduled rebalance. This could cause an underlying index to vary from its
normal or expected composition. |
153
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment
styles. |
| ∎ |
Issuer
Risk — Fund performance depends on the performance of
individual securities to which the Fund has exposure. Changes in the
financial condition or credit rating of an issuer of those securities may
cause the value of the securities to
decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities carry the risk that
the issuer will not be able to meet its obligations and that the equity
securities purchased with the mezzanine investments may lose
value. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not
limited to, software issues and other technological issues). There is no
guarantee that BlackRock’s use of these models will result in effective
investment decisions for the
Fund. |
The
information and data used in the models may be supplied by third parties.
Inaccurate or incomplete data may limit the effectiveness of the models. In
addition, some of the data that BlackRock uses may be historical data, which may
not accurately predict future market movement. There is a risk that the models
will not be successful in selecting investments or in determining the weighting
of investment positions that will enable the Fund to achieve its investment
objective.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the
IPO. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in
cash. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
154
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. The value of the securities the Fund buys
will not necessarily track the value of the underlying investments of the
issuers of such securities. |
| ∎ |
REIT Investment
Risk — Investments in REITs involve unique risks. REITs may
have limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code of
1986, as amended (the “Internal Revenue Code”), which allows REITs to
reduce their corporate taxable income for dividends paid to their
shareholders. In addition, certain issuers of real estate-related
securities may have developed or commenced development on properties and
may develop additional properties in the future. Real estate development
involves significant risks in addition to those involved in the ownership
and operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market supply and demand
factors. In addition, disruptions to creations and redemptions or the
existence of extreme market volatility may result in trading prices that
differ significantly from net asset value. If a shareholder purchases at a
time when the market price is at a premium to the net asset value or sells
at a time when the market price is at a discount to the net asset value,
the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. |
155
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a more limited management group than larger capitalized
companies. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The purchase of structured notes exposes the Fund
to the credit risk of the issuer of the structured product. Structured
notes may be leveraged, increasing the volatility of each structured
note’s value relative to the change in the reference measure. Structured
notes may also be less liquid and more difficult to price accurately than
less complex securities and instruments or more traditional debt
securities. |
| ∎ |
Tracking Error Risk — The Fund may be
subject to tracking error, which is the divergence of an Underlying Fund’s
performance from that of its underlying index. Tracking error may occur
because of differences between the securities (including shares of the
Underlying Funds) and other instruments held in an Underlying Fund’s
portfolio and those included in its underlying index, pricing differences
(including, as applicable, differences between a security’s price at the
local market close and an Underlying Fund’s valuation of a security at the
time of calculation of an Underlying Fund’s NAV, differences in
transaction costs, an Underlying Fund’s holding of uninvested cash,
differences in timing of the accrual of or the valuation of dividends or
other distributions, interest, the requirements to maintain pass-through
tax treatment, portfolio transactions carried out to minimize the
distribution of capital gains to shareholders, changes to an underlying
index and the cost to an Underlying Fund of complying with various new or
existing regulatory requirements, among other reasons. These risks may be
heightened during times of increased market volatility or other unusual
market conditions. In addition, tracking error may result because a fund
incurs fees and expenses, while the Underlying Index does
not. |
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do
so. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
156
Performance Information
Institutional
Shares
ANNUAL
TOTAL RETURNS
LifePath
Dynamic 2065 Fund
As
of 12/31
During
the periods shown in the bar chart, the highest
return for a quarter was 19.75 % (quarter ended
June 30, 2020 ) and the
lowest
return for a quarter was –23.15 % (quarter
ended March 31,
2020 ).
157
For
the periods ended 12/31/23
Average
Annual Total Returns |
1 Year | Since Inception ( |
||||||
|
LifePath
Dynamic 2065 Fund — Institutional Shares |
||||||||
|
Return
Before Taxes |
% | % | ||||||
|
Return
After Taxes on Distributions |
% | % | ||||||
|
Return
After Taxes on Distributions and Sale of Fund Shares |
% | % | ||||||
|
LifePath
Dynamic 2065 Fund — Investor A Shares |
||||||||
|
Return
Before Taxes |
% | % | ||||||
|
LifePath
Dynamic 2065 Fund — Investor C Shares |
||||||||
|
Return
Before Taxes |
% | % | ||||||
|
LifePath
Dynamic 2065 Fund — Class R Shares |
||||||||
|
Return
Before Taxes |
% | % | ||||||
|
LifePath
Dynamic 2065 Fund Custom Benchmark (Reflects no deduction for fees, expenses or taxes) |
% | % | ||||||
|
Russell
1000® Index
(Reflects no deduction for fees, expenses or taxes) |
% | % | ||||||
Investment Adviser
The
Fund’s investment adviser is BlackRock Fund Advisors (previously defined as
“BFA”). The Fund’s sub‑advisers are BlackRock International Limited
and BlackRock (Singapore) Limited. Where applicable, “BFA” refers also to the
Fund’s sub‑advisers.
Portfolio Managers
|
Portfolio
Manager |
Portfolio Manager of the Fund Since |
Title | ||
|
Philip
Green |
2019 | Managing Director of BlackRock, Inc. | ||
|
Chris
Chung, CFA |
2020 | Managing Director of BlackRock, Inc. | ||
|
Michael
Pensky, CFA |
2024 | Managing Director of BlackRock, Inc. | ||
158
Purchase and Sale of Fund Shares
You
may purchase or redeem shares of LifePath Dynamic 2065 Fund each day the New
York Stock Exchange is open. To purchase or sell shares you should contact your
Financial Intermediary, or, if you hold your shares through BlackRock, Inc. or
its affiliates (collectively, “BlackRock”), you should contact BlackRock by
calling (800) 441‑7762, by mail (c/o BlackRock Funds III, P.O. Box
534429, Pittsburgh, Pennsylvania 15253-4429), or online at www.blackrock.com.
The Fund’s initial and subsequent investment minimums generally are as follows,
although the Fund may reduce or waive the minimums in some cases:
|
Investor A and
Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no minimum initial investment for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Fund’s distributor to purchase such shares.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have
entered into an agreement with the Fund’s distributor to offer
Institutional Shares through a no‑load program or investment
platform
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis.
$2 million
for individuals and “Institutional Investors,” which include, but are not
limited to, endowments, foundations, family offices, local, city, and
state governmental institutions, corporations and insurance company
separate accounts who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Fund’s
distributor to purchase such shares. |
$100 for all accounts. |
159
|
Investor A and
Investor C Shares |
Institutional Shares | Class R Shares | ||||
| Minimum Initial Investment (continued) |
$1,000
for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax‑qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Fund’s distributor to offer Institutional Shares, and the family
members of such persons. |
|||||
| Minimum Additional Investment | $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum). | No subsequent minimum. | No subsequent minimum. |
Tax Information
Different
income tax rules apply depending on whether you are invested through a qualified
tax‑exempt plan described in section 401(a) of the Internal Revenue Code. If you
are invested through such a plan (and Fund shares are not “debt-financed
property” to the plan), then the dividends paid by the Fund and the gain
realized from a redemption or exchange of Fund shares will generally not be
subject to U.S. federal income taxes until you withdraw or receive distributions
from the plan. If you are not invested through such a plan, then the Fund’s
dividends and gain from a redemption or exchange may be subject to U.S. federal
income taxes and may be taxed as ordinary income or capital gains, unless you
are a tax‑exempt investor.
Payments to Broker/Dealers and Other Financial
Intermediaries
If
you purchase shares of LifePath Dynamic 2065 Fund through a Financial
Intermediary, the Fund and BlackRock Investments, LLC, the Fund’s distributor,
or its affiliates may pay the Financial Intermediary for the sale of Fund shares
and related services. These payments may create a conflict of interest by
influencing the Financial Intermediary and your individual financial
professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your Financial Intermediary’s
website for more information.
160
Details
About the Funds
This
prospectus includes information about BlackRock LifePath® Dynamic Retirement Fund
(“LifePath Dynamic Retirement Fund”), BlackRock LifePath® Dynamic 2025 Fund (“LifePath
Dynamic 2025 Fund”), BlackRock LifePath® Dynamic 2030 Fund (“LifePath
Dynamic 2030 Fund”), BlackRock LifePath® Dynamic 2035 Fund (“LifePath
Dynamic 2035 Fund”), BlackRock LifePath® Dynamic 2040 Fund (“LifePath
Dynamic 2040 Fund”), BlackRock LifePath® Dynamic 2045 Fund (“LifePath
Dynamic 2045 Fund”), BlackRock LifePath® Dynamic 2050 Fund (“LifePath
Dynamic 2050 Fund”), BlackRock LifePath® Dynamic 2055 Fund (“LifePath
Dynamic 2055 Fund”), BlackRock LifePath® Dynamic 2060 Fund (“LifePath
Dynamic 2060 Fund”) and BlackRock LifePath® Dynamic 2065 Fund (“LifePath
Dynamic 2065 Fund”) (each, a “Fund” and together, the “Funds”), each a series of
BlackRock Funds III (the “Trust”), including how to buy and sell shares,
management information, shareholder features and your rights as a
shareholder.
Investment Time Horizons
Each
Fund seeks to provide for retirement outcomes based on quantitatively measured
risk that investors on average may be willing to accept given a particular
investment time horizon. An investor’s time horizon marks the point when the
investor plans to start making net withdrawals from his or her investments, in
other words, the time when they will cease making new contributions to their
investments. For many Fund investors, their time horizon is tied to the date
that they plan to retire and begin gradually utilizing their investment to
support themselves in retirement.
As
a general rule, investors with a longer time horizon have a greater tolerance
for risk than investors with a shorter time horizon. Long-term investors are
more likely to accept a greater risk of loss in exchange for the potential to
achieve higher long-term returns. Each Fund has its own time horizon, as
described in the applicable “Fund Overview” section in this prospectus, which
affects the targeted risk level of that Fund and, in turn, its asset
allocation.
The
allocations for LifePath Dynamic Retirement Fund reflect the expectation that
investors in or near retirement, or otherwise seeking current income, are
willing to take some risk of loss of their investment in hopes of achieving
moderate long-term growth of capital. LifePath Dynamic Retirement Fund is
designed to help balance three risk factors that investors face during
retirement: market risk (potential declines in market values), longevity risk
(living longer than expected) and inflation risk (loss of purchasing power).
Specifically, LifePath Dynamic Retirement Fund seeks to enable investors to
maintain consistent spending throughout their retirement while minimizing the
risk of exhausting their investment. There is no guarantee that the performance
of LifePath Dynamic Retirement Fund will be sufficient to enable this spending
rate or that any one spending rate is appropriate for all investors. Investors
should work with a financial advisor or other expert to determine a sustainable
spending rate for their circumstances, and that spending rate should be
periodically reassessed throughout retirement as the value of the investor’s
portfolio changes.
The
investment objective of each Fund is as follows. The investment objective of
each Fund may be changed by the Trust’s Board of Trustees without shareholder
approval.
| ∎ |
LifePath
Dynamic Retirement Fund seeks to provide for retirement outcomes based on
quantitatively measured risk. In pursuit of this objective, LifePath
Dynamic Retirement Fund will be broadly diversified across global asset
classes. |
| ∎ |
Each
of LifePath Dynamic 2025 Fund, LifePath Dynamic 2030 Fund, LifePath
Dynamic 2035 Fund, LifePath Dynamic 2040 Fund, LifePath Dynamic 2045 Fund,
LifePath Dynamic 2050 Fund, LifePath Dynamic 2055 Fund, LifePath Dynamic
2060 Fund and LifePath Dynamic 2065 Fund seeks to provide for retirement
outcomes based on quantitatively measured risk. In pursuit of this
objective, each Fund will be broadly diversified across global asset
classes, with asset allocations becoming more conservative over
time. |
You
should carefully consider the asset allocation and risks of each Fund before
deciding whether to invest.
The
Funds are designed to offer individual investors comprehensive asset allocation
strategies tailored to the time when they expect to begin withdrawing assets.
Asset allocation is the distribution of investments among broad types of asset
classes: equity securities, bonds and money market instruments. To implement the
asset allocation strategy, each Fund invests in a combination of Underlying
Funds and related derivatives in proportions based on its own comprehensive
investment strategy that gradually becomes more conservative as the year in the
Fund’s name approaches, except for LifePath Dynamic Retirement Fund, which is
already in its most conservative phase.
161
Which Fund to Consider
The
number in the name of most of the Funds is actually a year — a “target year”
when you might expect to begin withdrawing your money to support spending in
retirement. Selecting the Fund that may be most appropriate for your investment
may be as simple as matching your target year with the closest Fund target
year.
For
example, let’s say that you are investing for retirement purposes, and that you
expect to retire at age 65. If you are 45 years old, you have 20 years before
retirement. By adding 20 to the current year, you can define your “target year.”
If you expect to retire in the year 2043, as in this example, you may conclude
that LifePath Dynamic 2045 Fund is the most appropriate Fund for you.
The
investment mix of the Funds gradually shifts from a greater concentration of
higher-risk investments (namely, equity funds, securities and related
derivatives) to a greater concentration of lower-risk investments (namely, bond
funds), thereby making the Funds increasingly conservative.
In
making your investment decision, you should keep in mind:
| ∎ |
The
Funds’ investment strategies derive from the risk tolerance of average
investors with a particular time horizon. |
| ∎ |
The
Funds’ time horizons are based on the year in their name, except for
LifePath Dynamic Retirement Fund, which is designed for investors who are
currently withdrawing, or plan in the near future to begin withdrawing, a
substantial portion of their investment. |
If
you are willing to accept a greater risk of loss in exchange for the potential
to achieve higher long-term returns, you may invest some or all of your assets
in a Fund with a longer time horizon. If you desire a more conservative
investment and are willing to forego some potential returns, you may invest some
or all of your assets in a Fund with a shorter time horizon. The final choice is
yours.
A Further Discussion of the Principal Investment
Strategies
Each
Fund allocates and reallocates its assets among a combination of equity, bond
and money market funds (the “Underlying Funds”) and derivatives in proportions
based on its own comprehensive investment strategy. Under normal circumstances,
the Funds intend to invest primarily in affiliated open-end funds and affiliated
exchange-traded funds (“ETFs”), some of which may be index funds.
The
Funds with longer time horizons invest a greater portion of their assets in
equity Underlying Funds and equity related derivatives, which provide a greater
opportunity for capital appreciation over the long-term but have a greater risk
of loss. The Funds with shorter time horizons invest a greater portion of their
assets in fixed income Underlying Funds, fixed income related derivatives and
money market instruments, which typically offer reduced risk and price
volatility but forego some potential returns. Accordingly, under normal
circumstances, the Funds with shorter time horizons have lower expected returns
than the Funds with longer time horizons. In addition, each Fund may borrow,
lend its portfolio securities to brokers, dealers and financial institutions,
and invest the collateral in certain short-term instruments either directly or
through one or more joint accounts or money market funds, as described in
greater detail in the Funds’ combined Statement of Additional Information
(“SAI”).
As
each Fund approaches its designated time horizon, it systematically seeks to
reduce the level of risk by allocating assets more conservatively. This
systematic shift toward more conservative investments is designed to reduce the
risk of significant reductions in the value of an investment in a Fund as it
approaches its time horizon.
For
example, LifePath Dynamic Retirement Fund has entered its “retirement phase” and
seeks to maximize returns consistent with the risk that an average investor in
retirement may be willing to accept. This does not mean, however, that it
invests exclusively, or primarily, in Underlying Funds that are money market
funds. Rather, because BlackRock Fund Advisors (“BFA”) believes that most
investors are still willing to take some risks in pursuing returns even while
drawing on their investments, almost all of LifePath Dynamic Retirement Fund’s
assets will continue to be allocated to Underlying Funds that are equity and
bond funds.
In
determining the allocation of assets, BFA uses a proprietary investment model
that analyzes securities market data, including risk, asset class correlations,
and expected returns, to provide portfolio allocations. The allocations are
periodically monitored and adjusted in an effort to maximize expected return for
a given level of risk. In addition, the allocations of each Fund are rebalanced
on a quarterly basis to reflect the Fund’s asset allocation to more conservative
asset classes as it approaches its target date.
In
managing the Funds, BFA focuses on long-term targets and objectives. The
Underlying Funds invest in a mix of equity securities, bonds and money market
instruments. Certain Underlying Funds invest in equity securities of issuers
that are primarily engaged in or related to the real estate industry, real
estate investment trusts (“REITs”), foreign
162
securities,
emerging market securities, below investment-grade bonds, commodity-related
instruments and derivatives, which are subject to additional risks, as described
in the “Details About the Funds — A Further Discussion of Risk Factors” section
of this prospectus and/or the “Investment Risks and Considerations” section of
the SAI.
Each
Fund may, when consistent with its investment goal, buy or sell options or
futures, or enter into total return swaps and foreign currency transactions
(collectively, commonly known as derivatives). Each Fund may seek to obtain
market exposure to the securities in which it primarily invests by entering into
a series of purchase and sale contracts or by using other investment techniques
(such as reverse repurchase agreements or dollar rolls). Each Fund may use
derivatives as a substitute for taking a position in an Underlying Fund and/or
as part of a strategy to reduce exposure to certain risks. Each Fund may also
use derivatives to enhance return, in which case their use may involve
leveraging risk. Derivatives that are used as a substitute for taking a position
in an Underlying Fund, to reduce exposure to risks (other than duration or
currency risk) or to enhance return will increase or decrease the Fund’s equity
or fixed income allocations for purposes of the glide path by the notional
amount of such derivatives. Derivatives that are used to manage duration or
hedge currency risk will not be allocated to the Fund’s equity or fixed income
allocations for purposes of the glide path.
Within
the prescribed percentage allocations to equity and fixed-income, BFA seeks to
diversify the Funds. The equity allocation may be further diversified by style
(including both value and growth funds and issuers), market capitalization
(including large cap, mid cap, small cap and emerging growth funds and issuers),
region (including domestic and international (including emerging market) funds
and issuers) or other factors. The fixed-income allocation may be further
diversified by sector (including government, corporate, agency, and other
sectors), duration (a calculation of the average life of a bond which measures
its price risk), credit quality (including non‑investment grade debt or junk
bonds), geographic location (including U.S. and foreign-issued securities), or
other factors. Though BFA seeks to diversify the Funds, certain Underlying Funds
may concentrate their investments in specific sectors or geographic regions or
countries. The percentage allocation to the various styles of equity and
fixed-income are determined at the discretion of the investment team and can be
changed to reflect the current market environment. The Funds and certain
Underlying Funds may also lend securities with a value up to 331⁄3%
of their respective total assets to financial institutions that provide cash or
securities issued or guaranteed by the U.S. Government as collateral.
When
a Fund reaches its stated time horizon and enters its most conservative phase,
the allocation of its assets is expected to be similar to that of LifePath
Dynamic Retirement Fund. Such Fund and LifePath Dynamic Retirement Fund may then
continue to operate as separate funds or, subject to approval by the Trust’s
Board of Trustees (the “Board”), they may be merged into a single fund.
Other
Strategies Applicable to the Funds
In
addition to the principal strategies discussed above, each Fund may also invest
or engage in the following investments/strategies:
| ∎ |
Borrowing — Each Fund may
borrow up to the limits set forth under the Investment Company Act of
1940, as amended (the “Investment Company Act”), the rules and regulations
thereunder and any applicable exemptive relief. |
| ∎ |
Illiquid
Investments — Each Fund may invest up
to an aggregate amount of 15% of its net assets in illiquid investments.
An illiquid investment is any investment that the Fund reasonably expects
cannot be sold or disposed of in current market conditions in seven
calendar days or less without the sale or disposition significantly
changing the market value of the investment. |
| ∎ |
Securities
Lending — Each Fund may lend securities with a value up
to 331⁄3% of its total assets to financial
institutions that provide cash or securities issued or guaranteed by the
U.S. Government as collateral. |
| ∎ |
Short-Term
Securities — Each Fund may invest in
money market securities or commercial paper. |
| ∎ |
U.S. Government
Obligations — Each Fund may invest in
debt of the U.S. Government. There are no restrictions on the maturity of
the debt securities in which a Fund may invest. |
| ABOUT THE PORTFOLIO MANAGEMENT TEAM OF THE FUNDS |
| The Funds are managed by a team of financial professionals. Philip Green, Chris Chung, CFA and Michael Pensky, CFA, are the portfolio managers and are jointly and primarily responsible for the day-to-day management of each Fund. Please see “Management of the Funds — Portfolio Managers” for additional information about the portfolio management team. |
Information About the Underlying Funds
Five
of the Underlying Funds — Diversified Equity Master Portfolio, International
Tilts Master Portfolio, Large Cap Index Master Portfolio, Total International ex
U.S. Index Master Portfolio and U.S. Total Bond Index Master Portfolio — are
diversified portfolios of Master Investment Portfolio. One of the Underlying Funds — CoreAlpha Bond
Master Portfolio — is a diversified portfolio of Master Investment Portfolio
II.
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Eleven
of the Underlying Funds — BlackRock Advantage Emerging Markets Fund, BlackRock
Advantage Large Cap Growth Fund, BlackRock Advantage Small Cap Growth Fund,
BlackRock Emerging Markets Fund, Inc., BlackRock High Yield Bond Portfolio,
BlackRock Sustainable Advantage Large Cap Core Fund, BlackRock Tactical
Opportunities Fund, CoreAlpha Bond Master Portfolio, International Tilts Master
Portfolio, iShares Developed Real Estate Index Fund and Master Small Cap Index
Series — are managed by BlackRock Advisors, LLC (“BAL”), an affiliate of BFA and
administrator for the Funds.
The
remaining Underlying Funds, other than BlackRock Cash Funds: Treasury (the
“Underlying Money Market Fund”) and BlackRock Diversified Fixed Income Fund, are
ETFs that are part of the iShares ETF family of funds (“Underlying iShares
Funds”). Each of the Underlying iShares Funds seeks investment results that
correspond generally to the performance, before fees and expenses, of its
underlying index. As a result, adverse performance of a particular security in
an Underlying iShares Fund’s portfolio will ordinarily not result in the
elimination of the security from the Underlying iShares Fund’s portfolio. Each
Underlying iShares Fund offers and issues iShares at their net asset value per
share only to certain institutional investors in aggregations of a specified
number of iShares, generally in exchange for a basket of securities included in
its underlying index, together with the deposit of a specified cash payment. The
iShares for these Underlying iShares Funds are listed and traded on national
securities exchanges and also may be listed on certain non-U.S. exchanges. BFA
purchases iShares on behalf of the Funds in the secondary market.
The
relative weightings for each Fund in the various Underlying Funds will vary over
time, and BFA is not required to invest any Fund’s assets in each of the
Underlying Funds or in any particular percentage in any given Underlying Fund.
BFA may, in its discretion, add, eliminate or replace Underlying Funds at any
time without notice to shareholders.
Each
Fund currently expects to invest in some or all of the Underlying Funds
described below:
Equity Funds
BlackRock
Advantage Emerging Markets Fund
BlackRock
Advantage Emerging Markets Fund seeks long-term capital appreciation. Under
normal circumstances, BlackRock Advantage Emerging Markets Fund seeks to invest
at least 80% of its net assets plus the amount of any borrowings for investment
purposes in equity securities issued by, or tied economically to, companies in
emerging markets and derivatives that have similar economic characteristics to
such securities. BAL considers an emerging market country to include any country
that is: (1) generally recognized to be an emerging market country by the
international financial community, including the World Bank; (2) classified
by the United Nations as a developing country; or (3) included in the MSCI
Emerging Markets Index (the “MSCI EM Index”). BAL determines that an investment
is tied economically to an emerging market if such investment satisfies one or
more of the following conditions: (1) the issuer’s primary trading market
is in an emerging market; (2) the issuer is organized under the laws of,
derives at least 50% of its revenue from, or has at least 50% of its assets in
emerging markets; and (3) the investment is included in an index
representative of emerging markets. Equity securities include common stock,
preferred stock, convertible securities and depositary receipts. Generally,
BlackRock Advantage Emerging Markets Fund will invest in equities or other
financial instruments that are components of, or have characteristics similar
to, the securities included in the MSCI EM Index. The MSCI EM Index is a
capitalization-weighted index from a broad range of industries chosen for market
size, liquidity and industry group representation. BlackRock Advantage Emerging
Markets Fund primarily seeks to buy common stock and may also invest in
preferred stock and convertible securities. From time to time, BlackRock
Advantage Emerging Markets Fund may invest in shares of companies through “new
issues” or initial public offerings. BlackRock Advantage Emerging Markets Fund
may use derivatives, including options, futures, swaps (including, but not
limited to, total return swaps, some of which may be referred to as contracts
for difference) and forward contracts, both to seek to increase the return of
BlackRock Advantage Emerging Markets Fund and to hedge (or protect) the value of
its assets against adverse movements in currency exchange rates, interest rates
and movements in the securities markets. In order to manage cash flows into or
out of BlackRock Advantage Emerging Markets Fund effectively, BlackRock
Advantage Emerging Markets Fund may buy and sell financial futures contracts or
options on such contracts. Derivatives are financial instruments whose value is
derived from another security, a currency or an index, including but not limited
to the MSCI EM Index. The use of options, futures, swaps (including, but not
limited to, total return swaps, some of which may be referred to as contracts
for difference) and forward contracts can be effective in protecting or
enhancing the value of BlackRock Advantage Emerging Markets Fund’s assets.
BlackRock
Advantage Large Cap Growth Fund
BlackRock
Advantage Large Cap Growth Fund seeks long-term capital appreciation. Under
normal circumstances, BlackRock Advantage Large Cap Growth Fund seeks to invest
at least 80% of its net assets plus the amount of any borrowings for investment
purposes in large cap equity securities of U.S. issuers and derivatives that
have similar economic characteristics to such securities. For purposes of
BlackRock Advantage Large Cap Growth Fund’s 80% policy, large cap equity
securities are equity securities that at the time of purchase have a market
capitalization within the range of companies included in the Russell 1000® Growth Index (the “Russell
1000 Growth Index”). BlackRock Advantage Large Cap Growth Fund is a growth fund
and primarily intends to invest in equity securities, which include common
stock, preferred stock and convertible securities, or other financial
instruments that are components of, or
164
have
characteristics similar to, the securities included in the Russell 1000 Growth
Index. The Russell 1000 Growth Index is a capitalization-weighted index from a
broad range of industries chosen for market size, liquidity and industry group
representation. BlackRock Advantage Large Cap Growth Fund primarily seeks to buy
common stock and may also invest in preferred stock and convertible securities.
From time to time, BlackRock Advantage Large Cap Growth Fund may invest in
shares of companies through “new issues” or initial public offerings. BlackRock
Advantage Large Cap Growth Fund may use derivatives, including options, futures,
swaps (including, but not limited to, total return swaps, some of which may be
referred to as contracts for difference) and forward contracts, both to seek to
increase the return of BlackRock Advantage Large Cap Growth Fund and to hedge
(or protect) the value of its assets against adverse movements in interest rates
and movements in the securities markets. In order to manage cash flows into or
out of BlackRock Advantage Large Cap Growth Fund effectively, BlackRock
Advantage Large Cap Growth Fund may buy and sell financial futures contracts or
options on such contracts. Derivatives are financial instruments whose value is
derived from another security, a currency or an index, including but not limited
to the Russell 1000 Growth Index. The use of options, futures, swaps and forward
contracts can be effective in protecting or enhancing the value of BlackRock
Advantage Large Cap Growth Fund’s assets.
BlackRock
Advantage Small Cap Growth Fund
BlackRock
Advantage Small Cap Growth Fund seeks long-term capital growth. Under normal
circumstances, BlackRock Advantage Small Cap Growth Fund will invest at least
80% of its net assets (plus any borrowings for investment purposes) in equity
securities of small cap companies and at least 80% of its net assets (plus any
borrowings for investment purposes) in securities or instruments of issuers
located in the United States. Equity securities consist primarily of common
stock, preferred stock, securities convertible into common stock and securities
or other instruments whose price is linked to the value of common stock, such as
derivatives. BlackRock Advantage Small Cap Growth Fund seeks to buy primarily
common stock but also can invest in preferred stock, convertible securities and
other equity securities. BlackRock Advantage Small Cap Growth Fund management
team focuses on small capitalization companies that Fund management believes
have above average prospects for earnings growth. Although a universal
definition of small-capitalization companies does not exist, BlackRock Advantage
Small Cap Growth Fund generally defines these companies as those with market
capitalizations, at the time of BlackRock Advantage Small Cap Growth Fund’s
investment, comparable in size to the companies in the Russell 2000® Growth Index (between
approximately $19 million and $15 billion as of December 29,
2023). In the future, BlackRock Advantage Small Cap Growth Fund may define
small-capitalization companies using a different index or classification system.
From time to time BlackRock Advantage Small Cap Growth Fund may invest in shares
of companies through “new issues” or initial public offerings. BlackRock
Advantage Small Cap Growth Fund may use derivatives, including options,
warrants, futures, swaps and forward contracts both to seek to increase the
return of BlackRock Advantage Small Cap Growth Fund and to hedge (or protect)
the value of its assets against adverse movements in currency exchange rates,
interest rates and movements in the securities markets. In order to manage cash
flows into or out of BlackRock Advantage Small Cap Growth Fund effectively,
BlackRock Advantage Small Cap Growth Fund may buy and sell financial futures
contracts or options on such contracts. Derivatives are financial instruments
whose value is derived from another security, a commodity (such as oil or gas),
a currency or an index, including but not limited to the Russell 2000® Growth Index. The use of
options, futures, swaps and forward contracts can be effective in protecting or
enhancing the value of BlackRock Advantage Small Cap Growth Fund’s assets.
BlackRock Advantage Small Cap Growth Fund will seek to pursue its investment
objective by investing in small cap growth securities in a disciplined manner
using proprietary return forecast models. These forecast models are designed to
identify aspects of mispricing across stocks, which BlackRock Advantage Small
Cap Growth Fund can seek to capture by over- and under-weighting particular
equities while seeking to control incremental risk. BlackRock Advantage Small
Cap Growth Fund will seek to pursue its investment objective by investing in
small cap growth securities in a disciplined manner using proprietary return
forecast models. These forecast models are designed to identify aspects of
mispricing across stocks, which BlackRock Advantage Small Cap Growth Fund can
seek to capture by over- and under-weighting particular equities while seeking
to control incremental risk. BlackRock Advantage Small Cap Growth Fund also may
use indexed or inverse securities.
BlackRock
Emerging Markets Fund, Inc.
BlackRock
Emerging Markets Fund, Inc. seeks long-term capital appreciation by investing in
securities, principally equity securities, of issuers in countries having
smaller capital markets. Under normal conditions, BlackRock Emerging Markets
Fund, Inc. invests at least 80% of its net assets plus any borrowings for
investment purposes in equity securities of issuers located in countries with
developing capital markets. Equity securities consist primarily of common and
preferred stocks and depositary receipts, and include securities convertible
into common stock, and securities or other instruments whose price is linked to
the value of common stock. A developing capital market is the market of any
country that the World Bank, the International Finance Corporation, the United
Nations or its authorities have determined to have a low or middle income
economy. Countries with developing capital markets can be found in regions such
as Asia, Latin America, Eastern Europe and Africa. For this purpose, developing
capital markets include, but are not limited to, the markets of all countries
that comprise the MSCI Emerging Markets Index. BlackRock Emerging Markets Fund,
Inc. may also consider an issuer to be located in a country that has a
developing capital market if at least 50% of the issuer’s assets, gross revenues
or profits in any one of the last two years represents assets or activities
located in such countries. BlackRock Emerging Markets Fund, Inc. may invest up
to 20% of its
165
assets
in equity securities of issuers domiciled in the People’s Republic of China
(“China” or the “PRC” and, for the purpose of this policy, excluding Hong Kong,
Macau and Taiwan) and listed in China that are accessible through the
Shanghai-Hong Kong Stock Connect program or the Shenzhen‑Hong Kong Stock Connect
program. BlackRock Emerging Markets Fund, Inc. may also invest in fixed income
securities issued by companies and governments in these countries, as well as
mezzanine investments. BlackRock Emerging Markets Fund, Inc. normally invests in
at least three countries at any given time. BlackRock Emerging Markets Fund,
Inc. can invest in securities denominated in either U.S. dollars or foreign
currencies. BlackRock Emerging Markets Fund, Inc. has not established any rating
or maturity criteria for the debt securities in which it may invest. From time
to time BlackRock Emerging Markets Fund, Inc. may invest in shares of companies
through initial public offerings. Fund management may, when consistent with
BlackRock Emerging Markets Fund, Inc.’s investment objective, buy or sell
options or futures on a security or an index of securities, or enter into
interest rate or foreign currency transactions, including swaps (collectively,
commonly known as derivatives). BlackRock Emerging Markets Fund, Inc.’s exposure
to certain markets may be effected through investments in participation notes or
other structured or derivative instruments that are designed to replicate, or
otherwise provide exposure to, the performance of securities listed in such
markets.
BlackRock
Sustainable Advantage Large Cap Core Fund
BlackRock
Sustainable Advantage Large Cap Core Fund seeks to provide total return while
seeking to maintain certain environmental, social and governance (“ESG”)
characteristics, climate risk exposure and climate opportunities relative to
BlackRock Sustainable Advantage Large Cap Core Fund’s benchmark. Under normal
circumstances, BlackRock Sustainable Advantage Large Cap Core Fund seeks to
invest at least 80% of its net assets plus the amount of any borrowings for
investment purposes in large cap equity securities and derivatives that have
similar economic characteristics to such securities. For purposes of BlackRock
Sustainable Advantage Large Cap Core Fund’s 80% policy, large cap equity
securities are equity securities that at the time of purchase have a market
capitalization within the range of companies included in the Russell 1000® Index. The companies
included in the Russell 1000® Index have market capitalizations that range from
approximately $738 million to $3.0 trillion as of August 31, 2023. Equity
securities include common stock, preferred stock and convertible securities.
BlackRock Sustainable Advantage Large Cap Core Fund primarily seeks to buy
common stock. BlackRock Sustainable Advantage Large Cap Core Fund seeks to
maintain certain ESG characteristics, climate risk exposure and climate
opportunities relative to the Russell 1000® Index. Specifically,
BlackRock Sustainable Advantage Large Cap Core Fund generally seeks to invest in
a portfolio of equity securities that, in BAL’s view, (i) has an aggregate
environmental, social and governance (“ESG”) assessment that is better than the
aggregate ESG assessment of the Russell 1000® Index, (ii) has an
aggregate carbon emissions assessment that is lower than that of the Russell
1000® Index, and
(iii) in the aggregate, includes issuers that BAL believes are better
positioned to capture climate opportunities relative to the issuers in the
Russell 1000® Index.
BlackRock Sustainable Advantage Large Cap Core Fund may invest in other sectors
that are not included in such assessments. BAL seeks to utilize exclusionary
screens in determining the investment universe and to incorporate investment
insights related to ESG characteristics in the portfolio construction process.
To determine BlackRock Sustainable Advantage Large Cap Core Fund’s investable
universe, BlackRock Sustainable Advantage Large Cap Core Fund management will
first seek to screen out certain issuers based on ESG criteria determined by
BAL, subject to the considerations noted below. Such screening criteria
principally includes: (i) issuers that derive more than zero percent of
revenue from the production of controversial weapons; (ii) issuers that
derive more than zero percent of revenue from the production of civilian
firearms; (iii) issuers that derive more than zero percent of revenue from
the production of tobacco-related products; (iv) issuers that derive more
than five percent of revenue from thermal coal generation, unless such issuers
either (a) have made certain commitments to reduce climate impact or
(b) derive at least fifty percent of revenue from alternative energy
sources; (v) issuers that derive more than five percent of revenue from
thermal coal mining; and (vi) issuers that derive more than five percent of
revenue from oil sands extraction. BlackRock Sustainable Advantage Large Cap
Core Fund relies on one or more third-party ratings agencies to identify issuers
for purposes of the above screening criteria. Third-party rating agencies may
base the above screening criteria on an estimate when revenue for a covered
business activity is not disclosed by the issuer or publicly available.
BlackRock Sustainable Advantage Large Cap Core Fund’s screening criteria is
measured at the time of investment and is dependent upon information and data
that may be incomplete, inaccurate, unavailable or estimated. Where BlackRock
Sustainable Advantage Large Cap Core Fund’s criteria looks solely to third-party
ratings or data, issuers are only screened to the extent such ratings or data
have been assigned or made available by the third parties. This screening
criteria is subject to change over time at BAL’s discretion. In addition,
BlackRock Sustainable Advantage Large Cap Core Fund may gain indirect exposure
(through, including but not limited to, derivatives and investments in other
investment companies) to issuers with exposures that are inconsistent with the
ESG‑related criteria used by BlackRock Sustainable Advantage Large Cap Core Fund
management. BlackRock Sustainable Advantage Large Cap Core Fund then seeks to
pursue its investment objective by investing in equity securities in a
disciplined manner, by using proprietary return forecast models that incorporate
quantitative analysis. These forecast models are designed to identify aspects of
mispricing across stocks which BlackRock Sustainable Advantage Large Cap Core
Fund can seek to capture by over-and under-weighting particular equities while
seeking to control incremental risk. The investment process is driven with
systematic and quantitative implementation based on an issuer’s expected
returns, which include measurable ESG characteristics, risk and transaction
costs, as determined by BAL’s proprietary research. BAL then constructs and
rebalances the portfolio’s weightings by integrating its investment insights
with the model-based
166
optimization
process. Certain of the investment insights relate to ESG characteristics in
BAL-defined categories, including, but not limited to, (i) superior growth
characteristics of issuers, (ii) risk mitigation characteristics of
issuers, (iii) themes related to social matters and (iv) economic
transition, which includes, but is not limited to, environmental considerations.
Examples of such ESG characteristics include management quality, governance,
controversies at issuers, public health analytics and an issuer’s
innovation-oriented research and development. The ESG characteristics
utilized in the portfolio construction process may change over time and one or
more characteristics may not be relevant to all issuers that are eligible for
investment. From time to time BlackRock Sustainable Advantage Large Cap Core
Fund may invest in shares of companies through “new issues” or initial public
offerings (“IPOs”). BlackRock Sustainable Advantage Large Cap Core Fund may use
derivatives, including options, futures, swaps (including, but not limited to,
total return swaps, some of which may be referred to as contracts for
difference) and forward contracts, both to seek to increase the return of
BlackRock Sustainable Advantage Large Cap Core Fund and to hedge (or protect)
the value of its assets against adverse movements in currency exchange rates,
interest rates and movements in the securities markets. In order to manage cash
flows into or out of BlackRock Sustainable Advantage Large Cap Core Fund
effectively, BlackRock Sustainable Advantage Large Cap Core Fund may buy and
sell financial futures contracts or options on such contracts. Derivatives are
financial instruments whose value is derived from another security, a currency
or an index, including but not limited to the Russell 1000® Index. The use of options,
futures, swaps and forward contracts can be effective in protecting or enhancing
the value of BlackRock Sustainable Advantage Large Cap Core Fund’s assets.
Diversified
Equity Master Portfolio
Diversified
Equity Master Portfolio seeks to provide long-term appreciation of capital.
Diversified Equity Master Portfolio invests, under normal circumstances, at
least 80% of its net assets, plus the amount of any borrowings for investment
purposes, in equity securities, including common stock, preferred stock,
securities convertible into common stock and securities or other instruments
whose price is linked to the value of common stock. Diversified Equity Master
Portfolio will provide interestholders with at least 60 days’ notice of any
change to Diversified Equity Master Portfolio’s non‑fundamental policy to invest
at least 80% of the value of Diversified Equity Master Portfolio’s net assets,
plus the amount of any borrowings for investment purposes, in equity securities,
including common stock, preferred stock, securities convertible into common
stock and securities or other instruments whose price is linked to the value of
common stock. Diversified Equity Master Portfolio does not limit its investments
to companies of any particular size, and may invest in equity securities of
companies of any market capitalization. Equity securities include securities
representing shares of ownership of a corporation (“common stock”), preferred
stock, securities convertible into common stock and securities or other
instruments whose price is linked to the value of common stock. Preferred stock
is a class of stock that often pays dividends at a specified rate and has
preference over common stock in dividend payments and liquidation of assets.
Convertible securities typically pay current income as either interest (debt
security convertibles) or dividends (preferred stock), and their value usually
reflects both the stream of current income payments and the market value of the
underlying common stock. Diversified Equity Master Portfolio may also invest in
securities of foreign issuers from any country, including emerging market
countries, and may invest in securities denominated in both U.S. dollars and
non‑U.S. dollar currencies. Diversified Equity Master Portfolio may use
derivatives to hedge its portfolio against market and currency risks or to gain
exposure to equity markets. Diversified Equity Master Portfolio may also use
derivatives to hedge its investment portfolio against interest rate risks or to
seek to enhance its return. Derivatives are financial instruments whose value is
derived from another security, a commodity (such as oil or gold), a currency or
an index such as the Russell 1000® Index. The derivatives that
Diversified Equity Master Portfolio may use include options on portfolio
positions or currencies, financial and currency futures, options on such
futures, forward foreign currency transactions and swaps. Diversified Equity
Master Portfolio may also invest in indexed and inverse securities.
International
Tilts Master Portfolio
International
Tilts Master Portfolio seeks to provide long-term returns in excess of the total
rate of return of the MSCI Europe Australasia Far East (“EAFE”) Index. Under
normal circumstances, International Tilts Master Portfolio seeks to invest a
majority of its net assets plus any borrowings for investment purposes in
non‑U.S. equity securities and equity like instruments of companies that are
components of, or have characteristics similar to, the companies included in the
MSCI EAFE Index. The MSCI EAFE Index is an equity index which captures large-and
mid‑cap representation across 21 developed markets countries around the world,
excluding the United States and Canada. With 796 constituents, the MSCI EAFE
Index covers approximately 85% of the free float-adjusted market capitalization
in each country. International Tilts Master Portfolio primarily seeks to buy
common stock and may also invest in preferred stock and convertible securities.
From time to time International Tilts Master Portfolio may invest in shares of
companies through “new issues” or initial public offerings. International Tilts
Master Portfolio may also invest in securities denominated in both U.S. dollars
and non‑U.S. dollar currencies. International Tilts Master Portfolio may invest
in securities of any market capitalization. Equity securities include securities
representing shares of ownership of a corporation (“common stock”), preferred
stock, securities convertible into common stock and securities or other
instruments whose price is linked to the value of common stock. Preferred stock
is a class of stock that often pays dividends at a specified rate and has
preference over common stock in dividend payments and liquidation of assets.
Convertible securities typically pay current income as either interest (debt
security convertibles) or dividends (preferred stock), and their value usually
reflects both the stream of current income payments and the market value of the
underlying common stock.
167
International
Tilts Master Portfolio may use derivatives, including futures, swap agreements
(including, but not limited to, total return swaps, some of which may be
referred to as contracts for difference) and/or foreign exchange transactions,
to manage the risk and return of International Tilts Master Portfolio. In order
to manage cash flows into or out of International Tilts Master Portfolio
effectively, International Tilts Master Portfolio may buy and sell financial
futures contracts. Derivatives are financial instruments whose value is derived
from another security, a commodity (such as oil or gas), a currency or an index,
including but not limited to the MSCI EAFE Index. The use of futures, swaps or
foreign exchange transactions can be effective in managing the risk and return
of International Tilts Master Portfolio. International Tilts Master Portfolio
may engage in active and frequent trading of portfolio securities to achieve its
primary investment strategies.
iShares
Developed Real Estate Index Fund
iShares
Developed Real Estate Index Fund seeks to track the investment results of an
index composed of real estate equities in developed markets. iShares Developed
Real Estate Index Fund seeks to track the investment results of the FTSE EPRA
Nareit Developed Index, which measures the stock performance of companies
engaged in the ownership, disposal and development of income-producing real
estate in developed countries as defined by FTSE EPRA Nareit. As of March 31,
2023, the FTSE EPRA Nareit Developed Index was comprised of stocks of companies
in the following markets: Australia, Austria, Belgium, Canada, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United
States. The FTSE EPRA Nareit Developed Index may include large-, mid‑ or
small-capitalization companies, and components primarily include REITs. The
components of the FTSE EPRA Nareit Developed Index, and the degree to which
these components represent certain industries, may change over time. BAL uses a
representative sampling indexing strategy to manage iShares Developed Real
Estate Index Fund. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to that of the FTSE EPRA Nareit Developed
Index. The securities selected are expected to have, in the aggregate,
investment characteristics (based on factors such as market capitalization and
industry weightings), fundamental characteristics (such as return variability
and yield) and liquidity measures similar to those of the FTSE EPRA Nareit
Developed Index. iShares Developed Real Estate Index Fund may or may not hold
all of the securities in the FTSE EPRA Nareit Developed Index. iShares Developed
Real Estate Index Fund generally invests at least 90% of its assets, plus the
amount of any borrowing for investment purposes, in securities of the FTSE EPRA
Nareit Developed Index and in depositary receipts representing securities of the
FTSE EPRA Nareit Developed Index.
Large
Cap Index Master Portfolio
Large
Cap Index Master Portfolio’s investment objective is to match the performance of
the Russell 1000® Index
as closely as possible before the deduction of Large Cap Index Master Portfolio
expenses. Large Cap Index Master Portfolio attempts to achieve, in both rising
and falling markets, a correlation of at least 95% between the total return of
its net assets before fees and expenses and the total return of Large Cap Index
Master Portfolio’s benchmark index, the Russell 1000® Index. There can be no
assurance, however, that these levels of correlation will be achieved. In the
event that this correlation is not achieved over time, the Trustees of Master
Investment Portfolio and the Trustees of BlackRock Funds III will consider
alternative strategies for the Master Portfolio and the BlackRock Funds III
Feeder Fund, respectively. Information regarding correlation of the Master
Portfolio’s performance to that of the Russell 1000 may be found in the Master
Portfolio’s Annual Report. Notwithstanding the factors described below, perfect
(100%) correlation would be achieved if the total return of Large Cap Index
Master Portfolio’s net assets, before fees and expenses, increased or decreased
exactly as the total return of Large Cap Index Master Portfolio’s benchmark
index increased or decreased. Large Cap Index Master Portfolio’s ability to
match its investment performance to the investment performance of its benchmark
index may be affected by, among other things, Large Cap Index Master Portfolio’s
expenses, transactions costs, taxes, the size of the Large Cap Index Master
Portfolio’s investment portfolio, changes in either the composition of the
benchmark index or the assets of the Large Cap Index Master Portfolio, the
amount of cash and cash equivalents held by Large Cap Index Master Portfolio,
the manner in which the total return of Large Cap Index Master Portfolio’s
benchmark index is calculated; and the timing, frequency and size of
interestholder purchases and withdrawals. Large Cap Index Master Portfolio will
be substantially invested in equity securities in the Russell 1000® Index, and will invest,
under normal circumstances, at least 80% of its net assets in securities or
other financial instruments that are components of or have economic
characteristics similar to the securities included in the Russell 1000® Index. For this purpose, net
assets include any borrowings for investment purposes, calculated at the time
the Large Cap Index Master Portfolio invests its assets. This is a
non‑fundamental policy of Large Cap Index Master Portfolio and may not be
changed without 60 days’ prior notice to interestholders. Large Cap Index Master
Portfolio may change its target index if Large Cap Index Master Portfolio
management believes a different index would better enable Large Cap Index Master
Portfolio to match the performance of the market segment represented by the
current index. Large Cap Index Master Portfolio may invest in all stocks in the
Russell 1000® Index in
roughly the same proportions as their weightings in the Russell 1000® Index. For example, if 2% of
the Russell 1000® Index
is made up of the stock of a particular company, Large Cap Index Master
Portfolio will normally invest approximately 2% of its assets in that company.
This strategy is known as “full replication.” However, when Large Cap Index
Master Portfolio management believes it would be cost efficient, Large Cap Index
Master Portfolio management is authorized to deviate from full replication and
to invest instead in a statistically selected sample of the stocks in the
Russell 1000® Index
168
which
has aggregate investment characteristics, such as average market capitalization
and industry weightings, similar to the Russell 1000® Index as a whole, but which
involves less transaction cost than would be incurred through full replication.
Large Cap Index Master Portfolio also may engage in futures transactions to
manage its short-term liquidity and/or as substitutes for comparable market
positions in the securities in its benchmark index. Large Cap Index Master
Portfolio management may also purchase stocks not included in the Russell
1000® Index when it
believes that it would be a cost efficient way of approximating the Russell
1000® Index’s performance
to do so. Large Cap Index Master Portfolio management may omit or remove a
security which is included in an index from the portfolio of Large Cap Index
Master Portfolio if, following objective criteria, Large Cap Index Master
Portfolio management judges the security to be insufficiently liquid or believes
the merit of the investment has been substantially impaired by extraordinary
events or financial conditions. If Large Cap Index Master Portfolio management
uses these techniques, Large Cap Index Master Portfolio may not track the
Russell 1000® Index as
closely as it would if it were fully replicating the Russell 1000® Index. Large Cap Index
Master Portfolio may lend securities with a value up to 331/3% of its total
assets to financial institutions that provide cash or securities issued or
guaranteed by the U.S. Government as collateral. Large Cap Index Master
Portfolio will concentrate its investments (i.e., hold 25% or more of its total
assets) in a particular industry or group of industries to approximately the
same extent that the Russell 1000® Index is concentrated.
Master
Small Cap Index Series
Master
Small Cap Index Series’ investment objective is to match the performance of the
Russell 2000® Index as
closely as possible before the deduction of Master Small Cap Index Series
expenses. Master Small Cap Index Series will not attempt to buy or sell
securities based on the economic, financial or market analysis of the Manager,
but will instead employ a “passive” investment approach. This means that the
Manager will attempt to invest in a portfolio of assets whose performance is
expected to match approximately the performance of the Russell 2000® Index before deduction of
expenses. Master Small Cap Index Series will buy or sell securities only when
the Manager believes it is necessary to do so in order to match the performance
of the Russell 2000®
Index. Accordingly, it is anticipated that Master Small Cap Index Series’
portfolio turnover rate and trading costs will be lower than those of an
“actively” managed fund. However, Master Small Cap Index Series has operating
and other expenses, while an index does not. Therefore, Master Small Cap Index
Series will tend to underperform its target index to some degree over time.
Master Small Cap Index Series will be substantially invested in securities in
the Russell 2000® Index,
and will invest, under normal circumstances, at least 80% of its assets in
securities or other financial instruments that are components of or have
economic characteristics similar to the securities included in the Russell
2000® Index. This policy
is a non-fundamental policy of Master Small Cap Index Series and may not be
changed without 60 days’ prior notice to interestholders. Master Small Cap Index
Series may change its target index if the Manager believes a different index
would better enable Master Small Cap Index Series to match the performance of
the market segment represented by the current index and, accordingly, the
investment objective of Master Small Cap Index Series may be changed without
interestholder approval.
Total
International ex U.S. Index Master Portfolio
Total
International ex U.S. Index Master Portfolio’s investment objective is to match
the performance of the MSCI ACWI ex USA Index in U.S. dollars with net dividends
as closely as possible before the deduction of Total International ex U.S. Index
Master Portfolio expenses. Total International ex U.S. Index Master Portfolio
attempts to achieve, in both rising and falling markets, a correlation of at
least 95% between the total return of its net assets before fees and expenses
and the total return of Total International ex U.S. Index Master Portfolio’s
benchmark index, the MSCI ACWI ex USA Index. Notwithstanding the factors
described below, perfect (100%) correlation would be achieved if the total
return of Total International ex U.S. Index Master Portfolio’s net assets,
before fees and expenses, increased or decreased exactly as the total return of
Total International ex U.S. Index Master Portfolio’s benchmark index increased
or decreased. Total International ex U.S. Index Master Portfolio’s ability to
match its investment performance to the investment performance of its benchmark
index may be affected by, among other things, Total International ex U.S. Index
Master Portfolio’s expenses, transactions costs, taxes (including foreign
withholding taxes, which will affect the performance of the Master Portfolio),
the size of the Total International ex U.S. Index Master Portfolio’s investment
portfolio, changes in either the composition of the benchmark index or the
assets of the Total International ex U.S. Index Master Portfolio, the amount of
cash and cash equivalents held by Total International ex U.S. Index Master
Portfolio, the manner in which the total return of Total International ex U.S.
Index Master Portfolio’s benchmark index is calculated and the timing, frequency
and size of interestholder purchases and withdrawals. Total International ex
U.S. Index Master Portfolio will be substantially invested in equity securities
in the MSCI ACWI ex USA Index, and will invest, under normal circumstances, at
least 80% of its net assets in securities or other financial instruments that
are components of or have economic characteristics similar to the securities
included in the MSCI ACWI ex USA Index. For this purpose, net assets include any
borrowings for investment purposes, calculated at the time the Master Portfolio
invests its assets. This is a non‑fundamental policy of Total International ex
U.S. Index Master Portfolio and may not be changed without 60 days’ prior notice
to interestholders. Total International ex U.S. Index Master Portfolio may
change its target index if Total International ex U.S. Index Master Portfolio
management believes a different index would better enable Total International ex
U.S. Index Master Portfolio to match the performance of the market segment
represented by the MSCI ACWI ex USA Index and, accordingly, the investment
objective of Total International ex U.S. Index Master
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Portfolio
may be changed without interestholder approval. Total International ex U.S.
Index Master Portfolio may invest in all stocks in the MSCI ACWI ex USA Index in
roughly the same proportions as their weightings in the MSCI ACWI ex USA Index.
For example, if 2% of the MSCI ACWI ex USA Index is made up of the stock of a
particular company, Total International ex U.S. Index Master Portfolio will
normally invest approximately 2% of its assets in that company. This strategy is
known as “full replication.” However, when Total International ex U.S. Index
Master Portfolio management believes it would be cost efficient, Total
International ex U.S. Index Master Portfolio management is authorized to deviate
from full replication and to invest instead in a statistically selected sample
of the stocks in the MSCI ACWI ex USA Index which has aggregate investment
characteristics, such as average market capitalization and industry weightings,
similar to the MSCI ACWI ex USA Index as a whole, but which involves less
transaction cost than would be incurred through full replication. Total
International ex U.S. Index Master Portfolio also may engage in futures
transactions to manage its short-term liquidity and/or as substitutes for
comparable market positions in the securities in its benchmark index. Total
International ex U.S. Index Master Portfolio management may also purchase stocks
not included in the MSCI ACWI ex USA Index when it believes that to do so would
be a cost efficient way of approximating the performance of the MSCI ACWI ex USA
Index. Master Portfolio management may omit or remove a security which is
included in the index from the portfolio of Total International ex U.S. Index
Master Portfolio if, following objective criteria, Total International ex U.S.
Index Master Portfolio management judges the security to be insufficiently
liquid or believes the merit of the investment has been substantially impaired
by extraordinary events or financial conditions. If Total International ex U.S.
Index Master Portfolio management uses these techniques, Total International ex
U.S. Index Master Portfolio may not track the MSCI ACWI ex USA Index as closely
as it would if it were fully replicating the MSCI ACWI ex USA Index. Total
International ex U.S. Index Master Portfolio may lend securities with a value up
to 331/3% of its total assets to financial institutions that provide cash or
securities issued or guaranteed by the U.S. Government as collateral. Total
International ex U.S. Index Master Portfolio will concentrate its investments
(i.e., hold 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the MSCI ACWI ex USA Index
is concentrated.
Fixed-Income Funds
Advantage
CoreAlpha Bond Master Portfolio
Advantage
CoreAlpha Bond Master Portfolio seeks to provide a combination of income and
capital growth. Advantage CoreAlpha Bond Master Portfolio invests, under normal
circumstances, at least 80% of the value of Advantage CoreAlpha Bond Master
Portfolio’s net assets, plus the amount of any borrowing for investment
purposes, in bonds. Advantage CoreAlpha Bond Master Portfolio will provide
interestholders with at least 60 days’ notice of any change to this investment
policy. For the purposes of this strategy, “bonds” include the following:
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; mortgage-backed securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, including U.S. agency mortgage
pass-through securities; commercial mortgage-backed securities; mortgage
to‑be‑announced securities; debt obligations of U.S. issuers; municipal
securities; asset-backed securities; and U.S.-registered dollar-denominated debt
obligations of foreign issuers. Advantage CoreAlpha Bond Master Portfolio may
invest in bonds issued by companies located in countries other than the United
States, including companies in emerging markets. These securities may have all
types of interest rate payment and reset terms, including fixed rate, adjustable
rate, floating rate, zero coupon, contingent, deferred, payment in kind and
auction rate features. Advantage CoreAlpha Bond Master Portfolio seeks to invest
a substantial portion of its assets in U.S.-registered, dollar-denominated
bonds. Advantage CoreAlpha Bond Master Portfolio may invest in bonds of any
maturity or duration. Advantage CoreAlpha Bond Master Portfolio may invest a
significant portion of its assets in U.S. agency mortgage pass-through
securities, which are securities issued by entities such as the Government
National Mortgage Association and the Federal National Mortgage Association that
are backed by pools of mortgages. Most transactions in mortgage pass-through
securities occur through standardized contracts for future delivery in which the
exact mortgage-backed securities to be delivered are not specified until a few
days prior to settlement. Advantage CoreAlpha Bond Master Portfolio expects to
enter into such contracts on a regular basis. Although Advantage CoreAlpha Bond
Master Portfolio normally invests primarily in investment grade securities, it
may invest up to 10% of its assets in securities rated below investment grade or
which are deemed to be of comparable quality by BAL (“high yield” or “junk”
bonds) at the time of purchase. Investment grade bonds are bonds rated in the
four highest categories by at least one of the major rating agencies or
determined by Advantage CoreAlpha Bond Master Portfolio management to be of
similar quality. Advantage CoreAlpha Bond Master Portfolio may use derivatives,
such as futures contracts, options (including, but not limited to, options on
swaps) and various other instruments (including, but not limited to, interest
rate, total return, credit default and credit default index swaps (which can be
used to transfer the credit risk of a security without actually transferring
ownership of the security or to customize exposure to a particular credit risk),
credit-linked notes, and indexed and inverse floating-rate securities).
Advantage CoreAlpha Bond Master Portfolio may use derivatives, for example, in
managing short-term liquidity, as substitutes for comparable positions in
underlying securities, in managing duration and/or to position the portfolio for
anticipated changes in markets. Advantage CoreAlpha Bond Master Portfolio may
also invest in derivatives based on foreign currencies. In addition, Advantage
CoreAlpha Bond Master Portfolio may use derivatives and short sales, which are
transactions in which Advantage CoreAlpha Bond Master Portfolio sells securities
borrowed from others with the expectation that the price of the security will
fall before Advantage CoreAlpha Bond Master Portfolio must purchase the
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security
to return it to the lender, to enhance returns as part of an overall investment
strategy or to offset a potential decline in the value of other holdings
(commonly referred to as a “hedge”), although Advantage CoreAlpha Bond Master
Portfolio is not required to hedge and may choose not to do so.
BlackRock
Diversified Fixed Income Fund
BlackRock
Diversified Fixed Income Fund seeks to provide a combination of income and
capital growth. BlackRock Diversified Fixed Income Fund invests, under normal
circumstances, at least 80% of the value of its net assets, plus the amount of
any borrowings for investment purposes, in fixed income instruments. The fixed
income instruments in which BlackRock Diversified Fixed Income Fund may invest
include, but are not limited to, the following: obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; mortgage-backed
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, including U.S. agency mortgage pass-through securities;
commercial mortgage-backed securities; mortgage to‑be‑announced securities; debt
obligations of U.S. issuers; municipal securities; asset-backed securities;
money market securities; U.S.-registered dollar denominated debt obligations of
foreign issuers, and derivatives with similar economic characteristics to such
fixed-income securities. BlackRock Diversified Fixed Income Fund seeks to invest
a substantial portion (generally, at least 60% at notional value) of its assets
in U.S. registered, dollar-denominated bonds or derivatives with similar
economic characteristics. BlackRock Diversified Fixed Income Fund may invest in
bonds issued by companies located in countries other than the United States,
including companies in emerging markets. The fixed income instruments in which
BlackRock Diversified Fixed Income Fund invests may have all types of interest
rate payment and reset terms, including fixed rate, adjustable rate, floating
rate, zero coupon, contingent, deferred, payment in kind and auction rate
features. BlackRock Diversified Fixed Income Fund may invest up to 20% of its
assets in securities rated below investment grade or which are deemed to be of
comparable quality by BFA (“high yield” or “junk” bonds) at the time of
purchase. Investment grade bonds are bonds rated in the four highest categories
by at least one of the major rating agencies or determined by BlackRock
Diversified Fixed Income Fund management to be of similar quality. BlackRock
Diversified Fixed Income Fund may invest in bonds of any maturity or duration.
BlackRock Diversified Fixed Income Fund may invest a significant portion of its
assets in U.S. agency mortgage pass-through securities, which are securities
issued by entities such as the Government National Mortgage Association and the
Federal National Mortgage Association that are backed by pools of mortgages.
Most transactions in mortgage pass-through securities occur through standardized
contracts for future delivery in which the exact mortgage-backed securities to
be delivered are not specified until a few days prior to settlement. BlackRock
Diversified Fixed Income Fund expects to enter into such contracts on a regular
basis. BlackRock Diversified Fixed Income Fund may invest up to 10% of its total
assets in collateralized debt obligations (“CDOs”), including collateralized
loan obligations (“CLOs”). CDOs are types of asset-backed securities. CLOs are
ordinarily issued by a trust or other special purpose entity and are typically
collateralized by a pool of loans, which may include, among others, domestic and
non‑U.S. senior secured loans, senior unsecured loans, and subordinate corporate
loans, including loans that may be rated below investment grade or equivalent
unrated loans, held by such issuer. BlackRock Diversified Fixed Income Fund may
use derivatives, such as futures contracts, options (including, but not limited
to, options on futures and swaps) and various other instruments (including, but
not limited to, interest rate, total return, credit default and credit default
index swaps (which can be used to transfer the credit risk of a security without
actually transferring ownership of the security or to customize exposure to a
particular credit risk) and indexed and inverse floating-rate securities).
BlackRock Diversified Fixed Income Fund may also invest in credit-linked notes,
credit-linked trust certificates, structured notes, or other instruments
evidencing interests in special purpose vehicles, trusts, or other entities that
hold or represent interests in fixed-income securities. BlackRock Diversified
Fixed Income Fund may also invest in derivatives based on foreign currencies. In
addition, BlackRock Diversified Fixed Income Fund may use derivatives and short
sales to enhance returns as part of an overall investment strategy or to offset
a potential decline in the value of other holdings (commonly referred to as a
“hedge”), although BlackRock Diversified Fixed Income Fund is not required to
hedge and may choose not to do so. BlackRock Diversified Fixed Income Fund may
engage in active and frequent trading of portfolio securities to achieve its
primary investment strategies. BlackRock Diversified Fixed Income Fund is
classified as diversified under the Investment Company Act of 1940, as
amended.
BlackRock
High Yield Bond Portfolio
BlackRock
High Yield Bond Portfolio seeks to maximize total return, consistent with income
generation and prudent investment management. BlackRock High Yield Bond
Portfolio invests primarily in non‑investment grade bonds with maturities of ten
years or less. BlackRock High Yield Bond Portfolio normally invests at least 80%
of its assets in high yield bonds. The high yield securities (commonly called
“junk bonds”) acquired by BlackRock High Yield Bond Portfolio will generally be
in the lower rating categories of the major rating agencies (BB or lower by
S&P Global Ratings or Fitch Ratings, Inc. or Ba or lower by Moody’s Investor
Services) or will be determined by the BlackRock High Yield Bond Portfolio
management team to be of similar quality. Split rated bonds and other
fixed-income securities (securities that receive different ratings from two or
more rating agencies) are valued as follows: if three agencies rate a security,
the security will be considered to have the median credit rating; if two of the
three agencies rate a security, the security will be considered to have the
lower credit rating. BlackRock High Yield Bond Portfolio may invest up to 30% of
its assets in non-dollar denominated bonds of issuers located outside of the
United States. BlackRock High Yield Bond Portfolio’s investment in non-dollar
denominated bonds may be on a currency hedged or unhedged basis. BlackRock
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High
Yield Bond Portfolio may also invest in convertible and preferred securities.
Convertible debt securities will be counted toward BlackRock High Yield Bond
Portfolio’s 80% policy to the extent they have characteristics similar to the
securities included within that policy. To add additional diversification, the
management team can invest in a wide range of securities including corporate
bonds, mezzanine investments, collateralized bond obligations, bank loans and
mortgage-backed and asset-backed securities. BlackRock High Yield Bond Portfolio
can also invest, to the extent consistent with its investment objective, in
non‑U.S. and emerging market securities and currencies. BlackRock High Yield
Bond Portfolio may invest in securities of any rating, and may invest up to 10%
of its assets (measured at the time of investment) in distressed securities that
are in default or the issuers of which are in bankruptcy. BlackRock High Yield
Bond Portfolio may buy or sell options or futures on a security or an index of
securities, or enter into credit default swaps and interest rate or foreign
currency transactions, including swaps (collectively, commonly known as
derivatives). BlackRock High Yield Bond Portfolio may use derivative instruments
to hedge its investments or to seek to enhance returns. BlackRock High Yield
Bond Portfolio may seek to obtain market exposure to the securities in which it
primarily invests by entering into a series of purchase and sale contracts or by
using other investment techniques (such as reverse repurchase agreements or
dollar rolls). BlackRock High Yield Bond Portfolio may engage in active and
frequent trading of portfolio securities to achieve its principal investment
strategies.
U.S.
Total Bond Index Master Portfolio
U.S.
Total Bond Index Master Portfolio seeks to provide investment results that
correspond to the total return performance of fixed-income securities in the
aggregate, as represented by the Bloomberg U.S. Aggregate Bond Index. Under
normal circumstances, at least 90% of the value of U.S. Total Bond Index Master
Portfolio’s assets, plus the amount of any borrowing for investment purposes, is
invested in securities comprising the Bloomberg U.S. Aggregate Bond Index,
which, for U.S. Total Bond Index Master Portfolio, are considered bonds. U.S.
Total Bond Index Master Portfolio will provide interestholders with at least 60
days’ notice of any change to this policy. U.S. Total Bond Index Master
Portfolio attempts to achieve, in both rising and falling markets, a correlation
of at least 95% between the total return of its net assets before fees and
expenses and the total return of U.S. Total Bond Index Master Portfolio’s
benchmark index, the Bloomberg U.S. Aggregate Bond Index. Notwithstanding the
factors described below, perfect (100%) correlation would be achieved if the
total return of U.S. Total Bond Index Master Portfolio’s net assets, before fees
and expenses, increased or decreased exactly as the total return of U.S. Total
Bond Index Master Portfolio’s benchmark index increased or decreased. U.S. Total
Bond Index Master Portfolio’s ability to match its investment performance to the
investment performance of its benchmark index may be affected by, among other
things, U.S. Total Bond Index Master Portfolio’s expenses, the amount of cash
and cash equivalents held by U.S. Total Bond Index Master Portfolio, the manner
in which the total return of U.S. Total Bond Index Master Portfolio’s benchmark
index is calculated, the size of U.S. Total Bond Index Master Portfolio’s
investment portfolio, and the timing, frequency and size of purchases of
interests and withdrawals. U.S. Total Bond Index Master Portfolio utilizes
sampling techniques that are designed to allow U.S. Total Bond Index Master
Portfolio to duplicate substantially the investment performance of the Bloomberg
U.S. Aggregate Bond Index. However, U.S. Total Bond Index Master Portfolio is
not expected to track the Bloomberg U.S. Aggregate Bond Index with the same
degree of accuracy that complete replication of the Bloomberg U.S. Aggregate
Bond Index would provide. No attempt is made to manage U.S. Total Bond Index
Master Portfolio using economic, financial or market analysis. In addition, at
times, the portfolio composition of U.S. Total Bond Index Master Portfolio may
be altered (or “rebalanced”) to reflect changes in the characteristics of the
index that U.S. Total Bond Index Master Portfolio tracks. U.S. Total Bond Index
Master Portfolio may invest in mortgage dollar rolls and participate in
to‑be‑announced transactions on a regular basis to obtain exposure to
mortgage-backed securities. U.S. Total Bond Index Master Portfolio also may
engage in futures and options transactions and other derivative securities
transactions and lend its portfolio securities, each of which involves risk.
U.S. Total Bond Index Master Portfolio may use futures contracts, options and
other derivative transactions to manage its short-term liquidity and/or as
substitutes for comparable market positions in the securities in its benchmark
index. U.S. Total Bond Index Master Portfolio may also invest in high-quality
money market instruments, including shares of money market funds advised by BFA
or its affiliates. Investors look to indexes as a standard of market
performance. Indexes are model portfolios, that is, groups of stocks or bonds
selected to represent an entire market or market segment. One way an index fund
seeks to match an index’s performance, before fees and expenses, is by buying
and selling all of the index’s securities in the same proportion as they are
reflected in the index. There were approximately 10,000 fixed-income securities
included in the Bloomberg U.S. Aggregate Bond Index. U.S. Total Bond Index
Master Portfolio maintains a weighted average maturity consistent with that of
the Bloomberg U.S. Aggregate Bond Index, which generally ranges between 5 and 10
years. As a practical matter, it would be inefficient for U.S. Total Bond Index
Master Portfolio to hold each security included in the Bloomberg U.S. Aggregate
Bond Index. U.S. Total Bond Index Master Portfolio can, however, substantially
replicate the Bloomberg U.S. Aggregate Bond Index’s profile by holding a
representative sample of securities in the Bloomberg U.S. Aggregate Bond Index.
It may, for example, hold U.S. Government obligations and corporate bonds in a
similar proportion to the Bloomberg U.S. Aggregate Bond Index. Additionally, it
can match certain Bloomberg U.S. Aggregate Bond Index features such as: average
time to maturity for both government and corporate securities, securities’
coupon rates, which are the interest rates securities pay based on their face
values, economic sectors represented by securities, credit quality of securities
(all securities in the Bloomberg U.S. Aggregate Bond Index are rated
investment-grade) and whether or not securities are callable, which means the
issuer has the right to repay principal and interest before maturity. U.S. Total
Bond Index Master Portfolio is designed for investors who desire a convenient
way to invest
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in
bonds issued in the United States. Although this market has increased in value
over the long-term, it fluctuates and has also decreased in value over shorter
time periods.
Multi-Asset Funds
BlackRock
Tactical Opportunities Fund
BlackRock
Tactical Opportunities Fund seeks total return. BlackRock Tactical Opportunities
Fund uses a macro asset allocation strategy, investing varying percentages of
its portfolio in global stocks, bonds, money market instruments, foreign
currencies and cash. BlackRock Tactical Opportunities Fund has wide flexibility
in the relative weightings given to each category. BlackRock Tactical
Opportunities Fund takes both long and short positions within and across each
category, which the Fund expects to result in a lower correlation to the equity
or fixed-income markets than if the Fund invested in either such market in its
entirety. In selecting investments, BlackRock Tactical Opportunities Fund
management team will identify global macro opportunities and position BlackRock
Tactical Opportunities Fund using a combination of individual securities and
derivatives. The Fund uses a combination of a systematic (i.e. rule-based)
investment process and a discretionary investment process to allocate assets.
The systematic process compares data across similar assets to rank expected
return opportunities and to appropriately scale the Fund’s exposure. The
discretionary process derives investment themes based on research and analysis
of macro-economic data and seeks exposures to these themes. With respect to its
equity investments, BlackRock Tactical Opportunities Fund may invest in
individual equity securities to an unlimited extent. BlackRock Tactical
Opportunities Fund may invest in common stock, preferred stock, securities
convertible into common stock, non‑convertible preferred stock and depositary
receipts. BlackRock Tactical Opportunities Fund may invest in securities of both
U.S. and non‑U.S. issuers without limit, which can be U.S. dollar-based or
non‑U.S. dollar-based and may be currency hedged or unhedged. BlackRock Tactical
Opportunities Fund may invest in securities of companies of any market
capitalization. With respect to its fixed-income investments, BlackRock Tactical
Opportunities Fund may invest in individual fixed-income securities to an
unlimited extent. BlackRock Tactical Opportunities Fund may invest in a
portfolio of fixed-income securities such as corporate bonds and notes,
commercial and residential mortgage-backed securities (bonds that are backed by
a mortgage loan or pools of loans secured either by commercial property or
residential mortgages, as applicable), collateralized mortgage obligations
(bonds that are backed by cash flows from pools of mortgages and may have
multiple classes with different payment rights and protections), collateralized
debt obligations, asset-backed securities, convertible securities, debt
obligations of governments and their sub‑divisions (including those of non‑U.S.
governments), other floating or variable rate obligations, municipal obligations
and zero coupon debt securities. BlackRock Tactical Opportunities Fund may also
invest a significant portion of its assets in non‑investment grade bonds (“junk”
bonds or distressed securities), non‑investment grade bank loans, foreign bonds
(both U.S. dollar- and non‑U.S. dollar-denominated) and bonds of emerging market
issuers. BlackRock Tactical Opportunities Fund may invest in non‑U.S.
dollar-denominated bonds on a currency hedged or unhedged basis. With respect to
its cash investments, BlackRock Tactical Opportunities Fund may hold high
quality money market securities, including short term U.S. Government
securities, U.S. Government agency securities, securities issued by U.S.
Government-sponsored enterprises and U.S. Government instrumentalities, bank
obligations, commercial paper, including asset-backed commercial paper,
corporate notes and repurchase agreements. BlackRock Tactical Opportunities Fund
may invest a significant portion of its assets in money market funds, including
those advised by BAL or its affiliates. BlackRock Tactical Opportunities Fund
may invest in derivatives, including, but not limited to, interest rate, total
return and credit default swaps, options, futures, options on futures and swaps
and foreign currency transactions (including swaps), for hedging purposes, as
well as to increase the return on its portfolio investments. BlackRock Tactical
Opportunities Fund may seek to obtain market exposure to the securities in which
it primarily invests by entering into a series of purchase and sale contracts or
by using other investment techniques (such as reverse repurchase agreements or
dollar rolls). BlackRock Tactical Opportunities Fund may also use forward
foreign currency exchange contracts (obligations to buy or sell a currency at a
set rate in the future) to hedge against movement in the value of non‑U.S.
currencies. BlackRock Tactical Opportunities Fund may also invest in indexed and
inverse floating rate securities. BlackRock Tactical Opportunities Fund may
invest in U.S. and non‑U.S. REITs, structured products (including, but not
limited to, structured notes, credit linked notes and participation notes, or
other instruments evidencing interests in special purpose vehicles, trusts, or
other entities that hold or represent interests in fixed-income securities) and
floating rate securities (such as bank loans).
Money Market Fund
BlackRock
Cash Funds: Treasury
BlackRock
Cash Funds: Treasury seeks current income as is consistent with liquidity and
stability of principal. BlackRock Cash Funds: Treasury seeks to achieve its
investment objective by investing at least 99.5% of its total assets in cash,
U.S. Treasury bills, notes and other direct obligations of the U.S. Treasury,
and repurchase agreements secured by such obligations or cash. BlackRock Cash
Funds: Treasury invests in securities maturing in 397 days or less (with certain
exceptions) and the portfolio will have a dollar-weighted average maturity of 60
days or less and a dollar-weighted average life of 120 days or less. In
addition, BlackRock Cash Funds: Treasury may invest in variable and floating
rate instruments and transact in securities on a when-issued, delayed delivery
or forward commitment
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basis.
BlackRock Cash Funds: Treasury will invest, under normal circumstances, at least
80% of its net assets, plus the amount of any borrowings for investment
purposes, in U.S. Treasury bills, notes and other obligations of the U.S.
Treasury, and repurchase agreements secured by such obligations. This policy is
a non‑fundamental policy of BlackRock Cash Funds: Treasury and BlackRock Cash
Funds: Treasury will not change the policy without providing shareholders with
at least 60 days’ prior notice of any change in the policy. U.S. Treasury
obligations are backed by the full faith and credit of the U.S. Government. The
principal and interest of all securities held by the Fund are payable in U.S.
dollars. The securities purchased by BlackRock Cash Funds: Treasury are subject
to the quality, diversification, and other requirements of Rule 2a‑7 under the
Investment Company Act, and other rules of the Securities and Exchange
Commission. BlackRock Cash Funds: Treasury is a “feeder” fund that invests all
of its investable assets in Treasury Master Portfolio of Master Investment
Portfolio, which has the same investment objective and strategies as BlackRock
Cash Funds: Treasury. All investments are made at the Treasury Master Portfolio
level. This structure is sometimes called a “master/feeder” structure. BlackRock
Cash Funds: Treasury’s investment results will correspond directly to the
investment results of Treasury Master Portfolio.
Underlying iShares Funds
In
managing each of the Underlying iShares Funds, BFA uses a representative
sampling index strategy. Representative sampling is an indexing strategy that
involves investing in a representative sample of securities that has an
investment profile similar to the underlying index. The securities selected are
expected to have, in the aggregate, investment characteristics (based on factors
such as market capitalization and industry weightings), fundamental
characteristics (such as return variability, duration, maturity or credit
ratings and yield) and liquidity measures similar to those of the applicable
underlying index. Underlying iShares Funds that use representative sampling may
or may not hold all of the securities in the relevant underlying index.
Equity ETFs
iShares Core MSCI EAFE ETF seeks to track the
investment results of an index composed of large-, mid‑ and small-capitalization
developed market equities, excluding the U.S. and Canada. The fund seeks to
track the investment results of the MSCI EAFE IMI Index (the “Underlying
Index”), which has been developed by MSCI Inc. (“MSCI”). The Underlying Index is
a free float-adjusted, market capitalization-weighted index designed to measure
large-, mid‑ and small-capitalization equity market performance and includes
stocks from Europe, Australasia and the Far East. As of July 31, 2023, the
Underlying Index consisted of securities from the following 21 developed market
countries or regions: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
As of July 31, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the financials and industrials
industries or sectors. The components of the Underlying Index are likely to
change over time.
iShares Core S&P 500 ETF seeks to track
the investment results of an index composed of large-capitalization U.S.
equities. The fund seeks to track the investment results of the S&P 500® (the “Underlying Index”),
which measures the performance of the large-capitalization sector of the U.S.
equity market, as determined by S&P Dow Jones Indices LLC. As of
March 31, 2023, the Underlying Index included approximately 85% of the
market capitalization of all publicly-traded U.S. equity securities. The
securities in the Underlying Index are weighted based on the float-adjusted
market value of their outstanding shares. The Underlying Index consists of
securities from a broad range of industries. As of March 31, 2023, a
significant portion of the Underlying Index is represented by securities of
companies in the information technology industry or sector. The components of
the Underlying Index are likely to change over time.
iShares Global Equity Factor ETF seeks to
track the investment results of an index composed of large-and
mid‑capitalization developed and emerging market stocks that have favorable
exposure to target style factors subject to constraints. The fund seeks to track
the investment results of the STOXX Global Equity Factor Index (the “Underlying
Index”), which is a rules-based equity index provided by STOXX Ltd. (“STOXX”).
The Underlying Index is composed of large-and mid‑capitalization equity
securities from the STOXX World AC Index (the “Parent Index”) that are selected
and weighted using an optimization process designed to maximize exposure to five
target factors: momentum, quality, value, low volatility and size. The
Underlying Index seeks to control exposure to, among other things, industries
and countries, limit turnover and maintain a level of risk similar to that of
the Parent Index. The Parent Index is a free float market
capitalization-weighted index designed to measure the performance of large-and
mid‑capitalization companies from developed and emerging markets. Large-and
mid‑capitalization companies, as calculated by the Index Provider, represent
approximately the top 85% of the investable market capitalization of each
developed and emerging market country included in the Parent Index, as
determined by STOXX. The momentum score is calculated from the following
signals: price momentum, earnings momentum and earnings announcement drift
(i.e., the difference between a stock’s performance on and immediately following
an earnings announcement date). The quality score is calculated from the
following signals: gross profitability, share dilution, accruals, changes in net
operating assets, carbon emissions intensity and greenhouse gas (“GHG”)
reduction targets. Carbon emissions intensity is based on the issuer’s Scope 1
and Scope 2 GHG emissions (i.e., direct emissions from sources that an issuer
owns or controls and indirect emissions from the issuer’s purchase of energy)
relative to peers in its Industry Classification Benchmark Supersector, as
reported by Institutional Shareholder Services (“ISS”). The GHG targets signal
is based on the robustness of an issuer’s GHG reduction targets, including
whether they are part of the Science Based Targets
174
initiative
(“SBTi”) framework; this is assessed by ISS based on its own ESG ratings data
and SBTi data. The value score is calculated from the following signals: current
book value‑to‑price ratio, dividend yield (i.e., 12‑month trailing dividend
divided by total market capitalization), earnings yield (i.e., 12‑month net
income divided by total market capitalization), cash flow yield (i.e., 12‑month
cash flow divided by total market capitalization) and time series normalized
cash flow yield over the previous 36 months. The low volatility score is based
on prior 12‑month volatility, as calculated by STOXX. The size score seeks to
measure an issuer’s market capitalization relative to other companies in the
Parent Index. The maximum weight of a single security is 10%, and the sum of
security weights that are individually greater than 4.5% must be less than 22.5%
of the Underlying Index. STOXX also applies other constraints, such as country
and sector exposures relative to the Parent Index, among others. The Underlying
Index is reviewed and rebalanced quarterly. As of July 31, 2023, the
Underlying Index consisted of approximately 690 constituents from companies in
the following countries or regions: Australia, Austria, Belgium, Brazil, Canada,
Chile, China, Colombia, Czech Republic, Denmark, Finland, France, Germany,
Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan,
Malaysia, Mexico, the Netherlands, New Zealand, Norway, Philippines, Poland,
Portugal, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Spain,
Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the
United Kingdom and the U.S. As of July 31, 2023, a significant portion of
the Underlying Index is represented by securities of companies in the consumer
discretionary and technology industries or sectors. The components of the
Underlying Index are likely to change over time.
iShares International Equity Factor ETF seeks
to track the investment results of an index composed of global developed market
large- and mid‑capitalization stocks, excluding the U.S., that have favorable
exposure to target style factors subject to constraints. The Fund seeks to track
the investment results of the STOXX Global Equity Factor Index (the “Underlying
Index”), which is a rules-based equity index provided by STOXX Ltd. (the
“STOXX”). The Underlying Index is composed of large- and mid-capitalization
equity securities from the STOXX World AC Index (the “Parent Index”) that are
selected and weighted using an optimization process designed to maximize
exposure to five target factors: momentum, quality, value, low volatility and
size. The Underlying Index seeks to control exposure to, among other things,
industries and countries, limit turnover and maintain a level of risk similar to
that of the Parent Index. The Parent Index is a free float market
capitalization-weighted index designed to measure the performance of large- and
mid-capitalization companies from developed and emerging markets. Large- and
mid-capitalization companies, as calculated by the STOXX, represent
approximately the top 85% of the investable market capitalization of each
developed and emerging market country included in the Parent Index, as
determined by STOXX. The momentum score is calculated from the following
signals: price momentum, earnings momentum and earnings announcement drift
(i.e., the difference between a stock’s performance on and immediately following
an earnings announcement date). The quality score is calculated from the
following signals: gross profitability, share dilution, accruals, changes in net
operating assets, carbon emissions intensity and greenhouse gas (“GHG”)
reduction targets. Carbon emissions intensity is based on the issuer’s Scope 1
and Scope 2 GHG emissions (i.e., direct emissions from sources that an issuer
owns or controls and indirect emissions from the issuer’s purchase of energy)
relative to peers in its Industry Classification Benchmark Supersector, as
reported by Institutional Shareholder Services (“ISS”). The GHG targets signal
is based on the robustness of an issuer’s GHG reduction targets, including
whether they are part of the Science Based Targets initiative (“SBTi”)
framework; this is assessed by ISS based on its own ESG ratings data and SBTi
data. The value score is calculated from the following signals: current book
value‑to‑price ratio, dividend yield (i.e., 12‑month trailing dividend divided
by total market capitalization), earnings yield (i.e., 12‑month net income
divided by total market capitalization), cash flow yield (i.e., 12‑month cash
flow divided by total market capitalization) and time series normalized cash
flow yield over the previous 36 months. The low volatility score is based on
prior 12‑month volatility, as calculated by STOXX. The size score seeks to
measure an issuer’s market capitalization relative to other companies in the
Parent Index. The maximum weight of a single security is 10%, and the sum of
security weights that are individually greater than 4.5% must be less than 22.5%
of the Underlying Index. STOXX also applies other constraints, such as country
and sector exposures relative to the Parent Index, among others. The Underlying
Index is reviewed and rebalanced quarterly. As of July 31, 2023, the Underlying
Index consisted of approximately 690 constituents from companies in the
following countries or regions: Australia, Austria, Belgium, Brazil, Canada,
Chile, China, Colombia, Czech Republic, Denmark, Finland, France, Germany,
Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan,
Malaysia, Mexico, the Netherlands, New Zealand, Norway, Philippines, Poland,
Portugal, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Spain,
Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the
United Kingdom and the U.S. As of July 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the consumer
discretionary and technology industries or sectors. The components of the
Underlying Index are likely to change over time.
iShares International Small‑Cap Equity Factor
ETF seeks to track the investment results of an index composed of global
developed market small-capitalization stocks, excluding the U.S., that have
favorable exposure to target style factors subject to constraints. The fund
seeks to track the investment results of the STOXX International Small‑Cap
Equity Factor Index (the “Underlying Index”), which is a rules-based equity
index provided by STOXX Ltd. (“STOXX”). The Underlying Index is composed of
small capitalization equity securities from the STOXX International Developed
Markets Small Cap Index (the “Parent Index”) that are selected and weighted
using an optimization process designed to maximize exposure to four target
factors: momentum, quality, value, and low volatility. The Underlying Index
seeks to control exposure to, among other things, industries and countries,
limit turnover and maintain a level of risk similar to
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that
of the Parent Index. The Parent Index is a free float market
capitalization-weighted index designed to measure the performance of
small-capitalization companies from developed market countries excluding the
U.S. Small-capitalization companies represent approximately the bottom 15% of
the investable market capitalization of each developed market country included
in the Parent Index, as determined by STOXX. The momentum score is calculated
from the following signals: price momentum, earnings momentum and earnings
announcement drift (i.e., the difference between a stock’s performance on and
immediately following an earnings announcement date). The quality score is
calculated from the following signals: gross profitability, share dilution,
accruals, changes in net operating assets, carbon emissions intensity and
greenhouse gas (“GHG”) reduction targets. Carbon emissions intensity is based on
the issuer’s Scope 1 and Scope 2 GHG emissions (i.e., direct emissions from
sources that an issuer owns or controls and indirect emissions from the issuer’s
purchase of energy) relative to peers in its Industry Classification Benchmark
Supersector, as reported by Institutional Shareholder Services (“ISS”). The GHG
targets signal is based on the robustness of an issuer’s GHG reduction targets,
including whether they are part of the Science Based Targets initiative (“SBTi”)
framework; this is assessed by ISS based on its own ESG ratings data and SBTi
data. The value score is calculated from the following signals: current book
value‑to‑price ratio, dividend yield (i.e., 12‑month trailing dividend divided
by total market capitalization), earnings yield (i.e., 12‑month net income
divided by total market capitalization), cash flow yield (i.e., 12‑month cash
flow divided by total market capitalization) and time series normalized cash
flow yield over the previous 36 months. The low volatility score is based on
prior 12‑month volatility, as calculated by STOXX. The maximum weight of a
single security is 10%, and the sum of security weights that are individually
greater than 4.5% must be less than 22.5% of the Underlying Index. STOXX also
applies other constraints, such as country and sector exposures relative to the
Parent Index, among others. The Underlying Index is reviewed and rebalanced
quarterly. As of July 31, 2023, the Underlying Index consisted of
approximately 1,055 constituents from companies in the following countries or
regions: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom (the
“U.K.”). As of July 31, 2023, a significant portion of the Underlying Index
is represented by securities of companies in the consumer discretionary and
industrials industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI Intl Momentum Factor ETF seeks to
track the investment results of an index that measures the performance of
international developed large- and mid‑capitalization stocks exhibiting
relatively higher momentum characteristics. The fund seeks to track the
investment results of the MSCI World ex USA Momentum Index (the “Underlying
Index”), which consists of stocks exhibiting relatively higher momentum
characteristics than the traditional market capitalization-weighted parent
index, the MSCI World ex USA Index (the “Parent Index”), as determined by MSCI
Inc. (“MSCI”). The Parent Index includes equity securities in approximately the
top 85% of equity market capitalization in developed market countries, as
defined by MSCI, excluding the U.S. The Underlying Index is designed to reflect
the performance of an equity momentum strategy that emphasizes stocks with high
price momentum, while maintaining reasonably high trading liquidity, investment
capacity and moderate index turnover. A risk-adjusted price momentum score,
defined by MSCI as the excess return over the risk-free rate divided by the
annualized standard deviation of weekly returns over the past three years, is
calculated for each security in the Parent Index over 6‑ and 12‑month time
periods. The 6‑ and 12‑month risk-adjusted price momentum calculations are then
standardized at +/- 3 standard deviations and translated into an average
momentum score. The weight of each Underlying Index constituent is determined by
multiplying the security’s momentum score by its market capitalization weight in
the Parent Index. Additionally, each individual issuer is capped at 5% at
reconstitution. MSCI uses an algorithm to determine the number of components in
the Underlying Index based on the number of constituents in the Parent Index.
The Underlying Index is reconstituted semi-annually. After the constituent
changes are determined at each semi-annual reconstitution, the Index Provider
distributes those changes over three days (generally, the reconstitution
effective date and the two prior business days) to reconstitute the Underlying
Index. As of July 31, 2023, the Underlying Index consisted of securities
from 300 companies in the following 21 countries or regions: Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. The Underlying Index includes large- and
mid‑capitalization companies and may change over time. As of July 31, 2023,
a significant portion of the Underlying Index is represented by securities of
companies in the consumer discretionary, financials and industrials industries
or sectors. The components of the Underlying Index are likely to change over
time.
iShares MSCI Intl Quality Factor ETF seeks to
track the investment results of an index that measures the performance of
international developed large- and mid‑capitalization stocks exhibiting
relatively higher quality characteristics as identified through three
fundamental variables: return on equity, earnings variability and
debt‑to‑equity. The fund seeks to track the investment results of the MSCI World
ex USA Sector Neutral Quality Index (the “Underlying Index”), which is based on
a traditional market capitalization-weighted parent index, the MSCI World ex USA
Index (the “Parent Index”). The Parent Index includes equity securities in
approximately the top 85% of equity market capitalization in developed market
countries, as defined by MSCI Inc. (“MSCI”), excluding the U.S. The Underlying
Index seeks to measure the performance of securities in the Parent Index that
exhibit higher quality characteristics relative to their peers within the
corresponding Global Industry Classification Standard (GICS®) sector. To construct the
Underlying Index, MSCI determines the “quality score” of each security in the
Parent Index based on three fundamental variables: high return on equity, stable
year-over-year earnings growth and low financial leverage. The Underlying Index
is weighted
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based
on a component’s quality score multiplied by its weight in the Parent Index.
Weights in the Underlying Index are next normalized so that sectors in the
Underlying Index represent approximately the same weight as in the Parent Index.
Additionally, each individual issuer is capped at 5%. The Underlying Index is
rebalanced semi-annually. As of July 31, 2023, the Underlying Index
consisted of securities from 300 companies in the following 22 countries or
regions: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
Underlying Index includes large- and mid‑capitalization companies and may change
over time. As of July 31, 2023, a significant portion of the Underlying
Index is represented by securities of companies in the financials and
industrials industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI Intl Value Factor ETF seeks to
track the investment results of an index composed of international developed
large- and mid‑capitalization stocks with value characteristics and relatively
lower valuations. The fund seeks to track the investment results of the MSCI
World ex USA Enhanced Value Index (the “Underlying Index”), which is based on a
traditional market capitalization-weighted parent index, the MSCI World ex USA
Index (the “Parent Index”). The Parent Index includes equity securities in
approximately the top 85% of equity market capitalization in developed market
countries, as defined by MSCI Inc. (“MSCI”), excluding the U.S. The Underlying
Index is designed to represent the performance of securities that exhibit higher
value style characteristics relative to their peers within the corresponding
Global Industry Classification Standard (GICS®) sector. The value style
characteristics for index construction are defined by MSCI using three
accounting variables based on publicly reported financial data: price‑to‑book
value, price‑to‑forward earnings and enterprise value‑to‑cash flow from
operations. MSCI calculates a “value score” based on these three variables and
assigns weights by multiplying a component’s value score by its market
capitalization. Weights in the Underlying Index are next normalized so that
sectors in the Underlying Index represent approximately the same weight as in
the Parent Index. MSCI uses an algorithm to determine the number of components
in the Underlying Index based on the number of constituents in the Parent Index.
The number of components is evaluated semi-annually. As of July 31, 2023,
the Underlying Index consisted of securities from 350 companies in the following
20 countries or regions: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands,
Norway, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
Underlying Index includes large- and mid‑capitalization companies and may change
over time. As of July 31, 2023, a significant portion of the Underlying
Index is represented by securities of companies in the financials and
industrials industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI EAFE Min Vol Factor ETF seeks to
track the investment results of an index composed of developed market equities
that, in the aggregate, have lower volatility characteristics relative to the
broader developed equity markets, excluding the U.S. and Canada. The Fund seeks
to track the investment results of the MSCI EAFE Minimum Volatility (USD) Index
(the “Underlying Index”), which has been developed by MSCI Inc. (the “Index
Provider” or “MSCI”) to measure the performance of international equity
securities (excluding the U.S. and Canada) that in the aggregate have lower
volatility relative to the MSCI EAFE Index (the “Parent Index”), which is a
capitalization-weighted index. In constructing the Underlying Index, MSCI uses a
rules-based methodology to select securities from the Parent Index and to
determine their weightings. In order to determine weightings of securities
within the Underlying Index, MSCI seeks to optimize the Parent Index such that
the resulting portfolio exhibits the lowest absolute volatility, as measured by
MSCI, while applying constraints based on turnover, minimum and maximum
weightings of index constituents, sectors, and countries as well as factor
constraints (for example, liquidity and financial leverage) as measured by
MSCI.
The
Underlying Index includes stocks from Europe, Australasia, the Middle East and
the Far East and, as of July 31, 2023, consisted of securities from the
following 20 developed market countries or regions: Australia, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. The Underlying Index includes large- and
mid-capitalization companies and may change over time. As of July 31, 2023, a
significant portion of the Underlying Index is represented by securities of
companies in the financials, industrials and healthcare industries or sectors.
The components of the Underlying Index are likely to change over time.
iShares MSCI Emerging Markets Min Vol Factor
ETF seeks to track the investment results of an index composed of
emerging market equities that, in the aggregate, have lower volatility
characteristics relative to the broader emerging equity markets. The fund seeks
to track the investment results of the MSCI Emerging Markets Minimum Volatility
(USD) Index (the “Underlying Index”), which has been developed by MSCI Inc.
(“MSCI”) to measure the performance of equity securities in global emerging
markets that, in the aggregate, have lower volatility relative to the broader
large- and mid‑capitalization global emerging market equities. The Underlying
Index is designed by selecting securities from the MSCI Emerging Markets Index
(the “Parent Index”), which is a capitalization-weighted index, and then follows
a rules-based methodology to optimize the Underlying Index and determine weights
for securities in the index having the lowest total risk. Under a rules-based
methodology, securities and weighting of the index are established based on
pre‑established parameters and discretionary factors are not relied on.
Generally, rules-based methodologies include specified requirements for security
eligibility, maximum and minimum weightings by security and, in some cases by
sector and country, established rules relating to handling of special dividends
and other distributions, and treatment of corporate events. In order to
determine weightings by security within the Underlying Index, MSCI seeks to
construct a portfolio of lowest absolute volatility using its multi-factor risk
model. The portfolio is then further refined by an
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optimization
tool that aims to determine the lowest absolute volatility based on the
projected “riskiness” of securities in the Parent Index while subjected to
constraints based on established minimum and maximum weightings of index
constituents and sectors as well as factor constraints (for example, liquidity
and financial leverage) as measured by MSCI. As of August 31, 2023, the
Underlying Index consisted of securities of companies in the following 21
countries: Brazil, Chile, China, Czech Republic, Egypt, Greece, Hungary, India,
Indonesia, Kuwait, Malaysia, Mexico, Peru, the Philippines, Qatar, Saudi Arabia,
South Korea, Taiwan, Thailand, Turkey and the United Arab Emirates. As of
August 31, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the communication services, financials
and technology industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI USA Min Vol Factor ETF seeks to
track the investment results of an index composed of U.S. equities that, in the
aggregate, have lower volatility characteristics relative to the broader U.S.
equity market. The fund seeks to track the investment results of the MSCI USA
Minimum Volatility (USD) Index (the “Underlying Index”), which has been
developed by MSCI Inc. (“MSCI”) to measure the performance of large and
mid‑capitalization equity securities listed on stock exchanges in the U.S. that,
in the aggregate, have lower volatility relative to the large- and mid‑cap U.S.
equity market. In constructing the Underlying Index, MSCI uses a rules-based
methodology to select securities from the MSCI USA Index (the “Parent Index”),
which is a capitalization-weighted index, and to determine the weightings of
such securities. In order to determine weightings of securities within the
Underlying Index, MSCI seeks to optimize the Parent Index such that the
resulting portfolio exhibits the lowest absolute volatility, as measured by
MSCI, while applying constraints based on turnover, established minimum and
maximum weightings of index constituents, sectors and countries, as well as
factor constraints (for example, liquidity and financial leverage) as measured
by MSCI. The Underlying Index includes large- and mid‑capitalization companies
and may change over time. As of July 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the healthcare and
technology industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI USA Momentum Factor ETF seeks to
track the investment results of an index composed of U.S. large- and
mid‑capitalization stocks exhibiting relatively higher price momentum. The fund
seeks to track the investment results of an index composed of U.S. large- and
mid-capitaliztion stocks exhibiting relatively higher price momentum. The fund
seeks to track the investment results of the MSCI USA Momentum SR Variant Index
(the “Underlying Index”), which consists of stocks exhibiting relatively higher
momentum characteristics than the traditional market capitalization-weighted
parent index, the MSCI USA Index (the “Parent Index”), as determined by MSCI
Inc. (“MSCI”). The Parent Index includes U.S. large- and mid‑capitalization
stocks, as defined by MSCI. A risk-adjusted price momentum metric, defined by
MSCI as the excess return over the risk-free rate divided by the annualized
standard deviation of weekly returns over the past three years, is calculated
for each security in the Parent Index over 6‑ and 12‑month time periods. The 6‑
and 12‑month risk-adjusted price momentum calculations are then standardized at
+/- 3 standard deviations and translated into an average momentum score. The
weight of each Underlying Index constituent is determined by multiplying the
security’s momentum score by its market capitalization weight in the Parent
Index. Additionally, each individual issuer is capped at 5% at reconstitution.
MSCI uses an algorithm to determine the number of components in the Underlying
Index based on the number of constituents in the Parent Index. The Underlying
Index is reconstituted semi-annually. After the constituent changes are
determined at each semi-annual reconstitution, MSCI distributes those changes
over three days (generally, the reconstitution effective date and the two prior
business days) to reconstitute the Underlying Index. As of July 31, 2023,
there were 125 securities in the Underlying Index. As of July 31, 2023, a
significant portion of the Underlying Index is represented by securities of
companies in the healthcare and technology industries or sectors. The components
of the Underlying Index are likely to change over time.
iShares MSCI USA Quality Factor ETF seeks to
track the investment results of an index composed of U.S. large- and
mid‑capitalization stocks with quality characteristics as identified through
certain fundamental metrics. The fund seeks to track the investment results of
the MSCI USA Sector Neutral Quality Index (the “Underlying Index”), which is
based on a traditional market capitalization-weighted parent index, the MSCI USA
Index (the “Parent Index”). The Parent Index includes U.S. large- and
mid‑capitalization stocks, as defined by MSCI Inc. (“MSCI”). The Underlying
Index seeks to measure the performance of securities in the Parent Index that
exhibit higher quality characteristics relative to their peers within the
corresponding Global Industry Classification Standard (GICS®) sector. To construct the
Underlying Index, MSCI determines the quality score of each security in the
Parent Index based on three fundamental variables: high return on equity, low
earnings variability and low leverage. The Underlying Index is weighted based on
a component’s quality score multiplied by its weight in the Parent Index.
Weights in the Underlying Index are next normalized so that sectors in the
Underlying Index represent the same weight as in the Parent Index. Additionally,
each individual issuer is capped at 5%. The Underlying Index is rebalanced on a
semi-annual basis. As of July 31, 2023, there were 125 securities in the
Underlying Index. As of July 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the technology
industry or sector. The components of the Underlying Index are likely to change
over time.
iShares MSCI USA Size Factor ETF seeks to
track the investment results of an index composed of U.S. large-and
mid‑capitalization stocks with relatively smaller average market capitalization.
The fund seeks to track the investment results of the MSCI USA Low Size Index
(the “Underlying Index”), which is based on a traditional market
capitalization-
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weighted
parent index, the MSCI USA Index (the “Parent Index”). The Parent Index includes
U.S. large-and mid‑capitalization stocks, as defined by MSCI Inc. (“MSCI”). The
Underlying Index is constructed by applying a mathematical formula at each
rebalancing that reweights the components of its market capitalization-weighted
Parent Index, such that the representation of smaller capitalization companies
is increased relative to larger capitalization companies. In addition, at each
rebalancing, MSCI calculates a “constraint factor” for each component. The
constraint factor is the ratio of the component’s weight in the Underlying Index
to that component’s weight in the Parent Index. The constraint factor is held
constant between each rebalancing, except in the case of corporate events (as
defined by MSCI). Changes in the relative weight of an individual component in
the Parent Index due to market appreciation/depreciation result in that
component increasing/decreasing in weight in the Underlying Index to hold the
constraint factor for that component constant between each rebalancing. The
Underlying Index is rebalanced semi-annually in May and November. As of
July 31, 2023, there are 627 component securities in the Underlying Index.
As of July 31, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the industrials and technology
industries or sectors. The components of the Underlying Index are likely to
change over time.
iShares MSCI USA Small‑Cap Min Vol Factor ETF
seeks to track the investment results of an index composed of
small-capitalization U.S. equities that, in the aggregate, have lower volatility
characteristics relative to the small-capitalization U.S. equity market. The
fund seeks to track the investment results of the MSCI USA Small Cap Minimum
Volatility (USD) Index (the “Underlying Index”), which has been developed by
MSCI Inc. (“MSCI”) to measure the performance of small-capitalization U.S.
equities that in the aggregate are expected to have lower volatility
characteristics relative to the small-capitalization U.S. equity market. In
constructing the Underlying Index, MSCI uses a rules-based methodology to select
securities from the MSCI USA Small Cap Index (the “Parent Index”), which is a
capitalization-weighted index that represents approximately 14% of the free
float-adjusted market capitalization in the U.S., and to determine the
weightings of such securities in the Underlying Index. Under the rules-based
methodology, securities and weightings of the Underlying Index are established
based on pre‑established parameters and discretionary factors are not relied on.
Generally, the rules-based methodology includes specified requirements for
security eligibility, maximum and minimum weightings by security and, in some
cases, by sector and country, as well as rules for special dividends and other
distributions and the treatment of corporate events. In order to determine
weightings of securities within the Underlying Index, MSCI seeks to optimize the
Parent Index such that the resulting portfolio exhibits the lowest absolute
volatility, as measured by MSCI, while applying constraints based on turnover,
established minimum and maximum weightings of index constituents and sectors, as
well as factor constraints (for example, liquidity and financial leverage) as
measured by MSCI. As of July 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the financials and
healthcare industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI USA Value Factor ETF seeks to
track the investment results of an index composed of U.S. large- and
mid‑capitalization stocks with value characteristics and relatively lower
valuations. The fund seeks to track the investment results of the MSCI USA
Enhanced Value Index (the “Underlying Index”), which is based on a traditional
market capitalization-weighted parent index, the MSCI USA Index (the “Parent
Index”). The Parent Index includes U.S. large- and mid‑capitalization stocks, as
defined by MSCI Inc. (“MSCI”). The Underlying Index is designed to measure the
performance of securities in the Parent Index that exhibit higher value
characteristics relative to their peers within the corresponding Global Industry
Classification Standard (GICS®) sector. To construct the
Underlying Index, MSCI calculates a “value score” for each security in the
Parent Index using three variables: price‑to‑book value, price‑to‑forward
earnings and enterprise value‑to‑cash flow from operations. MSCI assigns weights
by multiplying a component’s value score by its market capitalization. Weights
in the Underlying Index are next normalized so that sectors in the Underlying
Index represent the same weight as in the Parent Index. MSCI uses an algorithm
to determine the number of components in the Underlying Index based on the
number of constituents in the Parent Index. The number of components is
evaluated semi-annually. As of July 31, 2023, there were 150 securities in
the Underlying Index. As of July 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the technology
industry or sector. The components of the Underlying Index are likely to change
over time.
iShares International Developed Real Estate ETF
seeks to track the investment results of an index composed of real estate
equities in developed non‑U.S. markets. The fund seeks to track the investment
results of the FTSE EPRA Nareit Developed ex US Index (the “Underlying Index”),
which measures the performance of companies engaged in the ownership, trading
and development of income-producing real estate in the developed real estate
markets (except for the U.S.) as defined by FTSE EPRA Nareit. As of
April 30, 2023, the Underlying Index was composed of securities of
companies in the following countries or regions: Australia, Austria, Belgium,
Canada, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Singapore, South Korea, Spain,
Sweden, Switzerland and the United Kingdom (the “U.K.”). As of April 30,
2023, a significant portion of the Underlying Index includes companies offering
various real estate services, real estate operating companies and real estate
investment trusts (“REITs”). The components of the Underlying Index are likely
to change over time.
iShares U.S. Equity Factor ETF seeks to track
the investment results of an index composed of U.S. large-and mid‑capitalization
stocks that have favorable exposure to target style factors subject to
constraints. The fund seeks to track the investment results of the STOXX U.S.
Equity Factor Index (the “Underlying Index”), which is a rules-based equity
index provided by STOXX Ltd. (“STOXX”). The Underlying Index is composed of
large-and mid‑capitalization equity
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securities
from the STOXX USA 900 index (the “Parent Index”) that are selected and weighted
using an optimization process designed to maximize exposure to five target
factors: momentum, quality, value, low volatility and size. The Underlying Index
also seeks to mitigate exposure to unintended systematic exposures, limit
turnover and maintain a level of risk similar to that of the Parent Index. The
Parent Index measures the performance of the largest 900 companies of the U.S.
equity market, as defined by STOXX. The momentum score is calculated from the
following signals: price momentum, earnings momentum and earnings announcement
drift (i.e., the difference between a stock’s performance on and immediately
following an earnings announcement date). The quality score is calculated from
the following signals: gross profitability, share dilution, accruals, changes in
net operating assets, carbon emissions intensity and greenhouse gas (“GHG”)
reduction targets. Carbon emissions intensity is based on the issuer’s Scope 1
and Scope 2 GHG emissions (i.e., direct emissions from sources that an issuer
owns or controls and indirect emissions from the issuer’s purchase of energy)
relative to peers in its Industry Classification Benchmark Supersector, as
reported by Institutional Shareholder Services (“ISS”). The GHG targets signal
is based on the robustness of an issuer’s GHG reduction targets, including
whether they are part of the Science Based Targets initiative (“SBTi”)
framework; this is assessed by ISS based on its own ESG ratings data and SBTi
data. The value score is calculated from the following signals: current book
value‑to‑price ratio, dividend yield (i.e., 12‑month trailing dividend divided
by total market capitalization), earnings yield (i.e., 12‑month net income
divided by total market capitalization), cash flow yield (i.e., 12‑month cash
flow divided by total market capitalization) and time series normalized cash
flow yield over the previous 36 months. The low volatility score is based on
prior 12‑month volatility, as calculated by STOXX. The size score seeks to
measure an issuer’s market capitalization relative to other companies in the
Parent Index. The maximum weight of a single security is 10%, and the sum of
security weights that are individually greater than 4.5% must be less than 22.5%
of the Underlying Index. The Index Provider also applies other constraints, such
as sector exposures relative to the Parent Index, among others. The Underlying
Index is reviewed and rebalanced quarterly. As of July 31, 2023, the
Underlying Index consisted of approximately 305 constituents, and a significant
portion of the Underlying Index is represented by securities of companies in the
technology industry or sector. The components of the Underlying Index are likely
to change over time.
iShares U.S. Small‑Cap Equity Factor ETF seeks
to track the investment results of an index composed of U.S.
small-capitalization stocks that have favorable exposure to target style factors
subject to constraints. The fund seeks to track the investment results of the
STOXX U.S. Small‑Cap Equity Factor Index (the “Underlying Index”), which is a
rules-based equity index provided by STOXX Ltd. (“STOXX”). The Underlying Index
is composed of small-capitalization equity securities from the STOXX US Small
Cap Index (the “Parent Index”) that are selected and weighted using an
optimization process designed to maximize exposure to four target factors:
momentum, quality, value, and low volatility. The Underlying Index seeks to
control exposure to, among other things, industries, limit turnover and maintain
a level of risk similar to that of the Parent Index. The Parent Index is a free
float market capitalization-weighted index designed to measure the performance
of small-capitalization companies in the U.S. Small capitalization companies, as
calculated by STOXX, represent approximately the bottom 15% of the investable
market capitalization in the U.S. securities market, as determined by STOXX. The
momentum score is calculated from the following signals: price momentum,
earnings momentum and earnings announcement drift (i.e., the difference between
a stock’s performance on and immediately following an earnings announcement
date). The quality score is calculated from the following signals: gross
profitability, share dilution, accruals, changes in net operating assets, carbon
emissions intensity and greenhouse gas (“GHG”) reduction targets. Carbon
emissions intensity is based on the issuer’s Scope 1 and Scope 2 GHG emissions
(i.e., direct emissions from sources that an issuer owns or controls and
indirect emissions from the issuer’s purchase of energy) relative to peers in
its Industry Classification Benchmark Supersector, as reported by Institutional
Shareholder Services (“ISS”). The GHG targets signal is based on the robustness
of an issuer’s GHG reduction targets, including whether they are part of the
Science Based Targets initiative (“SBTi”) framework; this is assessed by ISS
based on its own ESG ratings data and SBTi data. The value score is calculated
from the following signals: current book value‑to‑price ratio, dividend yield
(i.e., 12‑month trailing dividend divided by total market capitalization),
earnings yield (i.e., 12‑month net income divided by total market
capitalization), cash flow yield (i.e., 12‑month cash flow divided by total
market capitalization) and time series normalized cash flow yield over the
previous 36 months. The low volatility score is based on prior 12 month
volatility, as calculated by STOXX. The maximum weight of a single security is
10%, and the sum of security weights that are individually greater than 4.5%
must be less than 22.5% of the Underlying Index. STOXX also applies other
constraints, such as country and sector exposures relative to the Parent Index,
among others. The Underlying Index is reviewed and rebalanced quarterly. As of
July 31, 2023, the Underlying Index consisted of approximately 857
constituents, and a significant portion of the Underlying Index is represented
by securities of companies in the consumer discretionary, financials and
industrials industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI Australia ETF seeks to track the
investment results of an index composed of Australian equities. The fund seeks
to track the investment results of the MSCI Australia Index (the “Underlying
Index”), which is designed to measure the performance of large- and
mid‑capitalization segments of the Australian equity market. As of
August 31, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the financials and materials
industries or sectors. The components of the Underlying Index are likely to
change over time.
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iShares MSCI Canada ETF seeks to track the
investment results of an index composed of Canadian equities. The fund seeks to
track the investment results of the MSCI Canada Custom Capped Index (the
“Underlying Index”), which is designed to measure broad-based equity performance
in Canada. The Underlying Index constrains at quarterly rebalance the weight of
any single issuer to a maximum of 22.5% of the Underlying Index. Additionally,
the sum of the issuers that individually constitute more than 4.75% of the
weight of the Underlying Index will not exceed a maximum of 22.5% of the weight
of the Underlying Index in the aggregate. Between quarterly rebalances, the
Underlying Index constrains weight of any single issuer to a maximum of 22.5% of
the Underlying Index and constrains the sum of the issuers that individually
constitute more than 5% of the weight of the Underlying Index to maximum of 24%
of the weight of the Underlying Index in the aggregate. The Underlying Index is
a variation of the MSCI Canada Index, designed to take into account the
investment diversification requirements applicable to RICs pursuant to
Subchapter M of the Internal Revenue Code. The Underlying Index includes
large-and mid‑capitalization companies and may change over time. As of
August 31, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the energy and financials industries
or sectors. The components of the Underlying Index are likely to change over
time.
iShares MSCI EAFE ETF seeks to track the
investment results of an index composed of large- and mid‑capitalization
developed market equities, excluding the U.S. and Canada. The Fund seeks to
track the investment results of the MSCI EAFE® 100% Hedged to USD Index
(the “Underlying Index”), which has been developed by MSCI Inc. (the “Index
Provider” or “MSCI”) as an equity benchmark for international stock performance,
which attempts to mitigate exposure to the currency risk inherent in certain
securities included in the Underlying Index by hedging to the U.S. dollar. The
Underlying Index includes stocks from Europe, Australasia and the Far East and,
as of July 31, 2023, consisted of securities from the following 21 developed
market countries or regions: Australia, Austria, Belgium, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom (the “U.K.”). The Underlying Index includes large- and mid-
capitalization companies and may change over time. As of July 31, 2023, a
significant portion of the Underlying Index is represented by securities of
companies in the financials and industrials industries or sectors. The
components of the Underlying Index are likely to change over time.
iShares MSCI EAFE Small‑Cap ETF seeks to track
the investment results of an index composed of small-capitalization developed
market equities, excluding the U.S. and Canada. The Fund seeks to track the
investment results of the MSCI EAFE Small Cap 100% Hedged to USD Index (the
“Underlying Index”), an equity benchmark which represents the performance of
international small-cap stocks, which attempts to mitigate exposure to the
currency risk inherent in certain securities included in the Underlying Index by
hedging to the U.S. dollar. As of July 31, 2023, the Underlying Index consisted
of securities from the following 22 developed market countries or regions:
Australia, Austria, Belgium, China, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom (the
“U.K.”). Under MSCI’s Global Investable Market Index Methodology, the small-cap
universe consists of securities of those companies not included in the large-cap
or mid-cap segments of a particular market, which together comprise
approximately 85% of each market’s free float-adjusted market capitalization.
The small-cap segment covers approximately the 85%-99% range of each market’s
free float-adjusted market capitalization. As of July 31, 2023, a significant
portion of the Underlying Index is represented by securities of companies in the
industrials industry or sector.
iShares MSCI Emerging Markets ETF seeks to
track the investment results of the MSCI Emerging Markets Index (the “Underlying
Index”), which is designed to measure equity market performance in the global
emerging markets. As of August 31, 2023, the Underlying Index consisted of
securities from the following 24 emerging market countries: Brazil, Chile,
China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Kuwait, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Saudi Arabia,
South Africa, South Korea, Taiwan, Thailand, Turkey and the United Arab
Emirates. The Underlying Index includes large- and mid‑capitalization companies
and may change over time. As of August 31, 2023, a significant portion of
the Underlying Index is represented by securities of companies in the financials
and technology industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI Emerging Markets Small‑Cap ETF
seeks to track the investment results of an index composed of
small-capitalization emerging market equities. The fund seeks to track the
investment results of the MSCI Emerging Markets Small Cap Index (the “Underlying
Index”), which is designed to measure the performance of equity securities of
small-capitalization companies in emerging market countries. As of
August 31, 2023, the Underlying Index consisted of issuers in the following
23 emerging market countries: Brazil, Chile, China, Colombia, Czech Republic,
Egypt, Greece, Hungary, India, Indonesia, Kuwait, Malaysia, Mexico, the
Philippines, Poland, Qatar, Saudi Arabia, South Africa, South Korea, Taiwan,
Thailand, Turkey and the United Arab Emirates. As of August 31, 2023, a
significant portion of the Underlying Index is represented by securities of
companies in the industrials and technology industries or sectors. The
components of the Underlying Index are likely to change over time.
iShares MSCI Eurozone ETF seeks to track the
investment results of an index composed of large-and mid‑capitalization equities
from developed market countries that use the euro as their official currency.
The fund seeks to track the
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investment
results of the MSCI EMU Index (the “Underlying Index”), which consists of
securities from the following 10 developed market countries: Austria, Belgium,
Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal and Spain.
The Underlying Index includes large-and mid‑capitalization companies and may
change over time. As of August 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the consumer
discretionary, financials and industrials industries or sectors. The components
of the Underlying Index are likely to change over time.
iShares MSCI France ETF seeks to track the
investment results of an index composed of French equities. The Fund seeks to
track the investment results of the MSCI France Index (the “Underlying Index”),
which is designed to measure the performance of the large- and
mid-capitalization segments of the French equity market. As of August 31, 2023,
a significant portion of the Underlying Index is represented by securities of
companies in the consumer discretionary and industrials industries or sectors.
The components of the Underlying Index are likely to change over time.
iShares MSCI Germany ETF seeks to track the
investment results of an index composed of German equities. The fund seeks to
track the investment results of the MSCI Germany Index (the “Underlying Index”),
which is designed to measure the performance of the large- and
mid‑capitalization segments of the German equity market. As of August 31,
2023, a significant portion of the Underlying Index is represented by securities
of companies in the consumer discretionary, financials, industrials and
technology industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares MSCI Japan ETF seeks to track the
investment results of an index composed of Japanese equities. The fund seeks to
track the investment results of the MSCI Japan Index (the “Underlying Index”),
which is designed to measure the performance of the large- and
mid‑capitalization segments of the Japanese equity market. As of August 31,
2023, a significant portion of the Underlying Index is represented by securities
of companies in the consumer discretionary and industrials industries or
sectors. The components of the Underlying Index are likely to change over
time.
iShares MSCI United Kingdom ETF seeks to track
the investment results of an index composed of U.K. equities. The Fund seeks to
track the investment results of the MSCI United Kingdom Index (the “Underlying
Index”), which is designed to measure the performance of the large- and
mid-capitalization segments of the United Kingdom market. As of August 31, 2023,
a significant portion of the Underlying Index is represented by securities of
companies in the consumer staples and financials industries or sectors. The
components of the Underlying Index are likely to change over time.
iShares North American Natural Resources ETF
seeks to track the investment results of an index composed of North American
equities in the natural resources sector. The fund seeks to track the investment
results of the S&P North American Natural Resources Sector Index (the
“Underlying Index”), which measures the performance of U.S.-traded stocks of
natural resource-related companies in the U.S. and Canada, as determined by
S&P Dow Jones Indices LLC. The Underlying Index includes companies that are
classified under the GICS® energy and materials
sectors, excluding the chemicals industry, and steel sub‑industry. The
Underlying Index includes large-, mid‑ and small-capitalization companies and
may change over time. As of March 31, 2023, a significant portion of the
Underlying Index is represented by securities of companies in the energy,
materials and natural resources industries or sectors. The components of the
Underlying Index are likely to change over time.
iShares Russell 2000 ETF seeks to track the
investment results of an index composed of small-capitalization U.S. equities.
The fund seeks to track the investment results of the Russell 2000® Index (the “Underlying
Index”), which measures the performance of the small-capitalization sector of
the U.S. equity market, as defined by FTSE Russell (“Russell”). The Underlying
Index is a subset of the Russell 3000 Index, which measures the performance of
the broad U.S. equity market, as defined by Russell. The Underlying Index is a
float-adjusted capitalization-weighted index of equity securities issued by the
approximately 1,921 smallest issuers in the Russell 3000 Index. As of
March 31, 2023, the Underlying Index represented approximately 6% of the
total market capitalization of the Russell 3000 Index. As of March 31,
2023, a significant portion of the Underlying Index is represented by securities
of companies in the financials, healthcare and industrials industries or
sectors. The components of the Underlying Index are likely to change over
time.
iShares Russell Mid‑Cap ETF seeks to track the
investment results of an index composed of mid‑capitalization U.S. equities. The
fund seeks to track the investment results of the Russell Midcap Index (the
“Underlying Index”), which measures the performance of the mid‑capitalization
sector of the U.S. equity market, as defined by FTSE Russell (“Russell”). The
Underlying Index is a subset of the Russell 1000® Index, which measures the
performance of the large- and mid‑capitalization sectors of the U.S. equity
market, as defined by Russell. As of March 31, 2023, the Underlying Index
represented approximately 25% of the total market capitalization of the Russell
1000® Index. The
Underlying Index is a float-adjusted capitalization-weighted index of equity
securities issued by the approximately 814 smallest issuers in the Russell 1000
Index. As of March 31, 2023, a significant portion of the Underlying Index
is represented by securities of companies in consumer discretionary and the
industrials industries or sectors. The components of the Underlying Index are
likely to change over time.
iShares U.S. Real Estate ETF seeks to track
the investment results of an index composed of U.S. equities in the real estate
sector. The fund seeks to track the investment results of the Dow Jones U.S.
Real Estate Capped Index (the
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“Underlying
Index”), which measures the performance of the real estate sector of the U.S.
equity market, as defined by S&P Dow Jones Indices LLC. The Underlying Index
uses a capping methodology to limit the weight of the securities of any single
issuer (as determined by S&P Dow Jones Indices LLC) to a maximum of 10% of
the Underlying Index. Additionally, the Underlying Index constrains at each
quarterly review: (i) the weight of any single issuer to a maximum of 10%,
and (ii) the aggregate weight of all issuers that individually exceed 4.50%
of the index weight to a maximum of 22.50%. Between scheduled quarterly index
reviews, the Underlying Index is rebalanced at the end of any day on which all
issuers that individually constitute more than 5% of the weight of the
Underlying Index constitute more than 25% of the weight of the Underlying Index
in the aggregate. In implementing this capping methodology, S&P Dow Jones
Indices LLC may consider two or more companies as belonging to the same issuer
where there is reasonable evidence of common control. As of March 31, 2023,
a significant portion of the Underlying Index is represented by securities of
companies in the REIT industry or sector. The components of the Underlying Index
are likely to change over time.
Fixed Income ETFs
iShares 1‑3 Year Treasury Bond ETF seeks to
track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities between one and three years. The fund seeks to track the
investment results of the ICE® U.S. Treasury 1‑3 Year Bond
Index (the “Underlying Index”), which measures the performance of public
obligations of the U.S. Treasury that have a remaining maturity of greater than
or equal to one year and less than three years. As of February 28, 2023,
there were 94 issues in the Underlying Index. The Underlying Index consists of
publicly-issued U.S. Treasury securities that have a remaining maturity of
greater than or equal to one year and less than three years and have
$300 million or more of outstanding face value, excluding amounts held by
the Federal Reserve System. In addition, the securities in the Underlying Index
must be fixed-rate and denominated in U.S. dollars. Excluded from the Underlying
Index are inflation-linked securities, Treasury bills, cash management bills,
any government agency debt issued with or without a government guarantee and
zero‑coupon issues that have been stripped from coupon-paying bonds. The
Underlying Index is market value weighted, and the securities in the Underlying
Index are updated on the last business day of each month.
iShares 3‑7 Year Treasury Bond ETF seeks to
track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities between three and seven years. The fund seeks to track the
investment results of the ICE® U.S. Treasury 3‑7 Year Bond
Index (the “Underlying Index”), which measures the performance of public
obligations of the U.S. Treasury that have a remaining maturity of greater than
or equal to three years and less than seven years. As of February 28, 2023,
there were 96 issues in the Underlying Index. The Underlying Index consists of
publicly-issued U.S. Treasury securities that have a remaining maturity of
greater than or equal to three years and less than seven years and have
$300 million or more of outstanding face value, excluding amounts held by
the Federal Reserve System. In addition, the securities in the Underlying Index
must be fixed-rate and denominated in U.S. dollars. Excluded from the Underlying
Index are inflation-linked securities, Treasury bills, cash management bills,
any government agency debt issued with or without a government guarantee and
zero‑coupon issues that have been stripped from coupon-paying bonds. The
Underlying Index is market value weighted, and the securities in the Underlying
Index are updated on the last business day of each month.
iShares 7‑10 Year Treasury Bond ETF seeks to
track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities between seven and ten years. The fund seeks to track the
investment results of the ICE® U.S. Treasury 7‑10 Year Bond
Index (the “Underlying Index”), which measures the performance of public
obligations of the U.S. Treasury that have a remaining maturity of greater than
or equal to seven years and less than ten years. As of February 28, 2023,
there were 14 issues in the Underlying Index. The Underlying Index consists of
publicly-issued U.S. Treasury securities that have a remaining maturity of
greater than or equal to seven years and less than ten years and have
$300 million or more of outstanding face value, excluding amounts held by
the Federal Reserve System. In addition, the securities in the Underlying Index
must be fixed-rate and denominated in U.S. dollars. Excluded from the Underlying
Index are inflation-linked securities, Treasury bills, cash management bills,
any government agency debt issued with or without a government guarantee and
zero‑coupon issues that have been stripped from coupon-paying bonds. The
Underlying Index is market value weighted, and the securities in the Underlying
Index are updated on the last business day of each month.
iShares 10‑20 Year Treasury Bond ETF seeks to
track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities between ten and twenty years. The fund seeks to track the
investment results of the ICE® U.S. Treasury 10‑20 Year
Bond Index (the “Underlying Index”), which measures the performance of public
obligations of the U.S. Treasury that have a remaining maturity of greater than
or equal to ten years and less than twenty years. As of February 28, 2023,
there were 34 issues in the Underlying Index. The Underlying Index consists of
publicly-issued U.S. Treasury securities that have a remaining maturity of
greater than or equal to ten years and less than twenty years and have
$300 million or more of outstanding face value, excluding amounts held by
the Federal Reserve System. In addition, the securities in the Underlying Index
must be fixed-rate and denominated in U.S. dollars. Excluded from the Underlying
Index are inflation-linked securities, Treasury bills, cash management bills,
any government agency debt issued with or without a government guarantee and
zero‑coupon issues that have been stripped from coupon-paying bonds. The
Underlying Index is market value weighted, and the securities in the Underlying
Index are updated on the last business day of each month.
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iShares 20+ Year Treasury Bond ETF seeks to
track the investment results of an index composed of U.S. Treasury bonds with
remaining maturities greater than twenty years. The fund seeks to track the
investment results of the ICE® U.S. Treasury 20+ Year Bond
Index (the “Underlying Index”), which measures the performance of public
obligations of the U.S. Treasury that have a remaining maturity greater than or
equal to twenty years. As of February 28, 2023, there were 40 issues in the
Underlying Index. The Underlying Index consists of publicly-issued U.S. Treasury
securities that have a remaining maturity greater than or equal to twenty years
and have $300 million or more of outstanding face value, excluding amounts
held by the Federal Reserve System. In addition, the securities in the
Underlying Index must be fixed-rate and denominated in U.S. dollars. Excluded
from the Underlying Index are inflation-linked securities, Treasury bills, cash
management bills, any government agency debt issued with or without a government
guarantee and zero‑coupon issues that have been stripped from coupon-paying
bonds. The Underlying Index is market value weighted, and the securities in the
Underlying Index are updated on the last business day of each month.
iShares Broad USD Investment Grade Corporate Bond
ETF seeks to track the investment results of an index composed of U.S.
dollar-denominated investment-grade corporate bonds. The fund seeks to track the
investment results of the ICE® BofA® US Corporate Index (the
“Underlying Index”), which measures the performance of investment-grade
corporate bonds of both U.S. and non‑U.S. issuers that are U.S.
dollar-denominated and publicly issued in the U.S. domestic market. As of
February 28, 2023, there were 9,831 issues in the Underlying Index. As of
February 28, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the financials industry or sector. The
components of the Underlying Index are likely to change over time. The
Underlying Index consists of investment-grade corporate bonds of both U.S. and
non‑U.S. issuers that have a remaining maturity of greater than or equal to one
year, have been publicly issued in the U.S. domestic market, and have
$250 million or more of outstanding face value. The Index Provider deems
securities as “investment grade” based on the average rating of Fitch Ratings,
Inc. (BBB or better), Moody’s Investors Service, Inc. (Baa or better) and/or
Standard & Poor’s® Financial Services LLC, a
subsidiary of S&P Global (BBB or better). In addition, the securities in the
Underlying Index must be denominated in U.S. dollars and must be fixed-rate.
Excluded from the Underlying Index are equity-linked securities, securities in
legal default, hybrid securitized corporate bonds, Eurodollar bonds (U.S.
dollar-denominated securities not issued in the U.S. domestic market), taxable
and tax‑exempt U.S. municipal securities and
dividends-received-deduction-eligible securities. The Underlying Index is market
capitalization-weighted, and the securities in the Underlying Index are updated
on the last calendar day of each month.
iShares Core U.S. Aggregate Bond ETF seeks to
track the investment results of an index composed of the total U.S.
investment-grade bond market. The fund seeks to track the investment results of
the Bloomberg U.S. Aggregate Bond Index (the “Underlying Index”), which measures
the performance of the total U.S. investment-grade (as determined by Bloomberg
Index Services Limited (“Bloomberg”)) bond market. As of February 28, 2023,
there were 13,192 issues in the Underlying Index. The Underlying Index includes
investment-grade U.S. Treasury bonds, government-related bonds, corporate bonds,
mortgage-backed pass-through securities (“MBS”), commercial mortgage-backed
securities (“CMBS”) and asset-backed securities (“ABS”) that are publicly
offered for sale in the U.S. As of February 28, 2023, a significant portion
of the Underlying Index is represented by MBS and U.S. Treasury securities. The
components of the Underlying Index are likely to change over time. The
securities in the Underlying Index must have $300 million or more of
outstanding face value and must have at least one year remaining to maturity,
with the exception of amortizing securities such as ABS and MBS, which have
lower thresholds as defined by Bloomberg. In addition, the securities in the
Underlying Index must be denominated in U.S. dollars and must be fixed-rate and
non‑convertible. Certain types of securities, such as state and local government
series bonds, structured notes with embedded swaps or other special features,
private placements, floating-rate securities and bonds that have been issued in
one country’s currency but are traded outside of that country in a different
monetary and regulatory system (e.g., Eurobonds), are excluded from the
Underlying Index. The Underlying Index is market capitalization-weighted, and
the securities in the Underlying Index are updated on the last business day of
each month. As of February 28, 2023, approximately 27.6% of the bonds
represented in the Underlying Index were U.S. fixed-rate agency MBS. Such
securities are issued by entities such as the Government National Mortgage
Association, the Federal National Mortgage Association, and the Federal Home
Loan Mortgage Corporation and are backed by pools of mortgages. Most
transactions in fixed-rate MBS occur through standardized contracts for future
delivery in which the exact mortgage pools to be delivered are not specified
until a few days prior to settlement (to‑be‑announced (“TBA”) transactions). The
fund may enter into such contracts on a regular basis. The fund, pending
settlement of such contracts, will invest its assets in high-quality, liquid
short-term instruments, including shares of money market funds advised by BFA or
its affiliates. The fund will assume its pro rata share of the fees and expenses
of any money market fund that it may invest in, in addition to the fund’s own
fees and expenses. The fund may also acquire interests in mortgage pools through
means other than such standardized contracts for future delivery.
iShares U.S. Fixed Income Balanced Risk Systematic
ETF seeks to track the investment results of an index, composed of
taxable U.S. dollar-denominated bonds and U.S. Treasury futures, which targets
an equal allocation between interest rate and credit spread risk. The fund seeks
to track the Bloomberg U.S. Fixed Income Balanced Risk Index (the “Underlying
Index”), which measures the performance of the corporate and mortgage portion of
the Bloomberg U.S. Universal Index (the “Parent Index”) while targeting an equal
allocation between interest rate and credit spread risk. As of October 31,
2023, approximately 83% of the Underlying Index consisted of issuers organized
or located in the
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United
States, and there were 7,303 issues in the Underlying Index from issuers in over
36 countries or regions. The Underlying Index may include large-, mid‑or
small-capitalization companies. As of October 31, 2023, a significant
portion of the Underlying Index is invested in securities of companies in the
financials industry or sector and mortgage-backed securities (“MBS”) and
investment-grade corporate bonds. The components of the Underlying Index are
likely to change over time. Securities may be registered or privately placed.
All securities in the Underlying Index are U.S. dollar-denominated. The
Underlying Index uses a rules-based approach to calculate an equal
volatility-weighted allocation to each of five segments of the Parent Index:
(1) investment-grade corporate bonds 1‑5 year; (2) investment-grade
corporate bonds 5‑10 year; (3) high yield corporate bonds rated BB or
higher; (4) high yield corporate bonds rated below BB; and (5) U.S.
agency MBS. Segments with lower credit spread volatility receive a higher
weighting in the Underlying Index, and segments with higher credit spread
volatility receive a lower weighting in the Underlying Index, with the result
that the contribution of each segment to overall credit spread volatility is
approximately equal. Credit spread volatility aims to capture the volatility of
the return attributable to the credit quality of the security. Credit spread
volatility for investment-grade corporate securities and MBS components is
measured differently than for the fund’s high yield securities. To increase
overall yield and credit spread exposure, the Underlying Index incorporates a
leverage factor of up to 25% that redeploys MBS exposure, via cash pending
settlement from to‑be‑announced mortgage transactions (“TBAs”), toward other
index constituent securities. The Underlying Index further adjusts interest rate
risk so that it equals credit spread risk, by adding either long positions in
U.S. Treasury bonds or short positions in U.S. Treasury futures. The Underlying
Index is rebalanced monthly.
iShares Government/Credit Bond ETF seeks to
track the investment results of an index composed of U.S. dollar-denominated
government, government-related and investment-grade U.S. corporate bonds. The
fund seeks to track the investment results of the Bloomberg U.S.
Government/Credit Bond Index (the “Underlying Index”), which measures the
performance of U.S. dollar-denominated U.S. Treasury bonds, government-related
bonds (i.e., U.S. and foreign agencies, sovereign, supranational and local
authority debt) and investment-grade (as determined by Bloomberg Index Services
Limited) U.S. corporate bonds that have a remaining maturity of greater than or
equal to one year. As of February 28, 2023, there were 9,060 issues in the
Underlying Index. As of February 28, 2023, a significant portion of the
Underlying Index is represented by U.S. Treasury securities. The components of
the Underlying Index are likely to change over time. The Underlying Index
consists of U.S. government, government-related and investment-grade U.S. credit
securities that have greater than or equal to one year remaining to maturity and
have $300 million or more of outstanding face value. In addition, the
securities in the Underlying Index must be denominated in U.S. dollars and must
be fixed-rate and non‑convertible. Excluded from the Underlying Index are
certain special issues such as targeted investor notes, state and local
government series bonds and coupon issues that have been stripped from bonds.
Also excluded from the Underlying Index are structured notes with embedded swaps
or other special features, private placements, floating-rate securities and
bonds that have been issued in one country’s currency but are traded outside of
that country in a different monetary and regulatory system (e.g., Eurobonds).
The Underlying Index is market capitalization-weighted and the securities in the
Underlying Index are updated on the last business day of each month.
iShares iBoxx $ High Yield Corporate Bond ETF
seeks to track the investment results of an index composed of U.S.
dollar-denominated, high yield corporate bonds. The fund seeks to track the
investment results of the Markit iBoxx® USD Liquid High Yield Index
(the “Underlying Index”), which is a rules-based index consisting of U.S.
dollar-denominated, high yield (as determined by Markit Indices Limited
(“Markit”)) corporate bonds for sale in the U.S. The Underlying Index is
designed to provide a broad representation of the U.S. dollar-denominated liquid
high yield corporate bond market. The Underlying Index is a modified
market-value weighted index with a cap on each issuer of 3%. There is no limit
to the number of issues in the Underlying Index. As of February 28, 2023,
the Underlying Index included approximately 1,175 constituents. As of
February 28, 2023, a significant portion of the Underlying Index is
represented by securities of companies in the consumer services industry or
sector. The components of the Underlying Index are likely to change over time.
Bonds in the Underlying Index are selected from the universe of eligible bonds
in the Markit iBoxx USD Corporate Bond Index using defined rules. As of
June 30, 2023, the bonds eligible for inclusion in the Underlying Index
include U.S. dollar-denominated high yield corporate bonds that: (i) are
issued by companies domiciled in countries classified as developed markets by
Markit; (ii) have an average rating of sub‑investment grade (ratings from
Fitch Ratings, Inc., Moody’s Investors Service, Inc. or Standard &
Poor’s® Global Ratings, a
subsidiary of S&P Global are considered; if more than one agency provides a
rating, the average rating is attached to the bond); (iii) are from issuers
with at least $1 billion outstanding face value; (iv) have at least
$400 million of outstanding face value; (v) have an original maturity
date of less than 15 years; (vi) have at least one year to maturity; and
(vii) have at least one year and 6 months to maturity for new index
insertions.
iShares iBoxx $ Investment Grade Corporate Bond ETF
seeks to track the investment results of an index composed of U.S.
dollar-denominated, investment-grade corporate bonds. The fund seeks to track
the investment results of the Markit iBoxx® USD Liquid Investment Grade
Index (the “Underlying Index”), which is a rules-based index consisting of U.S.
dollar-denominated, investment-grade (as determined by Markit Indices Limited)
corporate bonds for sale in the U.S. The Underlying Index is designed to provide
a broad representation of the U.S. dollar-denominated liquid investment-grade
corporate bond market. The Underlying Index is a modified market-value weighted
index with a cap on each issuer of 3%. There is no limit to the number of issues
in the Underlying Index. As of February 28, 2023, the Underlying Index
included approximately 2,570 constituents. As of February 28, 2023, a
significant portion of the
185
Underlying
Index is represented by securities of companies in the financials industry or
sector. The components of the Underlying Index are likely to change over time.
The Underlying Index is a subset of the Markit iBoxx USD Corporate Bond Index,
which as of February 28, 2023 is an index of 7,573 investment-grade bonds.
Bonds in the Underlying Index are selected from the universe of eligible bonds
in the Markit iBoxx USD Corporate Bond Index using defined rules. As of
June 30, 2023, the bonds eligible for inclusion in the Underlying Index
consist of U.S. dollar-denominated corporate bonds that: (i) are issued by
companies domiciled in countries classified as developed markets by Markit
Indices Limited; (ii) have an average rating of investment grade (ratings
from Fitch Ratings, Inc., Moody’s Investors Service, Inc. or Standard &
Poor’s® Global Ratings, a
subsidiary of S&P Global (“S&P Global Ratings”) are considered; if more
than one agency provides a rating, the average rating is attached to the bond);
(iii) are from issuers with at least $2 billion outstanding face value;
(iv) have at least $750 million of outstanding face value;
(v) have at least three years to maturity; and (vi) have at least
three years and 6 months to maturity for new index insertions.
iShares Intermediate Government/Credit Bond
ETF seeks to track the investment results of an index composed of U.S.
dollar-denominated government, government-related and investment-grade U.S.
corporate bonds with remaining maturities between one and ten years. The fund
seeks to track the investment results of the Bloomberg U.S. Intermediate
Government/Credit Bond Index (the “Underlying Index”), which measures the
performance of U.S. dollar-denominated U.S. Treasury bonds, government-related
bonds (i.e., U.S. and non‑U.S. agencies, sovereign, supranational and local
authority debt) and investment-grade (as determined by Bloomberg Index Services
Limited) U.S. corporate bonds that have a remaining maturity of greater than one
year and less than ten years. As of February 28, 2023, there were 5,744
issues in the Underlying Index. As of February 28, 2023, a significant
portion of the Underlying Index is represented by U.S. Treasury securities. The
components of the Underlying Index are likely to change over time. The
Underlying Index consists of U.S. government, government-related and
investment-grade U.S. credit securities that have greater than one year and less
than ten years remaining to maturity and have $300 million or more of
outstanding face value. In addition, the securities in the Underlying Index must
be denominated in U.S. dollars and must be fixed-rate and non‑convertible.
Excluded from the Underlying Index are certain special issues such as targeted
investor notes, state and local government series bonds and coupon issues that
have been stripped from bonds. Also excluded from the Underlying Index are
structured notes with embedded swaps or other special features, private
placements, floating-rate securities and bonds that have been issued in one
country’s currency but are traded outside of that country in a different
monetary and regulatory system (e.g., Eurobonds). The Underlying Index is market
capitalization-weighted and the securities in the Underlying Index are updated
on the last business day of each month.
iShares 5‑10 Year Investment Grade Corporate Bond
ETF seeks to track the investment results of an index composed of U.S.
dollar-denominated investment-grade corporate bonds with remaining maturities
between five and ten years. The fund seeks to track the investment results of
the ICE® BofA® 5‑10 Year US Corporate Index
(the “Underlying Index”), which measures the performance of investment-grade
corporate bonds of both U.S. and non‑U.S. issuers that are U.S.
dollar-denominated and publicly issued in the U.S. domestic market and have a
remaining maturity of greater than or equal to five years and less than ten
years. As of February 28, 2023, there were 2,634 issues in the Underlying
Index. As of February 28, 2023, a significant portion of the Underlying
Index is represented by securities of companies in the financials industry or
sector. The components of the Underlying Index are likely to change over time.
The Underlying Index consists of investment-grade corporate bonds of both U.S.
and non‑U.S. issuers that have a remaining maturity of greater than or equal to
five years and less than ten years, have been publicly issued in the U.S.
domestic market, and have $250 million or more of outstanding face value.
The Index Provider deems securities as “investment grade” based on the average
rating of Fitch Ratings, Inc. (BBB or better), Moody’s Investors Service, Inc.
(Baa or better) and/or Standard & Poor’s® Financial Services LLC, a
subsidiary of S&P Global (BBB or better). In addition, the securities in the
Underlying Index must be denominated in U.S. dollars and must be fixed-rate.
Excluded from the Underlying Index are equity-linked securities, securities in
legal default, hybrid securitized corporate bonds, Eurodollar bonds (U.S.
dollar-denominated securities not issued in the U.S. domestic market), taxable
and tax‑exempt U.S. municipal securities and
dividends-received-deduction-eligible securities. The Underlying Index is market
capitalization-weighted, and the securities in the Underlying Index are updated
on the last calendar day of each month. Under normal circumstances, the fund
will seek to maintain a weighted average maturity that is greater than three
years and lower than 10 years. Weighted average maturity is a U.S.
dollar-weighted average of the remaining term to maturity of the underlying
securities in the fund’s portfolio.
iShares J.P. Morgan USD Emerging Markets Bond
ETF seeks to track the investment results of an index composed of U.S.
dollar-denominated, emerging market bonds. The fund seeks to track the
investment results of the J.P. Morgan EMBI® Global Core Index (the
“Underlying Index”), which is a broad, diverse U.S. dollar-denominated emerging
markets debt benchmark that tracks the total return of actively traded external
debt instruments in emerging market countries. The methodology is designed to
distribute the weight of each country within the Underlying Index by limiting
the weights of countries with higher debt outstanding and reallocating this
excess to countries with lower debt outstanding. The Underlying Index was
composed of 54 countries as of October 31, 2023. As of October 31,
2023, the Underlying Index’s five highest weighted countries were Indonesia,
Mexico, Saudi Arabia, Turkey and the United Arab Emirates. The Underlying Index
may change its composition and weighting monthly upon rebalancing. The
Underlying Index includes both fixed-rate and floating-rate instruments issued
by sovereign and quasi-sovereign entities from index-eligible countries.
Quasi-sovereign entities are defined as entities that are 100% guaranteed or
100% owned by the national government and reside in the index-eligible country.
To be considered for inclusion in the Underlying Index,
186
instruments
must (i) be denominated in U.S. dollars, (ii) have a current face
amount outstanding of $1 billion or more, (iii) have at least 2.5
years until maturity to be eligible for inclusion and, at each subsequent
rebalance, have at least one year until maturity to remain in the index,
(iv) be able to settle internationally through Euroclear or another
institution domiciled outside the issuing country and (v) have bid and
offer prices that are available on a daily and timely basis sourced from a third
party valuation vendor. As of October 31, 2023, the Underlying Index
consisted of both investment-grade and non‑investment‑grade bonds (commonly
referred to as “junk bonds”), each as defined by JPMorgan Chase & Co.
Convertible bonds are not eligible for inclusion in the Underlying Index. The
Underlying Index is market value-weighted and is rebalanced monthly on the last
business day of the month.
iShares MBS ETF seeks to track the investment
results of an index composed of investment-grade mortgage-backed pass-through
securities issued and/or guaranteed by U.S. government agencies. The fund seeks
to track the investment results of the Bloomberg U.S. MBS Index (the “Underlying
Index”), which measures the performance of investment-grade (as determined by
Bloomberg Index Services Limited) mortgage-backed pass-through securities
(“MBS”) issued or guaranteed by U.S. government agencies or sponsored entities.
The Underlying Index includes fixed-rate MBS issued by the Government National
Mortgage Association, Federal National Mortgage Association and Federal Home
Loan Mortgage Corporation (“Freddie Mac”) that have 30‑, 20‑, or 15‑year
maturities. All securities in the Underlying Index must have a remaining
weighted average maturity of at least one year. In addition, the securities in
the Underlying Index must be denominated in U.S. dollars and must be
non‑convertible. The Underlying Index is market capitalization-weighted and the
securities in the Underlying Index are updated on the last business day of each
month. As of February 28, 2023, approximately 100% of the bonds represented
in the Underlying Index were U.S. agency MBS. Most transactions in MBS occur
through standardized contracts for future delivery in which the exact mortgage
pools to be delivered are not specified until a few days prior to settlement
(to‑be‑announced (“TBA”) transactions). The fund may enter into such contracts
for fixed-rate pass-through securities on a regular basis. The fund, pending
settlement of such contracts, will invest its assets in liquid, short-term
instruments, including shares of money market funds advised by BFA or its
affiliates. The fund will assume its pro rata share of the fees and expenses of
any money market fund that it may invest in, in addition to the fund’s own fees
and expenses. The fund may also acquire interests in mortgage pools through
means other than such standardized contracts for future delivery.
iShares National Muni Bond ETF seeks to track
the investment results of an index composed of investment-grade U.S. municipal
bonds. The fund seeks to track the investment results of the ICE AMT‑Free US
National Municipal Index (the “Underlying Index”), which measures the
performance of U.S. dollar denominated investment grade tax‑exempt debt publicly
issued in the U.S. domestic market by U.S. states and their political
subdivisions. As of February 28, 2023, there were 22,659 issues in the
Underlying Index. As of February 28, 2023, a significant portion of the
Underlying Index is represented by municipal bonds. The components of the
Underlying Index are likely to change over time. The Underlying Index includes
municipal bonds, the interest of which is exempt from Federal income taxes and
not subject to alternative minimum tax. Each bond in the Underlying Index must
have a rating of at least BBB by Standard & Poor’s® Global Ratings, a subsidiary
of S&P Global, Baa3 by Moody’s Investors Service, Inc., or BBB by Fitch
Ratings, Inc. A bond must be rated by at least one of these three rating
agencies in order to qualify for the Underlying Index, and the lowest rating
will be used in determining if the bond is investment-grade. Each bond in the
Underlying Index must be a constituent of an offering where the original
offering amount was at least $100 million and have a minimum par amount
(i.e., currently outstanding face value) of $15 million. In addition, each
bond must have a minimum remaining term to final maturity greater than or equal
to one calendar month to be included in the Underlying Index. The Underlying
Index is a market-value weighted index and is subject to a capping methodology
that aims at reducing index concentration. The Underlying Index is rebalanced on
the last calendar day of the month.
iShares 1‑5 Year Investment Grade Corporate Bond
ETF seeks to track the investment results of an index composed of U.S.
dollar-denominated, investment-grade corporate bonds with remaining maturities
between one and five years. The fund seeks to track the investment results of
the ICE® BofA® 1‑5 Year US Corporate Index
(the “Underlying Index”), which measures the performance of investment-grade
corporate bonds of both U.S. and non‑U.S. issuers that are U.S.
dollar-denominated and publicly issued in the U.S. domestic market and have a
remaining maturity of greater than or equal to one year and less than five
years. As of February 28, 2023, there were 3,667 issues in the Underlying
Index. As of February 28, 2023, a significant portion of the Underlying
Index is represented by securities of companies in the financials industry or
sector. The components of the Underlying Index are likely to change over time.
The Underlying Index consists of investment-grade corporate bonds of both U.S.
and non‑U.S. issuers that have a remaining maturity of greater than or equal to
one year and less than five years, have been publicly issued in the U.S.
domestic market, and have $250 million or more of outstanding face value.
The Index Provider deems securities as “investment grade” based on the average
rating of Fitch Ratings, Inc. (BBB or better), Moody’s Investors Service, Inc.
(Baa or better) and/or Standard & Poor’s® Financial Services LLC, a
subsidiary of S&P Global (BBB or better). In addition, the securities in the
Underlying Index must be denominated in U.S. dollars and must be fixed-rate.
Excluded from the Underlying Index are equity-linked securities, securities in
legal default, hybrid securitized corporate bonds, Eurodollar bonds (U.S.
dollar-denominated securities not issued in the U.S. domestic market), taxable
and tax‑exempt U.S. municipal securities and
dividends-received-deduction-eligible securities. The Underlying Index is market
capitalization-weighted, and the securities in the Underlying Index are updated
on the last calendar day of each month. Under normal
187
circumstances,
the fund will seek to maintain a weighted average maturity that is less than or
equal to three years. Weighted average maturity is a U.S. dollar-weighted
average of the remaining term to maturity of the underlying securities in the
fund’s portfolio.
iShares Short Treasury Bond ETF seeks to track
the investment results of an index composed of U.S. Treasury bonds with
remaining maturities of one year or less. The fund seeks to track the investment
results of the ICE® Short
US Treasury Securities Index (the “Underlying Index”), which measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of less than or equal to one year. Under normal circumstances, the fund
will seek to maintain a weighted average maturity of less than one year.
Weighted average maturity is the U.S. dollar weighted average of the remaining
term to maturity of the underlying securities in the fund’s portfolio. As of
February 28, 2023, there were 104 components in the Underlying Index. The
Underlying Index is market value-weighted based on amounts outstanding of
issuances consisting of publicly issued U.S. Treasury securities that have a
remaining term to final maturity of less than or equal to one year as of the
rebalance date and $1 billion or more of outstanding face value, excluding
amounts held by the Federal Reserve System Open Market Account. In addition, the
securities in the Underlying Index must have a fixed coupon schedule and be
denominated in U.S. dollars. Excluded from the Underlying Index are
inflation-linked debt and zero‑coupon bonds that have been stripped from
coupon-paying bonds (e.g., Separate Trading of Registered Interest and Principal
of Securities). However, the amounts outstanding of qualifying coupon securities
in the Underlying Index are not reduced by any individual components of such
securities (i.e., coupon or principal) that have been stripped after inclusion
in the Underlying Index. The Underlying Index is rebalanced on the last calendar
day of each month.
iShares TIPS Bond ETF seeks to track the
investment results of an index composed of inflation-protected U.S. Treasury
bonds. The fund seeks to track the investment results of the ICE U.S. Treasury
Inflation Linked Bond Index (the “Underlying Index”), which tracks the
performance of inflation-protected public obligations of the U.S. Treasury,
commonly known as “TIPS,” that have a remaining maturity of more than one year.
TIPS are securities issued by the U.S. Treasury that are designed to provide
inflation protection to investors. TIPS are income-generating instruments whose
interest and principal payments are adjusted for inflation — a sustained
increase in prices that erodes the purchasing power of money. The inflation
adjustment, which is typically applied monthly to the principal of the bond,
follows a designated inflation index, the Consumer Price Index (“CPI”), and
TIPS’ principal payments are adjusted according to changes in the CPI. A fixed
coupon rate is applied to the inflation-adjusted principal so that as inflation
rises, both the principal value and the interest payments increase. This can
provide investors with a hedge against inflation, as it helps preserve the
purchasing power of an investment. Because of this inflation adjustment feature,
inflation-protected bonds typically have lower yields than conventional
fixed-rate bonds. Qualifying securities must have more than one year remaining
to final maturity as of the rebalancing date and at least $300 million of
outstanding face value, excluding amounts held by the Federal Reserve System
Open Market Account. In addition, the securities in the Underlying Index must
have a fixed coupon schedule and must be denominated in U.S. dollars. Excluded
from the Underlying Index are government agency debt with or without a
government guarantee, securities issued or marketed primarily to retail
investors, floating rate notes, cash management and Treasury bills, original
issue zero coupon securities and Separate Trading of Registered Interest and
Principal Securities. However, the amounts outstanding of qualifying securities
in the Underlying Index are not reduced by any portions of such securities that
have been stripped after inclusion in the Underlying Index. Index constituents
are market capitalization weighted based on amounts outstanding reduced by
amounts held by the Federal Reserve SOMA. The Underlying Index is rebalanced on
the last calendar day of each month.
The
“Dow Jones U.S. Real Estate Capped IndexTM,” “S&P 500®,” “S&P
National AMT‑Free Municipal Bond IndexTM” and “S&P North
American Natural Resources Sector IndexTM” (collectively, the
“S&P Indexes”) are products of S&P Dow Jones Indices LLC or its
affiliates (“SPDJI”), and have been licensed for use by BFA or its affiliates.
“Standard & Poor’s®,” “S&P®” and “S&P 500®” are registered trademarks
of Standard & Poor’s Financial Services LLC, a division of S&P
Global (“S&P”), the “S&P North American Natural Resources Sector
IndexTM” is a trademark
of S&P Dow Jones LLC, a subsidiary of McGraw Hill Financial, Inc.; Dow
Jones® is a
registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and
these trademarks have been licensed for use by SPDJI and sublicensed for certain
purposes by iShares Trust. The iShares Core S&P 500 ETF, iShares National
Muni Bond ETF, iShares North American Natural Resources ETF and iShares U.S.
Real Estate ETF (collectively, the “iShares S&P Funds”) are not sponsored,
endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective
affiliates (collectively, “S&P Dow Jones Indices”). None of such parties
makes any representation regarding the advisability of investing in such
product(s); nor do they have any liability for any errors, omissions, or
interruptions of the S&P Indexes.
BLOOMBERG® is a trademark of
Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). “Bloomberg
U.S. Aggregate Bond Index,” “Bloomberg U.S. Fixed Income Balanced Risk
Index,” “Bloomberg U.S. Government/Credit Bond Index,” “Bloomberg U.S.
Intermediate Government/Credit Bond Index,” “Bloomberg U.S. MBS Index,”
“Bloomberg U.S. Treasury Inflation Protected Securities (TIPS)
Index (Series‑L)” and “Bloomberg U.S. Universal Index” (collectively,
the “Bloomberg Indexes”) are trademarks of Bloomberg and its licensors and have
been licensed for use for certain purposes by BFA or its affiliates.
“MSCI,”
“MSCI ACWI Diversified Multiple-Factor Index,” “MSCI ACWI Index,” “MSCI
Australia Index,” “MSCI Canada Custom Capped Index,” “MSCI EAFE Index,” “MSCI
EAFE IMI Index,” “MSCI EAFE Minimum Volatility (USD) Index,” “MSCI Emerging
Markets Index,” “MSCI Emerging Markets Minimum Volatility (USD) Index,” “MSCI
Emerging Markets Small Cap Index,” “MSCI EMU Index,” “MSCI France Index,” “MSCI
Germany Index,” “MSCI Japan Index” “MSCI United Kingdom Index,” “MSCI USA
Diversified Multiple-Factor Index,” “MSCI USA Enhanced Value Index,” “MSCI USA
Index,” “MSCI USA Low Size Index,” “MSCI USA Minimum Volatility (USD) Index,”
“MSCI USA Momentum SR Variant Index,” “MSCI USA Sector Neutral Quality Index,”
“MSCI USA Small Cap Diversified Multiple-Factor Index,” “MSCI USA Small Cap
Index,” “MSCI World ex USA Diversified Multiple-Factor Index,” “MSCI World ex
USA Enhanced Value Index,” “MSCI World ex‑USA Index,” “MSCI World ex USA
Momentum Index,” “MSCI
188
World
ex USA Sector Neutral Quality Index,” “MSCI World ex USA Small Cap Diversified
Multiple-Factor Index” and “MSCI World ex USA Small Cap Index” are servicemarks
and “MSCI EAFE Small Cap Index” (collectively, the “MSCI Indexes”) is a
trademark of MSCI Inc. (“MSCI”), and such marks have been licensed for use for
certain purposes by BFA and its affiliates. The MSCI Indexes are not sponsored,
endorsed, sold, or promoted by MSCI, nor does MSCI make any representation
regarding the advisability of investing in the MSCI Indexes. iShares Core MSCI
EAFE ETF, iShares MSCI Australia ETF, iShares MSCI Canada ETF, iShares MSCI EAFE
ETF, iShares MSCI EAFE Min Vol Factor ETF, iShares MSCI EAFE Small‑Cap ETF,
iShares MSCI Emerging Markets ETF, iShares MSCI Emerging Markets Min Vol Factor,
iShares MSCI Emerging Markets Small‑Cap ETF, ETF, iShares MSCI Eurozone ETF,
iShares MSCI France ETF, iShares MSCI Germany ETF, iShares MSCI Global
Multifactor ETF, iShares MSCI Intl Momentum Factor ETF, iShares MSCI Intl
Multifactor ETF, iShares MSCI Intl Quality Factor ETF, iShares MSCI Intl
Small‑Cap Multifactor ETF, iShares MSCI Intl Value Factor ETF, iShares MSCI
Japan ETF, iShares MSCI United Kingdom ETF, iShares MSCI USA Min Vol Factor ETF,
iShares MSCI USA Momentum Factor ETF, iShares MSCI USA Multifactor ETF, iShares
MSCI USA Quality Factor ETF, iShares MSCI USA Size Factor ETF, iShares MSCI USA
Small‑Cap Min Vol Factor ETF, iShares MSCI USA Small‑Cap Multifactor ETF,
iShares MSCI USA Value Factor ETF (collectively, the “iShares MSCI Funds”) are
not sponsored, endorsed, sold or promoted by MSCI nor does MSCI make any
representation regarding the advisability of investing in the iShares MSCI
Funds.
“FTSE
EPRA Nareit Developed ex-US Index,” “Russell,” “Russell Midcap® Index” and “Russell
2000® Index” are
registered trademarks of FTSE Russell (“Russell”) and have been licensed for use
for certain purposes by BFA or its affiliates.
“J.P.
Morgan” and “J.P. Morgan EMBI® Global Core Index” are
trademarks of JPMorgan Chase & Co. (“J.P. Morgan”) and have been
licensed for use for certain purposes by BFA or its affiliates.
Markit® and iBoxx® are registered
trademarks of Markit Group Limited and Markit Indices Limited (“Markit”),
respectively, and have been licensed for use for certain purposes by BFA or its
affiliates.
“ICE®” is a trademark of ICE Data
Indices, LLC or its affiliates and has been licensed for use for certain
purposes by BFA or its affiliates. “BofA®” is a registered trademark
of Bank of America Corporation licensed by Bank of America Corporation and its
affiliates (“BofA”), and may not be used without BofA’s prior written
approval.
iShares® and BlackRock® are registered trademarks of
BFA and its affiliates.
A Further Discussion of Risk Factors
This
section contains a description of the general risks of investing in the Funds.
The “Investment Objectives and Policies” section in the SAI also includes more
information about the Funds, their investments and the related risks. There can
be no guarantee that a Fund will meet its investment objective or that a Fund’s
performance will be positive for any period of time. Investors may lose money
investing in a Fund. An investment in a Fund is not a deposit in any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or by any
bank or government agency. Each Fund allocates and reallocates its assets among
a combination of Underlying Funds and derivatives. Therefore, references to a
Fund in the description of risks below may include the Underlying Funds, as
applicable. The order of the below risk factors does not indicate the
significance of any particular risk factor.
Principal
Risks of the Funds’ Investment Strategies
| ∎ |
Affiliated Fund
Risk — In managing the Fund, BFA will have authority to
select and substitute underlying funds and ETFs. BFA may be subject to
potential conflicts of interest in selecting underlying funds and ETFs
because the fees paid to BFA by some underlying funds and ETFs are higher
than the fees paid by other underlying funds and ETFs. However, BFA is a
fiduciary to the Fund and is legally obligated to act in the Fund’s best
interests when selecting underlying funds and ETFs. If an underlying fund
or ETF holds interests in an affiliated fund, the Fund may be prohibited
from purchasing shares of that underlying fund or
ETF. |
| ∎ |
Allocation
Risk — The Fund’s ability to achieve its investment
objective depends upon BFA’s skill in determining the Fund’s strategic
asset class allocation and in selecting the best mix of Underlying Funds
and direct investments. There is a risk that BFA’s evaluations and
assumptions regarding asset classes or Underlying Funds may be incorrect
in view of actual market conditions. In addition, there is no guarantee
that the Underlying Funds will achieve their investment objectives, and
the Underlying Funds’ performance may be lower than the performance of the
asset class which they were selected to represent. The Underlying Funds
may change their investment objectives or policies without the approval of
the Fund. If an Underlying Fund were to change its investment objective or
policies, the Fund might be forced to withdraw its investment from the
Underlying Fund at a disadvantageous time and price. In addition, the
asset allocation or the combination of Underlying Funds determined by BFA
could result in underperformance as compared to funds with similar
investment objectives and strategies. |
| ∎ |
Debt Securities
Risk — Debt securities, such as bonds, involve risks, such
as credit risk, interest rate risk, extension risk, and prepayment risk,
each of which are described in further detail
below: |
Credit Risk — Credit risk refers to the
possibility that the issuer of a debt security (i.e., the borrower) will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of the Fund’s investment in that issuer. The degree of
credit risk depends on both the financial condition of the issuer and the terms
of the obligation.
Interest Rate Risk — The market value of bonds
and other fixed-income securities changes in response to interest rate changes
and other factors. 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.
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The
Fund may be subject to a greater risk of rising interest rates due to the recent
period of historically low interest rates. For example, if interest rates
increase by 1%, assuming a current portfolio duration of ten years, and all
other factors being equal, the value of the Fund’s investments would be expected
to decrease by 10%. (Duration is a measure of the price sensitivity of a debt
security or portfolio of debt securities to relative changes in interest rates.)
The magnitude of these fluctuations in the market price of bonds and other
fixed-income securities is generally greater for those securities with longer
maturities. Fluctuations in the market price of the Fund’s investments will not
affect interest income derived from instruments already owned by the Fund, but
will be reflected in the Fund’s net asset value. The Fund may lose money if
short-term or long-term interest rates rise sharply in a manner not anticipated
by Fund management.
To
the extent the Fund invests in debt securities that may be prepaid at the option
of the obligor (such as mortgage-backed securities), the sensitivity of such
securities to changes in interest rates may increase (to the detriment of the
Fund) when interest rates rise. Moreover, because rates on certain floating rate
debt securities typically 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.
These
basic principles of bond prices also apply to U.S. Government securities. A
security backed by the “full faith and credit” of the U.S. Government is
guaranteed only as to its stated interest rate and face value at maturity, not
its current market price. Just like other fixed-income securities,
government-guaranteed securities will fluctuate in value when interest rates
change.
The
Federal Reserve has recently begun to raise the federal funds rate as part of
its efforts to address rising inflation. There is a risk that interest rates
will continue to rise, which will likely drive down the prices of bonds and
other fixed-income securities. A general rise in interest rates has the
potential to cause investors to move out of fixed-income securities on a large
scale, which may increase redemptions from mutual funds that hold large amounts
of fixed-income securities. Heavy redemptions could cause the Fund to sell
assets at inopportune times or at a loss or depressed value and could hurt the
Fund’s performance.
During
periods of very low or negative interest rates, the Fund may be unable to
maintain positive returns. Certain countries have recently experienced negative
interest rates on certain fixed-income instruments. Very low or negative
interest rates may magnify interest rate risk. Changing interest rates,
including rates that fall below zero, may have unpredictable effects on markets,
may result in heightened market volatility and may detract from Fund performance
to the extent the Fund is exposed to such interest rates.
Extension Risk — When interest rates rise,
certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to fall. Rising interest
rates tend to extend the duration of securities, making them more sensitive to
changes in interest rates. The value of longer-term securities generally changes
more in response to changes in interest rates than shorter-term securities. As a
result, in a period of rising interest rates, securities may exhibit additional
volatility and may lose value.
Prepayment Risk — When interest rates fall,
certain obligations will be paid off by the obligor more quickly than originally
anticipated, and the Fund may have to invest the proceeds in securities with
lower yields. In periods of falling interest rates, the rate of prepayments
tends to increase (as does price fluctuation) as borrowers are motivated to pay
off debt and refinance at new lower rates. During such periods, reinvestment of
the prepayment proceeds by the management team will generally be at lower rates
of return than the return on the assets that were prepaid. Prepayment reduces
the yield to maturity and the average life of the security.
| ∎ |
Derivatives
Risk — The Fund’s use of derivatives may increase its costs,
reduce the Fund’s returns and/or increase volatility. Derivatives involve
significant risks, including: |
Leverage Risk — The Fund’s use of derivatives
can magnify the Fund’s gains and losses. Relatively small market movements may
result in large changes in the value of a derivatives position and can result in
losses that greatly exceed the amount originally invested.
Market Risk — Some derivatives are more
sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives
positions as a result of unanticipated market movements, which losses are
potentially unlimited. Finally, BFA may not be able to predict correctly the
direction of securities prices, interest rates and other economic factors, which
could cause the Fund’s derivatives positions to lose value.
Counterparty Risk — Derivatives are also
subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation,
and the related risks of having concentrated exposure to such a
counterparty.
Illiquidity Risk —The possible lack of a
liquid secondary market for derivatives and the resulting inability of the Fund
to sell or otherwise close a derivatives position could expose the Fund to
losses and could make derivatives more difficult for the Fund to value
accurately.
190
Operational Risk — The use of derivatives
includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human
error.
Legal Risk — The risk of insufficient
documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract.
Volatility and Correlation Risk — The Fund’s
use of derivatives may reduce the Fund’s returns and/or increase volatility.
Volatility is defined as the characteristic of a security, an index or a market
to fluctuate significantly in price within a short time period. A risk of the
Fund’s use of derivatives is that the fluctuations in their values may not
correlate with the overall securities markets.
Valuation Risk — Valuation for
derivatives may not be readily available in the market. Valuation may be more
difficult in times of market turmoil since many investors and market makers may
be reluctant to purchase complex instruments or quote prices for them.
Derivatives may also expose the Fund to greater risk and increase its costs.
Certain transactions in derivatives involve substantial leverage risk and may
expose the Fund to potential losses that exceed the amount originally invested
by the Fund.
Hedging Risk — When a derivative is used as a
hedge against a position that the Fund holds, any loss generated by the
derivative generally should be substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce or eliminate losses, it can
also reduce or eliminate gains. Hedges are sometimes subject to imperfect
matching between the derivative and the underlying security, and there can be no
assurance that the Fund’s hedging transactions will be effective. The use of
hedging may result in certain adverse tax consequences noted below.
Tax Risk — The federal income tax treatment of
a derivative may not be as favorable as a direct investment in an underlying
asset and may adversely affect the timing, character and amount of income the
Fund realizes from its investments. As a result, a larger portion of the Fund’s
distributions may be treated as ordinary income rather than capital gains. In
addition, certain derivatives are subject to mark‑to‑market or straddle
provisions of the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”). If such provisions are applicable, there could be an increase
(or decrease) in the amount of taxable dividends paid by the Fund. In addition,
the tax treatment of certain derivatives, such as swaps, is unsettled and may be
subject to future legislation, regulation or administrative pronouncements
issued by the Internal Revenue Service (the “IRS”).
Regulatory Risk — Derivative contracts are
subject to regulation under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in the United States and under comparable
regimes in Europe, Asia and other non‑U.S. jurisdictions. Under the Dodd-Frank
Act, with respect to uncleared swaps, swap dealers are required to collect
variation margin from the Fund and may be required by applicable regulations to
collect initial margin from the Fund. Both initial and variation margin may be
comprised of cash and/or securities, subject to applicable regulatory haircuts.
Shares of investment companies (other than certain money market funds) may not
be posted as collateral under applicable regulations. In addition, regulations
adopted by global prudential regulators that are now in effect require certain
bank-regulated counterparties and certain of their affiliates to include in
certain financial contracts, including many derivatives contracts, terms that
delay or restrict the rights of counterparties, such as the Fund, to terminate
such contracts, foreclose upon collateral, exercise other default rights or
restrict transfers of credit support in the event that the counterparty and/or
its affiliates are subject to certain types of resolution or insolvency
proceedings. The implementation of these requirements with respect to
derivatives, as well as regulations under the Dodd-Frank Act regarding clearing,
mandatory trading and margining of other derivatives, may increase the costs and
risks to the Fund of trading in these instruments and, as a result, may affect
returns to investors in the Fund.
Future
regulatory developments may impact the Fund’s ability to invest or remain
invested in certain derivatives. Legislation or regulation may also change the
way in which the Fund itself is regulated. BFA cannot predict the effects of any
new governmental regulation that may be implemented on the ability of the Fund
to use swaps or any other financial derivative product, and there can be no
assurance that any new governmental regulation will not adversely affect the
Fund’s ability to achieve its investment objective.
Risks Specific to Certain Derivatives Used by the
Fund
Swaps — Swap agreements, including total
return swaps that may be referred to as contracts for difference, are two‑party
contracts entered into for periods ranging from a few days to more than one
year. In a standard “swap” transaction, two parties agree to exchange the
value(s) or cash flow(s) of one asset for another over a certain period of time.
Swap agreements involve the risk that the party with whom the Fund has entered
into the swap will default on its obligation to pay the Fund and the risk that
the Fund will not be able to meet its obligations to pay the other party to the
agreement. Swap agreements may also involve the risk that there is an imperfect
correlation between the return on the Fund’s obligation to its counterparty and
the return on the referenced asset. In addition, swap agreements are subject to
market and illiquidity risk, leverage risk and hedging risk.
Credit Default Swaps — Credit default swaps
may have as reference obligations one or more securities that are not currently
held by the Fund, the underlying funds and/or ETFs. The protection “buyer” may
be obligated to pay
191
the
protection “seller” an up‑front payment or a periodic stream of payments over
the term of the contract, provided generally that no credit event on a reference
obligation has occurred. Credit default swaps involve special risks in addition
to those mentioned above because they are difficult to value, are highly
susceptible to illiquid investments risk and credit risk, and generally pay a
return to the party that has paid the premium only in the event of an actual
default by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty).
Forward Foreign Currency Exchange Contracts —
Forward foreign currency exchange transactions are OTC contracts to purchase or
sell a specified amount of a specified currency or multinational currency unit
at a price and future date set at the time of the contract. Forward foreign
currency exchange contracts do not eliminate fluctuations in the value of
non‑U.S. securities but rather allow the Fund to establish a fixed rate of
exchange for a future point in time. This strategy can have the effect of
reducing returns and minimizing opportunities for gain.
Futures — Futures are standardized,
exchange-traded contracts that obligate a purchaser to take delivery, and a
seller to make delivery, of a specific amount of an asset at a specified future
date at a specified price. The primary risks associated with the use of futures
contracts and options are: (a) the imperfect correlation between the change
in market value of the instruments held by the Fund and the price of the futures
contract or option; (b) the possible lack of a liquid secondary market for
a futures contract and the resulting inability to close a futures contract when
desired; (c) losses caused by unanticipated market movements, which are
potentially unlimited; (d) the investment adviser’s inability to predict
correctly the direction of securities prices, interest rates, currency exchange
rates and other economic factors; and (e) the possibility that the
counterparty will default in the performance of its obligations.
Options — An option is an agreement that, for
a premium payment or fee, gives the option holder (the purchaser) the right but
not the obligation to buy (a “call option”) or sell (a “put option”) the
underlying asset (or settle for cash in an amount based on an underlying asset,
rate, or index) at a specified price (the “exercise price”) during a period of
time or on a specified date. Investments in options are considered speculative.
When the Fund purchases an option, it may lose the total premium paid for it if
the price of the underlying security or other assets decreased, remained the
same or failed to increase to a level at or beyond the exercise price (in the
case of a call option) or increased, remained the same or failed to decrease to
a level at or below the exercise price (in the case of a put option). If a put
or call option purchased by the Fund were permitted to expire without being sold
or exercised, its premium would represent a loss to the Fund. To the extent that
the Fund writes or sells an option, if the decline or increase in the underlying
asset is significantly below or above the exercise price of the written option,
the Fund could experience a substantial loss.
Commodity-Linked Derivatives — The value of a
commodity-linked derivative investment typically is based upon the price
movements of a commodity, a commodity futures contract or commodity index, or
some other readily measurable economic variable. The value of commodity-linked
derivative instruments may be affected by changes in overall market movements,
volatility of the underlying benchmark, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought, floods,
weather, livestock disease, embargoes, tariffs and international economic,
political and regulatory developments. The value of commodity-linked derivatives
will rise or fall in response to changes in the underlying commodity or related
index. Investments in commodity-linked derivatives may be subject to greater
volatility than non‑derivative based investments. A highly liquid secondary
market may not exist for certain commodity-linked derivatives, and there can be
no assurance that one will develop.
Commodity-linked
derivatives also may be subject to credit and interest rate risks that in
general affect the values of fixed-income securities. Therefore, at maturity,
the Fund may receive more or less principal than it originally invested. The
Fund might receive interest payments that are more or less than the stated
coupon interest payments.
In
connection with the Fund’s direct and indirect investments in commodity-linked
derivatives, the Fund will attempt to manage its counterparty exposure so as to
limit its exposure to any one counterparty. However, due to the limited number
of entities that may serve as counterparties (and which the Fund believes are
creditworthy) at any one time the Fund may enter into swap agreements with a
limited number of counterparties and may invest in commodity-linked notes issued
by a limited number of issuers that will act as counterparties, which may
increase the Fund’s exposure to counterparty credit risk. There can be no
assurance that the Fund will be able to limit exposure to any one counterparty
at all times.
Commodity-Linked Notes — Commodity-linked
notes involve substantial risks, including the risk of loss of a significant
portion of their principal value. In addition to commodity risk and general
derivatives risk, they may be subject to additional special risks, such as risk
of loss of interest and principal, lack of secondary market and risk of greater
volatility, that do not affect traditional equity and debt securities.
| ∎ |
Equity
Securities Risk — Common and preferred stocks represent
equity ownership in a company. Stock markets are volatile. The price of
equity securities will fluctuate and can decline and reduce the value of a
portfolio investing in equities. The value of equity securities purchased
by the Fund could decline if the financial condition of
the |
192
|
companies
the Fund invests in declines or if overall market and economic conditions
deteriorate. The value of equity securities may also decline due to
factors that affect a particular industry or industries, such as labor
shortages or an increase in production costs and competitive conditions
within an industry. In addition, the value may decline due to general
market conditions that are not specifically related to a company or
industry, such as real or perceived adverse economic conditions, changes
in the general outlook for corporate earnings, changes in inflation,
interest or currency rates or generally adverse investor
sentiment. |
| ∎ |
Investments in
Underlying Funds Risk — The Fund invests a portion of its
assets in Underlying Funds, so the Fund’s investment performance is
directly related to the performance of the Underlying Funds. The Fund’s
net asset value will change with changes in the value of the Underlying
Funds and other securities in which it invests. An investment in the Fund
will entail more direct and indirect costs and expenses than a direct
investment in the Underlying Funds. For example, the Fund indirectly pays
a portion of the expenses (including operating expenses and management
fees) incurred by the Underlying Funds. Additionally, in managing the
Fund, BFA will have the authority to select and substitute Underlying
Funds and BFA may be subject to potential conflicts of interest in
selecting Underlying Funds because the fees paid to BFA or its affiliates
by some Underlying Funds are higher than the fees paid by other Underlying
Funds. |
One
Underlying Fund may buy the same securities that another Underlying Fund sells.
Also, an investor in the Fund may receive taxable gains from portfolio
transactions by an Underlying Fund, as well as taxable gains from transactions
in shares of the Underlying Fund by the Fund. Certain of the Underlying Funds
may hold common portfolio securities, thereby reducing the diversification
benefits of the Fund.
In
order to minimize expenses, the Fund intends generally to invest in the class of
shares of each Underlying Fund with the lowest shareholder fees and net fund
operating expenses. As the Underlying Funds or the Fund’s allocations among the
Underlying Funds change from time to time, or to the extent that the expense
ratio of the Underlying Funds changes, the weighted average operating expenses
borne by the Fund may increase or decrease.
Underlying
iShares Funds are subject to additional risks due to their shares being listed
and traded on securities exchanges. The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in the
market value of the ETF’s holdings since the most recent calculation. The
trading prices of an ETF’s shares fluctuate continuously throughout trading
hours based on market supply and demand rather than net asset value. The trading
prices of an ETF’s shares may deviate significantly from net asset value during
periods of market volatility. Any of these factors may lead to an ETF’s shares
trading at a premium or discount to net asset value. However, because shares can
be created and redeemed in creation units, which are aggregated blocks of shares
that authorized participants who have entered into agreements with the ETF’s
distributor can purchase or redeem directly from the ETF, at net asset value
(unlike shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values), large
discounts or premiums to the net asset value of an ETF are not likely to be
sustained over the long-term. While the creation/redemption feature is designed
to make it likely that an ETF’s shares normally trade on exchanges at prices
close to the ETF’s next calculated net asset value, exchange prices are not
expected to correlate exactly with an ETF’s net asset value due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or the existence of extreme market volatility may
result in trading prices that differ significantly from net asset value. If a
shareholder purchases at a time when the market price is at a premium to the net
asset value or sells at a time when the market price is at a discount to the net
asset value, the shareholder may sustain losses.
There
can be no assurance that an active trading market for these particular ETFs will
develop or be maintained. Trading in ETFs may be halted because of market
conditions or for reasons that, in the view of the listing exchange, make
trading in ETFs inadvisable. In addition, trading in ETFs is subject to trading
halts caused by extraordinary market volatility pursuant to “circuit breaker”
rules. There can be no assurance that the requirements necessary to maintain the
listing of ETFs will continue to be met or will remain unchanged.
| ∎ |
Leverage
Risk — Some transactions may give rise to a form of economic
leverage. These transactions may include, among others, derivatives, and
may expose the Fund to greater risk and increase its costs. As an open-end
investment company registered with the Securities and Exchange Commission
(the “SEC”), the Fund is subject to the federal securities laws, including
the Investment Company Act and the rules thereunder. Under Rule 18f-4
under the Investment Company Act, among other things, the Fund must either
use derivatives in a limited manner or comply with an outer limit on fund
leverage risk based on value-at-risk. The use of leverage may cause the
Fund to liquidate portfolio positions when it may not be advantageous to
do so to satisfy its obligations or to meet the applicable requirements of
the Investment Company Act and the rules thereunder. Increases and
decreases in the value of the Fund’s portfolio will be magnified when the
Fund uses leverage. |
| ∎ |
Market Risk and
Selection Risk — Market risk is the risk that one or more
markets in which the Fund invests will go down in value, including the
possibility that the markets will go down sharply and unpredictably. The
value of a security or other asset may decline due to changes in general
market conditions, economic trends or events that are not specifically
related to the issuer of the security or other asset, or factors that
affect a particular issuer or |
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|
issuers,
exchange, country, group of countries, region, market, industry, group of
industries, sector or asset class. Local, regional or global events such
as war, acts of terrorism, the spread of infectious illness or other
public health issues like pandemics or epidemics, recessions, or other
events could have a significant impact on the Fund and its investments.
Selection risk is the risk that the securities selected by Fund management
will underperform the markets, the relevant indices or the securities
selected by other funds with similar investment objectives and investment
strategies. This means you may lose money. |
An
outbreak of an infectious coronavirus (COVID-19) that was first detected in
December 2019 developed into a global pandemic that has resulted in numerous
disruptions in the market and has had significant economic impact leaving
general concern and uncertainty. Although vaccines have been developed and
approved for use by various governments, the duration of the pandemic and its
effects cannot be predicted with certainty. The impact of this coronavirus, and
other epidemics and pandemics that may arise in the future, could affect the
economies of many nations, individual companies and the market in general ways
that cannot necessarily be foreseen at the present time.
| ∎ |
Retirement
Income Risk — The Fund does not provide a guarantee that
sufficient capital appreciation will be achieved to provide adequate
income at and through retirement. The Fund also does not ensure that you
will have assets in your account sufficient to cover your retirement
expenses or that you will have enough saved to be able to retire in the
target year identified in the Fund’s name, if applicable; this will depend
on the amount of money you have invested in the Fund, the length of time
you have held your investment, the returns of the markets over time, the
amount you spend in retirement, and your other assets and income
sources. |
Principal
Risks of the Underlying Funds
| ∎ |
Asset
Class Risk — The securities or other assets in an
Underlying Index or in an Underlying Fund’s portfolio may underperform in
comparison to other securities or indexes that track other countries,
groups of countries, regions, industries, groups of industries, markets,
asset classes or sectors. Various types of securities, currencies and
indexes or assets may experience cycles of outperformance and
underperformance in comparison to the general financial markets depending
upon a number of factors including, among other things, inflation,
interest rates, productivity, global demand for local products or
resources, and regulation and governmental controls. This may cause an
Underlying Fund to underperform other investment vehicles that invest in
different asset classes. |
| ∎ |
Authorized
Participant Concentration Risk — Only an authorized
participant may engage in creation or redemption transactions directly
with an ETF, and none of those authorized participants is obligated to
engage in creation and/or redemption transactions. The Underlying Funds
that are ETFs have a limited number of institutions that may act as
authorized participants on an agency basis (i.e., on behalf of other
market participants). To the extent that authorized participants exit the
business or are unable to proceed with creation or redemption orders with
respect to an ETF and no other authorized participant is able to step
forward to create or redeem, the ETF shares may be more likely to trade at
a premium or discount to net asset value and possibly face trading halts
or delisting. Authorized participant concentration risk may be heightened
because ETFs that invest in securities issued by non-U.S. issuers or other
securities or instruments that are less widely traded often involve
greater settlement and operational issues and capital costs for authorized
participants, which may limit the availability of authorized
participants. |
| ∎ |
Collateralized
Debt Obligations Risk — In addition to the typical risks
associated with fixed-income securities and asset-backed securities,
collateralized debt obligations (“CDOs”), including collateralized loan
obligations, carry additional risks including, but not limited to:
(i) the possibility that distributions from collateral securities
will not be adequate to make interest or other payments; (ii) the
risk that the collateral may default or decline in value or be downgraded,
if rated by a nationally recognized statistical rating organization;
(iii) the Fund may invest in tranches of CDOs that are subordinate to
other tranches; (iv) the structure and complexity of the transaction
and the legal documents could lead to disputes among investors regarding
the characterization of proceeds; (v) the investment return achieved
by the Fund could be significantly different than those predicted by
financial models; (vi) the lack of a readily available secondary
market for CDOs; (vii) the risk of forced “fire sale” liquidation due
to technical defaults such as coverage test failures; and (viii) the
CDO’s manager may perform poorly. |
| ∎ |
Commodities
Related Investments Risk — Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities. The value of commodity-linked derivative
investments may be affected by changes in overall market movements,
commodity index volatility, changes in inflation, interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, embargoes, tariffs and international economic, political
and regulatory developments. |
| ∎ |
Concentration
Risk — To the extent that the Fund or an Underlying Fund is
concentrated in the securities of companies, a particular market,
industry, group of industries, sector or asset class, country, region or
group of countries, the Fund or that Underlying Fund may be adversely
affected by the performance of those securities, may be subject to
increased price volatility and may be more susceptible to adverse
economic, market, political or regulatory occurrences affecting that
market, industry, group of industries, sector or asset class, country,
region or group of countries. |
194
| ∎ |
Convertible
Securities Risk — The market value of a convertible security
performs like that of a regular debt security; that is, if market interest
rates rise, the value of a convertible security usually falls. In
addition, convertible securities are subject to the risk that the issuer
will not be able to pay interest, principal or dividends when due, and
their market value may change based on changes in the issuer’s credit
rating or the market’s perception of the issuer’s creditworthiness. Since
it derives a portion of its value from the common stock into which it may
be converted, a convertible security is also subject to the same types of
market and issuer risks that apply to the underlying common stock,
including the potential for increased volatility in the price of the
convertible security. |
| ∎ |
Corporate Loans
Risk — Commercial banks and other financial institutions or
institutional investors make corporate loans to companies that need
capital to grow or restructure. Borrowers generally pay interest on
corporate loans at rates that change in response to changes in market
interest rates such as the Secured Overnight Financing Rate (“SOFR”), the
London Interbank Offered Rate (“LIBOR”) or the prime rates of U.S. banks.
As a result, the value of corporate loan investments is generally less
exposed to the adverse effects of shifts in market interest rates than
investments that pay a fixed rate of interest. However, because the
trading market for certain corporate loans may be less developed than the
secondary market for bonds and notes, the Fund may experience difficulties
in selling its corporate loans. Transactions in corporate loans may settle
on a delayed basis. As a result, the proceeds from the sale of corporate
loans may not be readily available to make additional investments or to
meet the Fund’s redemption obligations. To the extent the extended
settlement process gives rise to short-term liquidity needs, the Fund may
hold additional cash, sell investments or temporarily borrow from banks
and other lenders. Leading financial institutions often act as agent for a
broader group of lenders, generally referred to as a syndicate. The
syndicate’s agent arranges the corporate loans, holds collateral and
accepts payments of principal and interest. If the agent develops
financial problems, the Fund may not recover its investment or recovery
may be delayed. By investing in a corporate loan, the Fund may become a
member of the syndicate. |
The
market for corporate loans may be subject to irregular trading activity and wide
bid/ask spreads.
The
corporate loans in which the Fund invests are subject to the risk of loss of
principal and income. Although borrowers frequently provide collateral to secure
repayment of these obligations they do not always do so. If they do provide
collateral, the value of the collateral may not completely cover the borrower’s
obligations at the time of a default. If a borrower files for protection from
its creditors under the U.S. bankruptcy laws, these laws may limit the Fund’s
rights to its collateral. In addition, the value of collateral may erode during
a bankruptcy case. In the event of a bankruptcy, the holder of a corporate loan
may not recover its principal, may experience a long delay in recovering its
investment and may not receive interest during the delay.
| ∎ |
Counterparty
Risk — The counterparty to an over-the-counter derivatives
contract or a borrower of the Fund’s securities may be unable or unwilling
to make timely principal, interest or settlement payments, or otherwise to
honor its obligations. Any such failure to honor its obligations may cause
significant losses to the Fund. |
| ∎ |
Depositary
Receipts Risk — Depositary receipts are generally subject to
the same risks as the foreign securities that they evidence or into which
they may be converted. In addition to investment risks associated with the
underlying issuer, depositary receipts expose the Fund to additional risks
associated with the non‑uniform terms that apply to depositary receipt
programs, credit exposure to the depository bank and to the sponsors and
other parties with whom the depository bank establishes the programs,
currency risk and the risk of an illiquid market for depositary
receipts. The issuers of unsponsored depositary receipts are not
obligated to disclose information that is, in the United States,
considered material. Therefore, there may be less information available
regarding these issuers and there may not be a correlation between such
information and the market value of the depositary receipts. While
depositary receipts provide an alternative to directly purchasing
underlying foreign securities in their respective markets and currencies,
they continue to be subject to many of the risks associated with investing
directly in foreign securities, including political, economic, and
currency risk. |
| ∎ |
Distressed
Securities Risk — Distressed securities are speculative and
involve substantial risks in addition to the risks of investing in junk
bonds. The Fund will generally not receive interest payments on the
distressed securities and may incur costs to protect its investment. In
addition, distressed securities involve the substantial risk that
principal will not be repaid. These securities may present a substantial
risk of default or may be in default at the time of investment. The Fund
may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings. In any reorganization or liquidation proceeding
relating to a portfolio company, the Fund may lose its entire investment
or may be required to accept cash or securities with a value less than its
original investment. Distressed securities and any securities received in
an exchange for such securities may be subject to restrictions on
resale. |
| ∎ |
Dollar Rolls
Risk — A dollar roll transaction involves a sale by the Fund
of a mortgage-backed, U.S. Treasury or other security (as permitted by the
Fund’s investment strategies) concurrently with an agreement by the Fund
to repurchase a similar security at a later date at an agreed-upon price.
The market value of the securities the Fund is required to purchase may
decline below the agreed upon repurchase price of those securities. If the
broker/dealer to whom the Fund sells securities becomes insolvent, the
Fund’s right to purchase or repurchase securities may
be |
195
|
restricted.
Successful use of dollar rolls may depend upon the adviser’s ability to
correctly predict interest rates and prepayments, depending on the
underlying security. There is no assurance that dollar rolls can be
successfully employed. |
| ∎ |
Emerging
Markets Risk — The risks of foreign investments are usually
much greater for emerging markets. Investments in emerging markets may be
considered speculative. Emerging markets may include those in countries
considered emerging or developing by the World Bank, the International
Finance Corporation or the United Nations. Emerging markets are riskier
than more developed markets because they tend to develop unevenly and may
never fully develop. They are more likely to experience hyperinflation and
currency devaluations, which adversely affect returns to U.S. investors.
In addition, many emerging markets have far lower trading volumes and less
liquidity than developed markets. Since these markets are often small,
they may be more likely to suffer sharp and frequent price changes or
long-term price depression because of adverse publicity, investor
perceptions or the actions of a few large investors. In addition,
traditional measures of investment value used in the United States, such
as price to earnings ratios, may not apply to certain small markets. Also,
there may be less publicly available information about issuers in emerging
markets than would be available about issuers in more developed capital
markets, and such issuers may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to
which U.S. companies are subject. |
Many
emerging markets have histories of political instability and abrupt changes in
policies. As a result, their governments are more likely to take actions that
are hostile or detrimental to private enterprise or foreign investment than
those of more developed countries, including expropriation of assets,
confiscatory taxation, high rates of inflation or unfavorable diplomatic
developments. In the past, governments of such nations have expropriated
substantial amounts of private property, and most claims of the property owners
have never been fully settled. There is no assurance that such expropriations
will not reoccur. In such an event, it is possible that the Fund could lose the
entire value of its investments in the affected market. Some countries have
pervasive corruption and crime that may hinder investments. Certain emerging
markets may also face other significant internal or external risks, including
the risk of war, and ethnic, religious and racial conflicts. In addition,
governments in many emerging market countries participate to a significant
degree in their economies and securities markets, which may impair investment
and economic growth. National policies that may limit the Fund’s investment
opportunities include restrictions on investment in issuers or industries deemed
sensitive to national interests.
Emerging
markets may also have differing legal systems and the existence or possible
imposition of exchange controls, custodial restrictions or other foreign or U.S.
governmental laws or restrictions applicable to such investments. Sometimes,
they may lack or be in the relatively early development of legal structures
governing private and foreign investments and private property. Many emerging
markets do not have income tax treaties with the United States, and as a result,
investments by the Fund may be subject to higher withholding taxes in such
countries. In addition, some countries with emerging markets may impose
differential capital gains taxes on foreign investors. Foreign companies with
securities listed on U.S. exchanges may be delisted if they do not meet U.S.
accounting standards and auditor oversight requirements, which may significantly
decrease the liquidity and value of the securities.
Practices
in relation to settlement of securities transactions in emerging markets involve
higher risks than those in developed markets, in part because the Fund will need
to use brokers and counterparties that are less well capitalized, and custody
and registration of assets in some countries may be unreliable. The possibility
of fraud, negligence, undue influence being exerted by the issuer or refusal to
recognize ownership exists in some emerging markets, and, along with other
factors, could result in ownership registration being completely lost. The Fund
would absorb any loss resulting from such registration problems and may have no
successful claim for compensation. In addition, communications between the
United States and emerging market countries may be unreliable, increasing the
risk of delayed settlements or losses of security certificates.
| ∎ |
Foreign
Securities Risk — Securities traded in foreign markets have
often (though not always) performed differently from securities traded in
the United States. However, such investments often involve special risks
not present in U.S. investments that can increase the chances that the
Fund will lose money. In particular, the Fund is subject to the risk that
because there may be fewer investors on foreign exchanges and a smaller
number of securities traded each day, it may be more difficult for the
Fund to buy and sell securities on those exchanges. In addition, prices of
foreign securities may go up and down more than prices of securities
traded in the United States. |
Certain Risks of Holding Fund Assets Outside the
United States — The Fund generally holds its foreign securities and cash
in foreign banks and securities depositories. Some foreign banks and securities
depositories may be recently organized or new to the foreign custody business.
In addition, there may be limited or no regulatory oversight of their
operations. Also, the laws of certain countries limit the Fund’s ability to
recover its assets if a foreign bank, depository or issuer of a security, or any
of their agents, goes bankrupt. In addition, it is often more expensive for the
Fund to buy, sell and hold securities in certain foreign markets than in the
United States. The increased expense of investing in foreign markets reduces the
amount the Fund can earn on its investments and typically results in a higher
operating expense ratio for the Fund than for investment companies invested only
in the United States.
196
Currency Risk — Securities and other
instruments in which the Fund invests may be denominated or quoted in currencies
other than the U.S. dollar. For this reason, changes in foreign currency
exchange rates can affect the value of the Fund’s portfolio.
Generally,
when the U.S. dollar rises in value against a foreign currency, a security
denominated in that currency loses value because the currency is worth fewer
U.S. dollars. Conversely, when the U.S. dollar decreases in value against a
foreign currency, a security denominated in that currency gains value because
the currency is worth more U.S. dollars. This risk, generally known as “currency
risk,” means that a strong U.S. dollar will reduce returns for U.S. investors
while a weak U.S. dollar will increase those returns.
Foreign Economy Risk — The economies of
certain foreign markets may not compare favorably with the economy of the United
States with respect to such issues as growth of gross national product,
reinvestment of capital, resources and balance of payments position. Certain
foreign economies may rely heavily on particular industries or foreign capital
and are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, changes in international
trading patterns, trade barriers and other protectionist or retaliatory
measures. Investments in foreign markets may also be adversely affected by
governmental actions such as the imposition of capital controls, nationalization
of companies or industries, expropriation of assets or the imposition of
punitive taxes. In addition, economic conditions, such as volatile currency
exchange rates and interest rates, political events, military action and other
conditions may, without prior warning, lead to the governments of certain
countries, or the U.S. Government with respect to certain countries, prohibiting
or imposing substantial restrictions through capital controls and/or sanctions
on foreign investments in the capital markets or certain industries in those
countries. Capital controls and/or sanctions may include the prohibition of, or
restrictions on, the ability to own or transfer currency, securities,
derivatives or other assets and may also include retaliatory actions of one
government against another government, such as seizure of assets. Any of these
actions could severely impair the Fund’s ability to purchase, sell, transfer,
receive, deliver or otherwise obtain exposure to foreign securities and assets,
including the ability to transfer the Fund’s assets or income back into the
United States, and could negatively impact the value and/or liquidity of such
assets or otherwise adversely affect the Fund’s operations, causing the Fund to
decline in value.
Other
potential foreign market risks include foreign exchange controls, difficulties
in pricing securities, defaults on foreign government securities, difficulties
in enforcing legal judgments in foreign courts and political and social
instability. Diplomatic and political developments, including rapid and adverse
political changes, social instability, regional conflicts, terrorism and war,
could affect the economies, industries and securities and currency markets, and
the value of the Fund’s investments, in non‑U.S. countries. These factors are
extremely difficult, if not impossible, to predict and take into account with
respect to the Fund’s investments.
Governmental Supervision and Regulation/Accounting
Standards — Many foreign governments do not supervise and regulate stock
exchanges, brokers and the sale of securities to the same extent as such
regulations exist in the United States. They also may not have laws to protect
investors that are comparable to U.S. securities laws. For example, some foreign
countries may have no laws or rules against insider trading. Insider trading
occurs when a person buys or sells a company’s securities based on material
non‑public information about that company. In addition, some countries may have
legal systems that may make it difficult for the Fund to vote proxies, exercise
shareholder rights, and pursue legal remedies with respect to its foreign
investments. Accounting standards in other countries are not necessarily the
same as in the United States. If the accounting standards in another country do
not require as much detail as U.S. accounting standards, it may be harder for
Fund management to completely and accurately determine a company’s financial
condition.
Settlement Risk — Settlement and clearance
procedures in certain foreign markets differ significantly from those in the
United States. Foreign settlement and clearance procedures and trade regulations
also may involve certain risks (such as delays in payment for or delivery of
securities) not typically associated with the settlement of U.S.
investments.
At
times, settlements in certain foreign countries have not kept pace with the
number of securities transactions. These problems may make it difficult for the
Fund to carry out transactions. If the Fund cannot settle or is delayed in
settling a purchase of securities, it may miss attractive investment
opportunities and certain of its assets may be uninvested with no return earned
thereon for some period. If the Fund cannot settle or is delayed in settling a
sale of securities, it may lose money if the value of the security then declines
or, if it has contracted to sell the security to another party, the Fund could
be liable for any losses incurred.
Withholding Tax Reclaims Risk — The Fund may
file claims to recover foreign withholding taxes on dividend and interest income
(if any) received from issuers in certain countries and capital gains on the
disposition of stocks or securities where such withholding tax reclaim is
possible. Whether or when the Fund will receive a withholding tax refund is
within the control of the tax authorities in such countries. Where the Fund
expects to recover withholding taxes, the net asset value of the Fund generally
includes accruals for such tax refunds. The Fund regularly evaluates the
probability of recovery. If the likelihood of recovery materially decreases, due
to, for example, a change in tax regulation or approach in the foreign country,
accruals in the Fund’s net asset value for such refunds may be written down
partially or in full, which will adversely affect the Fund’s net asset value.
Shareholders in the Fund at the time
197
an
accrual is written down will bear the impact of the resulting reduction in net
asset value regardless of whether they were shareholders during the accrual
period. Conversely, if the Fund receives a tax refund that has not been
previously accrued, shareholders in the Fund at the time of the successful
recovery will benefit from the resulting increase in the Fund’s net asset value.
Shareholders who sold their shares prior to such time will not benefit from such
increase in the Fund’s net asset value.
European Economic Risk — The European
financial markets have recently experienced volatility and adverse trends due to
concerns about economic downturns in, or rising government debt levels of,
several European countries as well as acts of war in the region. These events
may spread to other countries in Europe and may affect the value and liquidity
of certain of the Fund’s investments.
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructurings by governments and
others of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world.
The
United Kingdom has withdrawn from the European Union, and one or more other
countries may withdraw from the European Union and/or abandon the Euro, the
common currency of the European Union. These events and actions have adversely
affected, and may in the future adversely affect, the value and exchange rate of
the Euro and may continue to significantly affect the economies of every country
in Europe, including countries that do not use the Euro and non-European Union
member states. The impact of these actions, especially if they occur in a
disorderly fashion, is not clear but could be significant and far reaching. In
addition, Russia launched a large-scale invasion of Ukraine on February 24,
2022. The extent and duration of the military action, resulting sanctions and
resulting future market disruptions in the region are impossible to predict, but
could be significant and have a severe adverse effect on the region, including
significant negative impacts on the economy and the markets for certain
securities and commodities, such as oil and natural gas, as well as other
sectors.
| ∎ |
Geographic
Risk — Some of the companies in which the Fund invests are
located in parts of the world that have historically been prone to natural
disasters, such as earthquakes, tornadoes, volcanic eruptions, droughts,
floods, hurricanes or tsunamis, and are economically sensitive to
environmental events. Any such event may adversely impact the economies of
these geographic areas or business operations of companies in these
geographic areas, causing an adverse impact on the value of the
Fund. |
| ∎ |
High Portfolio
Turnover Risk — The Fund may engage in active and frequent
trading of its portfolio securities. High portfolio turnover (more than
100%) may result in increased transaction costs to the Fund, including
brokerage commissions, dealer mark‑ups and other transaction costs on the
sale of the securities and on reinvestment in other securities. The sale
of Fund portfolio securities may result in the realization and/or
distribution to shareholders of higher capital gains or losses as compared
to a fund with less active trading policies. These effects of higher than
normal portfolio turnover may adversely affect Fund
performance. |
| ∎ |
High Yield
Bonds Risks — Although junk bonds generally pay higher rates
of interest than investment grade bonds, junk bonds are high risk
investments that are considered speculative and may cause income and
principal losses for the Fund. The major risks of junk bond investments
include: |
| ∎ |
Junk
bonds may be issued by less creditworthy issuers. Issuers of junk bonds
may have a larger amount of outstanding debt relative to their assets than
issuers of investment grade bonds. In the event of an issuer’s bankruptcy,
claims of other creditors may have priority over the claims of junk bond
holders, leaving few or no assets available to repay junk bond
holders. |
| ∎ |
Prices
of junk bonds are subject to extreme price fluctuations. Adverse changes
in an issuer’s industry and general economic conditions may have a greater
impact on the prices of junk bonds than on other higher rated fixed-income
securities. |
| ∎ |
Issuers
of junk bonds may be unable to meet their interest or principal payment
obligations because of an economic downturn, specific issuer developments,
or the unavailability of additional financing. |
| ∎ |
Junk
bonds frequently have redemption features that permit an issuer to
repurchase the security from the Fund before it matures. If the issuer
redeems junk bonds, the Fund may have to invest the proceeds in bonds with
lower yields and may lose income. |
| ∎ |
Junk
bonds may be less liquid than higher rated fixed-income securities, even
under normal economic conditions. There are fewer dealers in the junk bond
market, and there may be significant differences in the prices quoted for
junk bonds by the dealers. Because they are less liquid than higher rated
fixed-income securities, judgment may play a greater role in valuing junk
bonds than is the case with securities trading in a more liquid
market. |
| ∎ |
The
Fund may incur expenses to the extent necessary to seek recovery upon
default or to negotiate new terms with a defaulting
issuer. |
The
credit rating of a high yield security does not necessarily address its market
value risk. Ratings and market value may change from time to time, positively or
negatively, to reflect new developments regarding the issuer.
198
| ∎ |
Income
Risk — The Fund’s yield will vary as the short-term
securities in its portfolio mature and the proceeds are reinvested in
securities with different interest rates. |
| ∎ |
Indexed and
Inverse Securities Risk — Indexed and inverse securities
provide a potential return based on a particular index of value or
interest rates. The Fund’s return on these securities will be subject to
risk with respect to the value of the particular index. These securities
are subject to leverage risk and correlation risk. Certain indexed and
inverse securities have greater sensitivity to changes in interest rates
or index levels than other securities, and the Fund’s investment in such
instruments may decline significantly in value if interest rates or index
levels move in a way Fund management does not
anticipate. |
| ∎ |
Index-Related
Risk — An Underlying Fund may seek to achieve a return that
corresponds generally to the price and yield performance, before fees and
expenses, of the applicable Underlying Index as published by its index
provider. There is no assurance that an index provider or any agents that
may act on its behalf will compile an Underlying Index accurately, or that
an Underlying Index will be determined, composed or calculated accurately.
While the index providers provide descriptions of what the applicable
Underlying Index is designed to achieve, neither the index providers nor
their agents provide any warranty or accept any liability in relation to
the quality, accuracy or completeness of an Underlying Index or its
related data, and they do not guarantee that an Underlying Index will be
in line with its index provider’s methodology. BFA does not provide any
warranty or guarantee against an index provider’s or any agent’s errors.
Errors in respect of the quality, accuracy and completeness of the data
used to compile an Underlying Index may occur from time to time and may
not be identified and corrected by an index provider for a period of time
or at all, particularly where the indices are less commonly used as
benchmarks by funds or managers. Such errors may negatively or positively
impact the Underlying Fund and its shareholders. For example, during a
period where an Underlying Index contains incorrect constituents, an
Underlying Fund would have market exposure to such constituents and would
be underexposed to the Underlying Index’s other constituents. Shareholders
should understand that any gains from index provider errors will be kept
by the Underlying Fund and its shareholders and any losses or costs
resulting from index provider errors will be borne by the Underlying Fund
and its shareholders. |
Unusual
market conditions or other unforeseen circumstances (such as natural disasters,
political unrest or war) may impact the index provider or a third-party data
provider and could cause an index provider to postpone a scheduled rebalance to
an Underlying Index. This could cause the Underlying Index to vary from its
normal or expected composition. The postponement of a scheduled rebalance could
mean that constituents that would otherwise be removed at rebalance due to
changes in market capitalizations, issuer credit ratings, or other reasons may
remain, causing the performance and constituents of an Underlying Index to vary
from those expected under normal conditions. Apart from scheduled rebalances, an
index provider or its agents may carry out additional ad hoc rebalances to an
Underlying Index due to unusual market conditions or in order, for example, to
correct an error in the selection of index constituents. When an Underlying
Index is rebalanced and the Underlying Fund in turn rebalances its portfolio to
attempt to increase the correlation between the Underlying Fund’s portfolio and
the Underlying Index, any transaction costs and market exposure arising from
such portfolio rebalancing will be borne directly by the Underlying Fund and its
shareholders. Unscheduled rebalances to the Underlying Indexes may also expose
the Funds to tracking error risk, which is the risk that its returns may not
track exactly those of the Underlying Indexes. Therefore, errors and additional
ad hoc rebalances carried out by an index provider or its agents to an
Underlying Index may increase the costs to and the tracking error risk of an
Underlying Fund.
An
index fund has operating and other expenses while an index does not. As a
result, while an Underlying Fund that is an index fund will attempt to track its
underlying index as closely as possible, it will tend to underperform the
underlying index to some degree over time. If an index fund is properly
correlated to its stated index, the fund will perform poorly when the index
performs poorly.
| ∎ |
Inflation-Indexed Bonds Risk —
The principal value of an investment is not protected or otherwise
guaranteed by virtue of the Fund’s investments in inflation-indexed
bonds. |
Inflation-indexed
bonds are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be reduced.
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 value.
The
value of inflation-indexed bonds is expected to change in response to changes in
real interest rates. Real interest rates are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in the principal amount
of an inflation-indexed bond will be considered taxable ordinary income, even
though investors do not receive their principal until maturity.
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Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in the Fund’s
gross income. Due to original issue discount, the Fund may be required to make
annual distributions to shareholders that exceed the cash received, which may
cause the Fund to liquidate certain investments when it is not advantageous to
do so. Also, if the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the taxable year
may be characterized in some circumstances as a return of capital.
| ∎ |
Investment
Style Risk — Under certain market conditions, growth
investments have performed better during the later stages of economic
expansion and value investments have performed better during periods of
economic recovery. Therefore, these investment styles may over time go in
and out of favor. At times when an investment style used by the Fund or an
Underlying Fund is out of favor, the Fund may underperform other funds
that use different investment styles. |
| ∎ |
Issuer
Risk — The performance of the Fund depends on the
performance of individual securities to which the Fund has exposure. Any
issuer of these securities may perform poorly, causing the value of its
securities to decline. Poor performance may be caused by poor management
decisions, competitive pressures, changes in technology, expiration of
patent protection, disruptions in supply, labor problems or shortages,
corporate restructurings, fraudulent disclosures, credit deterioration of
the issuer or other factors. Issuers may, in times of distress or at their
own discretion, decide to reduce or eliminate dividends, which may also
cause their stock prices to decline. |
| ∎ |
Management
Risk — If a passively managed ETF does not fully replicate
the underlying index, it is subject to the risk that the manager’s
investment management strategy may not produce the intended
results. |
| ∎ |
Mezzanine
Securities Risk — Mezzanine securities generally are rated
below investment grade and frequently are unrated and present many of the
same risks as senior loans, second lien loans and non-investment grade
bonds. However, unlike senior loans and second lien loans, mezzanine
securities are not a senior or secondary secured obligation of the related
borrower. They typically are the most subordinated debt obligation in an
issuer’s capital structure. Mezzanine securities also may often be
unsecured. Mezzanine securities therefore are subject to the additional
risk that the cash flow of the related borrower and the property securing
the loan may be insufficient to repay the scheduled obligation after
giving effect to any senior obligations of the related borrower. Mezzanine
securities will be subject to certain additional risks to the extent that
such loans may not be protected by financial covenants or limitations upon
additional indebtedness. Investment in mezzanine securities is a highly
specialized investment practice that depends more heavily on independent
credit analysis than investments in other types of debt
obligations. |
| ∎ |
Model
Risk — The Fund seeks to pursue its investment objective by
using proprietary models that incorporate quantitative analysis.
Investments selected using these models may perform differently than as
forecasted due to the factors incorporated into the models and the
weighting of each factor, as well as the level and scope of changes from
historical trends. In addition, issues in the construction and
implementation of the models, including software or hardware malfunction,
power loss, software bugs, malicious code, viruses, system crashes and
other technological failures or various other events or circumstances
within or beyond the control of BlackRock, may adversely impact the Fund.
Please see also “Cyber Security Risk” below. There is no guarantee that
BlackRock’s use of these models will result in effective investment
decisions for the Fund. |
Some
of the models used by BlackRock rely on historical data and may not accurately
predict future market movements. The Fund bears the risk that the models used by
BlackRock will not be successful in forecasting movements in the market or in
determining the size, direction, and/or weighting of investment positions that
will enable the Fund to achieve its investment objective. In addition, the
models may not be reliable in the event of unusual or disruptive events that
cause market movements, which may be inconsistent with the historical
performance of individual markets. In such instances, the models may produce
unexpected results, which can result in losses for the Fund. Furthermore,
because predictive models may be constructed based on data supplied by third
parties, the success of relying on such models may depend heavily on the
accuracy and reliability of such data.
| ∎ |
Mortgage-and
Asset-Backed Securities Risks — Mortgage-backed securities
(residential and commercial) and asset-backed securities represent
interests in “pools” of mortgages or other assets, including consumer
loans or receivables held in trust. Although asset-backed and commercial
mortgage-backed securities (“CMBS”) generally experience less prepayment
than residential mortgage-backed securities, mortgage-backed and
asset-backed securities, like traditional fixed-income securities, are
subject to credit, interest rate, prepayment and extension
risks. |
Small
movements in interest rates (both increases and decreases) may quickly and
significantly reduce the value of certain mortgage-backed securities. The Fund’s
investments in asset-backed securities are subject to risks similar to those
associated with mortgage-related securities, as well as additional risks
associated with the nature of the assets and the servicing of those assets.
These securities also are subject to the risk of default on the underlying
mortgages or assets, particularly during periods of economic downturn. Certain
CMBS are issued in several classes with different levels of yield and credit
protection. The Fund’s investments in CMBS with several classes may be in the
lower classes that have greater risks than the higher classes, including greater
interest rate, credit and prepayment risks.
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Mortgage-backed
securities may be either pass-through securities or collateralized mortgage
obligations (“CMOs”). Pass-through securities represent a right to receive
principal and interest payments collected on a pool of mortgages, which are
passed through to security holders. CMOs are created by dividing the principal
and interest payments collected on a pool of mortgages into several revenue
streams (“tranches”) with different priority rights to portions of the
underlying mortgage payments. Certain CMO tranches may represent a right to
receive interest only (“IOs”), principal only (“POs”) or an amount that remains
after floating-rate tranches are paid (an “inverse floater”). These securities
are frequently referred to as “mortgage derivatives” and may be extremely
sensitive to changes in interest rates. Interest rates on inverse floaters, for
example, vary inversely with a short-term floating rate (which may be reset
periodically). Interest rates on inverse floaters will decrease when short-term
rates increase, and will increase when short-term rates decrease. These
securities have the effect of providing a degree of investment leverage. In
response to changes in market interest rates or other market conditions, the
value of an inverse floater may increase or decrease at a multiple of the
increase or decrease in the value of the underlying securities. If the Fund
invests in CMO tranches (including CMO tranches issued by government agencies)
and interest rates move in a manner not anticipated by Fund management, it is
possible that the Fund could lose all or substantially all of its investment.
Certain mortgage-backed securities in which the Fund may invest may also provide
a degree of investment leverage, which could cause the Fund to lose all or
substantially all of its investment.
The
mortgage market in the United States has experienced difficulties that may
adversely affect the performance and market value of certain of the Fund’s
mortgage-related investments. Delinquencies and losses on mortgage loans
(including subprime and second-lien mortgage loans), and a decline in or
flattening of real estate values (in each case as has been experienced and may
continue to be experienced in many housing markets) may exacerbate such
delinquencies and losses. Also, a number of mortgage loan originators have
experienced serious financial difficulties or bankruptcy. Reduced investor
demand for mortgage loans and mortgage-related securities and increased investor
yield requirements have caused limited liquidity in the secondary market for
mortgage-related securities, which can adversely affect the market value of
mortgage-related securities. It is possible that such limited liquidity in such
secondary markets could continue or worsen.
Asset-backed
securities entail certain risks not presented by mortgage-backed securities,
including the risk that in certain states it may be difficult to perfect the
liens securing the collateral backing certain asset-backed securities. In
addition, certain asset-backed securities are based on loans that are unsecured,
which means that there is no collateral to seize if the underlying borrower
defaults.
| ∎ |
Municipal
Securities Risks — Municipal securities risks include the
ability of the issuer to repay the obligation, the relative lack of
information about certain issuers of municipal securities, and the
possibility of future legislative changes which could affect the market
for and value of municipal securities. Budgetary constraints of local,
state, and federal governments upon which the issuers may be relying for
funding may also impact municipal securities. These risks
include: |
General Obligation Bonds Risks — The full
faith, credit and taxing power of the municipality that issues a general
obligation bond secures payment of interest and repayment of principal. Timely
payments depend on the issuer’s credit quality, ability to raise tax revenues
and ability to maintain an adequate tax base.
Revenue Bonds Risks — Payments of interest and
principal on revenue bonds are made only from the revenues generated by a
particular facility, class of facilities or the proceeds of a special tax or
other revenue source. These payments depend on the money earned by the
particular facility or class of facilities, or the amount of revenues derived
from another source.
Private Activity Bonds Risks — Municipalities
and other public authorities issue private activity bonds to finance development
of industrial facilities for use by a private enterprise. The private enterprise
pays the principal and interest on the bond, and the issuer does not pledge its
full faith, credit and taxing power for repayment. If the private enterprise
defaults on its payments, the Fund may not receive any income or get its money
back from the investment.
Moral Obligation Bonds Risks — Moral
obligation bonds are generally issued by special purpose public authorities of a
state or municipality. If the issuer is unable to meet its obligations,
repayment of these bonds becomes a moral commitment, but not a legal obligation,
of the state or municipality.
Municipal Notes Risks — Municipal notes are
shorter term municipal debt obligations. They may provide interim financing in
anticipation of, and are secured by, tax collection, bond sales or revenue
receipts. If there is a shortfall in the anticipated proceeds, the notes may not
be fully repaid and the Fund may lose money.
Municipal Lease Obligations Risks — In a
municipal lease obligation, the issuer agrees to make payments when due on the
lease obligation. The issuer will generally appropriate municipal funds for that
purpose, but is not obligated to do so. Although the issuer does not pledge its
unlimited taxing power for payment of the lease obligation, the lease obligation
is secured by the leased property. However, if the issuer does not fulfill its
payment obligation it may be difficult to sell the property and the proceeds of
a sale may not cover the Fund’s loss.
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Tax‑Exempt Status Risk — In making
investments, the Fund and its investment manager will rely on the opinion of
issuers’ bond counsel and, in the case of derivative securities, sponsors’
counsel, on the tax‑exempt status of interest on municipal obligations and
payments under tax‑exempt derivative securities. Neither the Fund nor its
investment manager will independently review the bases for those tax opinions.
If any of those tax opinions are ultimately determined to be incorrect or if
events occur after the security is acquired that impact the security’s
tax‑exempt status, the Fund and its shareholders could be subject to substantial
tax liabilities. The IRS has generally not ruled on the taxability of the
securities. An assertion by the IRS that a portfolio security is not exempt from
U.S. federal income tax (contrary to indications from the issuer) could affect
the Fund’s and its shareholders’ income tax liability for the current or past
years and could create liability for information reporting penalties. In
addition, an IRS assertion of taxability may impair the liquidity and the fair
market value of the securities.
| ∎ |
National Closed
Market Trading Risk — To the extent that the underlying
securities and/or other assets held by an Underlying Fund that is an ETF
trade on foreign exchanges or in foreign markets that may be closed when
the securities exchange on which the Underlying Fund’s shares trade is
open, there are likely to be deviations between the current price of such
an underlying security and the last quoted price for the underlying
security (i.e., an Underlying Fund’s quote from the closed foreign
market). The impact of a closed foreign market on an Underlying Fund is
likely to be greater where a large portion of the Underlying Fund’s
underlying securities and/or other assets trade on that closed foreign
market or when the foreign market is closed for unscheduled reasons. These
deviations could result in premiums or discounts to one or more of the
Underlying Funds’ net asset values that may be greater than those
experienced by other ETFs. |
| ∎ |
“New Issues”
Risk — “New issues” are initial public offerings (“IPOs”) of
equity securities. Investments in companies that have recently gone public
have the potential to produce substantial gains for the Fund. However,
there is no assurance that the Fund will have access to profitable IPOs
and therefore investors should not rely on these past gains as an
indication of future performance. The investment performance of the Fund
during periods when it is unable to invest significantly or at all in IPOs
may be lower than during periods when the Fund is able to do so. In
addition, as the Fund increases in size, the impact of IPOs on the Fund’s
performance will generally decrease. Securities issued in IPOs are subject
to many of the same risks as investing in companies with smaller market
capitalizations. Securities issued in IPOs have no trading history, and
information about the companies may be available for very limited periods.
In addition, the prices of securities sold in IPOs may be highly volatile
or may decline shortly after the IPO. When an IPO is brought to the
market, availability may be limited and the Fund may not be able to buy
any shares at the offering price, or, if it is able to buy shares, it may
not be able to buy as many shares at the offering price as it would
like. |
| ∎ |
Passive
Investment Risk — Because BFA does not select individual
companies in the underlying indexes for certain Underlying Funds, those
Underlying Funds may hold securities of companies that present risks that
an investment adviser researching individual securities might seek to
avoid. |
| ∎ |
Pay-in-kind
Bonds Risk — Similar to zero coupon obligations, pay-in-kind
bonds also carry additional risk as holders of these types of securities
realize no cash until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. The market price of pay-in-kind bonds is
affected by interest rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which pay interest in cash.
Additionally, current federal tax law requires the holder of certain
pay-in-kind bonds to accrue income with respect to these securities prior
to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for U.S. federal income
and excise taxes, the Fund may be required to distribute income accrued
with respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate cash
to satisfy these distribution requirements. |
| ∎ |
Preferred
Securities Risk — Preferred securities may pay fixed or
adjustable rates of return. Preferred securities are subject to
issuer-specific and market risks applicable generally to equity
securities. In addition, a company’s preferred securities generally pay
dividends only after the company makes required payments to holders of its
bonds and other debt. For this reason, the value of preferred securities
will usually react more strongly than bonds and other debt to actual or
perceived changes in the company’s financial condition or prospects.
Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred securities of larger
companies. |
| ∎ |
Real
Estate-Related Securities Risk — The main risk of real
estate-related securities is that the value of the underlying real estate
may go down. Many factors may affect real estate values. These factors
include both the general and local economies, vacancy rates, changes in
rent schedules, tenant bankruptcies, the ability to re‑lease space under
expiring leases on attractive terms, the amount of new construction in a
particular area, the laws and regulations (including zoning, environmental
and tax laws) affecting real estate and the costs of owning, maintaining
and improving real estate. The availability of mortgage financing and
changes in interest rates may also affect real estate values. If the
Fund’s real estate-related investments are concentrated in one geographic
area or in one property type, the Fund will be particularly subject to the
risks associated with that area or property type. Many issuers of real
estate-related securities are highly leveraged, which increases the risk
to holders of such securities. |
202
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The
value of the securities the Fund buys will not necessarily track the value
of the underlying investments of the issuers of such securities. In
addition, certain issuers of real estate-related securities may have
developed or commenced development on properties and may develop
additional properties in the future. Real estate development involves
significant risks in addition to those involved in the ownership and
operation of established properties. Real estate securities may have
limited diversification and are, therefore, subject to risks inherent in
operating and financing a limited number of projects. Real estate
securities are also subject to heavy cash flow dependency and defaults by
borrowers or tenants. |
| ∎ |
REIT Investment
Risk — In addition to the risks facing real estate-related
securities, such as a decline in property values due to increasing
vacancies, a decline in rents resulting from unanticipated economic, legal
or technological developments or a decline in the price of securities of
real estate companies due to a failure of borrowers to pay their loans or
poor management, investments in REITs involve unique risks. REITs may have
limited financial resources, may trade less frequently and in limited
volume, may engage in dilutive offerings of securities and may be more
volatile than other securities. REIT issuers may also fail to maintain
their exemptions from investment company registration or fail to qualify
for the “dividends paid deduction” under the Internal Revenue Code, which
allows REITs to reduce their corporate taxable income for dividends paid
to their shareholders. Ordinary REIT dividends received by the Fund and
distributed to the Fund’s shareholders will generally be taxable as
ordinary income and will not constitute “qualified dividend income.”
However, for tax years beginning after December 31, 2017 and before
January 1, 2026, a non‑corporate taxpayer who is a direct REIT
shareholder may claim a 20% “qualified business income” deduction for
ordinary REIT dividends, and a regulated investment company may report
dividends as eligible for this deduction to the extent the regulated
investment company’s income is derived from ordinary REIT dividends
(reduced by allocable regulated investment company expenses). A
shareholder may treat the dividends as such provided the regulated
investment company and the shareholder satisfy applicable holding period
requirements. |
| ∎ |
Representative
Sampling Risk — Representative sampling is a method of
indexing that involves investing in a representative sample of securities
that collectively have a similar investment profile to the index and
resemble the index in terms of risk factors and other key characteristics.
An ETF may or may not hold every security in the index. When an ETF
deviates from a full replication indexing strategy to utilize a
representative sampling strategy, the ETF is subject to an increased risk
of tracking error, in that the securities selected in the aggregate for
the ETF may not have an investment profile similar to those of its
index. |
| ∎ |
Repurchase
Agreements and Purchase and Sale Contracts Risk — If the
other party to a repurchase agreement or purchase and sale contract
defaults on its obligation under the agreement, the Fund may suffer delays
and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security in either
situation and the market value of the security declines, the Fund may lose
money. |
| ∎ |
Reverse
Repurchase Agreements Risk — Reverse repurchase agreements
involve the sale of securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and interest
payment. Reverse repurchase agreements involve the risk that the other
party may fail to return the securities in a timely manner or at all. The
Fund could lose money if it is unable to recover the securities and the
value of the collateral held by the Fund, including the value of the
investments made with cash collateral, is less than the value of the
securities. These events could also trigger adverse tax consequences for
the Fund. In addition, reverse repurchase agreements involve the risk that
the interest income earned in the investment of the proceeds will be less
than the interest expense. |
| ∎ |
Risks of Loan
Assignments and Participations — As the purchaser of an
assignment, the Fund typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit
agreement with respect to the debt obligation; however, the Fund may not
be able unilaterally to enforce all rights and remedies under the loan and
with regard to any associated collateral. Because assignments may be
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as
the purchaser of an assignment may differ from, and be more limited than,
those held by the assigning lender. In addition, if the loan is
foreclosed, the Fund could become part owner of any collateral and could
bear the costs and liabilities of owning and disposing of the collateral.
The Fund may be required to pass along to a purchaser that buys a loan
from the Fund by way of assignment a portion of any fees to which the Fund
is entitled under the loan. In connection with purchasing participations,
the Fund generally will have no right to enforce compliance by the
borrower with the terms of the loan agreement relating to the loan, nor
any rights of set‑off against the borrower, and the Fund may not directly
benefit from any collateral supporting the loan in which it has purchased
the participation. As a result, the Fund will be subject to the credit
risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling a
participation, the Fund may be treated as a general creditor of the lender
and may not benefit from any set‑off between the lender and the
borrower. |
| ∎ |
Second Lien
Loans Risk — Second lien loans generally are subject to
similar risks as those associated with investments in senior loans.
Because second lien loans are subordinated or unsecured and thus lower in
priority of payment to senior loans, they are subject to the additional
risk that the cash flow of the borrower and property securing the loan or
debt, if any, may be insufficient to meet scheduled payments after giving
effect to the senior |
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secured
obligations of the borrower. This risk is generally higher for
subordinated unsecured loans or debt, which are not backed by a security
interest in any specific collateral. Second lien loans generally have
greater price volatility and may be less liquid than senior
loans. |
There
is also a possibility that originators will not be able to sell participations
in second lien loans, which would create greater credit risk exposure for the
holders of such loans. Second lien loans share the same risks as other below
investment grade securities.
| ∎ |
Senior Loans
Risk — There is less readily available, reliable information
about most senior loans than is the case for many other types of
securities. In addition, there is no minimum rating or other independent
evaluation of a borrower or its securities limiting the Fund’s
investments, and BFA relies primarily on its own evaluation of a
borrower’s credit quality rather than on any available independent
sources. As a result, the Fund is particularly dependent on the analytical
abilities of BFA. |
An
economic downturn generally leads to a higher non‑payment rate, and a senior
loan may lose significant value before a default occurs. Moreover, any specific
collateral used to secure a senior loan may decline in value or become illiquid,
which would adversely affect the senior loan’s value.
No
active trading market may exist for certain senior loans, which may impair the
ability of the Fund to realize full value in the event of the need to sell a
senior loan and which may make it difficult to value senior loans. Adverse
market conditions may impair the liquidity of some actively traded senior loans.
To the extent that a secondary market does exist for certain senior loans, the
market may be subject to irregular trading activity, wide bid/ask spreads and
extended trade settlement periods. See “Illiquid Investments Risk.”
Although
senior loans in which the Fund will invest generally will be secured by specific
collateral, there can be no assurance that liquidation of such collateral would
satisfy the borrower’s obligation in the event of non‑payment of scheduled
interest or principal or that such collateral could be readily liquidated. In
the event of the bankruptcy of a borrower, the Fund could experience delays or
limitations with respect to its ability to realize the benefits of the
collateral securing a senior loan. If the terms of a senior loan do not require
the borrower to pledge additional collateral in the event of a decline in the
value of the already pledged collateral, the Fund will be exposed to the risk
that the value of the collateral will not at all times equal or exceed the
amount of the borrower’s obligations under the senior loans. To the extent that
a senior loan is collateralized by stock in the borrower or its subsidiaries,
such stock may lose all of its value in the event of the bankruptcy of the
borrower. Uncollateralized senior loans involve a greater risk of loss. Some
senior loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate the senior loans to
presently existing or future indebtedness of the borrower or take other action
detrimental to lenders, including the Fund. Such court action could under
certain circumstances include invalidation of senior loans.
If
a senior loan is acquired through an assignment, the Fund may not be able to
unilaterally enforce all rights and remedies under the loan and with regard to
any associated collateral. If a senior loan is acquired through a participation,
the Fund generally will have no right to enforce compliance by the borrower with
the terms of the loan agreement against the borrower, and the Fund may not
directly benefit from the collateral supporting the debt obligation in which it
has purchased the participation. As a result, the Fund will be exposed to the
credit risk of both the borrower and the institution selling the
participation.
The
senior loans in which the Fund invests are usually rated below investment grade.
As a result, the risks associated with senior loans are similar to the risks of
below investment grade securities, although senior loans are typically senior
and secured in contrast to other below investment grade securities, which are
often subordinated and unsecured. See “High Yield Bonds Risk.” The higher
standing of senior loans has historically resulted in generally higher
recoveries in the event of a corporate reorganization. In addition, because
their interest rates are typically adjusted for changes in short-term interest
rates, senior loans generally are subject to less interest rate risk than other
below investment grade securities, which are typically fixed rate.
| ∎ |
Shares of an
ETF May Trade at Prices Other Than Net Asset Value — Shares
of an ETF trade on exchanges at prices at, above or below their most
recent net asset value (“NAV”). The per share net asset value of an ETF is
calculated at the end of each business day and fluctuates with changes in
the market value of the ETF’s holdings since the most recent calculation.
The trading prices of an ETF’s shares fluctuate continuously throughout
trading hours based on market supply and demand rather than net asset
value. The trading prices of an ETF’s shares may deviate significantly
from net asset value during periods of market volatility. Any of these
factors may lead to an ETF’s shares trading at a premium or discount to
net asset value. However, because shares can be created and redeemed in
creation units, which are aggregated blocks of shares that authorized
participants who have entered into agreements with the ETF’s distributor
can purchase or redeem directly from the ETF, at net asset value (unlike
shares of many closed‑end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their net asset values),
large discounts or premiums to the net asset value of an ETF are not
likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that an ETF’s shares normally trade
on exchanges at prices close to the ETF’s next calculated net asset value,
exchange prices are not expected to correlate exactly with an ETF’s net
asset value due to timing reasons as well as market
supply |
204
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and
demand factors. In addition, disruptions to creations and redemptions or
the existence of extreme market volatility may result in trading prices
that differ significantly from net asset value. If a shareholder purchases
at a time when the market price is at a premium to the net asset value or
sells at a time when the market price is at a discount to the net asset
value, the shareholder may sustain losses. The use of cash creations and
redemptions may also cause the ETFs’ shares to trade in the market at
greater bid-ask spreads or greater premiums or discounts to the ETFs’
NAV. |
| ∎ |
Short Sales
Risk — Because making short sales in securities that it does
not own exposes the Fund to the risks associated with those securities,
such short sales involve speculative exposure risk. The Fund will incur a
loss as a result of a short sale if the price of the security increases
between the date of the short sale and the date on which the Fund replaces
the security sold short. The Fund will realize a gain if the security
declines in price between those dates. As a result, if the Fund makes
short sales in securities that increase in value, it will likely
underperform similar funds that do not make short sales in securities they
do not own. There can be no assurance that the Fund will be able to close
out a short sale position at any particular time or at an acceptable
price. Although the Fund’s gain is limited to the amount at which it sold
a security short, its potential loss is limited only by the maximum
attainable price of the security, less the price at which the security was
sold. The Fund may also pay transaction costs and borrowing fees in
connection with short sales. |
| ∎ |
Small and
Mid‑Capitalization Company Risk — Companies with small or
mid‑size market capitalizations will normally have more limited product
lines, markets and financial resources and will be dependent upon a more
limited management group than larger capitalized companies. In addition,
it is more difficult to get information on smaller companies, which tend
to be less well known, have shorter operating histories, do not have
significant ownership by large investors and are followed by relatively
few securities analysts. |
| ∎ |
Small Cap and
Emerging Growth Securities Risk — Small cap or emerging
growth companies may have limited product lines or markets. They may be
less financially secure than larger, more established companies. They may
depend on a small number of key personnel. If a product fails or there are
other adverse developments, or if management changes, the Fund’s
investment in a small cap or emerging growth company may lose substantial
value. In addition, it is more difficult to get information on smaller
companies, which tend to be less well known, have shorter operating
histories, do not have significant ownership by large investors and are
followed by relatively few securities analysts. |
The
securities of small cap and emerging growth companies generally trade in lower
volumes and are subject to greater and more unpredictable price changes than
larger cap securities or the market as a whole. In addition, small cap and
emerging growth securities may be particularly sensitive to changes in interest
rates, borrowing costs and earnings. Investing in small cap and emerging growth
securities requires a longer term view.
| ∎ |
Sovereign Debt
Risk — Sovereign debt instruments are subject to the risk
that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, the
relative size of the governmental entity’s debt position in relation to
the economy or the failure to put in place economic reforms required by
the International Monetary Fund or other multilateral agencies. If a
governmental entity defaults, it may ask for more time in which to pay or
for further loans. There is no legal process for collecting sovereign debt
that a government does not pay nor are there bankruptcy proceedings
through which all or part of the sovereign debt that a governmental entity
has not repaid may be collected. |
| ∎ |
Structured
Notes Risk — Structured notes and other related instruments
purchased by the Fund are generally privately negotiated debt obligations
where the principal and/or interest is determined by reference to the
performance of a specific asset, benchmark asset, market or interest rate
(“reference measure”). The interest rate or the principal amount payable
upon maturity or redemption may increase or decrease, depending upon
changes in the value of the reference measure. The terms of a structured
note may provide that, in certain circumstances, no principal is due at
maturity and, therefore, may result in a loss of invested capital by the
Fund. The interest and/or principal payments that may be made on a
structured product may vary widely, depending on a variety of factors,
including the volatility of the reference
measure. |
Structured
notes may be positively or negatively indexed, so the appreciation of the
reference measure may produce an increase or a decrease in the interest rate or
the value of the principal at maturity. The rate of return on structured notes
may be determined by applying a multiplier to the performance or differential
performance of reference measures. Application of a multiplier involves leverage
that will serve to magnify the potential for gain and the risk of loss.
The
purchase of structured notes exposes the Fund to the credit risk of the issuer
of the structured product. Structured notes may also be more volatile, less
liquid, and more difficult to price accurately than less complex securities and
instruments or more traditional debt securities.
| ∎ |
Structured
Securities Risk — Because structured securities of the type
in which the Fund may invest typically involve no credit enhancement,
their credit risk generally will be equivalent to that of the underlying
instruments, |
205
|
index
or reference obligation and will also be subject to counterparty risk. The
Fund may have the right to receive payments only from the structured
security, and generally does not have direct rights against the issuer or
the entity that sold the assets to be securitized. In addition to the
general risks associated with debt securities discussed herein, structured
securities carry additional risks, including, but not limited to: the
possibility that distributions from collateral securities will not be
adequate to make interest or other payments; the quality of the collateral
may decline in value or default; and the possibility that the structured
securities are subordinate to other classes. The Fund is permitted to
invest in a class of structured securities that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated
structured securities typically have higher yields and present greater
risks than unsubordinated structured securities. Structured securities are
typically sold in private placement transactions, and there currently is
no active trading market for structured securities. Structured securities
are based upon the movement of one or more factors, including currency
exchange rates, interest rates, reference bonds and stock indices, and
changes in interest rates and impact of these factors may cause
significant price fluctuations. Additionally, changes in the reference
instrument or security may cause the interest rate on the structured
security to be reduced to zero. Certain issuers of such structured
securities may be deemed to be “investment companies” as defined in the
Investment Company Act. As a result, the Fund’s investment in such
securities may be limited by certain investment restrictions contained in
the Investment Company Act. |
| ∎ |
Supranational
Entities Risk — The Fund may invest in obligations issued or
guaranteed by the World Bank. The government members, or “stockholders,”
usually make initial capital contributions to the World Bank and in many
cases are committed to make additional capital contributions if the World
Bank is unable to repay its borrowings. There is no guarantee that one or
more stockholders of the World Bank will continue to make any necessary
additional capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt
securities, and the Fund may lose money on such
investments. |
| ∎ |
Tender Option
Bonds and Related Securities Risk — The Fund’s participation
in tender option bond transactions may reduce the Fund’s returns and/or
increase volatility. Investments in tender option bond transactions expose
the Fund to counterparty risk and leverage risk. An investment in a tender
option bond transaction typically will involve greater risk than an
investment in a municipal fixed rate security, including the risk of loss
of principal. Distributions on residual inverse floating rate interest
tender option bonds (“TOB Residuals”) will bear an inverse relationship to
short-term municipal security interest rates. Distributions on TOB
Residuals paid to the Fund will be reduced or, in the extreme, eliminated
as short-term municipal interest rates rise and will increase when
short-term municipal interest rates fall. TOB Residuals generally will
underperform the market for fixed rate municipal securities in a rising
interest rate environment. |
The
Fund may invest in beneficial interests in a special purpose trust formed for
the purpose of holding Municipal Bonds contributed by one or more funds (a “TOB
Trust”) on either a non‑recourse or recourse basis. TOB Trusts are typically
supported by a liquidity facility provided by a third-party bank or other
financial institution (the “Liquidity Provider”) that allows the holders of the
TOB Floaters to tender their certificates in exchange for payment of par plus
accrued interest on any business day, subject to the non‑occurrence of tender
option termination events. When the Fund invests in a TOB Trust on a
non‑recourse basis, and the Liquidity Provider is required to make a payment
under the liquidity facility, the Liquidity Provider will typically liquidate
all or a portion of the municipal securities held in the TOB Trust and then fund
the balance, if any, of the amount owed under the liquidity facility over the
liquidation proceeds (the “Liquidation Shortfall”).
If
the Fund invests in a TOB Trust on a recourse basis, the Fund will typically
enter into a reimbursement agreement with the Liquidity Provider where the Fund
is required to reimburse the Liquidity Provider the amount of any Liquidation
Shortfall. As a result, if the Fund invests in a TOB Trust on a recourse basis,
the Fund will bear the risk of loss with respect to any Liquidation
Shortfall.
To
the extent that the Fund, rather than a third-party bank or financial
institution, sponsors a TOB Trust, certain responsibilities that previously
belonged to the sponsor bank will be performed by, or on behalf of, the Fund.
The Fund’s additional duties and responsibilities under the new TOB Trust
structure may give rise to certain additional risks including compliance,
securities law and operational risks.
| ∎ |
Tracking Error
Risk — The Fund may be subject to tracking error, which is
the divergence of an Underlying Fund’s performance from that of its
underlying index. Tracking error may occur because of differences between
the securities (including shares of the Underlying Funds) and other
instruments held in an Underlying Fund’s portfolio and those included in
its underlying index, pricing differences (including, as applicable,
differences between a security’s price at the local market close and an
Underlying Fund’s valuation of a security at the time of calculation of an
Underlying Fund’s NAV, differences in transaction costs, an Underlying
Fund’s holding of uninvested cash, differences in timing of the accrual of
or the valuation of dividends or other distributions, interest, the
requirements to maintain pass-through tax treatment, portfolio
transactions carried out to minimize the distribution of capital gains to
shareholders, changes to an underlying index and the cost to an Underlying
Fund of complying with various new or existing regulatory requirements,
among other reasons. These risks may be heightened during times of
increased market volatility or other unusual market conditions. In
addition, tracking error may result because a fund incurs fees and
expenses, while the Underlying Index does not. |
206
| ∎ |
U.S. Government
Issuer Risk — Treasury obligations may differ in their
interest rates, maturities, times of issuance and other characteristics.
Obligations of U.S. Government agencies and authorities are supported by
varying degrees of credit but generally are not backed by the full faith
and credit of the U.S. Government. No assurance can be given that the U.S.
Government will provide financial support to its agencies and authorities
if it is not obligated by law to do so. |
| ∎ |
U.S. Government
Mortgage-Related Securities Risk — 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. Mortgage-related securities guaranteed by the Government
National Mortgage Association (“GNMA” or “Ginnie Mae”) are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA
securities also are supported by the right of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-related
securities issued by Fannie Mae or Freddie Mac are solely the obligations
of Fannie Mae or Freddie Mac, as the case may be, and 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
Treasury. |
| ∎ |
Variable and
Floating Rate Instrument Risk — Variable and floating rate
securities provide for periodic adjustment in the interest rate paid on
the securities. These securities may be subject to greater illiquidity
risk than other fixed income securities, meaning the absence of an active
market for these securities could make it difficult for the Fund to
dispose of them at any given time. |
| ∎ |
Warrants Risk
— If the price of the underlying stock does not rise above
the exercise price before the warrant expires, the warrant generally
expires without any value and the Fund will lose any amount it paid for
the warrant. Thus, investments in warrants may involve substantially 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. |
| ∎ |
When-Issued and
Delayed Delivery Securities and Forward Commitments Risk —
When-issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery. There also is the risk that the security will not be issued
or that the other party to the transaction will not meet its obligation.
If this occurs, the Fund may lose both the investment opportunity for the
assets it set aside to pay for the security and any gain in the security’s
price. |
| ∎ |
Zero Coupon
Securities Risk —
While interest payments are not made on such securities, holders of such
securities are deemed to have received income (“phantom income”) annually,
notwithstanding that cash may not be received currently. The effect of
owning instruments that do not make current interest payments is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at a fixed rate eliminates the risk of
being unable to invest distributions at a rate as high as the implicit
yield on the zero coupon bond, but at the same time eliminates the
holder’s ability to reinvest at higher rates in the future. For this
reason, some of these securities may be subject to substantially greater
price fluctuations during periods of changing market interest rates than
are comparable securities that pay interest currently. Longer term zero
coupon bonds are more exposed to interest rate risk than shorter term zero
coupon bonds. These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher rate of return to
attract investors who are willing to defer receipt of
cash. |
Investment
in a Particular Geographic Region or Country Risks
| ∎ |
Asia-Pacific
Countries — In addition to the risks of investing in
non-U.S. securities and the risks of investing in emerging markets,
Asia-Pacific countries are subject to certain additional or specific
risks. In many of the developing market Asia-Pacific countries, there is a
high concentration of market capitalization and trading volume in a small
number of issuers representing a limited number of industries, as well as
a high concentration of investors and financial intermediaries. Many
developing market Asia-Pacific countries have experienced rapid growth and
industrialization in recent years, but there is no assurance that this
growth rate will be maintained. Other developing market Asia-Pacific
countries, however, have experienced high inflation, high unemployment,
currency devaluations and restrictions, and over-extension of credit.
Brokers in developing market Asia-Pacific countries typically are fewer in
number and less well capitalized than brokers in the United
States. |
Many
of the developing market Asia-Pacific countries may be subject to a greater
degree of economic, political and social instability than is the case in the
United States and Western European countries. Such instability may result from,
among other things: (i) authoritarian governments or military involvement
in political and economic decision-making, including changes in government
through extra-constitutional means; (ii) popular unrest associated with
demands for improved political, economic and social conditions;
(iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection. In addition,
the governments of many of such countries have a substantial role in regulating
and supervising the economy.
Another
risk common to most such countries is that the economy is heavily export
oriented and, accordingly, is dependent upon international trade. The existence
of overburdened infrastructure and obsolete financial systems
207
also
presents risks in certain countries, as do environmental problems. Certain
economies also depend to a significant degree upon exports of primary
commodities and, therefore, are vulnerable to changes in commodity prices that,
in turn, may be affected by a variety of factors.
The
rights of investors in developing market Asia-Pacific companies may be more
limited than those of shareholders of U.S. corporations. It may be difficult or
impossible to obtain and/or enforce a judgment in a developing market
Asia-Pacific country.
Some
developing Asia-Pacific countries prohibit or impose substantial restrictions on
investments in their capital markets, particularly their equity markets, by
foreign entities. For example, certain countries may require governmental
approval prior to investments by foreign persons or limit the amount of
investment by foreign persons in a particular company.
Geopolitical
hostility, political instability, and economic or environmental events in any
one of the Asia-Pacific countries may have a significant economic effect on the
entire Asia-Pacific region, as well as on major trading partners outside the
Asia-Pacific region. Any adverse event in the Asia-Pacific markets may have a
significant adverse effect on some or all of the economies of the Asia-Pacific
countries. In particular, China is a key trading partner of many Asia-Pacific
countries and any changes in trading relationships between China and other
Asia-Pacific countries may affect the region as a whole. Many Asia-Pacific
countries are subject to political risk, including political instability,
corruption and regional conflict with neighboring countries. North Korea and
South Korea each have substantial military capabilities, and historical tensions
between the two countries present the risk of war. Escalated tensions involving
the two countries and any outbreak of hostilities between the two countries, or
even the threat of an outbreak of hostilities, could have a severe adverse
effect on the entire Asia-Pacific region. Certain Asia-Pacific countries have
developed increasingly strained relationships with the U.S., and if these
relations were to worsen, they could adversely affect Asia-Pacific issuers that
rely on the U.S. for trade. In addition, many Asia-Pacific countries are subject
to social and labor risks associated with demands for improved political,
economic and social conditions.
| ∎ |
Canada — Investments in Canadian
issuers may subject the Fund to economic risk specific to Canada. Among
other things, the Canadian economy is heavily dependent on relationships
with certain key trading partners, including the United States and China.
The Canadian economy is sensitive to fluctuations in certain commodity
markets. |
| ∎ |
European
Economic Risk — The European financial markets have recently
experienced volatility and adverse trends due to concerns about economic
downturns in, or rising government debt levels of, several European
countries as well as acts of war in the region. These events may spread to
other countries in Europe and may affect the value and liquidity of
certain of the Fund’s investments. |
Responses
to the financial problems by European governments, central banks and others,
including austerity measures and reforms, may not work, may result in social
unrest and may limit future growth and economic recovery or have other
unintended consequences. Further defaults or restructurings by governments and
others of their debt could have additional adverse effects on economies,
financial markets and asset valuations around the world.
The
United Kingdom has withdrawn from the European Union, and one or more other
countries may withdraw from the European Union and/or abandon the Euro, the
common currency of the European Union. These events and actions have adversely
affected, and may in the future adversely affect, the value and exchange rate of
the Euro and may continue to significantly affect the economies of every country
in Europe, including countries that do not use the Euro and non-European Union
member states. The impact of these actions, especially if they occur in a
disorderly fashion, is not clear but could be significant and far reaching. In
addition, Russia launched a large-scale invasion of Ukraine on February 24,
2022. The extent and duration of the military action, resulting sanctions and
resulting future market disruptions in the region are impossible to predict, but
could be significant and have a severe adverse effect on the region, including
significant negative impacts on the economy and the markets for certain
securities and commodities, such as oil and natural gas, as well as other
sectors.
| ∎ |
Risk of
Investing in United States — A decrease in imports or
exports, changes in trade regulations, inflation and/or an economic
recession in the United States may have a material adverse effect on the
U.S. economy and the securities listed on U.S. exchanges. Proposed and
adopted policy and legislative changes in the United States are changing
many aspects of financial, commercial, public health, environmental, and
other regulation and may have a significant effect on U.S. markets
generally, as well as on the value of certain securities. Governmental
agencies project that the United States will continue to maintain elevated
public debt levels for the foreseeable future. Although elevated debt
levels do not necessarily indicate or cause economic problems, elevated
public debt service costs may constrain future economic
growth. |
The
United States has developed increasingly strained relations with a number of
foreign countries. If relations with certain countries deteriorate, it could
adversely affect U.S. issuers as well as non-U.S. issuers that rely on the
United States for trade. The United States has also experienced increased
internal political discord, as well as significant challenges in managing and
containing the outbreak of COVID-19. If these trends were to continue, it may
have an adverse impact on the U.S. economy and the issuers in which the Fund
invests.
208
Investment
in a Particular Market Segment Risks
| ∎ |
Consumer
Discretionary Sector Risk — The success of consumer product
manufacturers and retailers is tied closely to the performance of domestic
and international economies, interest rates, supply chains, exchange
rates, competition, consumer confidence, changes in demographics and
consumer preferences. Companies in the consumer discretionary sector
depend heavily on disposable household income and consumer spending, and
may be strongly affected by social trends and marketing campaigns. These
companies may be subject to severe competition, which may have an adverse
impact on their profitability. |
| ∎ |
Energy Sector
Risk — The performance of energy-related commodities is
generally cyclical and highly dependent on energy prices. Energy prices
may fluctuate significantly due to, among other things, national and
international political changes, Organization of Petroleum Exporting
Countries (“OPEC”) and non-OPEC energy exporters, such as the Russian
Federation, policies and relationships, and the economies of key
energy-consuming countries. The market value of energy-related commodities
may decline for many reasons, including, among other things: changes in
the levels and volatility of global energy prices, energy supply and
demand, and capital expenditures on exploration and production of energy
sources; exchange rates, interest rates, economic conditions, and tax
treatment; terrorism, natural disasters and other catastrophes; and energy
conservation efforts, increased competition and technological advances.
The energy sector may also be subject to substantial government regulation
and contractual fixed pricing. In 2020, in the context of the COVID-19
outbreak and disputes among oil-producing countries regarding potential
limits on the production of crude oil, the energy sector has experienced
increased volatility. In particular, significant market volatility
occurred in the crude oil markets as well as the oil futures markets,
which resulted in the market price of the front month WTI crude oil
futures contract falling below zero for a period of
time. |
| ∎ |
Financials
Sector Risk — Companies in the financials sector are subject
to extensive governmental regulation and intervention, which may adversely
affect the scope of their activities, the prices they can charge, the
amount of capital and liquid assets they must maintain and, potentially,
their size. Governmental regulation may change frequently and may have
significant adverse consequences for companies in the financials sector,
including effects not intended by such regulation. Increased risk taking
by financial companies may also result in greater overall risk in the U.S.
and global financials sector. The impact of changes in capital
requirements, or recent or future regulation in various countries, on any
individual financial company or on the financials sector as a whole cannot
be predicted. Certain risks may impact the value of investments in the
financials sector more severely than those of investments outside this
sector, including the risks associated with companies that operate with
substantial financial leverage. Companies in the financials sector are
exposed directly to the credit risk of their borrowers and counterparties,
who may be leveraged to an unknown degree, including through swaps and
other derivatives products. Financial services companies may have
significant exposure to the same borrowers and counterparties, with the
result that a borrower’s or counterparty’s inability to meet its
obligations to one company may affect other companies with exposure to the
same borrower or counterparty. This interconnectedness of risk may result
in significant negative impacts to companies with direct exposure to the
defaulting counterparty as well as adverse cascading effects in the
markets and the financials sector generally. Companies in the sector may
also be adversely affected by increases in interest rates and loan losses,
decreases in the availability of money or asset valuations, credit rating
downgrades and adverse conditions in other related markets. Insurance
companies, in particular, may be subject to severe price competition
and/or rate regulation, which may have an adverse impact on their
profitability. The financials sector is particularly sensitive to
fluctuations in interest rates. The financials sector is also a target for
cyberattacks. Cybersecurity incidents and technology malfunctions and
failures have become increasingly frequent and have caused significant
losses to companies in this sector, which may negatively impact the
Underlying Fund. The extent to which the Fund may invest in a company that
engages in securities-related activities or banking is limited by
applicable law. |
| ∎ |
Healthcare
Sector Risk — The profitability of companies in
the healthcare sector, including healthcare equipment and services
companies, may be affected by government regulations and government
healthcare programs, increases or decreases in the cost of medical
products and services, an increased emphasis on outpatient services,
demand for medical products and services and product liability claims,
among other factors. Many healthcare companies are heavily dependent on
patent protection, and the expiration of a company’s patent may adversely
affect that company’s profitability. Healthcare companies are subject to
competitive forces that may result in price discounting, and may be thinly
capitalized and susceptible to product obsolescence. In addition, a number
of legislative proposals concerning healthcare have been considered by the
U.S. Congress in recent years. It is unclear what proposals will
ultimately be enacted, if any, and what effect they may have on companies
in the healthcare sector. |
| ∎ |
Industrials
Sector Risk — The value of securities issued by companies in
the industrials sector may be adversely affected by supply and demand
changes related to their specific products or services and industrials
sector products in general. The products of manufacturing companies may
face obsolescence due to rapid technological developments and frequent new
product introduction. Global events, trade disputes and changes in
government regulations, economic conditions and exchange rates may
adversely affect the performance of companies in
the |
209
|
industrials
sector. Companies in the industrials sector may be adversely affected by
liability for environmental damage and product liability claims. The
industrials sector may also be adversely affected by changes or trends in
commodity prices, which may be influenced by unpredictable factors.
Companies in the industrials sector, particularly aerospace and defense
companies, may also be adversely affected by government spending policies
because companies in this sector tend to rely to a significant extent on
government demand for their products and
services. |
| ∎ |
Materials
Sector Risk — Companies in the materials sector may be
adversely affected by commodity price volatility, exchange rate
fluctuations, social and political unrest, war import or export controls,
increased competition, depletion of resources, technical advances, labor
relations, over-production, decreases in the demand for materials,
litigation and government regulations, among other factors. Companies in
the materials sector are also at risk of liability for environmental
damage and product liability claims and may incur significant
environmental remediation costs in complying with environmental laws.
Production of materials may exceed demand as a result of market imbalances
or economic downturns, leading to poor investment
returns. |
| ∎ |
Technology
Sector Risk — Technology companies, including
information technology companies, face intense competition, both
domestically and internationally, which may have an adverse effect on a
company’s profit margins. Technology companies may have limited product
lines, markets, financial resources or personnel. The products of
technology companies may face obsolescence due to rapid technological
developments, frequent new product introduction, unpredictable changes in
growth rates, aggressive pricing, changes in demand, and competition for
the services of qualified personnel. Companies in the technology sector
are heavily dependent on patent and other intellectual property rights. A
technology company’s loss or impairment of these rights may adversely
affect the company’s profitability. Companies in the technology sector may
face increased government and regulatory scrutiny and may be subject to
adverse government or regulatory action. The technology sector may also be
adversely affected by changes or trends in commodity prices, which may be
influenced or characterized by unpredictable
factors. |
| ∎ |
Telecommunications Sector Risk —
The telecommunications sector is subject to extensive government
regulation. The costs of complying with governmental regulations, delays
or failure to receive required regulatory approvals, or the enactment of
new regulatory requirements may negatively affect the business of
telecommunications companies. Government actions around the world,
specifically in the area of pre-marketing clearance of products and
prices, can be arbitrary and unpredictable. Companies in the
telecommunications sector may encounter distressed cash flows due to the
need to commit substantial capital to meet increasing competition,
particularly in developing new products and services using new technology.
Technological innovations may make the products and services of certain
telecommunications companies obsolete. Telecommunications providers are
generally required to obtain franchises or licenses in order to provide
services in a given location. Licensing and franchise rights in the
telecommunications sector are limited, which may provide an advantage to
certain participants. Limited availability of such rights, high barriers
to market entry and regulatory oversight, among other factors, have led to
consolidation of companies within the sector, which could lead to further
regulation or other negative effects in the
future. |
Other
Risks of Investing in the Funds
| ∎ |
Borrowing Risk
— Borrowing may exaggerate changes in the net asset value of
Fund shares and in the return on the Fund’s portfolio. Borrowing will cost
the Fund interest expense and other fees. The costs of borrowing may
reduce the Fund’s return. Borrowing may cause the Fund to liquidate
positions when it may not be advantageous to do so to satisfy its
obligations. |
| ∎ |
Cyber Security
Risk — Failures or breaches of the electronic systems of the
Fund, the Fund’s adviser, distributor, and other service providers, or the
issuers of securities in which the Fund invests have the ability to cause
disruptions and negatively impact the Fund’s business operations,
potentially resulting in financial losses to the Fund and its
shareholders. While the Fund has established business continuity plans and
risk management systems seeking to address system breaches or failures,
there are inherent limitations in such plans and systems. Furthermore, the
Fund cannot control the cyber security plans and systems of the Fund’s
service providers or issuers of securities in which the Fund
invests. |
| ∎ |
Expense Risk
— Fund expenses are subject to a variety of factors,
including fluctuations in the Fund’s net assets. Accordingly, actual
expenses may be greater or less than those indicated. For example, to the
extent that the Fund’s net assets decrease due to market declines or
redemptions, the Fund’s expenses will increase as a percentage of Fund net
assets. During periods of high market volatility, these increases in the
Fund’s expense ratio could be significant. |
| ∎ |
Illiquid
Investments Risk — The Fund may not acquire any illiquid
investment if, immediately after the acquisition, the Fund would have
invested more than 15% of its net assets in illiquid investments. An
illiquid investment is any investment that the Fund reasonably expects
cannot be sold or disposed of in current market conditions in seven
calendar days or less without the sale or disposition significantly
changing the market value of the investment. Liquid investments may become
illiquid after purchase by the Fund, particularly during periods of market
turmoil. There can be no assurance that a security or instrument that is
deemed to be liquid when purchased will continue to be liquid for as long
as it is held by the Fund, and any security or instrument held by the Fund
may be deemed an |
210
|
illiquid
investment pursuant to the Fund’s liquidity risk management program. The
Fund’s illiquid investments may reduce the returns of the Fund because it
may be difficult to sell the illiquid investments at an advantageous time
or price. In addition, if the Fund is limited in its ability to sell
illiquid investments during periods when shareholders are redeeming their
shares, the Fund will need to sell liquid securities to meet redemption
requests and illiquid securities will become a larger portion of the
Fund’s holdings. An investment may be illiquid due to, among other things,
the reduced number and capacity of traditional market participants to make
a market in fixed-income securities or the lack of an active trading
market. To the extent that the Fund’s principal investment strategies
involve derivatives or securities with substantial market and/or credit
risk, the Fund will tend to have the greatest exposure to the risks
associated with illiquid investments. Illiquid investments may be harder
to value, especially in changing markets, and if the Fund is forced to
sell these investments to meet redemption requests or for other cash
needs, the Fund may suffer a loss. This may be magnified in a rising
interest rate environment or other circumstances where investor
redemptions from fixed-income mutual funds may be higher than normal. In
addition, when there is illiquidity in the market for certain securities,
the Fund, due to limitations on illiquid investments, may be subject to
purchase and sale restrictions. |
| ∎ |
Investment
Companies and ETFs Risk — Subject to the limitations set
forth in the Investment Company Act and the rules thereunder, the Fund may
acquire shares in other investment companies and in ETFs, some of which
may be affiliated investment companies. The market value of the shares of
other investment companies and ETFs may differ from their net asset value.
As an investor in investment companies and ETFs, the Fund would bear its
ratable share of that entity’s expenses, including its investment advisory
and administration fees, while continuing to pay its own advisory and
administration fees and other expenses (to the extent not offset by
BlackRock through waivers). As a result, shareholders will be absorbing
duplicate levels of fees with respect to investments in other investment
companies and ETFs (to the extent not offset by BlackRock through
waivers). |
The
securities of other investment companies and ETFs in which the Fund may invest
may be leveraged. As a result, the Fund may be indirectly exposed to leverage
through an investment in such securities. An investment in securities of other
investment companies and ETFs that use leverage may expose the Fund to higher
volatility in the market value of such securities and the possibility that the
Fund’s long-term returns on such securities (and, indirectly, the long-term
returns of shares of the Fund) will be diminished.
As
with other investments, investments in other investment companies, including
ETFs, are subject to market and selection risk. To the extent the Fund is held
by an affiliated fund, the ability of the Fund itself to hold other investment
companies may be limited.
| ∎ |
Investment in
Other Investment Companies Risk — As with other investments,
investments in other investment companies, including ETFs, are subject to
market and selection risk. In addition, if the Fund acquires shares of
investment companies, including ones affiliated with the Fund,
shareholders bear both their proportionate share of expenses in the Fund
(including management and advisory fees) and, indirectly, the expenses of
the investment companies (to the extent not offset by BlackRock through
waivers). To the extent the Fund is held by an affiliated fund, the
ability of the Fund itself to hold other investment companies may be
limited. |
| ∎ |
Large
Shareholder and Large-Scale Redemption Risk — Certain
shareholders, including a third-party investor, the Fund’s adviser or an
affiliate of the Fund’s adviser, or another entity, may from time to time
own or manage a substantial amount of Fund shares or may invest in the
Fund and hold its investment for a limited period of time. There can be no
assurance that any large shareholder or large group of shareholders would
not redeem their investment or that the size of the Fund would be
maintained. Redemptions of a large number of Fund shares by these
shareholders may adversely affect the Fund’s liquidity and net assets.
These redemptions may force the Fund to sell portfolio securities to meet
redemption requests when it might not otherwise do so, which may
negatively impact the Fund’s NAV and increase the Fund’s brokerage costs
and/or accelerate the realization of taxable income and cause the Fund to
make taxable distributions to its shareholders earlier than the Fund
otherwise would have. In addition, under certain circumstances,
non-redeeming shareholders may be treated as receiving a
disproportionately large taxable distribution during or with respect to
such tax year. The Fund also may be required to sell its more liquid Fund
investments to meet a large redemption, in which case the Fund’s remaining
assets may be less liquid, more volatile, and more difficult to price. In
addition, large redemptions can result in a Fund’s current expenses being
allocated over a smaller asset base, which generally results in an
increase in a Fund’s expense ratio. Because large redemptions can
adversely affect a portfolio manager’s ability to implement a fund’s
investment strategy, each Fund also reserves the right to redeem in-kind,
subject to certain conditions. In addition, large purchases of Fund shares
may adversely affect the Fund’s performance to the extent that the Fund is
delayed in investing new cash and is required to maintain a larger cash
position than it ordinarily would, diluting its investment
returns. |
| ∎ |
Master Limited
Partnerships Risk — The common units of a master limited
partnership (“MLP”) are listed and traded on U.S. securities exchanges and
their value fluctuates predominantly based on prevailing market conditions
and the success of the MLP. Unlike owners of common stock of a
corporation, owners of common units have limited voting rights and have no
ability to annually elect directors. In the event of liquidation, common
units have preference over subordinated units, but not over debt or
preferred units, to the remaining assets of the
MLP. |
211
| ∎ |
Money Market
Securities Risk — If market conditions improve while the
Fund has invested some or all of its assets in high quality money market
securities, this strategy could result in reducing the potential gain from
the market upswing, thus reducing the Fund’s opportunity to achieve its
investment objective. |
| ∎ |
Operational
Risk — The Fund is exposed to operational risks arising from
a number of factors, including, but not limited to, human errors,
processing and communication errors, errors of the Fund’s service
providers, counterparties or other third parties, failed or inadequate
internal or external processes, and technology or systems failures. The
use of certain investment strategies that involve manual or additional
processing, such as over-the-counter derivatives, increases these risks.
While service providers are required to have appropriate operational risk
management policies and procedures, their methods of operational risk
management may differ from those of the Fund in the setting of priorities,
the personnel and resources available or the effectiveness of relevant
controls. The Fund and BlackRock seek to reduce these operational risks
through controls, procedures and oversight. However, it is not possible to
identify all of the operational risks that may affect the Fund or to
develop processes and controls that completely eliminate or mitigate the
occurrence or effects of such failures. The Fund, including its
performance and continued operation, and its shareholders could be
negatively impacted as a result. |
| ∎ |
Reference Rate
Replacement Risk — The Fund may be exposed to financial
instruments that recently transitioned from, or continue to be tied to,
the London Interbank Offered Rate (“LIBOR”) to determine payment
obligations, financing terms, hedging strategies or investment value. The
United Kingdom’s Financial Conduct Authority (“FCA”), which regulates
LIBOR, has ceased publishing all LIBOR settings. In April 2023, however,
the FCA announced that some USD LIBOR settings will continue to be
published under a synthetic methodology until September 30, 2024 for
certain legacy contracts. The Secured Overnight Financing Rate (“SOFR”) is
a broad measure of the cost of borrowing cash overnight collateralized by
U.S. Treasury securities in the repurchase agreement (“repo”) market and
has been used increasingly on a voluntary basis in new instruments and
transactions. Under U.S. regulations that implement a statutory fallback
mechanism to replace LIBOR, benchmark rates based on SOFR have replaced
LIBOR in certain financial contracts Neither the effect of the LIBOR
transition process nor its ultimate success can yet be known. While some
existing LIBOR-based instruments may contemplate a scenario where LIBOR is
no longer available by providing for an alternative rate-setting
methodology, there may be significant uncertainty regarding the
effectiveness of any such alternative methodologies to replicate LIBOR.
Not all existing LIBOR-based instruments may have alternative rate-setting
provisions and there remains uncertainty regarding the willingness and
ability of issuers to add alternative rate-setting provisions in certain
existing instruments. Parties to contracts, securities or other
instruments using LIBOR may disagree on transition rates or the
application of transition regulation, potentially resulting in uncertainty
of performance and the possibility of litigation. The Fund may have
instruments linked to other interbank offered rates that may also cease to
be published in the future. |
| ∎ |
Reliance on
Advisor Risk — The Fund is dependent upon services and
resources provided by BlackRock, and therefore BlackRock’s parent,
BlackRock, Inc. BlackRock is not required to devote its full time to the
business of the Fund and there is no guarantee or requirement that any
investment professional or other employee of BlackRock will allocate a
substantial portion of his or her time to the Fund. The loss of, or
changes in, BlackRock’s personnel could have a negative effect on the
performance or the continued operation of the
Fund. |
| ∎ |
Restricted
Securities Risk — Limitations on the resale of restricted
securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at advantageous prices.
Restricted securities may not be listed on an exchange and may have no
active trading market. In order to sell such securities, the Fund may have
to bear the expense of registering the securities for resale and the risk
of substantial delays in effecting the registration. Other transaction
costs may be higher for restricted securities than unrestricted
securities. Restricted securities may be difficult to value because market
quotations may not be readily available, and the securities may have
significant volatility. Also, the Fund may get only limited information
about the issuer of a given restricted security, and therefore may be less
able to predict a loss. Certain restricted securities may involve a high
degree of business and financial risk and may result in substantial losses
to the Fund. |
| ∎ |
Rights
Risk — The failure to exercise subscription rights to
purchase common stock would result in the dilution of the Fund’s interest
in the issuing company. The market for such rights is not well developed,
and, accordingly, the Fund may not always realize full value on the sale
of rights. |
| ∎ |
Securities
Lending Risk — The Fund may engage in securities lending.
Securities lending involves the risk that the Fund may lose money because
the borrower of the loaned securities fails to return the securities in a
timely manner or at all. The Fund could also lose money in the event of a
decline in the value of collateral provided for loaned securities or a
decline in the value of any investments made with cash collateral. These
events could also trigger adverse tax consequences for the Fund. BlackRock
Institutional Trust Company, N.A. (“BTC”), the Fund’s securities lending
agent, will consider the tax impact to shareholders of substitute payments
for dividends when managing the Fund’s securities lending
program. |
| ∎ |
Standby
Commitment Agreements Risk — Standby commitment agreements
involve the risk that the security the Fund buys will lose value prior to
its delivery to the Fund and will no longer be worth what the Fund has
agreed to pay for it. These agreements also involve the risk that if the
security goes up in value, the counterparty will
decide |
212
|
not
to issue the security. In this case, the Fund loses both the investment
opportunity for the assets it set aside to pay for the security and any
gain in the security’s price. |
| ∎ |
Treasury
Obligations Risk — Direct obligations of the U.S. Treasury
have historically involved little risk of loss of principal if held to
maturity. However, due to fluctuations in interest rates, the market value
of such securities may vary during the period shareholders own shares of
the Fund. In addition, notwithstanding that U.S. Treasury obligations are
backed by the full faith and credit of the United States, circumstances
could arise that could prevent the timely payment of interest or
principal, such as reaching the legislative “debt ceiling.” Such
non-payment could result in losses to the Fund and substantial negative
consequences for the U.S. economy and the global financial
system. |
| ∎ |
U.S. Government
Obligations Risk — Not all U.S. Government securities are
backed by the full faith and credit of the United States. Obligations of
certain agencies, authorities, instrumentalities and sponsored enterprises
of the U.S. Government are backed by the full faith and credit of the
United States (e.g., the Government National Mortgage Association); other
obligations are backed by the right of the issuer to borrow from the U.S.
Treasury (e.g., the Federal Home Loan Banks) and others are supported by
the discretionary authority of the U.S. Government to purchase an agency’s
obligations. Still others are backed only by the credit of the agency,
authority, instrumentality or sponsored enterprise issuing the obligation.
No assurance can be given that the U.S. Government would provide financial
support to any of these entities if it is not obligated to do so by law.
In addition, circumstances could arise that could prevent the timely
payment of interest or principal on U.S. Government obligations, such as
reaching the legislative “debt ceiling.” Such non-payment could result in
losses to the Fund and substantial negative consequences for the U.S.
economy and the global financial system. |
| ∎ |
Valuation
Risk — The price the Fund could receive upon the sale of any
particular portfolio investment may differ from the 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. As a result, the price
received upon the sale of an investment may be less than the value
ascribed by the Fund, and the Fund could realize a greater than expected
loss or lesser than expected gain upon the sale of the investment. Pricing
services that value fixed-income securities generally utilize a range of
market-based and security-specific inputs and assumptions, as well as
considerations about general market conditions, to establish a price.
Pricing services generally value fixed-income securities assuming orderly
transactions of an institutional round lot size, but may be held or
transactions may be conducted in such securities in smaller, odd lot
sizes. Odd lots may trade at lower prices than institutional round lots.
The 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. |
213
Account
Information
Those
Class R shareholder accounts established prior to May 3, 2010 are eligible
to purchase Investor A Shares at net asset value.
How to Choose the Share Class that Best Suits Your
Needs
Each
Fund currently offers multiple share classes (Investor A, Investor C,
Institutional and Class R Shares in this prospectus), each with its own sales
charge and expense structure, allowing you to invest in the way that best suits
your needs. Each share class represents an ownership interest in the same
investment portfolio of the particular Fund. When you choose your class of
shares, you should consider the size of your investment and how long you plan to
hold your shares. Either your financial professional or your selected securities
dealer, broker, investment adviser, service provider, or industry professional
(including BFA and its affiliates) (each a “Financial Intermediary”) can help
you determine which share class is best suited to your personal financial goals.
Investor A and Investor C Shares are sometimes referred to herein collectively
as “Investor Shares.”
For
example, if you select Institutional Shares, you will not pay any sales charge.
However, only certain investors may buy Institutional Shares. If you select
Investor A Shares, you generally pay a sales charge at the time of purchase and
an ongoing service fee of 0.25% per year. You may be eligible for a sales
charge reduction or waiver.
If
you select Investor C or Class R Shares, you will invest the full amount of your
purchase price, but you will be subject to a distribution fee of 0.75% per
year for Investor C Shares and 0.25% per year for Class R Shares, and a
service fee of 0.25% per year for both classes of shares under a plan
adopted pursuant to Rule 12b-1 under the Investment Company Act. Because these
fees are paid out of a Fund’s assets on an ongoing basis, over time these fees
increase the cost of your investment and may cost you more than paying other
types of sales charges. In addition, you may be subject to a deferred sales
charge when you sell Investor C Shares. Classes with lower expenses will have
higher net asset values and dividends relative to other share classes.
Each
Fund’s shares are distributed by BlackRock Investments, LLC (the “Distributor”),
an affiliate of BFA.
The
table below and on the following pages summarizes key features of each of the
share classes offered by this prospectus.
| Share Classes at a Glance1 | ||||||||
| Investor A | Investor C2,3 | Institutional | Class R | |||||
| Availability | Generally available through Financial Intermediaries. | Generally available through Financial Intermediaries. Must be held through a Financial Intermediary. |
Limited
to certain investors, including:
• Individuals
and “Institutional Investors,” which include, but are not limited to,
endowments, foundations, family offices, local, city, and state
governmental institutions, corporations and insurance company separate
accounts, who may purchase shares of the Fund through a Financial
Intermediary that has entered into an agreement with the Distributor to
purchase such shares. |
Available only to certain employer-sponsored retirement plans. | ||||
214
| Share Classes at a Glance1 | ||||||||
| Investor A | Investor C2,3 | Institutional | Class R | |||||
| Availability (continued) |
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which may purchase shares
of the Fund through a Financial Intermediary that has entered into an
agreement with the Distributor to purchase such shares.
• Employees,
officers and directors/trustees of BlackRock or its affiliates and
immediate family members of such persons, if they open an account directly
with BlackRock.
• Participants
in certain programs sponsored by BlackRock or its affiliates or other
Financial Intermediaries.
• Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Distributor to offer Institutional Shares, and the family members of
such persons.
• Clients
investing through Financial Intermediaries that have entered into an
agreement with the Distributor to offer such shares on a platform that
charges a transaction based sales commission outside of the Fund.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis. |
|||||||
215
| Share Classes at a Glance1 | ||||||||
| Investor A | Investor C2,3 | Institutional | Class R | |||||
| Minimum Investment |
$1,000
for all accounts except:
• $50,
if establishing an Automatic Investment Plan (“AIP”).
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
$1,000
for all accounts except:
• $50,
if establishing an AIP.
• There
is no investment minimum for employer-sponsored retirement plans (not
including SEP IRAs, SIMPLE IRAs or SARSEPs).
• There
is no investment minimum for certain fee‑based programs. |
There
is no investment minimum for:
• Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies.
• Employees,
officers and directors/trustees of BlackRock or its affiliates and
immediate family members of such persons, if they open an account directly
with BlackRock.
• Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Distributor to offer Institutional Shares
through a no-load program or investment platform.
• Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with the
Fund on an omnibus basis.
$2
million for individuals and Institutional Investors.
$1,000
investment minimum for:
• Clients
investing through Financial Intermediaries that offer such shares on a
platform that charges a transaction based sales commission outside of the
Fund.
• Tax-qualified
accounts for insurance agents
|
• $100
for all accounts. | ||||
216
| Share Classes at a Glance1 | ||||||||
| Investor A | Investor C2,3 | Institutional | Class R | |||||
| Minimum Investment (continued) |
|
|
that
are registered representatives of an insurance company’s broker-dealer
that has entered into an agreement with the Distributor to offer
Institutional Shares, and the family members of such persons. |
| ||||
| Initial Sales Charge? | Yes. Payable at time of purchase. Lower sales charges are available for larger investments. | No. Entire purchase price is invested in shares of the Fund. | No. Entire purchase price is invested in shares of the Fund. | No. Entire purchase price is invested in shares of the Fund. | ||||
| Deferred Sales Charge? | No. (May be charged for purchases of $1 million or more that are redeemed within 18 months.) | Yes. Payable if you redeem within one year of purchase. | No. | No. | ||||
| Distribution and Service (12b-1) Fees? | No Distribution Fee. 0.25% Annual Service Fee. | 0.75% Annual Distribution Fee. 0.25% Annual Service Fee. | No. | 0.25% Annual Distribution Fee. 0.25% Annual Service Fee. | ||||
| Redemption Fees? | No. | No. | No. | No. | ||||
| Conversion to Investor A Shares? | N/A |
Yes,
automatically approximately eight years after the date of purchase. It is
the Financial Intermediary’s responsibility to ensure that the shareholder
is credited with the proper holding period. As of the Effective Date (as
defined below), certain Financial Intermediaries, including group
retirement recordkeeping platforms, may not have been tracking such
holding periods and therefore may not be able to process such conversions.
In such instances, the automatic conversion of Investor C Shares to
Investor A Shares will occur approximately eight years after the Effective
Date.
In
addition, accounts that do not have a Financial Intermediary associated
with them are not eligible to hold Investor C Shares, and any Investor C
Shares held in such accounts will be automatically converted to Investor A
Shares. |
No. | No. | ||||
217
| Share Classes at a Glance1 | ||||||||
| Investor A | Investor C2,3 | Institutional | Class R | |||||
| Advantage | Makes sense for investors who are eligible to have the sales charge reduced or eliminated or who have a long-term investment horizon because there are no ongoing distribution fees. | No up-front sales charge so you start off owning more shares. These shares may make sense for investors who have a shorter investment horizon relative to Investor A Shares. | No up-front sales charge so you start off owning more shares. No distribution or service fees. | No up-front sales charge so you start off owning more shares. | ||||
| Disadvantage | You pay a sales charge up-front, and therefore you start off owning fewer shares. | You pay ongoing distribution fees each year you own Investor C Shares, which means that over the long term you can expect higher total fees per share than Investor A Shares, and as a result, lower total performance. | Limited availability. | You pay ongoing distribution fees each year you own Class R Shares, which means that over the long term you can expect higher total fees per share than Investor A Shares and, as a result, lower total performance. | ||||
| 1 |
Please
see “Details About the Share Classes” for more information about each
share class. |
| 2 |
If
you establish a new account, or have an existing account, directly with
the Fund and do not have a Financial Intermediary associated with your
account, you may only invest in Investor A Shares. Applications without a
Financial Intermediary that select Investor C Shares will not be accepted
and accounts without an associated Financial Intermediary will not be
eligible to hold Investor C Shares. |
| 3 |
The
Funds will not accept a purchase order of $500,000 or more for Investor C
Shares (may be lower on funds that have set a lower breakpoint for
purchasing Investor A Shares without a front-end sales charge). Your
Financial Intermediary may set a lower maximum for Investor C
Shares. |
The
following pages will cover the additional details of each share class, including
the Institutional and Class R Share requirements, the sales charge table for
Investor A Shares, reduced sales charge information, Investor C Share contingent
deferred sales charge (“CDSC”) information, and sales charge waivers.
The
availability of certain sales charge waivers and reductions will depend on
whether you purchase your shares directly from the Funds or through a Financial
Intermediary. Financial Intermediaries may have different policies and
procedures regarding the availability of front-end sales charge waivers or
deferred sales charge waivers, which are discussed below. In all instances, it
is your responsibility to notify the Funds or your Financial Intermediary at the
time of purchase of any relationship or other facts qualifying you for sales
charge waivers or reductions. For waivers
and discounts not available through a
particular Financial Intermediary, shareholders will have to purchase Fund
shares directly from the Funds or through another Financial Intermediary to
receive these waivers or reductions. Please see the “Intermediary-Defined Sales
Charge Waiver Policies” section beginning on page A-1 of the Funds’ prospectus
to determine any sales charge waivers and reductions that may be available to
you through your Financial Intermediary.
More
information about existing sales charge reductions and waivers is available free
of charge in a clear and prominent format via hyperlink at www.blackrock.com and
in the SAI, which is available on the website or on request.
Details About the Share Classes
Investor
A Shares — Initial Sales Charge Option
The
following table shows the front-end sales charges that you may pay if you buy
Investor A Shares. The offering price for Investor A Shares includes any
front-end sales charge. The front-end sales charge expressed as a percentage of
the offering price may be higher or lower than the charge described below due to
rounding. Similarly, any contingent deferred sales charge paid upon certain
redemptions of Investor A Shares expressed as a percentage of the applicable
redemption amount may be higher or lower than the charge described below due to
rounding. You may qualify for a reduced front-end sales charge. Purchases of
Investor A Shares at certain fixed dollar levels, known as “breakpoints,” cause
a reduction in the front-end sales charge. Once you achieve a breakpoint, you
pay that sales charge on your entire purchase amount (and not just the portion
above the breakpoint). If you select Investor A Shares, you will pay a sales
charge at the time of purchase as shown in the following table.
218
|
Your
Investment |
Sales Charge as a % of Offering Price |
Sales Charge as a % of Your Investment1 |
Dealer Compensation as a % of Offering Price |
|||||||||
|
Less
than $25,000 |
5.25% | 5.54% | 5.00% | |||||||||
|
$25,000
but less than $50,000 |
4.75% | 4.99% | 4.50% | |||||||||
|
$50,000
but less than $100,000 |
4.00% | 4.17% | 3.75% | |||||||||
|
$100,000
but less than $250,000 |
3.00% | 3.09% | 2.75% | |||||||||
|
$250,000
but less than $500,000 |
2.50% | 2.56% | 2.25% | |||||||||
|
$500,000
but less than $750,000 |
2.00% | 2.04% | 1.75% | |||||||||
|
$750,000
but less than $1,000,000 |
1.50% | 1.52% | 1.25% | |||||||||
|
$1,000,000
and over2 |
0.00% | 0.00% | — | 2 | ||||||||
| 1 |
Rounded
to the nearest one-hundredth percent. |
| 2 |
If
you invest $1,000,000 or more in Investor A Shares, you will not pay an
initial sales charge. In that case, BFA compensates the Financial
Intermediary from its own resources. However, if you redeem your shares
within 18 months after purchase, you may be charged a deferred sales
charge of 1.00% of the lesser of the original cost of the shares being
redeemed or your redemption proceeds. Such deferred sales charge may be
waived in connection with certain fee-based
programs. |
No
initial sales charge applies to Investor A Shares that you buy through
reinvestment of the Funds’ dividends or capital gains.
Sales
Charges Reduced or Eliminated for Investor A Shares
There
are several ways in which the sales charge can be reduced or eliminated.
Purchases of Investor A Shares at certain fixed dollar levels, known as
“breakpoints,” cause a reduction in the front-end sales charge (as described
above in the “Investor A Shares — Initial Sales Charge Option” section).
Additionally, the front-end sales charge can be reduced or eliminated through
one or a combination of the following: a Letter of Intent, the right of
accumulation, the reinstatement privilege (described under “Account Services and
Privileges”), or a waiver of the sales charge (described below).
Reductions
or eliminations through the right of accumulation or Letter of Intent will apply
to the value of all qualifying holdings in shares of mutual funds sponsored and
advised by BFA or its affiliates (“BlackRock Funds”) owned by: (a) the
investor, or (b) the investor’s spouse and any children and a trust,
custodial account or fiduciary account for the benefit of any such individuals.
For this purpose, the value of an investor’s holdings means the offering price
of the newly purchased shares (including any applicable sales charge) plus the
current value (including any sales charges paid) of all other shares the
investor already holds taken together.
See
the “Intermediary-Defined Sales Charge Waiver Policies” section beginning on
page A-1 of the Funds’ prospectus for sales charge reductions and waivers that
may be available to customers of certain Financial Intermediaries.
Qualifying Holdings — Investor A and A1,
Investor C, Investor P, Institutional, Class K and Premier Shares (in most
BlackRock Funds), investments in certain unlisted closed-end management
investment companies sponsored and advised by BlackRock or its affiliates
(“Eligible Unlisted BlackRock Closed-End Funds”) and investments in the
BlackRock CollegeAdvantage 529 Program.
Qualifying
Holdings may include shares held in accounts held at a Financial Intermediary,
including personal accounts, certain retirement accounts, UGMA/UTMA accounts,
Joint Tenancy accounts, trust accounts and Transfer on Death accounts, as well
as shares purchased by a trust of which the investor is a beneficiary. For
purposes of the Letter of Intent and right of accumulation, the investor may not
combine with the investor’s other holdings shares held in pension, profit
sharing or other employer-sponsored retirement plans if those shares are held in
the name of a nominee or custodian.
In
order to receive a reduced sales charge, at the time an investor purchases
shares of the Fund, the investor should inform the Financial Intermediary and/or
BlackRock Funds of any other shares of the Fund or any other BlackRock Fund or
Eligible Unlisted BlackRock Closed-End Fund that qualify for a reduced sales
charge. Failure by the investor to notify the Financial Intermediary or
BlackRock Funds may result in the investor not receiving the sales charge
reduction to which the investor is otherwise entitled.
The
Financial Intermediary or BlackRock Funds may request documentation — including
account statements and records of the original cost of the shares owned by the
investor, the investor’s spouse and/or children showing that the investor
qualifies for a reduced sales charge. The investor should retain these records
because — depending on where an account is held or the type of account — the
Fund and/or the Financial Intermediary, BlackRock Funds or Eligible Unlisted
BlackRock Closed-End Funds may not be able to maintain this information.
For
more information, see the SAI or contact your Financial Intermediary.
219
Letter
of Intent
An
investor may qualify for a reduced front-end sales charge immediately by signing
a “Letter of Intent” stating the investor’s intention to make one or more of the
following investments within the next 13 months which would, if bought all at
once, qualify the investor for a reduced sales charge:
i.
Buy a specified amount of Investor A, Investor C, Investor P, Institutional,
Class K and/or Premier Shares,
ii.
Make an investment in one or more Eligible Unlisted BlackRock Closed-End Funds
and/or
iii.
Make an investment through the BlackRock CollegeAdvantage 529 Program in one or
more BlackRock Funds.
The
initial investment must meet the minimum initial purchase requirement. The
13-month Letter of Intent period commences on the day that the Letter of Intent
is received by the Fund.
The
market value of current holdings in the BlackRock Funds (including Investor A,
Investor C, Investor P, Institutional, Class K and Premier Shares, Eligible
Unlisted BlackRock Closed-End Funds and the BlackRock CollegeAdvantage 529
Program Class A and Class C Units) as of the date of commencement that are
eligible under the Right of Accumulation may be counted towards the sales charge
reduction.
The
investor must notify the Fund of (i) any current holdings in the BlackRock
Funds, Eligible Unlisted BlackRock Closed-End Funds and/or the BlackRock
CollegeAdvantage 529 Program that should be counted towards the sales charge
reduction and (ii) any subsequent purchases that should be counted towards the
Letter of Intent.
During
the term of the Letter of Intent, the Fund will hold Investor A Shares
representing up to 5% of the indicated amount in an escrow account for payment
of a higher sales load if the full amount indicated in the Letter of Intent is
not purchased. If the full amount indicated is not purchased within the 13-month
period, and the investor does not pay the higher sales load within 20 days, the
Fund will redeem enough of the Investor A Shares held in escrow to pay the
difference.
Right
of Accumulation
Investors
have a “right of accumulation” under which any of the following may be combined
with the amount of the current purchase in determining whether an investor
qualifies for a breakpoint and a reduced front-end sales charge:
i.
The current value of an investor’s existing Investor A and A1, Investor C,
Investor P, Institutional, Class K and Premier Shares in most BlackRock
Funds,
ii.
The current value of an investor’s existing shares of certain unlisted
closed-end management investment companies sponsored and advised by BlackRock or
its affiliates and
iii.
The investment in the BlackRock CollegeAdvantage 529 Program by the investor or
by or on behalf of the investor’s spouse and children.
Financial
Intermediaries may value current holdings of their customers differently for
purposes of determining whether an investor qualifies for a breakpoint and a
reduced front-end sales charge, although customers of the same Financial
Intermediary will be treated similarly. In order to use this right, the investor
must alert BlackRock to the existence of any previously purchased shares.
Other
Front-End Sales Charge Waivers
The
following persons may also buy Investor A Shares without paying a sales
charge:
| ∎ |
Certain
employer-sponsored retirement plans. For purposes of this waiver,
employer-sponsored retirement plans do not include SEP IRAs, SIMPLE IRAs
or SARSEPs; |
| ∎ |
Rollovers
of current investments through certain employer-sponsored retirement plans
provided the shares are transferred to the same BlackRock Fund as either a
direct rollover, or subsequent to distribution, the rolled-over proceeds
are contributed to a BlackRock IRA through an account directly with a
Fund; or purchases by IRA programs that are sponsored by Financial
Intermediary firms provided the Financial Intermediary firm has entered
into a Class A Net Asset Value agreement with respect to such program
with the Distributor; |
| ∎ |
Insurance
company separate accounts; |
| ∎ |
Registered
investment advisers, trust companies and bank trust departments exercising
discretionary investment authority with respect to amounts to be invested
in a Fund; |
| ∎ |
Persons
participating in a fee-based program (such as a wrap account) under which
they pay advisory fees to a broker-dealer or other financial
institution; |
| ∎ |
Financial
Intermediaries who have entered into an agreement with the Distributor and
have been approved by the Distributor to offer Fund shares to
self-directed investment brokerage accounts that may or may not charge a
transaction fee; |
220
| ∎ |
Persons
associated with a Fund, a Fund’s manager, a Fund’s sub-advisers, transfer
agent, Distributor, fund accounting agents, Barclays PLC (“Barclays”) and
their respective affiliates (to the extent permitted by these firms)
including: (a) officers, directors and partners; (b) employees
and retirees; (c) employees of firms who have entered into selling
agreements to distribute shares of BlackRock Funds; (d) immediate
family members of such persons; and (e) any trust, pension,
profit-sharing or other benefit plan for any of the persons set forth in
(a) through (d); and |
| ∎ |
State
sponsored 529 college savings plans. |
| ∎ |
Accounts
opened directly with the Fund that do not have a Financial Intermediary
associated with the account. |
In
addition, a sales charge waiver may be available for investors exchanging
Investor P Shares of another BlackRock Fund for Investor A Shares of the Fund
through an intermediary-processed exchange, provided that the investor had
previously paid a sales charge with respect to such shares.
In
addition, Financial Intermediaries may, in connection with a change in account
type or otherwise in accordance with a Financial Intermediary’s policies and
procedures, exchange one class of shares for Investor A Shares of the same Fund.
In such cases, such exchange would not be subject to an Investor A Shares sales
charge. The availability of Investor A Shares sales charge waivers may depend on
the policies, procedures and trading platforms of your Financial Intermediary;
consult your financial adviser.
See
the “Intermediary-Defined Sales Charge Waiver Policies” section beginning on
page A-1 of the Funds’ prospectus for sales charge reductions and waivers that
may be available to customers of certain Financial Intermediaries.
Investor
A Shares at Net Asset Value
If
you invest $1,000,000 or more in Investor A Shares, you will not pay any initial
sales charge. However, if you redeem your Investor A Shares within 18 months
after purchase, you may be charged a deferred sales charge of 1.00% of the
lesser of the original cost of the shares being redeemed or your redemption
proceeds. For a discussion on waivers, see “Contingent Deferred Sales Charge
Waiver.”
If
you are eligible to buy both Investor A and Institutional Shares, you should buy
Institutional Shares since Investor A Shares are subject to a front end
sales charge and an annual 0.25% service fee, while Institutional Shares are
not. The Distributor normally pays the annual Investor A Shares service fee to
dealers as a shareholder servicing fee on a monthly basis.
Investor
C Shares — Deferred Sales Charge Option
If
you select Investor C Shares, you do not pay an initial sales charge at the time
of purchase. If you redeem your Investor C Shares within one year after
purchase, you may be charged a deferred sales charge of 1.00%. The charge will
apply to the lesser of the original cost of shares being redeemed or the
proceeds of your redemption. When you redeem Investor C Shares, the redemption
order is processed so that the lowest deferred sales charge is charged. Investor
C Shares that are not subject to the deferred sales charge are redeemed first.
In addition, you will not be charged a deferred sales charge when you redeem
shares that you acquire through reinvestment of Fund dividends or capital gains.
Any CDSC paid on the redemptions of Investor C Shares expressed as a percentage
of the applicable redemption amount may be higher or lower than the charge
described due to rounding.
Effective
November 23, 2020 (the “Effective Date”), Investor C Shares will automatically
convert to Investor A Shares approximately eight years after the date of
purchase. It is the Financial Intermediary’s responsibility to ensure that the
shareholder is credited with the proper holding period. As of the Effective
Date, certain Financial Intermediaries, including group retirement recordkeeping
platforms, may not have been tracking such holding periods and therefore may not
be able to process such conversions. In such instances, the automatic conversion
of Investor C Shares to Investor A Shares will occur approximately eight years
after the Effective Date. The automatic conversion of Investor C Shares to
Investor A Shares is not a taxable event for Federal income tax purposes. Please
consult your Financial Intermediary for additional information.
In
addition, accounts that do not have a Financial Intermediary associated with
them are not eligible to hold Investor C Shares, and any Investor C Shares held
in such accounts will be automatically converted to Investor A Shares.
See
the “Intermediary-Defined Sales Charge Waiver Policies” section beginning on
page A-1 of the Funds’ prospectus for sales charge reductions and waivers that
may be available to customers of certain Financial Intermediaries.
You
will also pay distribution fees of 0.75% and service fees of 0.25% for Investor
C Shares each year. Because these fees are paid out of the Fund’s assets on an
ongoing basis, over time these fees increase the cost of your investment and may
cost you more than paying other types of sales charges. The Distributor uses the
money that it receives from the deferred sales charges and the distribution fees
to cover the costs of marketing, advertising and compensating the Financial
Intermediary who assists you in purchasing Fund shares.
The
Distributor currently pays dealers a sales concession of 1.00% of the purchase
price of Investor C Shares from its own resources at the time of sale. The
Distributor pays the annual Investor C Shares distribution fee and the annual
Investor C Shares service fee as an ongoing concession and as a shareholder
servicing fee, respectively, to dealers monthly for Investor C Shares held for
over a year and normally retains the Investor C Shares distribution fee
and
221
service
fee during the first year after purchase. For certain employer-sponsored
retirement plans, the Distributor will pay the full Investor C Shares
distribution fee and service fee to dealers beginning in the first year after
purchase in lieu of paying the sales concession. This may depend on the
policies, procedures and trading platforms of your Financial Intermediary;
consult your financial adviser.
Contingent
Deferred Sales Charge Waiver
The
deferred sales charge relating to Investor Shares may be reduced or waived in
certain circumstances, such as:
| ∎ |
Redemptions
of shares purchased through certain employer-sponsored retirement plans
and rollovers of current investments in a Fund through such
plans; |
| ∎ |
Exchanges
pursuant to the exchange privilege, as described in “How to Exchange
Shares or Transfer Your Account”; |
| ∎ |
Redemptions
made in connection with minimum required distributions from IRA or
403(b)(7) accounts due to the shareholder reaching the age of
72; |
| ∎ |
Certain
post-retirement withdrawals from an IRA or other retirement plan if you
are over 591⁄2 years old and you purchased your
shares prior to October 2, 2006; |
| ∎ |
Redemptions
made with respect to certain retirement plans sponsored by a Fund, BFA or
an affiliate; |
| ∎ |
Redemptions
resulting from shareholder death as long as the waiver request is made
within one year of death or, if later, reasonably promptly following
completion of probate (including in connection with the distribution of
account assets to a beneficiary of the
decedent); |
| ∎ |
Withdrawals
resulting from shareholder disability (as defined in the Internal Revenue
Code), as long as the disability arose subsequent to the purchase of the
shares; |
| ∎ |
Involuntary
redemptions made of shares in accounts with low
balances; |
| ∎ |
Certain
redemptions made through the Systematic Withdrawal Plan (“SWP”) offered by
a Fund, BFA or an affiliate; |
| ∎ |
Redemptions
related to the payment of BNY Mellon Investment Servicing Trust Company
custodial IRA fees; and |
| ∎ |
Redemptions
when a shareholder can demonstrate hardship, in the absolute discretion of
the Fund. |
See
the “Intermediary-Defined Sales Charge Waiver Policies” section beginning on
page A-1 of the Funds’ prospectus for sales charge reductions and waivers that
may be available to customers of certain Financial Intermediaries.
More
information about existing sales charge reductions and waivers is available free
of charge in a clear and prominent format via hyperlink at www.blackrock.com and
in the SAI, which is available on the website or upon request.
Institutional
Shares
Institutional
Shares are not subject to any sales charge. Only certain investors are eligible
to buy Institutional Shares. Your Financial Intermediary can help you determine
whether you are eligible to buy Institutional Shares. A Fund may permit a lower
initial investment for certain investors if their purchase, combined with
purchases by other investors received together by the Fund, meets the minimum
investment requirement.
Institutional
Shares may also be available on certain brokerage platforms. An investor
transacting in Institutional Shares on such brokerage platforms through a broker
acting as an agent for the investor may be required to pay a commission and/or
other forms of compensation to the broker. Shares of the Funds are available in
other share classes that have different fees and expenses.
Eligible
Institutional Shares investors include the following:
| ∎ |
Individuals
and “Institutional Investors” with a minimum initial investment of $2
million who may purchase shares of a Fund through a Financial Intermediary
that has entered into an agreement with the Distributor to purchase such
shares; |
| ∎ |
Clients
of Financial Intermediaries that: (i) charge such clients a fee for
advisory, investment consulting, or similar services or (ii) have entered
into an agreement with the Distributor to offer Institutional Shares
through a no-load program or investment platform, in each case, with no
minimum initial investment; |
| ∎ |
Clients
investing through Financial Intermediaries that have entered into an
agreement with the Distributor to offer such shares on a platform that
charges a transaction based sales commission outside of the Fund, with a
minimum initial investment of $1,000; |
| ∎ |
Employer-sponsored
retirement plans (not including SEP IRAs, SIMPLE IRAs or SARSEPs), state
sponsored 529 college savings plans, collective trust funds, investment
companies or other pooled investment vehicles, unaffiliated thrifts and
unaffiliated banks and trust companies, each of which is not subject to
any minimum initial investment and may purchase shares of a Fund through a
Financial Intermediary that has entered into an agreement with the
Distributor to purchase such shares; |
222
| ∎ |
Trust
department clients of Bank of America, N.A. and its affiliates for whom
they (i) act in a fiduciary capacity (excluding participant directed
employee benefit plans); (ii) otherwise have investment discretion; or
(iii) act as custodian for at least $2 million in assets, who are not
subject to any minimum initial investment; |
| ∎ |
Holders
of certain Bank of America Corporation (“BofA Corp.”) sponsored unit
investment trusts (“UITs”) who reinvest dividends received from such UITs
in shares of a Fund, who are not subject to any minimum initial
investment; |
| ∎ |
Employees,
officers and directors/trustees of BlackRock, Inc., BlackRock Funds, BofA
Corp., Barclays or their respective affiliates and immediate family
members of such persons, if they open an account directly with BlackRock,
who are not subject to any minimum initial
investment; |
| ∎ |
Tax-qualified
accounts for insurance agents that are registered representatives of an
insurance company’s broker-dealer that has entered into an agreement with
the Distributor to offer Institutional Shares, and the family members of
such persons; and |
| ∎ |
Clients
investing through a self-directed IRA brokerage account program sponsored
by a retirement plan record-keeper, provided that such program offers only
mutual fund options and that the program maintains an account with a Fund
on an omnibus basis. |
Each
Fund reserves the right to modify or waive the above-stated policies at any
time.
Class
R Shares
Class
R Shares are available only to certain employer-sponsored retirement plans. For
this purpose, employer sponsored retirement plans do not include SEP IRAs,
SIMPLE IRAs or SARSEPs. If you buy Class R Shares, you will pay neither an
initial sales charge nor a CDSC. However, Class R Shares are subject to a
distribution fee of 0.25% per year and a service fee of 0.25% per
year. Because these fees are paid out of the Fund’s assets on an ongoing basis,
over time these fees increase the cost of your investment and may cost you more
than paying other types of sales charges.
Class
R Shares do not offer a conversion privilege.
The
Distributor currently pays the annual Class R Shares distribution fee and annual
Class R Shares service fee to dealers as an ongoing concession and as a
shareholder servicing fee, respectively, on a monthly basis.
Distribution and Shareholder Servicing Payments
Plan
Payments
The
Trust, on behalf of the Funds, has adopted a plan (the “Plan”) pursuant to Rule
12b-1 under the Investment Company Act with respect to the Investor Shares and
Class R Shares that allows a Fund to pay distribution fees for the sale of its
shares and/or shareholder servicing fees for certain services provided to its
shareholders.
Under
the Plan, Investor C Shares and Class R Shares pay a distribution fee to the
Distributor and/or its affiliates, for distribution and sales support services.
The distribution fees may be used to pay the Distributor for distribution and
sales support services and to pay the Distributor and BFA and its affiliates for
sales support services provided and related expenses incurred in connection with
the sale of Investor C Shares and Class R Shares. The distribution fees may also
be used to pay Financial Intermediaries for sales support services and related
expenses. All Investor C Shares and Class R Shares pay a maximum distribution
fee per year that is a percentage of the average daily net asset value of the
Investor C Shares and Class R Shares of a Fund. Institutional and Investor A
Shares do not pay distribution fees.
Under
the Plan, the Funds also pay shareholder servicing fees (also referred to as
general shareholder liaison services fees) to Financial Intermediaries for
providing support services to their customers who own Investor Shares and
Class R Shares of a Fund. The shareholder servicing fee payment is
calculated as a percentage of the average daily net asset value of Investor
Shares and Class R Shares of each Fund. All Investor Shares and Class R Shares
pay this shareholder servicing fee. Institutional Shares do not pay a
shareholder servicing fee.
In
return for the shareholder servicing fee, Financial Intermediaries (including
BFA) may provide one or more of the following services to their customers who
own Investor A, Investor C and Class R Shares:
| ∎ |
Answering
customer inquiries regarding account status and history, the manner in
which purchases, exchanges and redemptions or repurchases of shares may be
effected and certain other matters pertaining to the customers’
investments; |
| ∎ |
Assisting
customers in designating and changing dividend options, account
designations and addresses; and |
| ∎ |
Providing
other similar shareholder liaison services. |
The
shareholder servicing fees payable pursuant to the Plan are paid to compensate
Financial Intermediaries for the administration and servicing of shareholder
accounts and are not costs which are primarily intended to result in the sale of
a Fund’s shares.
223
Because
the fees paid by a Fund under the Plan are paid out of Fund assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. In addition, the
distribution fees paid by Investor C Shares and Class R Shares may over time
cost investors more than the front-end sales charge on Investor A Shares. For
more information on the Plan, including a complete list of services provided
thereunder, see the SAI.
Other
Payments by the Funds
In
addition to fees that a Fund may pay to a Financial Intermediary pursuant to the
Plan and fees a Fund pays to its transfer agent, BNY Mellon Investment Servicing
(US) Inc. (the “Transfer Agent”), BFA, on behalf of a Fund, may enter into
non-Plan agreements with affiliated and unaffiliated Financial Intermediaries
pursuant to which the Fund will pay a Financial Intermediary for administrative,
networking, recordkeeping, sub-transfer agency, sub-accounting and/or
shareholder services. These non-Plan payments are generally based on either (1)
a percentage of the average daily net assets of Fund shareholders serviced by a
Financial Intermediary or (2) a fixed dollar amount for each account serviced by
a Financial Intermediary. The aggregate amount of these payments may be
substantial.
Other
Payments by BFA
From
time to time, BFA, the Distributor or their affiliates also may pay a portion of
the fees for administrative, networking, recordkeeping, sub-transfer agency,
sub-accounting and shareholder services described above at its or their own
expense and out of its or their profits. BFA, the Distributor and their
affiliates may also compensate affiliated and unaffiliated Financial
Intermediaries for the sale and distribution of shares of the Funds. These
payments would be in addition to the Fund payments described in this prospectus
and may be a fixed dollar amount, may be based on the number of customer
accounts maintained by the Financial Intermediary, may be based on a percentage
of the value of shares sold to, or held by, customers of the Financial
Intermediary or may be calculated on another basis. The aggregate amount of
these payments by BFA, the Distributor and their affiliates may be substantial
and, in some circumstances, may create an incentive for a Financial
Intermediary, its employees or associated persons to recommend or sell shares of
a Fund to you.
Please
contact your Financial Intermediary for details about payments it may receive
from a Fund or from BFA, the Distributor or their affiliates. For more
information, see the SAI.
How to Buy, Sell, Exchange and Transfer Shares
The
chart on the following pages summarizes how to buy, sell, exchange and transfer
shares through your Financial Intermediary. You may also buy, sell, exchange and
transfer shares through BlackRock, if your account is held directly with
BlackRock. To learn more about buying, selling, exchanging or transferring
shares through BlackRock, call (800) 441-7762. Because the selection of a
mutual fund involves many considerations, your Financial Intermediary may help
you with this decision.
With
certain limited exceptions, the Funds are generally available only to investors
residing in the United States and may not be distributed by a foreign Financial
Intermediary. Under this policy, in order to accept new accounts or additional
investments (including by way of exchange from another BlackRock Fund) into
existing accounts, a Fund generally requires that (i) a shareholder that is a
natural person be a U.S. citizen or resident alien, in each case residing within
the United States or a U.S. territory (including APO/FPO/DPO addresses), and
have a valid U.S. taxpayer identification number, and (ii) a Financial
Intermediary or a shareholder that is an entity be domiciled in the United
States and have a valid U.S. taxpayer identification number or be domiciled in a
U.S. territory and have a valid U.S. taxpayer identification number or IRS Form
W-8. Any existing account that is updated to reflect a non-U.S. address will
also be restricted from making additional investments.
Each
Fund may reject any purchase order, modify or waive the minimum initial or
subsequent investment requirements for any shareholders and suspend and resume
the sale of any share class of the Fund at any time for any reason. In addition,
the Funds may waive certain requirements regarding the purchase, sale, exchange
or transfer of shares described below.
Under
certain circumstances, if no activity occurs in an account within a time period
specified by state law, a shareholder’s shares in a Fund may be transferred to
that state.
224
| How to Buy Shares | ||||||
| Your Choices | Important Information for You to Know | |||||
| Initial Purchase | First, select the share class appropriate for you |
Refer
to the “Share Classes at a Glance” table in this prospectus (be sure to
read this prospectus carefully). When you place your initial order, you
must indicate which share class you select (if you do not specify a share
class and do not qualify to purchase Institutional Shares, you will
receive Investor A Shares).
Certain
factors, such as the amount of your investment, your time frame for
investing, and your financial goals, may affect which share class you
choose. Your Financial Intermediary can help you determine which share
class is appropriate for you.
Class
R Shares are available only to certain retirement and other similar
plans. | ||||
| Next, determine the amount of your investment | Refer to the minimum initial investment in the “Share Classes at a Glance” table in this prospectus. Be sure to note the maximum investment amounts for Investor C Shares. See “Account Information — Details About the Share Classes” for information on lower initial investment requirements for certain Fund investors if their purchase, combined with purchases by other investors received together by a Fund, meets the minimum investment requirement. | |||||
| Have your Financial Intermediary submit your purchase order | The price of your shares is based on the next calculation of a Fund’s net asset value after your order is placed. Any purchase orders placed prior to the close of business on the New York Stock Exchange (the “NYSE”) (generally 4:00 p.m. Eastern time) will be priced at the net asset value determined that day. Certain Financial Intermediaries, however, may require submission of orders prior to that time. Purchase orders placed after that time will be priced at the net asset value determined on the next business day. A broker-dealer or financial institution maintaining the account in which you hold shares may charge a separate account, service or transaction fee on the purchase or sale of Fund shares that would be in addition to the fees and expenses shown in each Fund’s “Fees and Expenses” table. The Funds may reject any order to buy shares and may suspend the sale of shares at any time. Certain Financial Intermediaries may charge a processing fee to confirm a purchase. | |||||
| Or contact BlackRock (for accounts held directly with BlackRock) | To purchase shares directly from BlackRock, call (800) 441-7762 and request a new account application. Mail the completed application along with a check payable to “BlackRock Funds” to the Transfer Agent at the address on the application. The Funds limit purchases by personal check to $500,000 per trade. | |||||
| Add to Your Investment | Purchase additional shares | For Investor A and Investor C Shares, the minimum investment for additional purchases is generally $50 for all accounts (with the exception of certain employer-sponsored retirement plans which may have a lower minimum for additional purchases). The minimums for additional purchases may be waived under certain circumstances. Institutional and Class R Shares have no minimum for additional purchases. | ||||
| Have your Financial Intermediary submit your purchase order for additional shares | To purchase additional shares you may contact your Financial Intermediary. | |||||
|
|
Or contact BlackRock (for accounts held directly with BlackRock) |
|
Purchase by Telephone: Call (800)
441-7762 and speak with one of our representatives. The Funds have the
right to reject any telephone request for any reason.
Purchase in Writing: You may send a
written request to BlackRock at the address on the back cover of this
prospectus.
Purchase by VRU: Shares may also be
purchased by use of the Fund’s automated voice response unit (“VRU”)
service at (800) 441‑7762.
Purchase by Internet: You may purchase
your shares, and view activity in your account, by logging onto the
BlackRock website at www.blackrock.com. Purchases made on the Internet
using the Automated Clearing House Network (“ACH”) will have a trade date
that is the day after the purchase is made. Certain institutional
clients’ | |||
225
| How to Buy Shares | ||||||
| Your Choices | Important Information for You to Know | |||||
|
Add
to Your Investment (continued) |
Or
contact BlackRock (for accounts held directly with BlackRock)
(continued) |
|
purchase
orders for Institutional Shares placed by wire prior to the close of
business on the NYSE will be priced at the net asset value determined that
day. Contact your Financial Intermediary or BlackRock for further
information. Each Fund limits Internet purchases in shares of the Fund to
$25,000 per trade. Different maximums may apply to certain institutional
investors.
Please
read the On-Line Services Disclosure Statement and User Agreement, the
Terms and Conditions page and the Consent to Electronic Delivery Agreement
(if you consent to electronic delivery), before attempting to transact
online.
Each
Fund employs reasonable procedures to confirm that transactions entered
over the Internet are genuine. By entering into the User Agreement with a
Fund in order to open an account through the website, the shareholder
waives any right to reclaim any losses from a Fund or any of its
affiliates incurred through fraudulent activity. | |||
| Acquire additional shares by reinvesting dividends and capital gains | All dividends and capital gains distributions are automatically reinvested in shares of the Fund at net asset value. To make any changes to your dividend and/or capital gains distributions options, please call (800) 441-7762, or contact your Financial Intermediary (if your account is not held directly with BlackRock). | |||||
| Participate in the AIP |
BlackRock’s
AIP allows you to invest a specific amount on a periodic basis from your
checking or savings account into your investment account.
Refer
to the “Account Services and Privileges” section of this prospectus for
additional information. | |||||
| How to Pay for Shares | Making payment for purchases |
Payment
for an order must be made in Federal funds or other immediately available
funds by the time specified by your Financial Intermediary, but in no
event later than 4:00 p.m. (Eastern time) on the first business day
following BlackRock’s receipt of the order. If payment is not received by
this time, the order will be canceled and you and your Financial
Intermediary will be responsible for any loss to the Funds.
For
shares purchased directly from a Fund, a check payable to “BlackRock
Funds,” which bears the name of the Fund must accompany a completed
purchase application. The Funds limit purchases by personal check to
$500,000 per trade.
There
is a $20 fee for each purchase check that is returned due to insufficient
funds. The Funds do not accept third-party checks. You may also wire
Federal funds to a Fund to purchase shares, but you must call (800)
441-7762 before doing so to confirm the wiring instructions. | ||||
| How to Sell Shares | ||||||
| Your Choices | Important Information for You to Know | |||||
| Full or Partial Redemption of Shares | Have your Financial Intermediary submit your sales order |
|
You
can make redemption requests through your Financial Intermediary.
Shareholders should indicate whether they are redeeming Investor A,
Investor C, Institutional or Class R Shares. The price of your shares is
based on the next calculation of a Fund’s net asset value after your order
is placed. For your redemption request to be priced at the net asset value
on the day of your request, you must submit your request to your Financial
Intermediary prior to that day’s close of business on the NYSE (generally
4:00 p.m. Eastern time). Certain Financial Intermediaries, however, may
require submission of orders prior to that time. Any redemption request
placed after that time will be priced at the net asset value at the close
of business on the next business day.
Regardless
of the method the Fund uses to make payment of your redemption proceeds
(check, wire or ACH), your redemption proceeds typically will be sent one
business day after your request is submitted, but in any event within
seven days. | |||
226
| How to Sell Shares (continued) | ||||||
| Your Choices | Important Information for You to Know | |||||
| Full or Partial Redemption of Shares (continued) | Have your Financial Intermediary submit your sales order (continued) |
|
Certain
Financial Intermediaries may charge a fee to process a redemption of
shares. Shareholders should indicate which class of shares they are
redeeming.
Each
Fund may reject an order to sell shares under certain
circumstances. | |||
|
|
Selling shares held directly with BlackRock |
|
Methods
of Redeeming
Redeem by Telephone: You may sell
Investor Shares held directly at BlackRock by telephone request if certain
conditions are met and if the amount being sold is less than (i) $100,000
for payments by check or (ii) $250,000 for payments through ACH or wire
transfers. Certain redemption requests, such as those in excess of these
amounts, must be in writing with a medallion signature guarantee. For
Institutional Shares, certain redemption requests may require written
instructions with a medallion signature guarantee. Call (800) 441-7762 for
details.
You
can obtain a medallion signature guarantee stamp from a bank, securities
dealer, securities broker, credit union, savings and loan association,
national securities exchange or registered securities association. A
notary public seal will not be acceptable.
Each
Fund, its administrator and the Distributor will employ reasonable
procedures to confirm that instructions communicated by telephone are
genuine. Each Fund and its service providers will not be liable for any
loss, liability, cost or expense for acting upon telephone instructions
that are reasonably believed to be genuine in accordance with such
procedures. Each Fund may refuse a telephone redemption request if it
believes it is advisable to do so.
During
periods of substantial economic or market change, telephone redemptions
may be difficult to complete. Please find alternative redemption methods
below.
Redeem by VRU: Shares may also be
redeemed by use of the Funds’ automated VRU service. Payment for Investor
Shares redeemed by the VRU service may be made for non-retirement accounts
in amounts up to $25,000, either through check, ACH or wire.
Redeem by Internet: You may redeem in
your account by logging onto the BlackRock website at www.blackrock.com.
Proceeds from Internet redemptions may be sent via check, ACH or wire to
the bank account of record. Payment for Investor Shares redeemed by
Internet may be made for non-retirement accounts in amounts up to $25,000,
either through check, ACH or wire. Different maximums may apply to
investors in Institutional Shares.
Redeem in Writing: You may sell shares
held with BlackRock by writing to BlackRock, P.O. Box 534429, Pittsburgh,
Pennsylvania 15253-4429 or, for overnight delivery, Attention: 534429, 500
Ross Street 154-0520, Pittsburgh, Pennsylvania 15262. All shareholders on
the account must sign the letter. A medallion signature guarantee will
generally be required but may be waived in certain limited circumstances.
You can obtain a medallion signature guarantee stamp from a bank,
securities dealer, securities broker, credit union, savings and loan
association, national securities exchange or registered securities
association. A notary public seal will not be acceptable. If you hold
stock certificates, return the certificates with the letter. Proceeds from
redemptions may be sent via check, ACH or wire to the bank account of
record.
Payment
of Redemption Proceeds
Redemption
proceeds may be paid by check or, if a Fund has verified banking
information on file, through ACH or by wire transfer.
Payment by Check: BlackRock will normally
mail redemption proceeds within one business day following receipt of a
properly completed request but in any event within seven days. Shares can
be redeemed by telephone and the proceeds sent by check to the shareholder
at the address on record. Shareholders will pay $15 for redemption
proceeds | |||
227
| How to Sell Shares (continued) | ||||||
| Your Choices | Important Information for You to Know | |||||
| Full or Partial Redemption of Shares (continued) | Selling shares held directly with BlackRock (continued) |
sent
by check via overnight mail. You are responsible for any additional
charges imposed by your bank for this service.
Each
Fund reserves the right to reinvest any dividend or distribution amounts
(e.g., income dividends or capital gains) which you have elected to
receive by check should your check be returned as undeliverable or remain
uncashed for more than 6 months. No interest will accrue on amounts
represented by uncashed checks. Your check will be reinvested in your
account at the net asset value next calculated, on the day of the
investment. When reinvested, those amounts are subject to the risk of loss
like any fund investment. If you elect to receive distributions in cash
and a check remains undeliverable or uncashed for more than 6 months, your
cash election may also be changed automatically to reinvest and your
future dividend and capital gains distributions will be reinvested in the
Fund at the net asset value as of the date of payment of the
distribution.
Payment by Wire Transfer: Payment for
redeemed shares for which a redemption order is received before 4:00 p.m.
(Eastern time) on a business day is normally made in Federal funds wired
to the redeeming shareholder on the next business day, provided that the
Funds’ custodian is also open for business. Payment for redemption orders
received after 4:00 p.m. (Eastern time) or on a day when the Funds’
custodian is closed is normally wired in Federal funds on the next
business day following redemption on which the Funds’ custodian is open
for business. Each Fund reserves the right to wire redemption proceeds
within seven days after receiving a redemption order if, in the judgment
of the Fund, an earlier payment could adversely affect the Fund.
If
a shareholder has given authorization for expedited redemption, shares can
be redeemed by Federal wire transfer to a single previously designated
bank account. Shareholders will pay $7.50 for redemption proceeds sent by
Federal wire transfer. You are responsible for any additional charges
imposed by your bank for this service. No charge for wiring redemption
payments with respect to Institutional Shares is imposed by the
Funds.
The
Funds are not responsible for the efficiency of the Federal wire system or
the shareholder’s firm or bank. To change the name of the single,
designated bank account to receive wire redemption proceeds, it is
necessary to send a written request to the Fund at the address on the back
cover of this prospectus.
Payment by ACH: Redemption proceeds may
be sent to the shareholder’s bank account (checking or savings) via ACH.
Payment for redeemed shares for which a redemption order is received
before 4:00 p.m. (Eastern time) on a business day is normally sent to the
redeeming shareholder the next business day, with receipt at the receiving
bank within the next two business days (48-72 hours), provided that the
Funds’ custodian is also open for business. Payment for redemption orders
received after 4:00 p.m. (Eastern time) or on a day when the Funds’
custodian is closed is normally sent on the next business day following
redemption on which the Funds’ custodian is open for business.
The
Funds reserve the right to send redemption proceeds within seven days
after receiving a redemption order if, in the judgment of a Fund, an
earlier payment could adversely affect the Fund. No charge for sending
redemption payments via ACH is imposed by the Funds.
*
* *
If
you make a redemption request before a Fund has collected payment for the
purchase of shares, the Fund may delay mailing your proceeds. This delay
will usually not exceed ten days. | ||||
228
| How to Exchange Shares or Transfer Your Account | ||||||
| Your Choices | Important Information for You to Know | |||||
| Exchange Privilege | Selling shares of one BlackRock Fund to purchase shares of another BlackRock Fund (“exchanging”) |
Investor
and Institutional Shares of the Funds are generally exchangeable for
shares of the same class of another BlackRock Fund, to the extent such
shares are offered by your Financial Intermediary. No exchange privilege
is available for Class R Shares.
You
can exchange $1,000 or more of Investor Shares from one fund into the same
class of another fund which offers that class of shares (you can exchange
less than $1,000 of Investor Shares if you already have an account in the
fund into which you are exchanging). Investors who own Institutional
Shares of a Fund may make exchanges into Institutional Shares of other
BlackRock Funds except for investors holdings shares through certain
client accounts at financial professionals that are omnibus with the Fund
or do not meet applicable minimums. There is no required minimum amount
with respect to exchanges of Institutional Shares. You may only exchange
into a share class and BlackRock Fund that are open to new investors or in
which you have a current account, if the fund is closed to new
investors.
Some
of the BlackRock Funds impose a different initial or deferred sales charge
schedule. The CDSC will continue to be measured from the date of the
original purchase. The CDSC schedule applicable to your original purchase
will apply to the shares you receive in the exchange and any subsequent
exchange.
To
exercise the exchange privilege, you may contact your Financial
Intermediary. Alternatively, if your account is held directly with
BlackRock, you may: (i) call (800) 441-7762 and speak with one of our
representatives, (ii) make the exchange via the Internet by accessing your
account online at www.blackrock.com, or (iii) send a written request to
the Fund at the address on the back cover of this prospectus. Please note,
if you indicated on your new account application that you did not want the
Telephone Exchange Privilege, you will not be able to place exchanges via
the telephone until you update this option either in writing or by calling
(800) 441-7762. The Funds have the right to reject any telephone request
for any reason.
Although
there is currently no express limit on the number of exchanges that you
can make, the exchange privilege may be modified or terminated at any time
in the future. Each Fund may suspend or terminate your exchange privilege
at any time for any reason, including if a Fund believes, in its sole
discretion, that you are engaging in market timing activities. See
“Short-Term Trading Policy” below. For U.S. federal income tax purposes, a
share exchange is a taxable event and a capital gain or loss may be
realized. Please consult your tax adviser or other Financial Intermediary
before making an exchange request. | ||||
| Transfer Shares to Another Financial Intermediary | Transfer to a participating Financial Intermediary |
You
may transfer your shares of a Fund only to another securities dealer that
has an agreement with the Distributor. Certain shareholder services may
not be available for the transferred shares. All future trading of these
assets must be coordinated by the receiving firm.
If
your account is held directly with BlackRock, you may call
(800) 441‑7762 with any questions; otherwise please contact your
Financial Intermediary to accomplish the transfer of shares. | ||||
| Transfer to a non-participating Financial Intermediary |
You
must either:
• Transfer
your shares to an account with a Fund; or
• Sell
your shares, paying any applicable deferred sales charge.
If
your account is held directly with BlackRock, you may call
(800) 441‑7762 with any questions; otherwise please contact your
Financial Intermediary to accomplish the transfer of
shares. | |||||
229
Account Services and Privileges
The
following table provides examples of account services and privileges available
in your BlackRock account. Certain of these account services and privileges are
only available to shareholders whose accounts are held directly with BlackRock.
If your account is held directly with BlackRock, please call (800) 441-7762
for additional information as well as forms and applications. Otherwise, please
contact your Financial Intermediary for assistance in requesting one or more of
the following services and privileges.
| Automatic Investment Plan | Allows systematic investments on a periodic basis from your checking or savings account. | BlackRock’s AIP allows you to invest a specific amount on a periodic basis from your checking or savings account into your investment account. You may apply for this option upon account opening or by completing the AIP application. The minimum investment amount for an automatic investment is $50 per portfolio. | ||||
| Dividend Allocation Plan | Automatically invests your distributions into another BlackRock Fund of your choice pursuant to your instructions, without any fees or sales charges. | Dividend and capital gains distributions may be reinvested in your account to purchase additional shares or paid in cash. Using the Dividend Allocation Plan, you can direct your distributions to your bank account (checking or savings), to purchase shares of another fund at BlackRock without any fees or sales charges, or by check to special payee. Please call (800) 441-7762 for details. The fund into which you request your distribution to be invested must be open to new purchases. | ||||
| EZ Trader | Allows an investor to purchase or sell Institutional Shares by telephone or over the Internet through ACH. |
(NOTE:
This option is offered to shareholders whose accounts are held directly
with BlackRock. Please speak with your Financial Intermediary if your
account is held elsewhere.)
Prior
to establishing an EZ Trader account, please contact your bank to confirm
that it is a member of the ACH system. Once confirmed, complete an
application, making sure to include the appropriate bank information, and
return the application to the address listed on the form.
Prior
to placing a telephone or internet purchase or sale order, please contact
(800) 441-7762 to confirm that your bank information has been updated on
your account. Once this is established, you may place your request to sell
shares with the Funds by telephone or Internet.
Proceeds
will be sent to your pre-designated bank account. | ||||
| Systematic Exchange Plan | This feature can be used by investors to systematically exchange money from one fund to up to four other funds. | A minimum of $10,000 in the initial BlackRock Fund is required and investments in any additional funds must meet minimum initial investment requirements. For more information, please contact the Fund at (800) 441-7762. | ||||
| Systematic Withdrawal Plan | This feature can be used by investors who want to receive regular distributions from their accounts. |
To
start an SWP a shareholder must have a current investment of $10,000 or
more in a BlackRock Fund. Shareholders can elect to receive cash payments
of $50 or more at any interval they choose. Shareholders may sign up by
completing the SWP Application Form, which may be obtained from
BlackRock.
Shareholders
should realize that if withdrawals exceed income the invested principal in
their account will be depleted.
To
participate in the SWP, shareholders must have their dividends reinvested.
Shareholders may change or cancel the SWP at any time, with a minimum of
24 hours’ notice. If a shareholder purchases additional Investor A Shares
of a fund at the same time he or she redeems shares through the SWP, that
investor may lose money because of the sales charge involved. No CDSC will
be assessed on redemptions of Investor A or Investor C Shares made through
the SWP that do not exceed 12% of the account’s net asset value on an
annualized basis. For example, monthly, quarterly, and semi-annual SWP
redemptions of Investor A or Investor C Shares will not be subject to the
CDSC if they do not exceed 1%, 3% and 6%, respectively, of an account’s
net asset value on the redemption date. SWP redemptions of Investor A or
Investor C Shares in excess of this limit will still pay any applicable
CDSC.
Ask
your Financial Intermediary for details. |
230
| Reinstatement Privilege |
|
|
If you redeem Investor A or Institutional Shares and buy new Investor A Shares of the same or another BlackRock Fund (equal to all or a portion of the redemption amount) within 90 days of such redemption, you will not pay a sales charge on the new purchase amount. This right may be exercised within 90 days of the redemption, provided that the Investor A Share class of that fund is currently open to new investors or the shareholder has a current account in that closed fund. Shares will be purchased at the net asset value calculated at the close of trading on the day the request is received. To exercise this privilege, the Funds must receive written notification from the shareholder of record or the Financial Intermediary of record, at the time of purchase. Investors should consult a tax adviser concerning the tax consequences of exercising this reinstatement privilege. |
Funds’ Rights
Each
Fund may:
| ∎ |
Suspend
the right of redemption if trading is halted or restricted on the NYSE or
under other emergency conditions described in the Investment Company
Act, |
| ∎ |
Postpone
the date of payment upon redemption if trading is halted or restricted on
the NYSE or under other emergency conditions described in the Investment
Company Act or if a redemption request is made before a Fund has collected
payment for the purchase of shares, |
| ∎ |
Redeem
shares for property other than cash as may be permitted under the
Investment Company Act, and |
| ∎ |
Redeem
shares involuntarily in certain cases, such as when the value of a
shareholder account falls below a specified
level. |
Note on Low Balance Accounts. Because of the
high cost of maintaining smaller shareholder accounts, BlackRock has set a
minimum balance of $500 in each Fund position you hold within your account (the
“Fund Minimum”), and may redeem the shares in your account if the net asset
value of those shares in your account falls below $500 for any reason, including
market fluctuation.
You
will be notified that the value of your account is less than the Fund Minimum
before the Fund makes any involuntary redemption. This notification will provide
you with a 90 calendar day period to make an additional investment in order to
bring the value of your account to at least $500 before the Fund makes an
involuntary redemption. This involuntary redemption will not charge any deferred
sales charge, and may not apply to accounts of certain employer-sponsored
retirement plans (not including IRAs), qualified state tuition plan (529 Plan)
accounts, and select fee-based programs at your Financial Intermediary.
Participation in Fee-Based Programs
If
you participate in certain fee‑based programs offered by BlackRock or an
affiliate of BlackRock, or by Financial Intermediaries that have agreements with
the Distributor or in certain fee‑based programs in which BlackRock
participates, you may be able to buy Institutional Shares, including by
exchanges from other share classes. Sales charges on the shares being exchanged
may be reduced or waived under certain circumstances. You generally cannot
transfer shares held through a fee‑based program into another account. Instead,
if you choose to leave the fee‑based program, you may have to redeem your shares
held through the program and purchase shares of another class, which may be
subject to distribution and service fees. This may be a taxable event and you
may pay any applicable sales charges or redemption fee. Please speak to your
Financial Intermediary for information about specific policies and procedures
applicable to your account.
Generally,
upon termination of a fee‑based program, the shares may be liquidated, or the
shares can be held in an account. In certain instances, when a shareholder
chooses to continue to hold the shares, whatever share class was held in the
program can be held after termination. Shares that have been held for less than
specified periods within the program may be subject to a fee upon redemption.
Shareholders that held Investor A or Institutional Shares in the program may be
eligible to purchase additional shares of the respective share class of a Fund,
but may be subject to upfront sales charges with respect to Investor A Shares.
Additional purchases of Institutional Shares are permitted only if you have an
existing position at the time of purchase or are otherwise eligible to purchase
Institutional Shares. Please speak to your Financial Intermediary for more
information.
Certain
Financial Intermediaries may, in connection with a change in account type (for
example, due to leaving a fee‑based program or upon termination of the fee‑based
program) or otherwise in accordance with the Financial Intermediary’s policies
and procedures, exchange the share class held in the program for another share
class of the
231
same
fund, provided that the exchanged shares are not subject to a sales charge and
the shareholder meets the eligibility requirements of the new share class.
Please speak to your Financial Intermediary for information about specific
policies and procedures applicable to your account.
Details
about the features of each fee‑based program and the relevant charges, terms and
conditions are included in the client agreement for each fee‑based program and
are available from your Financial Intermediary. Please speak to your Financial
Intermediary for more information.
Short-Term Trading Policy
The
Board has determined that the interests of long-term shareholders and a Fund’s
ability to manage its investments may be adversely affected when shares are
repeatedly bought, sold or exchanged in response to short-term market
fluctuations — also known as “market timing.” The Funds are not designed for
market timing organizations or other entities using programmed or frequent
purchases and sales or exchanges. The exchange privilege is not intended as a
vehicle for short-term trading. Excessive purchase and sale or exchange activity
may interfere with portfolio management, increase expenses and taxes and may
have an adverse effect on the performance of a Fund and its returns to
shareholders. For example, large flows of cash into and out of a Fund may
require the management team to allocate a significant amount of assets to cash
or other short-term investments or sell securities, rather than maintaining such
assets in securities selected to achieve the Fund’s investment objective.
Frequent trading may cause a Fund to sell securities at less favorable prices,
and transaction costs, such as brokerage commissions, can reduce the Fund’s
performance.
A
fund’s investment in non-U.S. securities is subject to the risk that an investor
may seek to take advantage of a delay between the change in value of the fund’s
portfolio securities and the determination of the fund’s net asset value as a
result of different closing times of U.S. and non-U.S. markets by buying or
selling fund shares at a price that does not reflect their true value. A similar
risk exists for funds that invest in securities of small capitalization
companies, securities of issuers located in emerging markets or high yield
securities (“junk bonds”) that are thinly traded and therefore may have actual
values that differ from their market prices. This short-term arbitrage activity
can reduce the return received by long-term shareholders. Each Fund will seek to
eliminate these opportunities by using fair value pricing, as described in
“Management of the Funds — Valuation of Fund Investments.”
Each
Fund discourages market timing and seeks to prevent frequent purchases and sales
or exchanges of Fund shares that it determines may be detrimental to the Fund or
long-term shareholders. The Board has approved the policies discussed below to
seek to deter market timing activity. The Board has not adopted any specific
numerical restrictions on purchases, sales and exchanges of Fund shares because
certain legitimate strategies will not result in harm to a Fund or its
shareholders.
If
as a result of its own investigation, information provided by a Financial
Intermediary or other third party, or otherwise, a Fund believes, in its sole
discretion, that your short-term trading is excessive or that you are engaging
in market timing activity, it reserves the right to reject any specific purchase
or exchange order. If a Fund rejects your purchase or exchange order, you will
not be able to execute that transaction, and the Fund will not be responsible
for any losses you therefore may suffer. For transactions placed directly with a
Fund, the Fund may consider the trading history of accounts under common
ownership or control for the purpose of enforcing these policies. Transactions
placed through the same Financial Intermediary on an omnibus basis may be deemed
part of a group for the purpose of this policy and may be rejected in whole or
in part by a Fund. Certain accounts, such as omnibus accounts and accounts at
Financial Intermediaries, however, include multiple investors and such accounts
typically provide a Fund with net purchase or redemption and exchange requests
on any given day where purchases, redemptions and exchanges of shares are netted
against one another and the identity of individual purchasers, redeemers and
exchangers whose orders are aggregated may not be known by the Fund. While each
Fund monitors for market timing activity, a Fund may be unable to identify such
activities because the netting effect in omnibus accounts often makes it more
difficult to locate and eliminate market timers from the Fund. The Distributor
has entered into agreements with respect to Financial Intermediaries that
maintain omnibus accounts with the Fund pursuant to which such Financial
Intermediaries undertake to cooperate with the Distributor in monitoring
purchase, exchange and redemption orders by their customers in order to detect
and prevent short-term or excessive trading in a Fund’s shares through such
accounts. Identification of market timers may also be limited by operational
systems and technical limitations. In the event that a Financial Intermediary is
determined by a Fund to be engaged in market timing or other improper trading
activity, the Distributor may terminate such Financial Intermediary’s agreement
with the Distributor, suspend such Financial Intermediary’s trading privileges
or take other appropriate actions.
There
is no assurance that the methods described above will prevent market timing or
other trading that may be deemed abusive.
A
Fund may from time to time use other methods that it believes are appropriate to
deter market timing or other trading activity that may be detrimental to the
Fund or long-term shareholders.
232
Fund of Funds Structure
The
Funds do not invest directly in a portfolio of securities. Instead, they invest
in certain Underlying Funds that are advised by BFA or its affiliates. Each Fund
charges for its own direct expenses, in addition to bearing a pro rata share of
the expenses charged by the Underlying Funds in which it invests.
233
Management
of the Funds
Investment Adviser
BFA,
a registered investment adviser, serves as investment adviser to each Fund and,
along with certain affiliates, serves as investment adviser to certain
Underlying Funds. The Funds may also invest in ETFs that are not advised by
BlackRock. BFA manages the investment of the Funds’ assets and provides the
Funds with investment guidance and policy direction in connection with daily
portfolio management, subject to the supervision of the Board.
BFA
is located at 400 Howard Street, San Francisco, CA 94105. BFA is an indirect
wholly-owned subsidiary of BlackRock, Inc. BlackRock International Limited
(“BIL”), a registered investment adviser organized in 1995, and BlackRock
(Singapore) Limited (“BRS” and, together with BIL, the “Sub-Advisers”), a
registered investment adviser organized in 2000, are affiliates of BFA, and each
acts as a sub-adviser for each Fund. As of March 31, 2024, BFA and its
affiliates had approximately $10.472 trillion in investment company and other
portfolio assets under management.
BFA,
along with certain affiliates, provides investment advisory services for the
Underlying Funds that differ from the investment advisory services it provides
for the Funds and receives investment advisory fees for such services to the
Underlying Funds that differ from the fees described in this Prospectus for the
Funds. In addition, BAL, along with certain affiliates, provides administration
services to certain of the Underlying Funds and, for those services, may receive
administration fees from those Underlying Funds.
For
its services to each Fund, BFA is entitled to receive an annual management fee
of 0.30% of such Fund’s average daily net assets. Prior to April 29, 2022, BFA
received an annual management fee of 0.35% of such Fund’s average daily net
assets.
BFA
and BAL have contractually agreed to reimburse each Fund for Acquired Fund Fees
and Expenses up to a maximum amount equal to the combined management fee and
administration fee of each share class of the Fund, through June 30, 2025. BFA
has contractually agreed to waive its management fees by the amount of
investment advisory fees each Fund pays to BFA indirectly through its investment
in money market funds managed by BFA or its affiliates, through June 30, 2025.
The contractual agreements may be terminated upon 90 days’ notice by a majority
of the non-interested trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Fund.
The
fees and expenses of the trustees who are not “interested persons” of the Trust
as defined in the Investment Company Act (the “Independent Trustees”), counsel
to the Independent Trustees and the independent registered public accounting
firm that provides audit services in connection with the Funds (collectively
referred to as the “Independent Expenses”) are paid directly by the
Funds. Each of BAL and BFA has contractually undertaken, through
June 30, 2034, to reimburse or provide an offsetting credit to each Fund
for such Independent Expenses. This contractual arrangement may not be
terminated prior to July 1, 2034 without the consent of the Board.
For
the fiscal year ended December 31, 2023, each Fund paid BFA management fees at
the following management fee rate, net of applicable waivers:
| Management Fee Rate (Net of Applicable Waivers) |
||||
|
BlackRock
LifePath® Dynamic
Retirement Fund |
0.06 | % | ||
|
BlackRock
LifePath® Dynamic 2025
Fund |
0.06 | % | ||
|
BlackRock
LifePath® Dynamic 2030
Fund |
0.06 | % | ||
|
BlackRock
LifePath® Dynamic 2035
Fund |
0.04 | % | ||
|
BlackRock
LifePath® Dynamic 2040
Fund |
0.04 | % | ||
|
BlackRock
LifePath® Dynamic 2045
Fund |
0.03 | % | ||
|
BlackRock
LifePath® Dynamic 2050
Fund |
0.02 | % | ||
|
BlackRock
LifePath® Dynamic 2055
Fund |
0.01 | % | ||
|
BlackRock
LifePath® Dynamic 2060
Fund |
0.00 | % | ||
|
BlackRock
LifePath® Dynamic 2065
Fund |
0.00 | % | ||
BFA
has entered into a sub-advisory agreement with each Sub-Adviser, with respect to
each Fund, under which BFA pays each Sub-Adviser for services it provides for
that portion of the Fund for which each Sub-Adviser acts as sub-adviser a fee
equal to a percentage of the management fee paid to BFA under the investment
advisory agreement with respect to each Fund.
234
A
discussion regarding the basis for the Board’s approval of the investment
advisory agreement with BFA with respect to each Fund and the sub-advisory
agreements with the Sub-Advisers with respect to each Fund is included in the
Funds’ semi-annual report for the period ended June 30,
2023.
From
time to time, a manager, analyst, or other employee of BFA or its affiliates may
express views regarding a particular asset class, company, security, industry,
or market sector. The views expressed by any such person are the views of only
that individual as of the time expressed and do not necessarily represent the
views of BFA or any other person within the BFA organization. Any such views are
subject to change at any time based upon market or other conditions and BFA
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for the Funds are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of the Funds.
Portfolio Managers
Information
regarding the portfolio managers of the Funds is set forth below. Further
information regarding the portfolio managers, including other accounts managed,
compensation, ownership of Fund shares and possible conflicts of interest, is
available in the SAI.
| Portfolio Manager | Primary Role | Since | Title and Recent Biography | |||||
| Philip Green | Jointly and primarily responsible for the day‑to‑day management of each Fund’s portfolio, including setting the Fund’s overall investment strategy and overseeing the management of the Fund. | 20161 | Managing Director of BlackRock, Inc. since 2006. | |||||
| Chris Chung, CFA | Jointly and primarily responsible for the day‑to‑day management of each Fund’s portfolio, including setting the Fund’s overall investment strategy and overseeing the management of the Fund. | 2020 | Managing Director of BlackRock, Inc. since 2021; Director of BlackRock, Inc. from 2015 to 2020; Vice President of BlackRock, Inc. from 2011 to 2014; Associate of BlackRock, Inc. from 2009 to 2010; Associate of Barclays Global Investors from 2008 to 2009; Senior Manager of American Express from 2004 to 2008; research professional at the Center for Interuniversity Research and Analysis of Organizations (CIRANO) from 2002 to 2006. | |||||
| Michael Pensky, CFA | Jointly and primarily responsible for the day-to-day management of the Fund’s portfolio, including setting the Fund’s overall investment strategy and overseeing the management of the Fund. | 2024 | Managing Director of BlackRock, Inc. since 2021; Director of BlackRock, Inc. from 2018 to 2020; Vice President of BlackRock, Inc. from 2016 to 2017; Associate of BlackRock, Inc. from 2012 to 2015. | |||||
| 1 |
Mr. Green
has been managing the LifePath Dynamic 2060 Fund since its inception in
2017 and the LifePath Dynamic 2065 Fund since its inception in
2019. |
Administrative Services
Pursuant
to an Administration Agreement between the Trust, on behalf of the Funds, and
BAL, BAL provides the following services, among others, as the Funds’
administrator:
| ∎ |
Supervises
the Funds’ administrative operations; |
| ∎ |
Provides
or causes to be provided management reporting and treasury administration
services; |
| ∎ |
Financial
reporting; |
| ∎ |
Legal,
blue sky and tax services; |
| ∎ |
Preparation
of proxy statements and shareholder reports; and |
| ∎ |
Engaging
and supervising the shareholder servicing agents on behalf of the
Funds. |
BAL
is entitled to receive fees for these services at the annual rate of 0.29% of
the average daily net assets of Investor A, Investor C and Institutional Shares
and 0.24% of the average daily net assets of Class R Shares of each Fund. In
addition to performing these services, BAL has agreed to bear all costs of
operating the Funds, other than brokerage expenses, advisory fees, any 12b-1
fees, certain fees and expenses related to the Trust’s trustees who are not
“interested persons” of the Funds or the Trust as defined in the Investment
Company Act, and their counsel, auditing fees, litigation expenses, taxes and
extraordinary expenses.
235
Prior
to April 29, 2022, BAL received fees for these services at the annual rate of
0.30% of the average daily net assets of Investor A, Investor C and
Institutional Shares and 0.25% of the average daily net assets of Class R Shares
of each Fund. Prior to March 9, 2020, BAL received fees for these services at
the annual rate of 0.35% of the average daily net assets of Investor A and
Institutional Shares, 0.40% of the average daily net assets of Investor C Shares
and 0.30% of the average daily net assets of Class R Shares of each Fund.
Conflicts of Interest
The
investment activities of BFA and its affiliates (including BlackRock, Inc. and
its subsidiaries (collectively, the “Affiliates”)), and their respective
directors, officers or employees, in the management of, or their interest in,
their own accounts and other accounts they manage, may present conflicts of
interest that could disadvantage the Funds and their shareholders.
BFA
and its Affiliates provide investment management services to other funds and
discretionary managed accounts that may follow investment programs similar to
that of the Funds. BFA and its Affiliates are involved worldwide with a broad
spectrum of financial services and asset management activities and may engage in
the ordinary course of business in activities in which their interests or the
interests of their clients may conflict with those of the Funds. BFA or one or
more Affiliates act or may act as an investor, research provider, investment
manager, commodity pool operator, commodity trading advisor, financier,
underwriter, adviser, trader, lender, index provider, agent and/or principal,
and have other direct and indirect interests in securities, currencies,
commodities, derivatives and other instruments in which the Funds may directly
or indirectly invest. The Funds may invest in securities of, or engage in other
transactions with, companies with which an Affiliate has significant debt or
equity investments or other interests. The Funds may also invest in issuances
(such as structured notes) by entities for which an Affiliate provides and is
compensated for cash management services relating to the proceeds from the sale
of such issuances. The Funds also may invest in securities of, or engage in
other transactions with, companies for which an Affiliate provides or may in the
future provide research coverage. An Affiliate may have business relationships
with, and purchase, or distribute or sell services or products from or to,
distributors, consultants or others who recommend the Funds or who engage in
transactions with or for the Funds, and may receive compensation for such
services. BFA or one or more Affiliates may engage in proprietary trading and
advise accounts and funds that have investment objectives similar to those of
the Funds and/or that engage in and compete for transactions in the same types
of securities, currencies and other instruments as the Funds. This may include
transactions in securities issued by other open-end and closed-end investment
companies (which may include investment companies that are affiliated with the
Funds and BFA, to the extent permitted under the Investment Company Act). The
trading activities of BFA and these Affiliates are carried out without reference
to positions held directly or indirectly by the Funds and may result in BFA or
an Affiliate having positions in certain securities that are senior or junior
to, or have interests different from or adverse to, the securities that are
owned by the Funds.
Neither
BFA nor any Affiliate is under any obligation to share any investment
opportunity, idea or strategy with the Funds. As a result, an Affiliate may
compete with the Funds for appropriate investment opportunities. The results of
a Fund’s investment activities, therefore, may differ from those of an Affiliate
and of other accounts managed by BFA or an Affiliate, and it is possible that a
Fund could sustain losses during periods in which one or more Affiliates and
other accounts achieve profits on their trading for proprietary or other
accounts. The opposite result is also possible.
In
addition, the Funds may, from time to time, enter into transactions in which BFA
or an Affiliate or their directors, officers or employees or other clients have
an adverse interest. Furthermore, transactions undertaken by clients advised or
managed by BFA or its Affiliates may adversely impact the Funds. Transactions by
one or more clients or BFA or its Affiliates or their directors, officers or
employees, may have the effect of diluting or otherwise disadvantaging the
values, prices or investment strategies of the Funds. The Funds’ activities may
be limited because of regulatory restrictions applicable to BFA or one or more
Affiliates and/or their internal policies designed to comply with such
restrictions.
Under
a securities lending program approved by the Board, the Trust, on behalf of each
Fund, has retained BlackRock Institutional Trust Company, N.A., an Affiliate of
BFA, to serve as the securities lending agent for the Funds to the extent that
the Funds participate in the securities lending program. For these services, the
securities lending agent will receive a fee from the Funds based on the returns
earned on the Funds’ lending activities, including investment of the cash
received as collateral for the loaned securities. In addition, one or more
Affiliates may be among the entities to which the Funds may lend its portfolio
securities under the securities lending program.
The
activities of BFA and its Affiliates and their respective directors, officers or
employees, may give rise to other conflicts of interest that could disadvantage
the Funds and their shareholders. BFA has adopted policies and procedures
designed to address these potential conflicts of interest. See the SAI for
further information.
236
Valuation of Fund Investments
When
you buy shares, you pay the net asset value, plus any applicable sales charge.
This is the offering price. Shares are also redeemed at their net asset value,
minus any applicable redemption fee. The net asset value used in determining
your share price is the next one calculated after your purchase or redemption
order is received. The net asset value of each class of shares normally is
determined once daily Monday through Friday, generally as of the close of
regular trading hours of the New York Stock Exchange (“NYSE”) (normally 4:00
p.m., Eastern time), on each day that the NYSE is open for trading, based on
prices at the time of closing, provided that any Fund assets or liabilities
denominated in currencies other than the U.S. dollar are translated into U.S.
dollars at the prevailing market rates on the date of valuation as quoted by one
or more data service providers. The net asset value of shares is calculated by
dividing the value of the net assets of each class of shares (i.e., the value of
its total assets less total liabilities) by the total number of outstanding
shares of the class, generally rounded to the nearest cent.
Generally,
Institutional Shares will have the highest net asset value because that class
has the lowest expenses. Investor A Shares will have a higher net asset value
than Investor C or Class R Shares, and Class R Shares will have a higher net
asset value than Investor C Shares. Also, dividends paid on Investor A,
Institutional and Class R Shares will generally be higher than dividends paid on
Investor C Shares because Investor A, Institutional and Class R Shares have
lower expenses.
The
value of the securities and other assets and liabilities held by a Fund are
determined pursuant to BFA’s valuation policies and procedures. BFA has been
designated by the Board as the valuation designee for a Fund pursuant to
Rule 2a-5 under the Investment Company Act.
Equity
securities and other equity instruments for which market quotations are readily
available are valued at market value, which is generally determined using the
last reported official closing price or, if a reported closing price is not
available, the last traded price on the exchange or market on which the security
or instrument is primarily traded at the time of valuation. Shares of underlying
open-end funds (including money market funds) are valued at net asset value.
Shares of underlying exchange-traded closed-end funds or other ETFs are valued
at their most recent closing price. Each Fund values fixed income portfolio
securities using last available bid prices or current market quotations provided
by dealers or prices (including evaluated prices) supplied by the Fund’s
approved independent third-party pricing services, each in accordance with BFA’s
valuation policies and procedures. Pricing services may use matrix pricing or
valuation models that utilize certain inputs and assumptions to derive values.
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 may trade at
lower prices than institutional round lots. An amortized cost method of
valuation may be used with respect to debt obligations with 60 days or less
remaining to maturity unless BFA determines in good faith that such method does
not represent fair value.
Generally,
trading in non-U.S. securities, U.S. government securities, money market
instruments and certain fixed-income securities is substantially completed each
day at various times prior to the close of business on the NYSE. The values of
such securities used in computing the net asset value of a Fund’s shares are
determined as of such times.
When
market quotations are not readily available or are believed by BFA to be
unreliable, BFA will fair value a Fund’s investments in accordance with its
policies and procedures. BFA may conclude that a market quotation is not readily
available or is unreliable if a security or other asset or liability does not
have a price source due to its lack of trading or other reasons, if a market
quotation differs significantly from recent price quotations or otherwise no
longer appears to reflect fair value, where the security or other asset or
liability is thinly traded, when there is a significant event subsequent to the
most recent market quotation, or if the trading market on which a security is
listed is suspended or closed and no appropriate alternative trading market is
available. A “significant event” is deemed to occur if BFA determines, in its
reasonable business judgment prior to or at the time of pricing a Fund’s assets
or liabilities, that the event is likely to cause a material change to the
closing market price of one or more assets held by, or liabilities of, the
Fund.
For
certain foreign assets, a third-party vendor supplies evaluated, systematic fair
value pricing based upon the movement of a proprietary multi-factor model after
the relevant foreign markets have closed. This systematic fair value pricing
methodology is designed to correlate the prices of foreign assets following the
close of the local markets to the price that might have prevailed as of a Fund’s
pricing time.
Fair
value represents a good faith approximation of the value of an asset or
liability. The fair value of an asset or liability held by a Fund is the amount
a Fund might reasonably expect to receive from the current sale of that asset or
the cost to extinguish that liability in an arm’s-length transaction. Valuing a
Fund’s investments using fair value pricing will result in prices that may
differ from current market valuations and that may not be the prices at which
those investments could have been sold during the period in which the particular
fair values were used. Use of fair value prices and certain current market
valuations could result in a difference between the prices used to calculate a
Fund’s net asset value and the prices used by the Underlying Index, which, in
turn, could result in a difference between a Fund’s performance and the
performance of the Underlying Index.
237
A
Fund may accept orders from certain authorized Financial Intermediaries or their
designees. A Fund will be deemed to receive an order when accepted by the
Financial Intermediary or designee, and the order will receive the net asset
value next computed by the Fund after such acceptance. If the payment for a
purchase order is not made by a designated later time, the order will be
canceled and the Financial Intermediary could be held liable for any
losses.
Dividends, Distributions and Taxes
| BUYING A DIVIDEND |
| Unless your investment is in a tax-deferred account, you may want to avoid buying shares shortly before each Fund pays a dividend. The reason? If you buy shares when a Fund has declared but not yet distributed ordinary income or capital gains, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable dividend. Before investing you may want to consult your tax adviser. |
Each
Fund will distribute net investment income, if any, and net realized capital
gains, if any, at least annually. Each Fund may also pay a special distribution
at the end of the calendar year to comply with federal tax requirements.
Dividends may be reinvested automatically in shares of a Fund at net asset value
or may be taken in cash. If you would like to receive dividends in cash, contact
your Financial Intermediary or the applicable Fund.
Your
tax consequences from an investment in a Fund will depend on whether you have
invested through a qualified tax-exempt plan described in section 401(a) of the
Internal Revenue Code (a “Qualified Plan”).
Investments Through a Qualified Plan
Special
tax rules apply to investments made through Qualified Plans. If you are invested
through a Qualified Plan (and Fund shares are not “debt-financed property” to
the plan), then you will not be subject to U.S. federal income tax on the
dividends paid by a Fund or the gain realized from a redemption or exchange of
Fund shares until you withdraw or receive distributions from the plan.
Distributions you receive from the Qualified Plan may be subject to U.S. federal
withholding tax depending on the kind of payment you receive.
Investments Not Made Through Qualified Plans
If
you are not invested through a Qualified Plan, you will generally pay tax on
dividends from a Fund whether you receive them in cash or additional shares. If
you redeem Fund shares or exchange them for shares of another fund, you
generally will be treated as having sold your shares and any gain on the
transaction may be subject to tax. Fund distributions derived from qualified
dividend income, which consists of dividends received from U.S. corporations and
qualifying foreign corporations, and long-term capital gains, are eligible for
taxation at a maximum rate of 15% or 20% for individuals, depending on whether
their income exceeds certain threshold amounts, which are adjusted annually for
inflation.
A
3.8% Medicare tax is imposed on the net investment income (which includes, but
is not limited to, interest, dividends and net gain from investments) of U.S.
individuals with income exceeding $200,000, or $250,000 if married filing
jointly, and of trusts and estates.
Your
dividends and redemption proceeds will be subject to backup withholding tax if
you have not provided a taxpayer identification number or social security number
or the number you have provided is incorrect.
Special Considerations for Non-U.S. Persons
If
you are not invested through a Qualified Plan and you are neither a tax resident
nor a citizen of the United States or if you are a foreign entity (other than a
pass-through entity to the extent owned by U.S. persons), a Fund’s ordinary
income dividends will generally be subject to a 30% U.S. withholding tax, unless
a lower treaty rate applies. However, certain distributions paid to a foreign
shareholder and reported by a Fund as capital gain dividends, interest-related
dividends or short-term capital gain dividends may be eligible for an exemption
from U.S. withholding tax.
Separately,
a 30% withholding tax is currently imposed on U.S.-source dividends, interest
and other income items paid to (i) certain foreign financial institutions and
investment funds, and (ii) certain other foreign entities. To avoid withholding,
foreign financial institutions and investment funds will generally either need
to (a) collect and report to the IRS detailed information identifying their U.S.
accounts and U.S. account holders, comply with due diligence procedures for
identifying U.S. accounts and withhold tax on certain payments made to
noncomplying foreign entities and account holders or (b) if an intergovernmental
agreement is entered into and implementing legislation is adopted, comply with
the agreement and legislation. Other foreign entities will generally either need
to provide detailed information identifying each substantial U.S. owner or
certify there are no such owners.
This
section summarizes some of the consequences under current federal tax law of an
investment in a Fund. It is not a substitute for individualized tax advice.
Consult your tax adviser about the potential tax consequences of an investment
in a Fund under all applicable tax laws.
238
Financial Highlights
The
financial highlights tables in this section are intended to help investors
understand a Fund’s financial performance for the periods shown. Certain
information reflects the financial results for a single Fund share. The total
returns in the tables represent the rate of return that an investor would have
earned (or lost) on an investment in a Fund (assuming reinvestment of all
dividends and/or distributions). The information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund’s audited
financial statements, is included in the Funds’ combined annual report. The
Funds’ combined annual report is available upon request.
The
information for the Funds for the fiscal periods prior to March 9, 2020 reflects
the “master-feeder” structure previously in place during that time.
| BlackRock LifePath® Dynamic Retirement Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 9.17 | $ | 10.89 | $ | 11.68 | $ | 11.04 | $ | 9.69 | ||||||||||||
|
Net
investment income(a)
|
0.33 | 0.20 | 0.16 | 0.19 | 0.28 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
0.78 | (1.81 | ) | 0.63 | 1.20 | 1.35 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.11 | (1.61 | ) | 0.79 | 1.39 | 1.63 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.36 | ) | (0.01 | ) | (0.43 | ) | (0.22 | ) | (0.19 | ) | ||||||||||||
|
From
net realized gain |
(0.43 | ) | (0.04 | ) | (1.15 | ) | (0.53 | ) | (0.09 | ) | ||||||||||||
|
Return
of capital |
— | (0.06 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.79 | ) | (0.11 | ) | (1.58 | ) | (0.75 | ) | (0.28 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 9.49 | $ | 9.17 | $ | 10.89 | $ | 11.68 | $ | 11.04 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
12.27 | % | (14.85 | )% | 6.88 | % | 12.82 | % | 16.91 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.70 | % | 0.72 | % | 0.77 | % | 0.73 | % | 0.57 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.46 | % | 0.51 | % | 0.55 | % | 0.56 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
3.40 | % | 2.03 | % | 1.34 | % | 1.68 | % | 2.61 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 34,048 | $ | 36,438 | $ | 49,943 | $ | 59,201 | $ | 99,249 | ||||||||||||
|
Portfolio
turnover rate |
53 | %(e) | 7 | %(e) | 2 | %(e) | 43 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
239
Financial Highlights (continued)
| BlackRock LifePath® Dynamic Retirement Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 7.65 | $ | 9.12 | $ | 10.03 | $ | 9.58 | $ | 8.45 | ||||||||||||
|
Net
investment income(a)
|
0.25 | 0.14 | 0.11 | 0.13 | 0.23 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
0.66 | (1.51 | ) | 0.54 | 1.05 | 1.16 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
0.91 | (1.37 | ) | 0.65 | 1.18 | 1.39 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.35 | ) | (0.01 | ) | (0.40 | ) | (0.20 | ) | (0.17 | ) | ||||||||||||
|
From
net realized gain |
(0.43 | ) | (0.04 | ) | (1.16 | ) | (0.53 | ) | (0.09 | ) | ||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.78 | ) | (0.10 | ) | (1.56 | ) | (0.73 | ) | (0.26 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 7.78 | $ | 7.65 | $ | 9.12 | $ | 10.03 | $ | 9.58 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
12.00 | % | (15.08 | )% | 6.61 | % | 12.56 | % | 16.56 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.95 | % | 0.97 | % | 1.02 | % | 0.98 | % | 0.82 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.71 | % | 0.76 | % | 0.80 | % | 0.81 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
3.15 | % | 1.77 | % | 1.09 | % | 1.40 | % | 2.43 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 111,979 | $ | 116,173 | $ | 164,481 | $ | 190,948 | $ | 234,757 | ||||||||||||
|
Portfolio
turnover rate |
53 | %(e) | 7 | %(e) | 2 | %(e) | 43 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
240
Financial Highlights (continued)
| BlackRock LifePath® Dynamic Retirement Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 8.95 | $ | 10.69 | $ | 11.50 | $ | 10.87 | $ | 9.57 | ||||||||||||
|
Net
investment income(a)
|
0.22 | 0.10 | 0.04 | 0.06 | 0.18 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
0.78 | (1.78 | ) | 0.63 | 1.20 | 1.30 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.00 | (1.68 | ) | 0.67 | 1.26 | 1.48 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.27 | ) | — | (0.33 | ) | (0.10 | ) | (0.09 | ) | |||||||||||||
|
From
net realized gain |
(0.43 | ) | (0.04 | ) | (1.15 | ) | (0.53 | ) | (0.09 | ) | ||||||||||||
|
Return
of capital |
— | (0.02 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.70 | ) | (0.06 | ) | (1.48 | ) | (0.63 | ) | (0.18 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 9.25 | $ | 8.95 | $ | 10.69 | $ | 11.50 | $ | 10.87 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
11.22 | % | (15.75 | )% | 5.83 | % | 11.72 | % | 15.54 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.70 | % | 1.72 | % | 1.77 | % | 1.73 | % | 1.62 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.46 | % | 1.51 | % | 1.55 | % | 1.57 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
2.35 | % | 1.02 | % | 0.35 | % | 0.55 | % | 1.66 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,330 | $ | 1,585 | $ | 2,249 | $ | 2,303 | $ | 3,846 | ||||||||||||
|
Portfolio
turnover rate |
53 | %(e) | 7 | %(e) | 2 | %(e) | 43 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
241
Financial Highlights (continued)
| BlackRock LifePath® Dynamic Retirement Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 9.02 | $ | 10.74 | $ | 11.54 | $ | 10.91 | $ | 9.60 | ||||||||||||
|
Net
investment income(a)
|
0.28 | 0.16 | 0.11 | 0.14 | 0.23 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
0.77 | (1.79 | ) | 0.62 | 1.19 | 1.32 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.05 | (1.63 | ) | 0.73 | 1.33 | 1.55 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.32 | ) | — | (0.38 | ) | (0.17 | ) | (0.15 | ) | |||||||||||||
|
From
net realized gain |
(0.43 | ) | (0.04 | ) | (1.15 | ) | (0.53 | ) | (0.09 | ) | ||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.75 | ) | (0.09 | ) | (1.53 | ) | (0.70 | ) | (0.24 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 9.32 | $ | 9.02 | $ | 10.74 | $ | 11.54 | $ | 10.91 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
11.76 | % | (15.25 | )% | 6.41 | % | 12.41 | % | 16.24 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.15 | % | 1.17 | % | 1.22 | % | 1.19 | % | 1.02 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.91 | % | 0.95 | % | 1.00 | % | 1.01 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
2.99 | % | 1.66 | % | 0.91 | % | 1.29 | % | 2.19 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 5,540 | $ | 5,292 | $ | 6,183 | $ | 6,360 | $ | 5,291 | ||||||||||||
|
Portfolio
turnover rate |
53 | %(e) | 7 | %(e) | 2 | %(e) | 43 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
242
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2025 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 12.05 | $ | 14.43 | $ | 14.72 | $ | 13.42 | $ | 11.81 | ||||||||||||
|
Net
investment income(a)
|
0.44 | 0.24 | 0.20 | 0.22 | 0.30 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.12 | (2.44 | ) | 1.08 | 1.47 | 1.99 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.56 | (2.20 | ) | 1.28 | 1.69 | 2.29 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.49 | ) | (0.05 | ) | (0.58 | ) | (0.26 | ) | (0.27 | ) | ||||||||||||
|
From
net realized gain |
— | (0.04 | ) | (0.99 | ) | (0.13 | ) | (0.41 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.49 | ) | (0.18 | ) | (1.57 | ) | (0.39 | ) | (0.68 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.12 | $ | 12.05 | $ | 14.43 | $ | 14.72 | $ | 13.42 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
13.07 | % | (15.28 | )% | 8.82 | % | 12.87 | % | 19.46 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.70 | % | 0.75 | % | 0.80 | % | 0.78 | % | 0.57 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.46 | % | 0.50 | % | 0.54 | % | 0.55 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
3.45 | % | 1.87 | % | 1.29 | % | 1.65 | % | 2.32 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 7,855 | $ | 6,563 | $ | 11,872 | $ | 10,690 | $ | 2,908 | ||||||||||||
|
Portfolio
turnover rate |
49 | %(e) | 15 | %(e) | 6 | %(e) | 45 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
243
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2025 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.90 | $ | 14.28 | $ | 14.58 | $ | 13.29 | $ | 11.70 | ||||||||||||
|
Net
investment income(a)
|
0.39 | 0.21 | 0.15 | 0.18 | 0.26 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.12 | (2.43 | ) | 1.08 | 1.46 | 1.98 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.51 | (2.22 | ) | 1.23 | 1.64 | 2.24 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.46 | ) | (0.03 | ) | (0.54 | ) | (0.22 | ) | (0.24 | ) | ||||||||||||
|
From
net realized gain |
— | (0.04 | ) | (0.99 | ) | (0.13 | ) | (0.41 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.46 | ) | (0.16 | ) | (1.53 | ) | (0.35 | ) | (0.65 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.95 | $ | 11.90 | $ | 14.28 | $ | 14.58 | $ | 13.29 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
12.79 | % | (15.54 | )% | 8.56 | % | 12.60 | % | 19.16 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.95 | % | 1.00 | % | 1.05 | % | 1.01 | % | 0.82 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.71 | % | 0.75 | % | 0.79 | % | 0.80 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
3.14 | % | 1.71 | % | 1.02 | % | 1.34 | % | 1.97 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 18,732 | $ | 18,335 | $ | 23,788 | $ | 24,518 | $ | 23,298 | ||||||||||||
|
Portfolio
turnover rate |
49 | %(e) | 15 | %(e) | 6 | %(e) | 45 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
244
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2025 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.76 | $ | 14.16 | $ | 14.49 | $ | 13.20 | $ | 11.63 | ||||||||||||
|
Net
investment income(a)
|
0.28 | 0.12 | 0.04 | 0.06 | 0.16 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.12 | (2.40 | ) | 1.07 | 1.47 | 1.96 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.40 | (2.28 | ) | 1.11 | 1.53 | 2.12 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.35 | ) | — | (0.45 | ) | (0.11 | ) | (0.14 | ) | |||||||||||||
|
From
net realized gain |
— | (0.04 | ) | (0.99 | ) | (0.13 | ) | (0.41 | ) | |||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.35 | ) | (0.12 | ) | (1.44 | ) | (0.24 | ) | (0.55 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.81 | $ | 11.76 | $ | 14.16 | $ | 14.49 | $ | 13.20 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
11.98 | % | (16.12 | )% | 7.70 | % | 11.76 | % | 18.25 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.71 | % | 1.75 | % | 1.80 | % | 1.77 | % | 1.62 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.47 | % | 1.50 | % | 1.54 | % | 1.56 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
2.25 | % | 0.97 | % | 0.28 | % | 0.49 | % | 1.25 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,401 | $ | 2,170 | $ | 2,763 | $ | 2,610 | $ | 3,416 | ||||||||||||
|
Portfolio
turnover rate |
49 | %(e) | 15 | %(e) | 6 | %(e) | 45 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
245
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2025 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.87 | $ | 14.25 | $ | 14.56 | $ | 13.26 | $ | 11.68 | ||||||||||||
|
Net
investment income(a)
|
0.38 | 0.20 | 0.13 | 0.14 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.10 | (2.43 | ) | 1.07 | 1.48 | 1.97 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.48 | (2.23 | ) | 1.20 | 1.62 | 2.21 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.44 | ) | (0.02 | ) | (0.52 | ) | (0.19 | ) | (0.22 | ) | ||||||||||||
|
From
net realized gain |
— | (0.04 | ) | (0.99 | ) | (0.13 | ) | (0.41 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.44 | ) | (0.15 | ) | (1.51 | ) | (0.32 | ) | (0.63 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.91 | $ | 11.87 | $ | 14.25 | $ | 14.56 | $ | 13.26 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
12.56 | % | (15.65 | )% | 8.30 | % | 12.44 | % | 18.91 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.15 | % | 1.20 | % | 1.25 | % | 1.20 | % | 1.02 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.91 | % | 0.95 | % | 0.99 | % | 1.00 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
3.04 | % | 1.59 | % | 0.85 | % | 1.05 | % | 1.82 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 5,794 | $ | 3,754 | $ | 3,875 | $ | 3,559 | $ | 5,479 | ||||||||||||
|
Portfolio
turnover rate |
49 | %(e) | 15 | %(e) | 6 | %(e) | 45 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
246
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2030 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.64 | $ | 14.10 | $ | 14.80 | $ | 13.65 | $ | 11.90 | ||||||||||||
|
Net
investment income(a)
|
0.39 | 0.23 | 0.19 | 0.20 | 0.29 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.38 | (2.46 | ) | 1.48 | 1.52 | 2.32 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.77 | (2.23 | ) | 1.67 | 1.72 | 2.61 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.41 | ) | (0.10 | ) | (0.75 | ) | (0.23 | ) | (0.30 | ) | ||||||||||||
|
From
net realized gain |
— | (0.06 | ) | (1.62 | ) | (0.34 | ) | (0.56 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.41 | ) | (0.23 | ) | (2.37 | ) | (0.57 | ) | (0.86 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.00 | $ | 11.64 | $ | 14.10 | $ | 14.80 | $ | 13.65 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
15.38 | % | (15.83 | )% | 11.46 | % | 13.05 | % | 22.07 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.71 | % | 0.74 | % | 0.79 | % | 0.75 | % | 0.56 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.46 | % | 0.49 | % | 0.53 | % | 0.54 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
3.16 | % | 1.88 | % | 1.25 | % | 1.51 | % | 2.18 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 45,102 | $ | 40,746 | $ | 55,606 | $ | 58,905 | $ | 73,530 | ||||||||||||
|
Portfolio
turnover rate |
33 | %(e) | 11 | %(e) | 5 | %(e) | 38 | %(f) | 32 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
247
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2030 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 10.96 | $ | 13.30 | $ | 14.09 | $ | 13.02 | $ | 11.39 | ||||||||||||
|
Net
investment income(a)
|
0.33 | 0.19 | 0.15 | 0.16 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.29 | (2.31 | ) | 1.40 | 1.45 | 2.22 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.62 | (2.12 | ) | 1.55 | 1.61 | 2.46 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.38 | ) | (0.09 | ) | (0.72 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||
|
From
net realized gain |
— | (0.06 | ) | (1.62 | ) | (0.34 | ) | (0.56 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.38 | ) | (0.22 | ) | (2.34 | ) | (0.54 | ) | (0.83 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.20 | $ | 10.96 | $ | 13.30 | $ | 14.09 | $ | 13.02 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
14.97 | % | (15.98 | )% | 11.13 | % | 12.79 | % | 21.72 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.96 | % | 0.99 | % | 1.04 | % | 1.00 | % | 0.81 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.71 | % | 0.74 | % | 0.78 | % | 0.79 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
2.88 | % | 1.64 | % | 1.00 | % | 1.24 | % | 1.89 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 132,514 | $ | 133,740 | $ | 172,296 | $ | 183,497 | $ | 212,100 | ||||||||||||
|
Portfolio
turnover rate |
33 | %(e) | 11 | %(e) | 5 | %(e) | 38 | %(f) | 32 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
248
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2030 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.26 | $ | 13.71 | $ | 14.47 | $ | 13.34 | $ | 11.65 | ||||||||||||
|
Net
investment income(a)
|
0.25 | 0.11 | 0.04 | 0.06 | 0.14 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.33 | (2.38 | ) | 1.43 | 1.50 | 2.27 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.58 | (2.27 | ) | 1.47 | 1.56 | 2.41 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.29 | ) | (0.05 | ) | (0.61 | ) | (0.09 | ) | (0.16 | ) | ||||||||||||
|
From
net realized gain |
— | (0.06 | ) | (1.62 | ) | (0.34 | ) | (0.56 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.29 | ) | (0.18 | ) | (2.23 | ) | (0.43 | ) | (0.72 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.55 | $ | 11.26 | $ | 13.71 | $ | 14.47 | $ | 13.34 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
14.10 | % | (16.62 | )% | 10.29 | % | 12.00 | % | 20.76 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.71 | % | 1.74 | % | 1.79 | % | 1.76 | % | 1.61 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.46 | % | 1.49 | % | 1.53 | % | 1.55 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
2.07 | % | 0.91 | % | 0.23 | % | 0.44 | % | 1.08 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,972 | $ | 2,359 | $ | 2,698 | $ | 2,925 | $ | 3,746 | ||||||||||||
|
Portfolio
turnover rate |
33 | %(e) | 11 | %(e) | 5 | %(e) | 38 | %(f) | 32 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
249
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2030 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.41 | $ | 13.86 | $ | 14.59 | $ | 13.46 | $ | 11.76 | ||||||||||||
|
Net
investment income(a)
|
0.33 | 0.18 | 0.13 | 0.14 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.35 | (2.42 | ) | 1.45 | 1.50 | 2.27 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
1.68 | (2.24 | ) | 1.58 | 1.64 | 2.51 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.36 | ) | (0.08 | ) | (0.69 | ) | (0.17 | ) | (0.25 | ) | ||||||||||||
|
From
net realized gain |
— | (0.06 | ) | (1.62 | ) | (0.34 | ) | (0.56 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.36 | ) | (0.21 | ) | (2.31 | ) | (0.51 | ) | (0.81 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 12.73 | $ | 11.41 | $ | 13.86 | $ | 14.59 | $ | 13.46 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
14.85 | % | (16.21 | )% | 10.93 | % | 12.58 | % | 21.44 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.16 | % | 1.19 | % | 1.24 | % | 1.20 | % | 1.01 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.91 | % | 0.94 | % | 0.98 | % | 0.99 | % | 1.01 | % | ||||||||||||
|
Net
investment income |
2.75 | % | 1.50 | % | 0.84 | % | 1.10 | % | 1.78 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 6,778 | $ | 5,157 | $ | 5,389 | $ | 4,434 | $ | 4,646 | ||||||||||||
|
Portfolio
turnover rate |
33 | %(e) | 11 | %(e) | 5 | %(e) | 38 | %(f) | 32 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
250
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2035 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 13.19 | $ | 16.13 | $ | 15.92 | $ | 14.34 | $ | 12.21 | ||||||||||||
|
Net
investment income(a)
|
0.43 | 0.25 | 0.20 | 0.22 | 0.30 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.83 | (2.91 | ) | 1.97 | 1.71 | 2.58 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.26 | (2.66 | ) | 2.17 | 1.93 | 2.88 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.48 | ) | (0.10 | ) | (0.85 | ) | (0.23 | ) | (0.30 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (1.11 | ) | (0.12 | ) | (0.45 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.48 | ) | (0.28 | ) | (1.96 | ) | (0.35 | ) | (0.75 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 14.97 | $ | 13.19 | $ | 16.13 | $ | 15.92 | $ | 14.34 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
17.25 | % | (16.56 | )% | 13.76 | % | 13.82 | % | 23.66 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.73 | % | 0.76 | % | 0.82 | % | 0.80 | % | 0.57 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.48 | % | 0.48 | % | 0.52 | % | 0.54 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
3.04 | % | 1.80 | % | 1.19 | % | 1.55 | % | 2.20 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 13,914 | $ | 10,486 | $ | 12,898 | $ | 11,677 | $ | 4,004 | ||||||||||||
|
Portfolio
turnover rate |
19 | %(e) | 14 | %(e) | 3 | %(e) | 29 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
251
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2035 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 13.10 | $ | 16.05 | $ | 15.85 | $ | 14.27 | $ | 12.15 | ||||||||||||
|
Net
investment income(a)
|
0.39 | 0.22 | 0.16 | 0.16 | 0.25 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.82 | (2.91 | ) | 1.96 | 1.73 | 2.58 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.21 | (2.69 | ) | 2.12 | 1.89 | 2.83 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.44 | ) | (0.08 | ) | (0.81 | ) | (0.19 | ) | (0.26 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (1.11 | ) | (0.12 | ) | (0.45 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.44 | ) | (0.26 | ) | (1.92 | ) | (0.31 | ) | (0.71 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 14.87 | $ | 13.10 | $ | 16.05 | $ | 15.85 | $ | 14.27 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
17.00 | % | (16.79 | )% | 13.46 | % | 13.55 | % | 23.37 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.99 | % | 1.01 | % | 1.07 | % | 1.03 | % | 0.82 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.73 | % | 0.73 | % | 0.77 | % | 0.79 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
2.77 | % | 1.57 | % | 0.93 | % | 1.18 | % | 1.85 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 30,565 | $ | 24,670 | $ | 26,304 | $ | 28,189 | $ | 28,656 | ||||||||||||
|
Portfolio
turnover rate |
19 | %(e) | 14 | %(e) | 3 | %(e) | 29 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
252
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2035 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 12.85 | $ | 15.80 | $ | 15.67 | $ | 14.11 | $ | 12.02 | ||||||||||||
|
Net
investment income(a)
|
0.27 | 0.11 | 0.03 | 0.06 | 0.14 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.79 | (2.85 | ) | 1.93 | 1.70 | 2.56 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.06 | (2.74 | ) | 1.96 | 1.76 | 2.70 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.33 | ) | (0.03 | ) | (0.72 | ) | (0.08 | ) | (0.16 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (1.11 | ) | (0.12 | ) | (0.45 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.33 | ) | (0.21 | ) | (1.83 | ) | (0.20 | ) | (0.61 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 14.58 | $ | 12.85 | $ | 15.80 | $ | 15.67 | $ | 14.11 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
16.12 | % | (17.38 | )% | 12.56 | % | 12.68 | % | 22.43 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.74 | % | 1.76 | % | 1.82 | % | 1.79 | % | 1.62 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.49 | % | 1.48 | % | 1.52 | % | 1.55 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
1.95 | % | 0.80 | % | 0.20 | % | 0.42 | % | 1.07 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 2,768 | $ | 3,066 | $ | 3,637 | $ | 3,123 | $ | 3,173 | ||||||||||||
|
Portfolio
turnover rate |
19 | %(e) | 14 | %(e) | 3 | %(e) | 29 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
253
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2035 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 13.08 | $ | 16.03 | $ | 15.85 | $ | 14.26 | $ | 12.15 | ||||||||||||
|
Net
investment income(a)
|
0.36 | 0.19 | 0.13 | 0.13 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.81 | (2.89 | ) | 1.95 | 1.73 | 2.57 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.17 | (2.70 | ) | 2.08 | 1.86 | 2.81 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.42 | ) | (0.07 | ) | (0.79 | ) | (0.15 | ) | (0.25 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (1.11 | ) | (0.12 | ) | (0.45 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.42 | ) | (0.25 | ) | (1.90 | ) | (0.27 | ) | (0.70 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 14.83 | $ | 13.08 | $ | 16.03 | $ | 15.85 | $ | 14.26 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
16.69 | % | (16.91 | )% | 13.19 | % | 13.33 | % | 23.15 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.18 | % | 1.21 | % | 1.27 | % | 1.21 | % | 1.02 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.93 | % | 0.93 | % | 0.97 | % | 0.99 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
2.60 | % | 1.40 | % | 0.77 | % | 0.91 | % | 1.71 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 5,775 | $ | 4,143 | $ | 3,687 | $ | 2,620 | $ | 5,541 | ||||||||||||
|
Portfolio
turnover rate |
19 | %(e) | 14 | %(e) | 3 | %(e) | 29 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
254
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2040 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.63 | $ | 18.02 | $ | 18.74 | $ | 17.22 | $ | 14.62 | ||||||||||||
|
Net
investment income(a)
|
0.44 | 0.26 | 0.23 | 0.23 | 0.35 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.34 | (3.33 | ) | 2.73 | 2.09 | 3.39 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.78 | (3.07 | ) | 2.96 | 2.32 | 3.74 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.56 | ) | (0.13 | ) | (1.29 | ) | (0.24 | ) | (0.37 | ) | ||||||||||||
|
From
net realized gain |
(0.24 | ) | (0.11 | ) | (2.39 | ) | (0.56 | ) | (0.77 | ) | ||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.80 | ) | (0.32 | ) | (3.68 | ) | (0.80 | ) | (1.14 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.61 | $ | 14.63 | $ | 18.02 | $ | 18.74 | $ | 17.22 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
19.15 | % | (17.09 | )% | 16.04 | % | 13.98 | % | 25.72 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.75 | % | 0.76 | % | 0.81 | % | 0.77 | % | 0.55 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.49 | % | 0.47 | % | 0.52 | % | 0.53 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
2.81 | % | 1.67 | % | 1.13 | % | 1.41 | % | 2.10 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 48,906 | $ | 41,098 | $ | 54,509 | $ | 59,328 | $ | 60,508 | ||||||||||||
|
Portfolio
turnover rate |
11 | %(e) | 13 | %(e) | 6 | %(e) | 39 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
255
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2040 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 12.65 | $ | 15.66 | $ | 16.71 | $ | 15.44 | $ | 13.22 | ||||||||||||
|
Net
investment income(a)
|
0.35 | 0.19 | 0.16 | 0.17 | 0.27 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.02 | (2.89 | ) | 2.45 | 1.87 | 3.06 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.37 | (2.70 | ) | 2.61 | 2.04 | 3.33 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.53 | ) | (0.13 | ) | (1.26 | ) | (0.21 | ) | (0.34 | ) | ||||||||||||
|
From
net realized gain |
(0.24 | ) | (0.11 | ) | (2.40 | ) | (0.56 | ) | (0.77 | ) | ||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.77 | ) | (0.31 | ) | (3.66 | ) | (0.77 | ) | (1.11 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 14.25 | $ | 12.65 | $ | 15.66 | $ | 16.71 | $ | 15.44 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
18.90 | % | (17.32 | )% | 15.84 | % | 13.72 | % | 25.29 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.00 | % | 1.01 | % | 1.06 | % | 1.02 | % | 0.80 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.74 | % | 0.72 | % | 0.77 | % | 0.78 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
2.54 | % | 1.43 | % | 0.89 | % | 1.14 | % | 1.81 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 134,232 | $ | 121,680 | $ | 153,955 | $ | 157,613 | $ | 173,103 | ||||||||||||
|
Portfolio
turnover rate |
11 | %(e) | 13 | %(e) | 6 | %(e) | 39 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
256
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2040 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.17 | $ | 17.56 | $ | 18.38 | $ | 16.89 | $ | 14.37 | ||||||||||||
|
Net
investment income(a)
|
0.28 | 0.11 | 0.03 | 0.05 | 0.17 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.26 | (3.25 | ) | 2.69 | 2.06 | 3.32 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.54 | (3.14 | ) | 2.72 | 2.11 | 3.49 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.41 | ) | (0.06 | ) | (1.15 | ) | (0.06 | ) | (0.20 | ) | ||||||||||||
|
From
net realized gain |
(0.24 | ) | (0.11 | ) | (2.39 | ) | (0.56 | ) | (0.77 | ) | ||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.65 | ) | (0.25 | ) | (3.54 | ) | (0.62 | ) | (0.97 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.06 | $ | 14.17 | $ | 17.56 | $ | 18.38 | $ | 16.89 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
18.00 | % | (17.94 | )% | 14.97 | % | 12.80 | % | 24.35 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.75 | % | 1.76 | % | 1.81 | % | 1.77 | % | 1.60 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.49 | % | 1.47 | % | 1.52 | % | 1.55 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
1.82 | % | 0.71 | % | 0.15 | % | 0.32 | % | 1.05 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 2,625 | $ | 2,210 | $ | 2,486 | $ | 2,325 | $ | 3,276 | ||||||||||||
|
Portfolio
turnover rate |
11 | %(e) | 13 | %(e) | 6 | %(e) | 39 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
257
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2040 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.35 | $ | 17.73 | $ | 18.51 | $ | 17.02 | $ | 14.48 | ||||||||||||
|
Net
investment income(a)
|
0.37 | 0.19 | 0.14 | 0.16 | 0.28 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.29 | (3.28 | ) | 2.70 | 2.06 | 3.34 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.66 | (3.09 | ) | 2.84 | 2.22 | 3.62 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.49 | ) | (0.10 | ) | (1.23 | ) | (0.17 | ) | (0.31 | ) | ||||||||||||
|
From
net realized gain |
(0.24 | ) | (0.11 | ) | (2.39 | ) | (0.56 | ) | (0.77 | ) | ||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.73 | ) | (0.29 | ) | (3.62 | ) | (0.73 | ) | (1.08 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.28 | $ | 14.35 | $ | 17.73 | $ | 18.51 | $ | 17.02 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
18.68 | % | (17.48 | )% | 15.55 | % | 13.45 | % | 25.10 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.20 | % | 1.21 | % | 1.26 | % | 1.21 | % | 1.01 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.94 | % | 0.92 | % | 0.97 | % | 0.98 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
2.39 | % | 1.28 | % | 0.72 | % | 0.96 | % | 1.70 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 6,203 | $ | 4,880 | $ | 4,977 | $ | 3,946 | $ | 4,005 | ||||||||||||
|
Portfolio
turnover rate |
11 | %(e) | 13 | %(e) | 6 | %(e) | 39 | %(f) | 35 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
258
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2045 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.31 | $ | 17.81 | $ | 17.06 | $ | 15.31 | $ | 12.75 | ||||||||||||
|
Net
investment income(a)
|
0.43 | 0.23 | 0.20 | 0.21 | 0.31 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.55 | (3.36 | ) | 2.79 | 1.91 | 3.04 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.98 | (3.13 | ) | 2.99 | 2.12 | 3.35 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.53 | ) | (0.13 | ) | (1.16 | ) | (0.22 | ) | (0.31 | ) | ||||||||||||
|
From
net realized gain |
— | (0.15 | ) | (1.08 | ) | (0.15 | ) | (0.48 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.53 | ) | (0.37 | ) | (2.24 | ) | (0.37 | ) | (0.79 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.76 | $ | 14.31 | $ | 17.81 | $ | 17.06 | $ | 15.31 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
20.98 | % | (17.68 | )% | 17.61 | % | 14.31 | % | 26.38 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.77 | % | 0.78 | % | 0.84 | % | 0.82 | % | 0.58 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.50 | % | 0.47 | % | 0.51 | % | 0.53 | % | 0.56 | % | ||||||||||||
|
Net
investment income |
2.78 | % | 1.49 | % | 1.07 | % | 1.43 | % | 2.13 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 9,509 | $ | 6,317 | $ | 8,641 | $ | 7,491 | $ | 4,656 | ||||||||||||
|
Portfolio
turnover rate |
2 | %(e) | 16 | %(e) | — | %(e)(f) | 26 | %(g) | 49 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) Rounds to less
than 1%.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
259
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2045 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.24 | $ | 17.75 | $ | 17.02 | $ | 15.27 | $ | 12.72 | ||||||||||||
|
Net
investment income(a)
|
0.39 | 0.19 | 0.16 | 0.16 | 0.26 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.54 | (3.35 | ) | 2.77 | 1.92 | 3.05 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.93 | (3.16 | ) | 2.93 | 2.08 | 3.31 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.49 | ) | (0.12 | ) | (1.12 | ) | (0.18 | ) | (0.28 | ) | ||||||||||||
|
From
net realized gain |
— | (0.15 | ) | (1.08 | ) | (0.15 | ) | (0.48 | ) | |||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.49 | ) | (0.35 | ) | (2.20 | ) | (0.33 | ) | (0.76 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.68 | $ | 14.24 | $ | 17.75 | $ | 17.02 | $ | 15.27 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
20.72 | % | (17.89 | )% | 17.33 | % | 14.03 | % | 26.05 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.02 | % | 1.03 | % | 1.09 | % | 1.05 | % | 0.84 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.76 | % | 0.72 | % | 0.76 | % | 0.79 | % | 0.81 | % | ||||||||||||
|
Net
investment income |
2.51 | % | 1.23 | % | 0.84 | % | 1.12 | % | 1.82 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 25,035 | $ | 17,896 | $ | 21,856 | $ | 17,996 | $ | 18,811 | ||||||||||||
|
Portfolio
turnover rate |
2 | %(e) | 16 | %(e) | — | %(e)(f) | 26 | %(g) | 49 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) Rounds to less
than 1%.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
260
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2045 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 13.90 | $ | 17.42 | $ | 16.78 | $ | 15.04 | $ | 12.54 | ||||||||||||
|
Net
investment income(a)
|
0.26 | 0.07 | 0.02 | 0.04 | 0.15 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.48 | (3.28 | ) | 2.72 | 1.90 | 2.99 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.74 | (3.21 | ) | 2.74 | 1.94 | 3.14 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.37 | ) | (0.08 | ) | (1.02 | ) | (0.05 | ) | (0.16 | ) | ||||||||||||
|
From
net realized gain |
— | (0.15 | ) | (1.08 | ) | (0.15 | ) | (0.48 | ) | |||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.37 | ) | (0.31 | ) | (2.10 | ) | (0.20 | ) | (0.64 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.27 | $ | 13.90 | $ | 17.42 | $ | 16.78 | $ | 15.04 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
19.81 | % | (18.51 | )% | 16.40 | % | 13.16 | % | 25.07 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.78 | % | 1.78 | % | 1.84 | % | 1.81 | % | 1.64 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.51 | % | 1.47 | % | 1.51 | % | 1.55 | % | 1.61 | % | ||||||||||||
|
Net
investment income |
1.70 | % | 0.47 | % | 0.08 | % | 0.29 | % | 1.04 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,358 | $ | 1,284 | $ | 1,392 | $ | 1,129 | $ | 1,732 | ||||||||||||
|
Portfolio
turnover rate |
2 | %(e) | 16 | %(e) | — | %(e)(f) | 26 | %(g) | 49 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) Rounds to less
than 1%.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
261
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2045 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.17 | $ | 17.68 | $ | 16.97 | $ | 15.23 | $ | 12.69 | ||||||||||||
|
Net
investment income(a)
|
0.36 | 0.17 | 0.12 | 0.13 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.51 | (3.34 | ) | 2.77 | 1.90 | 3.03 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.87 | (3.17 | ) | 2.89 | 2.03 | 3.27 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.46 | ) | (0.11 | ) | (1.10 | ) | (0.14 | ) | (0.25 | ) | ||||||||||||
|
From
net realized gain |
— | (0.15 | ) | (1.08 | ) | (0.15 | ) | (0.48 | ) | |||||||||||||
|
Return
of capital |
— | (0.08 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.46 | ) | (0.34 | ) | (2.18 | ) | (0.29 | ) | (0.73 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 16.58 | $ | 14.17 | $ | 17.68 | $ | 16.97 | $ | 15.23 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
20.43 | % | (18.03 | )% | 17.10 | % | 13.73 | % | 25.83 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.22 | % | 1.23 | % | 1.29 | % | 1.24 | % | 1.04 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.95 | % | 0.92 | % | 0.96 | % | 0.99 | % | 1.01 | % | ||||||||||||
|
Net
investment income |
2.35 | % | 1.17 | % | 0.64 | % | 0.87 | % | 1.65 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 7,396 | $ | 4,108 | $ | 2,989 | $ | 2,454 | $ | 4,104 | ||||||||||||
|
Portfolio
turnover rate |
2 | %(e) | 16 | %(e) | — | %(e)(f) | 26 | %(g) | 49 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) Rounds to less
than 1%.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
262
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2050 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 18.25 | $ | 22.99 | $ | 22.78 | $ | 20.39 | $ | 17.13 | ||||||||||||
|
Net
investment income(a)
|
0.52 | 0.28 | 0.26 | 0.24 | 0.41 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
3.47 | (4.56 | ) | 3.83 | 2.67 | 4.09 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.99 | (4.28 | ) | 4.09 | 2.91 | 4.50 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.63 | ) | (0.20 | ) | (1.69 | ) | (0.26 | ) | (0.42 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (2.19 | ) | (0.26 | ) | (0.82 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.63 | ) | (0.46 | ) | (3.88 | ) | (0.52 | ) | (1.24 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 21.61 | $ | 18.25 | $ | 22.99 | $ | 22.78 | $ | 20.39 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
22.02 | % | (18.71 | )% | 18.15 | % | 14.80 | % | 26.38 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.78 | % | 0.78 | % | 0.84 | % | 0.79 | % | 0.56 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.50 | % | 0.49 | % | 0.54 | % | 0.54 | % | 0.55 | % | ||||||||||||
|
Net
investment income |
2.60 | % | 1.45 | % | 1.04 | % | 1.24 | % | 2.07 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 20,535 | $ | 15,423 | $ | 21,290 | $ | 19,215 | $ | 16,870 | ||||||||||||
|
Portfolio
turnover rate |
7 | %(e) | 16 | %(e) | 1 | %(e) | 31 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
263
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2050 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) |
Year Ended
12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 18.13 | $ | 22.87 | $ | 22.69 | $ | 20.31 | $ | 17.06 | ||||||||||||
|
Net
investment income(a)
|
0.46 | 0.24 | 0.19 | 0.19 | 0.34 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
3.45 | (4.54 | ) | 3.82 | 2.66 | 4.10 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.91 | (4.30 | ) | 4.01 | 2.85 | 4.44 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.58 | ) | (0.18 | ) | (1.64 | ) | (0.21 | ) | (0.37 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (2.19 | ) | (0.26 | ) | (0.82 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.58 | ) | (0.44 | ) | (3.83 | ) | (0.47 | ) | (1.19 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 21.46 | $ | 18.13 | $ | 22.87 | $ | 22.69 | $ | 20.31 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.69 | % | (18.90 | )% | 17.88 | % | 14.50 | % | 26.11 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.03 | % | 1.03 | % | 1.09 | % | 1.04 | % | 0.81 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.75 | % | 0.75 | % | 0.79 | % | 0.79 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
2.32 | % | 1.22 | % | 0.78 | % | 0.96 | % | 1.76 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 75,362 | $ | 64,526 | $ | 77,982 | $ | 73,608 | $ | 75,986 | ||||||||||||
|
Portfolio
turnover rate |
7 | %(e) | 16 | %(e) | 1 | %(e) | 31 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
264
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2050 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 17.70 | $ | 22.42 | $ | 22.36 | $ | 20.02 | $ | 16.86 | ||||||||||||
|
Net
investment income(a)
|
0.30 | 0.09 | 0.01 | 0.04 | 0.20 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
3.37 | (4.44 | ) | 3.75 | 2.62 | 4.02 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.67 | (4.35 | ) | 3.76 | 2.66 | 4.22 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.44 | ) | (0.11 | ) | (1.51 | ) | (0.06 | ) | (0.24 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (2.19 | ) | (0.26 | ) | (0.82 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.44 | ) | (0.37 | ) | (3.70 | ) | (0.32 | ) | (1.06 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 20.93 | $ | 17.70 | $ | 22.42 | $ | 22.36 | $ | 20.02 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
20.78 | % | (19.50 | )% | 17.00 | % | 13.60 | % | 25.10 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.78 | % | 1.78 | % | 1.84 | % | 1.80 | % | 1.61 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.50 | % | 1.50 | % | 1.54 | % | 1.55 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
1.57 | % | 0.47 | % | 0.05 | % | 0.19 | % | 1.01 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,812 | $ | 1,690 | $ | 2,002 | $ | 1,477 | $ | 1,774 | ||||||||||||
|
Portfolio
turnover rate |
7 | %(e) | 16 | %(e) | 1 | %(e) | 31 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
265
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2050 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 18.01 | $ | 22.74 | $ | 22.59 | $ | 20.23 | $ | 17.00 | ||||||||||||
|
Net
investment income(a)
|
0.42 | 0.21 | 0.15 | 0.15 | 0.31 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
3.42 | (4.52 | ) | 3.80 | 2.64 | 4.08 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.84 | (4.31 | ) | 3.95 | 2.79 | 4.39 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.55 | ) | (0.16 | ) | (1.61 | ) | (0.17 | ) | (0.34 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (2.19 | ) | (0.26 | ) | (0.82 | ) | |||||||||||||
|
Return
of capital |
— | (0.09 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.55 | ) | (0.42 | ) | (3.80 | ) | (0.43 | ) | (1.16 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 21.30 | $ | 18.01 | $ | 22.74 | $ | 22.59 | $ | 20.23 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.41 | % | (19.05 | )% | 17.65 | % | 14.23 | % | 25.92 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.23 | % | 1.23 | % | 1.29 | % | 1.24 | % | 1.01 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.95 | % | 0.94 | % | 0.99 | % | 1.00 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
2.14 | % | 1.10 | % | 0.60 | % | 0.77 | % | 1.57 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 4,388 | $ | 3,302 | $ | 3,149 | $ | 2,647 | $ | 2,558 | ||||||||||||
|
Portfolio
turnover rate |
7 | %(e) | 16 | %(e) | 1 | %(e) | 31 | %(f) | 42 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
266
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2055 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.99 | $ | 18.90 | $ | 17.94 | $ | 15.90 | $ | 13.19 | ||||||||||||
|
Net
investment income(a)
|
0.43 | 0.22 | 0.20 | 0.20 | 0.32 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.87 | (3.75 | ) | 3.07 | 2.18 | 3.16 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.30 | (3.53 | ) | 3.27 | 2.38 | 3.48 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.53 | ) | (0.14 | ) | (1.24 | ) | (0.21 | ) | (0.31 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (1.07 | ) | (0.13 | ) | (0.46 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.53 | ) | (0.38 | ) | (2.31 | ) | (0.34 | ) | (0.77 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 17.76 | $ | 14.99 | $ | 18.90 | $ | 17.94 | $ | 15.90 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
22.18 | % | (18.75 | )% | 18.43 | % | 15.47 | % | 26.48 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
0.80 | % | 0.79 | % | 0.87 | % | 0.85 | % | 0.59 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.51 | % | 0.50 | % | 0.54 | % | 0.54 | % | 0.54 | % | ||||||||||||
|
Net
investment income |
2.64 | % | 1.40 | % | 0.99 | % | 1.30 | % | 2.14 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 9,062 | $ | 6,014 | $ | 7,814 | $ | 6,308 | $ | 3,461 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(e) | 27 | %(e) | 2 | %(e) | 23 | %(f) | 54 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
267
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2055 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.88 | $ | 18.78 | $ | 17.85 | $ | 15.82 | $ | 13.13 | ||||||||||||
|
Net
investment income(a)
|
0.38 | 0.18 | 0.15 | 0.16 | 0.27 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.84 | (3.72 | ) | 3.06 | 2.17 | 3.15 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.22 | (3.54 | ) | 3.21 | 2.33 | 3.42 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.49 | ) | (0.12 | ) | (1.21 | ) | (0.17 | ) | (0.27 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (1.07 | ) | (0.13 | ) | (0.46 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.49 | ) | (0.36 | ) | (2.28 | ) | (0.30 | ) | (0.73 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 17.61 | $ | 14.88 | $ | 18.78 | $ | 17.85 | $ | 15.82 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.77 | % | (18.90 | )% | 18.13 | % | 15.17 | % | 26.12 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.06 | % | 1.04 | % | 1.12 | % | 1.09 | % | 0.85 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.77 | % | 0.75 | % | 0.79 | % | 0.80 | % | 0.80 | % | ||||||||||||
|
Net
investment income |
2.35 | % | 1.15 | % | 0.75 | % | 1.05 | % | 1.81 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 18,754 | $ | 14,873 | $ | 17,422 | $ | 15,871 | $ | 13,347 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(e) | 27 | %(e) | 2 | %(e) | 23 | %(f) | 54 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
268
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2055 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.53 | $ | 18.42 | $ | 17.59 | $ | 15.58 | $ | 12.95 | ||||||||||||
|
Net
investment income(a)
|
0.24 | 0.07 | (0.00 | )(b) | 0.04 | 0.16 | ||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.79 | (3.66 | ) | 3.00 | 2.15 | 3.10 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.03 | (3.59 | ) | 3.00 | 2.19 | 3.26 | ||||||||||||||||
|
Distributions(c) |
||||||||||||||||||||||
|
From
net investment income |
(0.36 | ) | (0.06 | ) | (1.10 | ) | (0.05 | ) | (0.17 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (1.07 | ) | (0.13 | ) | (0.46 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.36 | ) | (0.30 | ) | (2.17 | ) | (0.18 | ) | (0.63 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 17.20 | $ | 14.53 | $ | 18.42 | $ | 17.59 | $ | 15.58 | ||||||||||||
|
Total
Return(d) |
||||||||||||||||||||||
|
Based
on net asset value |
20.94 | % | (19.53 | )% | 17.19 | % | 14.32 | % | 25.17 | % | ||||||||||||
|
Ratios
to Average Net Assets(e)
|
||||||||||||||||||||||
|
Total
expenses |
1.83 | % | 1.79 | % | 1.87 | % | 1.84 | % | 1.65 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.54 | % | 1.50 | % | 1.54 | % | 1.56 | % | 1.60 | % | ||||||||||||
|
Net
investment income |
1.54 | % | 0.45 | % | (0.00 | )% | 0.27 | % | 1.08 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 1,099 | $ | 1,341 | $ | 1,340 | $ | 1,071 | $ | 1,212 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(f) | 27 | %(f) | 2 | %(f) | 23 | %(g) | 54 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Amount is greater
than $(0.005) per share.
(c) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(d) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(e) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(f) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
269
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2055 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 14.81 | $ | 18.72 | $ | 17.82 | $ | 15.78 | $ | 13.11 | ||||||||||||
|
Net
investment income(a)
|
0.35 | 0.16 | 0.12 | 0.13 | 0.24 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.83 | (3.72 | ) | 3.03 | 2.17 | 3.15 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
3.18 | (3.56 | ) | 3.15 | 2.30 | 3.39 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.46 | ) | (0.11 | ) | (1.18 | ) | (0.13 | ) | (0.26 | ) | ||||||||||||
|
From
net realized gain |
— | (0.17 | ) | (1.07 | ) | (0.13 | ) | (0.46 | ) | |||||||||||||
|
Return
of capital |
— | (0.07 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.46 | ) | (0.35 | ) | (2.25 | ) | (0.26 | ) | (0.72 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 17.53 | $ | 14.81 | $ | 18.72 | $ | 17.82 | $ | 15.78 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.60 | % | (19.09 | )% | 17.83 | % | 14.96 | % | 25.89 | % | ||||||||||||
|
Ratios
to Average Net Assets(d)
|
||||||||||||||||||||||
|
Total
expenses |
1.25 | % | 1.24 | % | 1.32 | % | 1.28 | % | 1.04 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.96 | % | 0.95 | % | 0.99 | % | 1.00 | % | 1.00 | % | ||||||||||||
|
Net
investment income |
2.17 | % | 1.05 | % | 0.59 | % | 0.85 | % | 1.59 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 3,643 | $ | 2,464 | $ | 2,204 | $ | 1,306 | $ | 2,088 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(e) | 27 | %(e) | 2 | %(e) | 23 | %(f) | 54 | %(g) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(e) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(f) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(g) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio, Large Cap Index
Master Portfolio, Master Small Cap Index Series and Master Total Return
Portfolio. |
| |||||||||||||||||||||
270
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2060 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.11 | $ | 13.93 | $ | 12.85 | $ | 11.47 | $ | 9.34 | ||||||||||||
|
Net
investment income(a)
|
0.33 | 0.18 | 0.16 | 0.16 | 0.26 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.13 | (2.77 | ) | 2.17 | 1.44 | 2.20 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.46 | (2.59 | ) | 2.33 | 1.60 | 2.46 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.37 | ) | (0.09 | ) | (0.73 | ) | (0.17 | ) | (0.21 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (0.52 | ) | (0.05 | ) | (0.12 | ) | |||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.37 | ) | (0.23 | ) | (1.25 | ) | (0.22 | ) | (0.33 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.20 | $ | 11.11 | $ | 13.93 | $ | 12.85 | $ | 11.47 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
22.30 | % | (18.64 | )% | 18.14 | % | 14.34 | % | 26.47 | %(d) | ||||||||||||
|
Ratios
to Average Net Assets(e)
|
||||||||||||||||||||||
|
Total
expenses |
0.86 | % | 0.91 | % | 1.05 | % | 1.12 | % | 0.92 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.49 | % | 0.49 | % | 0.52 | % | 0.52 | % | 0.54 | % | ||||||||||||
|
Net
investment income |
2.70 | % | 1.54 | % | 1.09 | % | 1.40 | % | 2.39 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 3,573 | $ | 1,596 | $ | 1,314 | $ | 1,197 | $ | 237 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(f) | 37 | %(f) | 5 | %(f) | 18 | %(g) | 44 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Includes payment
received from an affiliate, which impacted the Fund’s total return.
Excluding the payment from an affiliate, the Fund’s total return is
26.36%.
(e) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(f) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
271
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2060 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.07 | $ | 13.91 | $ | 12.84 | $ | 11.46 | $ | 9.33 | ||||||||||||
|
Net
investment income(a)
|
0.29 | 0.15 | 0.12 | 0.12 | 0.23 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.13 | (2.77 | ) | 2.17 | 1.45 | 2.21 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.42 | (2.62 | ) | 2.29 | 1.57 | 2.44 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.34 | ) | (0.08 | ) | (0.70 | ) | (0.14 | ) | (0.19 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (0.52 | ) | (0.05 | ) | (0.12 | ) | |||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.34 | ) | (0.22 | ) | (1.22 | ) | (0.19 | ) | (0.31 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.15 | $ | 11.07 | $ | 13.91 | $ | 12.84 | $ | 11.46 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.99 | % | (18.88 | )% | 17.87 | % | 14.03 | % | 26.20 | %(d) | ||||||||||||
|
Ratios
to Average Net Assets(e)
|
||||||||||||||||||||||
|
Total
expenses |
1.14 | % | 1.15 | % | 1.30 | % | 1.36 | % | 1.17 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.76 | % | 0.74 | % | 0.77 | % | 0.80 | % | 0.79 | % | ||||||||||||
|
Net
investment income |
2.39 | % | 1.31 | % | 0.84 | % | 1.14 | % | 2.11 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 2,529 | $ | 1,562 | $ | 1,054 | $ | 580 | $ | 390 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(f) | 37 | %(f) | 5 | %(f) | 18 | %(g) | 44 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Includes payment
received from an affiliate, which impacted the Fund’s total return.
Excluding the payment from an affiliate, the Fund’s total return is
26.09%.
(e) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(f) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
272
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2060 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 10.99 | $ | 13.86 | $ | 12.83 | $ | 11.45 | $ | 9.34 | ||||||||||||
|
Net
investment income(a)
|
0.20 | 0.06 | 0.02 | 0.04 | 0.11 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.11 | (2.75 | ) | 2.16 | 1.45 | 2.23 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.31 | (2.69 | ) | 2.18 | 1.49 | 2.34 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.25 | ) | (0.04 | ) | (0.63 | ) | (0.06 | ) | (0.11 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (0.52 | ) | (0.05 | ) | (0.12 | ) | |||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.25 | ) | (0.18 | ) | (1.15 | ) | (0.11 | ) | (0.23 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.05 | $ | 10.99 | $ | 13.86 | $ | 12.83 | $ | 11.45 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.09 | % | (19.48 | )% | 16.98 | % | 13.16 | % | 25.09 | %(d) | ||||||||||||
|
Ratios
to Average Net Assets(e)
|
||||||||||||||||||||||
|
Total
expenses |
1.90 | % | 1.90 | % | 2.05 | % | 2.11 | % | 2.03 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.52 | % | 1.49 | % | 1.51 | % | 1.55 | % | 1.61 | % | ||||||||||||
|
Net
investment income |
1.66 | % | 0.51 | % | 0.11 | % | 0.38 | % | 1.07 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 153 | $ | 100 | $ | 96 | $ | 45 | $ | 33 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(f) | 37 | %(f) | 5 | %(f) | 18 | %(g) | 44 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(d) Includes payment
from an affiliate, which had no impact on the Fund’s total return.
(e) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(f) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
273
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2060 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of year |
$ | 11.06 | $ | 13.91 | $ | 12.85 | $ | 11.46 | $ | 9.34 | ||||||||||||
|
Net
investment income(a)
|
0.27 | 0.14 | 0.09 | 0.10 | 0.40 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
2.13 | (2.78 | ) | 2.17 | 1.45 | 2.02 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.40 | (2.64 | ) | 2.26 | 1.55 | 2.42 | ||||||||||||||||
|
Distributions(b) |
||||||||||||||||||||||
|
From
net investment income |
(0.32 | ) | (0.07 | ) | (0.68 | ) | (0.11 | ) | (0.18 | ) | ||||||||||||
|
From
net realized gain |
— | (0.09 | ) | (0.52 | ) | (0.05 | ) | (0.12 | ) | |||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.32 | ) | (0.21 | ) | (1.20 | ) | (0.16 | ) | (0.30 | ) | ||||||||||||
|
Net
asset value, end of year |
$ | 13.14 | $ | 11.06 | $ | 13.91 | $ | 12.85 | $ | 11.46 | ||||||||||||
|
Total
Return(c) |
||||||||||||||||||||||
|
Based
on net asset value |
21.79 | % | (19.04 | )% | 17.63 | % | 13.84 | % | 25.92 | %(d) | ||||||||||||
|
Ratios
to Average Net Assets(e)
|
||||||||||||||||||||||
|
Total
expenses |
1.34 | % | 1.36 | % | 1.50 | % | 1.56 | % | 1.37 | % | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.96 | % | 0.94 | % | 0.97 | % | 0.98 | % | 0.99 | % | ||||||||||||
|
Net
investment income |
2.19 | % | 1.19 | % | 0.66 | % | 0.89 | % | 3.67 | % | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of year (000) |
$ | 2,001 | $ | 1,247 | $ | 817 | $ | 359 | $ | 185 | ||||||||||||
|
Portfolio
turnover rate |
3 | %(f) | 37 | %(f) | 5 | %(f) | 18 | %(g) | 44 | %(h) | ||||||||||||
|
(a) Based on average
shares outstanding.
(b) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(c) Where applicable,
assumes the reinvestment of distributions.
(d) Includes payment
received from an affiliate, which impacted the Fund’s total return.
Excluding the payment from an affiliate, the Fund’s total return is
25.81%.
(e) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(f) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(g) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(h) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
274
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2065 Fund | ||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Period from
10/30/19(a)
to 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of period |
$ | 10.07 | $ | 12.67 | $ | 11.74 | $ | 10.47 | $ | 10.00 | ||||||||||||
|
Net
investment income(b)
|
0.29 | 0.16 | 0.14 | 0.13 | 0.07 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.95 | (2.50 | ) | 2.02 | 1.30 | 0.47 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.24 | (2.34 | ) | 2.16 | 1.43 | 0.54 | ||||||||||||||||
|
Distributions(c) |
||||||||||||||||||||||
|
From
net investment income |
(0.30 | ) | (0.11 | ) | (0.78 | ) | (0.16 | ) | (0.07 | ) | ||||||||||||
|
From
net realized gain |
— | (0.10 | ) | (0.45 | ) | — | — | |||||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.30 | ) | (0.26 | ) | (1.23 | ) | (0.16 | ) | (0.07 | ) | ||||||||||||
|
Net
asset value, end of period |
$ | 12.01 | $ | 10.07 | $ | 12.67 | $ | 11.74 | $ | 10.47 | ||||||||||||
|
Total
Return(d) |
||||||||||||||||||||||
|
Based
on net asset value |
22.39 | % | (18.55 | )% | 18.43 | % | 13.99 | % | 5.36 | %(e) | ||||||||||||
|
Ratios
to Average Net Assets(f)
|
||||||||||||||||||||||
|
Total
expenses |
1.09 | % | 1.20 | % | 1.47 | % | 1.23 | % | 0.83 | %(g)(h) | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.51 | % | 0.48 | % | 0.53 | % | 0.54 | % | 0.56 | %(g) | ||||||||||||
|
Net
investment income |
2.66 | % | 1.54 | % | 1.09 | % | 1.34 | % | 4.23 | %(g) | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of period (000) |
$ | 1,094 | $ | 604 | $ | 596 | $ | 486 | $ | 419 | ||||||||||||
|
Portfolio
turnover rate |
4 | %(i) | 26 | %(i) | 8 | %(i) | 45 | %(j) | 3 | %(k) | ||||||||||||
|
(a) Commencement of
operations.
(b) Based on average
shares outstanding.
(c) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(d) Where applicable,
assumes the reinvestment of distributions.
(e) Not
annualized.
(f) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(g) Annualized.
(h) Audit fees were not
annualized in the calculation of expense ratios. If this expense was
annualized, the total expenses would have been 2.14%.
(i) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(j) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(k) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
275
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2065 Fund | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Period from 10/30/19(a) to 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of period |
$ | 10.05 | $ | 12.66 | $ | 11.74 | $ | 10.47 | $ | 10.00 | ||||||||||||
|
Net
investment income(b)
|
0.28 | 0.14 | 0.11 | 0.11 | 0.07 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.92 | (2.50 | ) | 2.02 | 1.30 | 0.46 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.20 | (2.36 | ) | 2.13 | 1.41 | 0.53 | ||||||||||||||||
|
Distributions(c) |
||||||||||||||||||||||
|
From
net investment income |
(0.28 | ) | (0.10 | ) | (0.76 | ) | (0.14 | ) | (0.06 | ) | ||||||||||||
|
From
net realized gain |
— | (0.10 | ) | (0.45 | ) | — | — | |||||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.28 | ) | (0.25 | ) | (1.21 | ) | (0.14 | ) | (0.06 | ) | ||||||||||||
|
Net
asset value, end of period |
$ | 11.97 | $ | 10.05 | $ | 12.66 | $ | 11.74 | $ | 10.47 | ||||||||||||
|
Total
Return(d) |
||||||||||||||||||||||
|
Based
on net asset value |
21.99 | % | (18.71 | )% | 18.13 | % | 13.70 | % | 5.32 | %(e) | ||||||||||||
|
Ratios
to Average Net Assets(f)
|
||||||||||||||||||||||
|
Total
expenses |
1.31 | % | 1.44 | % | 1.72 | % | 1.48 | % | 1.08 | %(g)(h) | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.72 | % | 0.72 | % | 0.78 | % | 0.79 | % | 0.81 | %(g) | ||||||||||||
|
Net
investment income |
2.51 | % | 1.35 | % | 0.85 | % | 1.10 | % | 3.98 | %(g) | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of period (000) |
$ | 2,502 | $ | 868 | $ | 722 | $ | 501 | $ | 419 | ||||||||||||
|
Portfolio
turnover rate |
4 | %(i) | 26 | %(i) | 8 | %(i) | 45 | %(j) | 3 | %(k) | ||||||||||||
|
(a) Commencement of
operations.
(b) Based on average
shares outstanding.
(c) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(d) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(e) Not
annualized.
(f) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(g) Annualized.
(h) Audit fees were not
annualized in the calculation of expense ratios. If this expense was
annualized, the total expenses would have been 2.39%.
(i) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(j) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(k) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
276
Financial Highlights (continued)
| BlackRock LifePath® Dynamic 2065 Fund | ||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Period from 10/30/19(a) to 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of period |
$ | 9.99 | $ | 12.64 | $ | 11.74 | $ | 10.47 | $ | 10.00 | ||||||||||||
|
Net
investment income(b)
|
0.18 | 0.06 | 0.01 | 0.03 | 0.05 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.92 | (2.50 | ) | 2.02 | 1.30 | 0.47 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.10 | (2.44 | ) | 2.03 | 1.33 | 0.52 | ||||||||||||||||
|
Distributions(c) |
||||||||||||||||||||||
|
From
net investment income |
(0.19 | ) | (0.06 | ) | (0.68 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||
|
From
net realized gain |
— | (0.10 | ) | (0.45 | ) | — | — | |||||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.19 | ) | (0.21 | ) | (1.13 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||
|
Net
asset value, end of period |
$ | 11.90 | $ | 9.99 | $ | 12.64 | $ | 11.74 | $ | 10.47 | ||||||||||||
|
Total
Return(d) |
||||||||||||||||||||||
|
Based
on net asset value |
21.08 | % | (19.38 | )% | 17.30 | % | 12.83 | % | 5.18 | %(e) | ||||||||||||
|
Ratios
to Average Net Assets(f)
|
||||||||||||||||||||||
|
Total
expenses |
2.11 | % | 2.20 | % | 2.47 | % | 2.24 | % | 1.88 | %(g)(h) | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
1.52 | % | 1.48 | % | 1.53 | % | 1.55 | % | 1.61 | %(g) | ||||||||||||
|
Net
investment income |
1.61 | % | 0.59 | % | 0.08 | % | 0.33 | % | 3.13 | %(g) | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of period (000) |
$ | 774 | $ | 553 | $ | 528 | $ | 470 | $ | 419 | ||||||||||||
|
Portfolio
turnover rate |
4 | %(i) | 26 | %(i) | 8 | %(i) | 45 | %(j) | 3 | %(k) | ||||||||||||
|
(a) Commencement of
operations.
(b) Based on average
shares outstanding.
(c) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(d) Where applicable,
excludes the effects of any sales charges and assumes the reinvestment of
distributions.
(e) Not
annualized.
(f) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(g) Annualized.
(h) Audit fees were not
annualized in the calculation of expense ratios. If this expense was
annualized, the total expenses would have been 3.19%.
(i) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(j) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(k) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
277
Financial Highlights (concluded)
| BlackRock LifePath® Dynamic 2065 Fund | ||||||||||||||||||||||
| Class R | ||||||||||||||||||||||
| (For a share outstanding throughout each period) | Year Ended 12/31/23 |
Year Ended 12/31/22 |
Year Ended 12/31/21 |
Year Ended 12/31/20 |
Period from 10/30/19(a) to 12/31/19 |
|||||||||||||||||
|
Net
asset value, beginning of period |
$ | 10.03 | $ | 12.65 | $ | 11.74 | $ | 10.47 | $ | 10.00 | ||||||||||||
|
Net
investment income(b)
|
0.23 | 0.11 | 0.08 | 0.09 | 0.07 | |||||||||||||||||
|
Net
realized and unrealized gain (loss) |
1.95 | (2.49 | ) | 2.01 | 1.30 | 0.46 | ||||||||||||||||
|
Net
increase (decrease) from investment operations |
2.18 | (2.38 | ) | 2.09 | 1.39 | 0.53 | ||||||||||||||||
|
Distributions(c) |
||||||||||||||||||||||
|
From
net investment income |
(0.25 | ) | (0.09 | ) | (0.73 | ) | (0.12 | ) | (0.06 | ) | ||||||||||||
|
From
net realized gain |
— | (0.10 | ) | (0.45 | ) | — | — | |||||||||||||||
|
Return
of capital |
— | (0.05 | ) | — | — | — | ||||||||||||||||
|
Total
distributions |
(0.25 | ) | (0.24 | ) | (1.18 | ) | (0.12 | ) | (0.06 | ) | ||||||||||||
|
Net
asset value, end of period |
$ | 11.96 | $ | 10.03 | $ | 12.65 | $ | 11.74 | $ | 10.47 | ||||||||||||
|
Total
Return(d) |
||||||||||||||||||||||
|
Based
on net asset value |
21.82 | % | (18.92 | )% | 17.86 | % | 13.47 | % | 5.28 | %(e) | ||||||||||||
|
Ratios
to Average Net Assets(f)
|
||||||||||||||||||||||
|
Total
expenses |
1.59 | % | 1.65 | % | 1.92 | % | 1.68 | % | 1.28 | %(g)(h) | ||||||||||||
|
Total
expenses after fees waived and/or reimbursed |
0.99 | % | 0.93 | % | 0.98 | % | 0.99 | % | 1.01 | %(g) | ||||||||||||
|
Net
investment income |
2.14 | % | 1.05 | % | 0.63 | % | 0.89 | % | 3.78 | %(g) | ||||||||||||
|
Supplemental
Data |
||||||||||||||||||||||
|
Net
assets, end of period (000) |
$ | 509 | $ | 445 | $ | 509 | $ | 470 | $ | 419 | ||||||||||||
|
Portfolio
turnover rate |
4 | %(i) | 26 | %(i) | 8 | %(i) | 45 | %(j) | 3 | %(k) | ||||||||||||
|
(a) Commencement of
operations.
(b) Based on average
shares outstanding.
(c) Distributions for
annual periods determined in accordance with U.S. federal income tax
regulations.
(d) Where applicable,
assumes the reinvestment of distributions.
(e) Not
annualized.
(f) Excludes fees and
expenses incurred indirectly as a result of investments in underlying
funds.
(g) Annualized.
(h) Audit fees were not
annualized in the calculation of expense ratios. If this expense was
annualized, the total expenses would have been 2.59%
(i) Includes the
purchases and sales of the underlying funds and the Underlying Master
Portfolios.
(j) From
January 1, 2020 through March 8, 2020, the rate includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and the Underlying Master Portfolios. Beginning March 9, 2020,
the rate includes the LifePath Dynamic Fund’s purchases and sales of the
underlying funds and the Underlying Master Portfolios.
(k) Includes the
LifePath Dynamic Master Portfolio’s purchases and sales of the underlying
funds and Diversified Equity Master Portfolio, Advantage CoreAlpha Bond
Master Portfolio, International Tilts Master Portfolio and Master Total
Return Portfolio. |
| |||||||||||||||||||||
278
General
Information
Shareholder Documents
Electronic
Access to Annual Reports, Semi-Annual Reports and Prospectuses
Electronic
copies of most financial reports and prospectuses are available on BlackRock’s
website. Shareholders can sign up for e-mail notifications of annual and
semi-annual reports and prospectuses by enrolling in a Fund’s electronic
delivery program. To enroll:
Shareholders Who Hold Accounts with Investment
Advisers, Banks or Brokerages: Please contact your Financial
Intermediary. Please note that not all investment advisers, banks or brokerages
may offer this service.
Shareholders
Who Hold Accounts Directly with BlackRock:
| ∎ |
Access
the BlackRock website at http://www.blackrock.com/edelivery;
and |
| ∎ |
Log
into your account. |
Delivery
of Shareholder Documents
The
Funds deliver only one copy of shareholder documents, including prospectuses,
shareholder reports and proxy statements, to shareholders with multiple accounts
at the same address. This practice is known as “householding” and is intended to
eliminate duplicate mailings and reduce expenses. 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 contact the Funds
at (800) 441-7762.
Certain Fund Policies
Anti-Money
Laundering Requirements
The
Funds are subject to the USA PATRIOT Act (the “Patriot Act”). The Patriot Act is
intended to prevent the use of the U.S. financial system in furtherance of money
laundering, terrorism or other illicit activities. Pursuant to requirements
under the Patriot Act, a Fund is required to obtain sufficient information from
shareholders to enable it to form a reasonable belief that it knows the true
identity of its shareholders. This information will be used to verify the
identity of investors or, in some cases, the status of Financial Intermediaries.
Such information may be verified using third-party sources. This information
will be used only for compliance with the Patriot Act or other applicable laws,
regulations and rules in connection with money laundering, terrorism, or
economic sanctions.
The
Funds reserve the right to reject purchase orders from persons who have not
submitted information sufficient to allow the Funds to verify their identity.
The Funds also reserve the right to redeem any amounts in a Fund from persons
whose identity it is unable to verify on a timely basis. It is the Funds’ policy
to cooperate fully with appropriate regulators in any investigations conducted
with respect to potential money laundering, terrorism or other illicit
activities.
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
nonpublic 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 nonpublic 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 website.
BlackRock
does not sell or disclose to nonaffiliated third parties any nonpublic 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
nonaffiliated 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 nonpublic personal
information about its Clients to those BlackRock employees with a legitimate
business need for the
279
information.
BlackRock maintains physical, electronic and procedural safeguards that are
designed to protect the nonpublic personal information of its Clients, including
procedures relating to the proper storage and disposal of such
information.
Statement of Additional Information
If
you would like further information about a Fund, including how it invests,
please see the SAI.
For
a discussion of a Fund’s policies and procedures regarding the selective
disclosure of its portfolio holdings, please see the SAI. The Funds makes their
top ten holdings available on a monthly basis at www.blackrock.com generally within 5
business days after the end of the month to which the information applies.
Disclaimers
The
S&P Indexes are products of SPDJI and have been licensed for use by BFA or
its affiliates. Standard & Poor’s® and S&P® are registered trademarks of
S&P; Dow Jones® is a
registered trademark of Dow Jones, and these trademarks have been licensed for
use by SPDJI and sublicensed for certain purposes by the iShares Trust. It is
not possible to invest directly in an index. The iShares S&P Funds are not
sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their
respective affiliates (collectively, “S&P Dow Jones Indices”). S&P
Dow Jones Indices make no representation or warranty, express or implied, to the
owners of the iShares S&P Funds or any member of the public regarding the
advisability of investing in securities generally or in the iShares S&P
Funds particularly or the ability of the S&P Indexes to track general market
performance. Past performance of an index is not an indication or guarantee
of future results. S&P Dow Jones Indices’ only relationship to the iShares
Trust and BFA and their affiliates with respect to the S&P Indexes is the
licensing of the S&P Indexes and certain trademarks, service marks and/or
trade names of S&P Dow Jones Indices and/or its licensors. The S&P
Indexes are determined, composed and calculated by S&P Dow Jones Indices
without regard to the iShares Trust, BFA or its affiliates or the iShares
S&P Funds. S&P Dow Jones Indices have no obligation to take the
needs of BFA or its affiliates or the owners of the iShares S&P Funds into
consideration in determining, composing or calculating the S&P
Indexes. S&P Dow Jones Indices are not responsible for and have not
participated in the determination of the prices, and amount of the iShares
S&P Funds or the timing of the issuance or sale of the iShares S&P Funds
or in the determination or calculation of the equation by which the iShares
S&P Funds are to be converted into cash, surrendered or redeemed, as the
case may be. S&P Dow Jones Indices have no obligation or liability in
connection with the administration, marketing or trading of the iShares S&P
Funds. There is no assurance that investment products based on the S&P
Indexes will accurately track index performance or provide positive investment
returns. S&P Dow Jones Indices LLC is not an investment or tax
advisor. A tax advisor should be consulted to evaluate the impact of any
tax‑exempt securities on portfolios and the tax consequences of making any
particular investment decision. Inclusion of a security within an index is not a
recommendation by S&P Dow Jones Indices to buy, sell, or hold such security,
nor is it considered to be investment advice.
NEITHER
S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P INDEXES OR ANY DATA
RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR
LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES
INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS
TO RESULTS TO BE OBTAINED BY BFA OR ITS AFFILIATES, OWNERS OF THE ISHARES
S&P FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEXES
OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING
BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN
IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN
CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD-PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES
INDICES AND BFA OR ITS AFFILIATES, OTHER THAN THE LICENSORS OF S&P DOW JONES
INDICES.
The
iShares Russell Funds have been developed solely by BFA or its affiliates. The
iShares Russell Funds are not in any way connected to or sponsored, endorsed,
sold or promoted by the LSE Group. FTSE Russell is a trading name of certain of
the LSE Group companies.
All
rights in the Russell Midcap® Index and Russell 2000® Index (the “Russell
Indexes”) vest in the relevant LSE Group company which owns the Russell Indexes.
“FTSE®”, “Russell®”, and “FTSE Russell®”, are trade marks of the
relevant LSE Group company and is/are used by any other LSE Group company under
license.
The
Russell Indexes are calculated by or on behalf of FTSE International Limited,
FTSE Fixed Income, LLC, or its affiliate, agent or partner. The LSE Group does
not accept any liability whatsoever to any person arising out of (a) the
use of, reliance on or any error in the Russell Indexes or (b) investment
in or operation of the iShares Russell Funds.
280
The
LSE Group makes no claim, prediction, warranty or representation either as to
the results to be obtained from the iShares Russell Funds or the suitability of
the Russell Indexes for the purpose to which it is being put by BFA or its
affiliates.
The
iShares J.P. Morgan USD Emerging Markets Bond ETF is not sponsored, endorsed,
sold or promoted by J.P. Morgan. J.P. Morgan makes no representation or
warranty, express or implied, to the owners of shares of iShares J.P. Morgan USD
Emerging Markets Bond ETF or any member of the public regarding the advisability
of investing in securities generally or in iShares J.P. Morgan USD Emerging
Markets Bond ETF in particular, or the ability of the J.P. Morgan EMBI® Global Core Index to track
general bond market performance. J.P. Morgan’s only relationship to the iShares
Trust and BFA or its affiliates is the licensing of certain trademarks and trade
names of J.P. Morgan and of the J.P. Morgan EMBI® Global Core Index which is
determined, composed and calculated by J.P. Morgan without regard to the iShares
Trust, BFA or its affiliates or iShares J.P. Morgan USD Emerging Markets Bond
ETF. J.P. Morgan has no obligation to take the needs of BFA or its affiliates or
the owners of shares of iShares J.P. Morgan USD Emerging Markets Bond ETF into
consideration in determining, composing or calculating the J.P. Morgan EMBI® Global Core Index. J.P.
Morgan is not responsible for and has not participated in the determination of
the prices and amount of shares of iShares J.P. Morgan USD Emerging Markets Bond
ETF, or the timing of the issuance or sale of such shares or in the
determination or calculation of the equation by which shares of iShares J.P.
Morgan USD Emerging Markets Bond ETF are to be converted into cash. J.P. Morgan
has no obligation or liability in connection with the administration, marketing
or trading of shares of iShares J.P. Morgan USD Emerging Markets Bond ETF. J.P.
Morgan does not guarantee the accuracy or the completeness of the J.P. Morgan
EMBI® Global Core Index
or any data included therein and J.P. Morgan shall have no liability for any
errors, omissions or interruptions therein. J.P. Morgan makes no warranty,
express or implied, as to results to be obtained by BFA or its affiliates,
owners of shares of iShares J.P. Morgan USD Emerging Markets Bond ETF or
any other person or entity from the use of the J.P. Morgan EMBI® Global Core Index or any
data included therein. J.P. Morgan makes no express or implied warranties and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the J.P. Morgan EMBI® Global Core Index or any
data included therein. Without limiting any of the foregoing, in no event shall
J.P. Morgan have any liability for any special, punitive, direct, indirect
or consequential damages (including lost profits) resulting from the use of the
J.P. Morgan EMBI® Global
Core Index or any data included therein, even if notified of the possibility of
such damages.
Markit® and iBoxx® are service marks of Markit
and have been licensed for use by BFA or its affiliates.
The
Markit iBoxx® USD Liquid
High Yield Index (the “Markit Index”) referenced herein is the property of
Markit (“Index Provider”) and has been licensed for use in connection with
iShares iBoxx $ High Yield Corporate Bond ETF. Each owner of iShares iBoxx $
High Yield Corporate Bond ETF acknowledges and agrees that iShares iBoxx $ High
Yield Corporate Bond ETF is not sponsored, endorsed or promoted by the Index
Provider. The Index Provider makes no representation whatsoever, whether express
or implied, and hereby expressly disclaims all warranties (including, without
limitation, those of merchantability or fitness for a particular purpose or
use), with respect to the Markit Index or any data included therein or relating
thereto, and in particular disclaims any warranty either as to the quality,
accuracy and/or completeness of the Markit Index or any data included therein,
the results obtained from the use of the Markit Index and/or the composition of
the Markit Index at any particular time on any particular date or otherwise
and/or the creditworthiness of any entity, or the likelihood of the occurrence
of a credit event or similar event (however defined) with respect to an
obligation, in the Markit Index at any particular time on any particular date or
otherwise. The Index Provider shall not be liable (whether in negligence or
otherwise) to the parties or any other person for any error in the Markit Index,
and the Index Provider is under no obligation to advise the parties or any
person of any error therein.
The
Index Provider makes no representation whatsoever, whether express or implied,
as to the advisability of purchasing or selling iShares iBoxx $ High Yield
Corporate Bond ETF, the ability of the Markit Index to track relevant markets’
performances, or otherwise relating to the Markit Index or any transaction or
product with respect thereto, or of assuming any risks in connection therewith.
The Index Provider has no obligation to take the needs of any party into
consideration in determining, composing or calculating the Markit Index. No
party purchasing or selling iShares iBoxx $ High Yield Corporate Bond ETF, nor
the Index Provider, shall have any liability to any party for any act or failure
to act by the Index Provider in connection with the determination, adjustment,
calculation or maintenance of the Markit Index.
THE
ISHARES MSCI FUNDS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI, ANY OF
ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY
INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX
(COLLECTIVELY, THE “MSCI PARTIES”). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY
OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS
AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY BFA OR ITS
AFFILIATES. NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THE ISHARES MSCI FUNDS OR ANY
OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN FUNDS
GENERALLY OR IN THE ISHARES MSCI FUNDS PARTICULARLY OR THE ABILITY OF ANY MSCI
INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES
ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF
THE MSCI INDEXES WHICH ARE DETERMINED,
281
COMPOSED
AND CALCULATED BY MSCI WITHOUT REGARD TO THE ISHARES MSCI FUNDS OR THE ISSUER OR
OWNERS OF THE ISHARES MSCI FUNDS OR ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI
PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR OWNERS OF THE
ISHARES MSCI FUNDS OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES
IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF,
PRICES AT, OR QUANTITIES OF THE ISHARES MSCI FUNDS TO BE ISSUED OR IN THE
DETERMINATION OR CALCULATION OF THE EQUATION BY OR THE CONSIDERATION INTO WHICH
THE ISHARES MSCI FUNDS ARE REDEEMABLE. FURTHER, NONE OF THE MSCI PARTIES HAS ANY
OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THE ISHARES MSCI FUNDS OR ANY
OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR
OFFERING OF THE ISHARES MSCI FUNDS.
ALTHOUGH
MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF
THE MSCI INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI
PARTIES WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS
OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES
ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF
THE ISHARES MSCI FUNDS, OWNERS OF THE ISHARES MSCI FUNDS, OR ANY OTHER PERSON OR
ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE
MSCI PARTIES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS
OF OR IN CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER,
NONE OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
AND THE MSCI PARTIES HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO EACH MSCI INDEX AND ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
ANY OF THE MSCI PARTIES HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
No
purchaser, seller or holder of the iShares MSCI Funds, or any other person or
entity, should use or refer to any MSCI trade name, trademark or service mark to
sponsor, endorse, market or promote the iShares MSCI Funds without first
contacting MSCI to determine whether MSCI’s permission is required. Under no
circumstances may any person or entity claim any affiliation with MSCI without
the prior written permission of MSCI.
“Bloomberg®” and the Bloomberg Indexes
are service marks of Bloomberg and have been licensed for use for certain
purposes by BFA or its affiliates.
The
iShares Bloomberg Funds are not sponsored, endorsed, sold or promoted by
Bloomberg. Bloomberg does not make any representation or warranty, express or
implied, to the owners of or counterparties to the iShares Bloomberg Funds or
any member of the public regarding the advisability of investing in securities
generally or in the iShares Bloomberg Funds particularly. The only relationship
of Bloomberg to BFA or its affiliates is the licensing of certain trademarks,
trade names and service marks and of the Bloomberg Indexes, which is determined,
composed and calculated by BISL without regard to BFA or its affiliates or the
iShares Bloomberg Funds. Bloomberg has no obligation to take the needs of BFA or
its affiliates or the owners of the iShares Bloomberg Funds into consideration
in determining, composing, or calculating the Bloomberg Indexes. Bloomberg is
not responsible for and has not participated in the determination of the timing
of, prices at, or quantities of the iShares Bloomberg Funds to be issued.
Bloomberg shall not have any obligation or liability, including, without
limitation, to iShares Bloomberg Funds customers, in connection with the
administration, marketing or trading of the iShares Bloomberg Funds.
BLOOMBERG
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE BLOOMBERG INDEXES
OR ANY DATA RELATED THERETO AND SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. BLOOMBERG DOES NOT MAKE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BFA OR ITS AFFILIATES,
OWNERS OF THE ISHARES BLOOMBERG FUNDS OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE BLOOMBERG INDEXES OR ANY DATA RELATED THERETO. BLOOMBERG DOES NOT MAKE
ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
BLOOMBERG INDEXES OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, TO THE MAXIMUM EXTENT ALLOWED BY LAW, BLOOMBERG, ITS LICENSORS, AND
ITS AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS, AND VENDORS
SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR ANY INJURY OR DAMAGES —
WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR OTHERWISE —
ARISING IN CONNECTION WITH THE ISHARES BLOOMBERG FUNDS OR BLOOMBERG INDEXES OR
ANY DATA OR VALUES RELATING THERETO — WHETHER ARISING FROM THEIR NEGLIGENCE OR
OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
The
ICE BofA 1‑5 Year US Corporate Index, ICE U.S. Treasury 1‑3 Year Bond Index, ICE
U.S. Treasury 3‑7 Year Bond Index, ICE U.S. Treasury 7‑10 Year Bond Index, ICE
U.S. Treasury 10‑20 Year Bond Index, ICE U.S. Treasury 20+ Year Bond Index, ICE
BofA US Corporate Index, ICE BofA 5‑10 Year US Corporate Index and ICE Short US
Treasury Securities Index (collectively, the “ICE Indexes”) are service/trade
marks of ICE Data Indices, LLC (“ICE Data”) or its affiliates (“Interactive
Data”) and have been licensed for use by BlackRock, Inc. and its affiliates in
connection with the iShares 1‑5 Year Investment Grade Corporate Bond ETF,
iShares 1‑3 Year Treasury Bond ETF, iShares 3‑7 Year Treasury Bond ETF, iShares
7‑10 Year Treasury Bond ETF, iShares 10‑20 Year Treasury Bond ETF, iShares 20+
Year Treasury Bond
282
ETF,
iShares Broad USD Investment Grade Corporate Bond ETF, iShares 5‑10 Year
Investment Grade Corporate Bond ETF and iShares Short Treasury Bond ETF
(collectively, the “iShares ICE Funds”). Neither BlackRock, Inc., iShares Trust
nor the iShares ICE Funds, as applicable, are sponsored, endorsed, sold or
promoted by ICE Data and ICE Data makes no representations or warranties
regarding BlackRock, Inc. or the iShares ICE Funds or the ability of the the
iShares ICE Funds to track the applicable Index.
ICE
DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE ICE INDEXES OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, DIRECT, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
283
Glossary
This
glossary contains an explanation of some of the common terms used in this
prospectus. For additional information about the Funds, please see the
SAI.
Acquired Fund Fees
and Expenses — a Fund’s pro rata share of the fees and expenses
incurred indirectly by a Fund as a result of investing in other investment
companies.
Administration
Fee — a fee paid to the administrator for providing administrative
services to a Fund.
Annual Fund Operating
Expenses — expenses that cover the costs of operating a
Fund.
Bloomberg U.S.
Aggregate Bond Index — a broad-based flagship benchmark that
measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond
market. The index includes U.S. Treasuries, government-related and corporate
securities, mortgage-backed securities (agency fixed-rate pass-throughs),
asset-backed securities and commercial mortgage-backed securities (agency and
non-agency).
Bloomberg U.S.
Intermediate Credit Bond Index — measures the investment grade, US
dollar-denominated, fixed-rate, taxable corporate and government-related bond
markets with a maturity greater than 1 year and less than 10 years. It is
composed of the US Corporate Index and a non-corporate component that includes
non-US agencies, sovereigns, supranationals and local authorities constrained by
maturity.
Bloomberg U.S.
Intermediate Government Bond Index — includes US
dollar-denominated, fixed-rate, nominal US Treasuries and US agency debentures
(securities issued by US government owned or government sponsored entities, and
debt explicitly guaranteed by the US government) with a maturity greater 1 year
and less than 10 years.
Bloomberg U.S. Long
Credit Bond Index — measures the investment grade, US
dollar-denominated, fixed-rate, taxable corporate and government-related bond
markets with a maturity greater than 10 years. It is composed of the US
Corporate Index and a non-corporate component that includes non-US agencies,
sovereigns, supranationals and local authorities constrained by maturity.
Bloomberg U.S. Long
Government Bond Index — includes US dollar-denominated,
fixed-rate, nominal US Treasuries and US agency debentures (securities issued by
US government owned or government sponsored entities, and debt explicitly
guaranteed by the US government) with a maturity greater than 10 years.
Bloomberg U.S.
Securitized: MBS, ABS and CMBS Index — measures the performance of
residential mortgage backed securities issued by Government Sponsored
Enterprises, asset backed securities and commercial mortgage backed
securities.
Distribution
Fees — fees used to support a Fund’s marketing and distribution
efforts, such as compensating Financial Intermediaries, advertising and
promotion.
LifePath Dynamic Fund
Custom Benchmark — a customized weighted index comprised of
different indexes which are representative of the asset classes in which a Fund
invests according to their weightings as of the most recent quarter end.
Management
Fee — a fee paid to BFA for managing a Fund.
Other
Expenses — include accounting, administration, transfer agency,
custody, professional and registration fees.
Russell 1000® Index — an
index that measures the performance of the large-cap segment of the U.S. equity
universe. It is a subset of the Russell 3000® Index and includes
approximately 1,000 of the largest securities based on a combination of their
market capitalization and current index membership. The Russell 1000® Index represents
approximately 93% of the U.S. market.
Service
Fees — fees used to compensate Financial Intermediaries for
certain shareholder servicing activities.
Shareholder
Fees — fees paid directly by a shareholder, including sales
charges that you may pay when you buy or sell shares of a Fund.
284
Intermediary-Defined
Sales Charge Waiver Policies
Intermediary-Defined Sales Charge Waiver Policies
Merrill
Lynch:
Purchases
or sales of front‑end (i.e. Investor A) or level-load (i.e., Investor
C) mutual fund shares through a Merrill platform or account will be eligible
only for the following sales load waivers (front‑end, contingent
deferred, or back‑end waivers) and discounts, which differ from those
disclosed elsewhere in this Fund’s prospectus. Purchasers will have to buy
mutual fund shares directly from the mutual fund company or through another
intermediary to be eligible for waivers or discounts not listed below.
It
is the client’s responsibility to notify Merrill at the time of purchase or sale
of any relationship or other facts that qualify the transaction for a waiver or
discount. A Merrill representative may ask for reasonable documentation of such
facts and Merrill may condition the granting of a waiver or discount on the
timely receipt of such documentation.
Additional
information on waivers and discounts is available in the Merrill Sales Load
Waiver and Discounts Supplement (the “Merrill SLWD Supplement”) and in the
Mutual Fund Investing at Merrill pamphlet at ml.com/funds. Clients are
encouraged to review these documents and speak with their financial advisor to
determine whether a transaction is eligible for a waiver or discount.
Front‑end Load Waivers Available at Merrill
| ∎ |
Shares
of mutual funds available for purchase by employer-sponsored retirement,
deferred compensation, and employee benefit plans (including health
savings accounts) and trusts used to fund those plans provided the shares
are not held in a commission-based brokerage account and shares are held
for the benefit of the plan. For purposes of this provision,
employer-sponsored retirement plans do not include SEP IRAs, Simple
IRAs, SAR‑SEPs or Keogh plans |
| ∎ |
Shares
purchased through a Merrill investment advisory
program |
| ∎ |
Brokerage
class shares exchanged from advisory class shares due to the holdings
moving from a Merrill investment advisory program to a Merrill brokerage
account |
| ∎ |
Shares
purchased through the Merrill Edge Self-Directed
platform |
| ∎ |
Shares
purchased through the systematic reinvestment of capital gains
distributions and dividend reinvestment when purchasing shares of the same
mutual fund in the same account |
| ∎ |
Shares
exchanged from level-load shares to front‑end load shares of the
same mutual fund in accordance with the description in the Merrill SLWD
Supplement |
| ∎ |
Shares
purchased by eligible employees of Merrill or its affiliates and their
family members who purchase shares in accounts within the employee’s
Merrill Household (as defined in the Merrill SLWD
Supplement) |
| ∎ |
Shares
purchased by eligible persons associated with the Fund as defined in this
prospectus (e.g. the Fund’s officers or
trustees) |
| ∎ |
Shares
purchased from the proceeds of a mutual fund redemption
in front‑end load shares provided (1) the repurchase is in
a mutual fund within the same fund family, (2) the repurchase occurs
within 90 calendar days from the redemption trade date, and (3) the
redemption and purchase occur in the same account (known as Rights of
Reinstatement). Automated transactions (i.e. systematic purchases and
withdrawals) and purchases made after shares are automatically sold to pay
Merrill’s account maintenance fees are not eligible for Rights of
Reinstatement |
Contingent Deferred Sales Charge (“CDSC”) Waivers
on Front‑end, Back‑end, and Level Load Shares Available at
Merrill
| ∎ |
Shares
sold due to the client’s death or disability (as defined by Internal
Revenue Code Section 22e(3)) |
| ∎ |
Shares
sold pursuant to a systematic withdrawal program subject to Merrill’s
maximum systematic withdrawal limits as described in the Merrill SLWD
Supplement |
| ∎ |
Shares
sold due to return of excess contributions from an IRA
account |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the investor reaching the qualified age based on
applicable IRS regulation |
A-1
| ∎ |
Front‑end or
level-load shares held in
commission‑based, non‑taxable retirement brokerage accounts
(e.g. traditional, Roth, rollover, SEP IRAs, Simple
IRAs, SAR‑SEPs or Keogh plans) that are transferred
to fee‑based accounts or platforms and exchanged for a lower
cost share class of the same mutual fund |
Front‑end Load Discounts Available at Merrill:
Breakpoints, Rights of Accumulation & Letters of Intent
| ∎ |
Breakpoint
discounts, as described in this prospectus, where the sales load is at or
below the maximum sales load that Merrill permits to be assessed to
a front‑end load purchase, as described in the Merrill SLWD
Supplement |
| ∎ |
Rights
of Accumulation (ROA), as described in the Merrill SLWD Supplement, which
entitle clients to breakpoint discounts based on the aggregated holdings
of mutual fund family assets held in accounts in their Merrill
Household |
| ∎ |
Letters
of Intent (LOI), which allow for breakpoint discounts on eligible new
purchases based on anticipated future eligible purchases within a fund
family at Merrill, in accounts within your Merrill Household, as further
described in the Merrill SLWD Supplement |
A-2
Ameriprise
Financial:
Investor A Shares Front-End Sales Charge Waivers
Available at Ameriprise Financial:
The following information applies to Investor A
Shares purchases if you have an account with or otherwise purchase Fund shares
through Ameriprise Financial:
Shareholders
purchasing Fund shares through an Ameriprise Financial retail brokerage account
are eligible for the following front-end sales charge waivers and discounts,
which may differ from those disclosed elsewhere in this Fund’s prospectus or
SAI:
| ∎ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement
plans do not include SEP IRAs, Simple IRAs or
SAR-SEPs. |
| ∎ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other
fund within BlackRock Funds). |
| ∎ |
Shares
exchanged from Investor C Shares of the same fund in the month of or
following the 7-year anniversary of the purchase date. To the extent that
this prospectus elsewhere provides for a waiver with respect to exchanges
of Investor C Shares or conversion of Investor C Shares following a
shorter holding period, that waiver will apply. |
| ∎ |
Employees
and registered representatives of Ameriprise Financial or its affiliates
and their immediate family members. |
| ∎ |
Shares
purchased by or through qualified accounts (including IRAs, Coverdell
Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and
defined benefit plans) that are held by a covered family member, defined
as an Ameriprise financial advisor and/or the advisor’s spouse, advisor’s
lineal ascendant (mother, father, grandmother, grandfather, great
grandmother, great grandfather), advisor’s lineal descendant (son,
step-son, daughter, step-daughter, grandson, granddaughter, great
grandson, great granddaughter) or any spouse of a covered family member
who is a lineal descendant. |
| ∎ |
Shares
purchased from the proceeds of redemptions within BlackRock Funds,
provided (1) the repurchase occurs within 90 days following the
redemption, (2) the redemption and purchase occur in the same
account, and (3) redeemed shares were subject to a front-end or
deferred sales charge (i.e. Rights of
Reinstatement). |
A-3
Morgan
Stanley Wealth Management:
Morgan Stanley Wealth Management Investor A Share
Front-End Sales Charge Waiver
Effective
July 1, 2018, Morgan Stanley Wealth Management clients purchasing Investor
A Shares of the Fund through Morgan Stanley’s transactional brokerage accounts
are entitled to a waiver of the front-end sales charge in the following
circumstances:
| ∎ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement
plans does not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh
plans |
| ∎ |
Morgan
Stanley employee and employee-related accounts according to Morgan
Stanley’s account linking rules |
| ∎ |
Shares
purchased through reinvestment of dividends and capital gains
distributions when purchasing shares of the same
fund |
| ∎ |
Shares
purchased through a Morgan Stanley self-directed brokerage
account |
| ∎ |
Investor
C Shares that are no longer subject to a contingent deferred sales charge
and are exchanged for Investor A Shares of the same fund pursuant to
Morgan Stanley Wealth Management’s share class conversion
program |
| ∎ |
Shares
purchased from the proceeds of redemptions within BlackRock Funds under a
Rights of Reinstatement provision, provided the repurchase occurs within
90 days following the redemption, the redemption and purchase occur in the
same account, and redeemed shares were subject to a front-end or deferred
sales charge |
Unless
specifically described above, no other front-end sales charge waivers are
available to mutual fund purchases by Morgan Stanley Wealth Management clients
through Morgan Stanley’s transactional brokerage accounts.
A-4
Raymond James & Associates, Inc., Raymond
James Financial Services, Inc. and Each Entity’s Affiliates
(“Raymond James”):
Effective
March 1, 2019, shareholders purchasing Fund shares through a Raymond James
platform or account, or through an introducing broker-dealer or independent
registered investment adviser for which Raymond James provides trade execution,
clearance, and/or custody services, will be eligible only for the following
sales charge waivers (front-end sales charge waivers and CDSC waivers)
and discounts, which may differ from those disclosed elsewhere in this
prospectus or the SAI.
Front-End Sales Charge Waivers on Investor A
Shares Available at Raymond James
| ∎ |
Shares
purchased in a Raymond James investment advisory
program. |
| ∎ |
Shares
purchased of the same Fund or another BlackRock Fund through a systematic
reinvestment of capital gains distributions and dividend
distributions. |
| ∎ |
Shares
purchased by employees and registered representatives of Raymond James or
its affiliates and their family members as designated by Raymond
James. |
| ∎ |
Shares
purchased from the proceeds of redemptions from another BlackRock Fund,
provided (1) the repurchase occurs within 90 days following the
redemption, (2) the redemption and purchase occur in the same
account, and (3) redeemed shares were subject to
a front-end or deferred sales charge (known as Rights of
Reinstatement). |
| ∎ |
A
shareholder in the Fund’s Investor C shares will have their shares
converted at net asset value to Investor A shares of the Fund if the
shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of Raymond James. |
CDSC Waivers on Investor A and C Shares Available at
Raymond James
| ∎ |
Shares
sold due to death or disability of the
shareholder. |
| ∎ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus. |
| ∎ |
Shares
bought due to return of excess contributions from an IRA
Account. |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the shareholder reaching age 701⁄2 as described in the Fund’s
prospectus. |
| ∎ |
Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James. |
| ∎ |
Shares
acquired through a Right of Reinstatement. |
Front-End Sales Charge Discounts Available at
Raymond James: Breakpoints, Rights of Accumulation and/or Letters of Intent
| ∎ |
Breakpoints
as described in this prospectus. |
| ∎ |
Rights
of accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of BlackRock Fund
assets held by accounts within the purchaser’s household at Raymond James.
Eligible BlackRock Fund assets not held at Raymond James may be included
in the calculation of rights of accumulation only if the shareholder
notifies his or her financial advisor about such
assets. |
| ∎ |
Letters
of intent which allow for breakpoint discounts based on anticipated
purchases of BlackRock Funds over a 13-month time period. Eligible
BlackRock Fund assets not held at Raymond James may be included in the
calculation of letters of intent only if the shareholder notifies his or
her financial advisor about such assets. |
A-5
Janney Montgomery Scott LLC:
Effective
May 1, 2020, if you purchase fund shares through a Janney Montgomery Scott
LLC (“Janney”) brokerage account, you will be eligible for the following sales
charge waivers (front‑end sales charge waivers and contingent deferred sales
charge (“CDSC”), or back‑end sales charge, waivers) and discounts, which may
differ from those disclosed elsewhere in this Fund’s prospectus or SAI.
Front‑end Sales Charge* Waivers on Investor A Shares
available at Janney
| ∎ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other
BlackRock Fund). |
| ∎ |
Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by
Janney. |
| ∎ |
Shares
purchased from the proceeds of redemptions from another BlackRock Fund,
provided (1) the repurchase occurs within ninety (90) days
following the redemption, (2) the redemption and purchase occur in
the same account, and (3) redeemed shares were subject to a front‑end
or deferred sales charge (i.e., right of
reinstatement). |
| ∎ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement
plans do not include SEP IRAs, Simple IRAs, SAR‑SEPs or Keogh
plans. |
| ∎ |
Shares
acquired through a right of reinstatement. |
| ∎ |
Investor
C shares that are no longer subject to a contingent deferred sales charge
and are converted to Investor A shares of the same fund pursuant to
Janney’s policies and procedures. |
CDSC Waivers on Investor A and C Shares available at
Janney
| ∎ |
Shares
sold upon the death or disability of the
shareholder. |
| ∎ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus or SAI. |
| ∎ |
Shares
purchased in connection with a return of excess contributions from an IRA
account. |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts pursuant to the Internal Revenue Code. |
| ∎ |
Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney. |
| ∎ |
Shares
acquired through a right of reinstatement. |
| ∎ |
Shares
exchanged into the same share class of a different
fund. |
Front‑end Sales Charge* Discounts available at
Janney: Breakpoints, Rights of Accumulation, and/or Letters of Intent
| ∎ |
Breakpoints
as described in the Fund’s prospectus or SAI. |
| ∎ |
Rights
of accumulation (“ROA”), which entitle shareholders to breakpoint
discounts, will be automatically calculated based on the aggregated
holding of BlackRock Fund assets held by accounts within the purchaser’s
household at Janney. Eligible BlackRock Fund assets not held at Janney may
be included in the ROA calculation only if the shareholder notifies his or
her financial advisor about such assets. |
| ∎ |
Letters
of intent which allow for breakpoint discounts based on anticipated
purchases within a BlackRock Fund, over a 13‑month time period. Eligible
BlackRock Fund assets not held at Janney Montgomery Scott may be included
in the calculation of letters of intent only if the shareholder notifies
his or her financial advisor about such assets. |
| * |
Also
referred to as an “initial sales charge.” |
A-6
Edward
D. Jones & Co., L.P. (“Edward Jones”):
Policies Regarding Transactions Through Edward Jones
The following information has been provided by Edward
Jones:
Effective
on or after January 1, 2024, the following information supersedes prior
information with respect to transactions and positions held in fund shares
through an Edward Jones system. Clients of Edward Jones (also referred to as
“shareholders”) purchasing fund shares on the Edward Jones commission
and fee‑based platforms are eligible only for the following sales
charge discounts (also referred to as “breakpoints”) and waivers, which can
differ from discounts and waivers described elsewhere in this prospectus or
statement of additional information (“SAI”) or through another broker-dealer. In
all instances, it is the shareholder’s responsibility to inform Edward Jones at
the time of purchase of any relationship, holdings of BlackRock Funds, or other
facts qualifying the purchaser for discounts or waivers. Edward Jones can ask
for documentation of such circumstance. Shareholders should contact Edward Jones
if they have questions regarding their eligibility for these discounts and
waivers.
Breakpoints
| ∎ |
Breakpoint
pricing, otherwise known as volume pricing, at dollar thresholds as
described in the prospectus. |
Rights
of Accumulation (“ROA”)
| ∎ |
The
applicable sales charge on a purchase of Investor A Shares is determined
by taking into account all share classes (except certain money market
funds and any assets held in group retirement plans) of BlackRock Funds
held by the shareholder or in an account grouped by Edward Jones with
other accounts for the purpose of providing certain pricing considerations
(“pricing groups”). If grouping assets as a shareholder, this includes all
share classes held on the Edward Jones platform and/or held on another
platform. The inclusion of eligible fund family assets in the ROA
calculation is dependent on the shareholder notifying Edward Jones of such
assets at the time of calculation. Money market funds are included only if
such shares were sold with a sales charge at the time of purchase or
acquired in exchange for shares purchased with a sales
charge. |
| ∎ |
The
employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to
establish or change ROA for the IRA accounts associated with the plan to a
plan-level grouping as opposed to including all share classes at a
shareholder or pricing group level. |
| ∎ |
ROA
is determined by calculating the higher of cost minus redemptions or
market value (current shares multiplied by NAV). |
Letter
of Intent (“LOI”)
| ∎ |
Through
a LOI, a shareholder can receive the sales charge and breakpoint discounts
for purchases such shareholder intends to make over
a 13‑month period from the date Edward Jones receives the LOI.
The LOI is determined by calculating the higher of cost or market value of
qualifying holdings at LOI initiation in combination with the value that
the shareholder intends to buy over a 13‑month period to
calculate the front‑end sales charge and any breakpoint
discounts. Each purchase the shareholder makes during
that 13‑month period will receive the sales charge and
breakpoint discount that applies to the total amount. The inclusion of
eligible BlackRock Funds assets in the LOI calculation is dependent on the
shareholder notifying Edward Jones of such assets at the time of
calculation. Purchases made before the LOI is received by Edward Jones are
not adjusted under the LOI and will not reduce the sales charge previously
paid. Sales charges will be adjusted if the LOI is not
met. |
| ∎ |
If
the employer maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected
to establish or change ROA for the IRA accounts associated with the plan
to a plan-level grouping, LOIs will also be at
the plan-level and may only be established by the
employer. |
Sales
Charge Waivers
Sales
charges are waived for the following shareholders and in the following
situations:
| ∎ |
Associates
of Edward Jones and its affiliates and other accounts in the same pricing
group (as determined by Edward Jones under its policies and procedures) as
the associate. This waiver will continue for the remainder of the
associate’s life if the associate retires from Edward Jones in
good-standing and remains in good standing pursuant to Edward Jones’
policies and procedures. |
| ∎ |
Shares
purchased in an Edward
Jones fee‑based program. |
| ∎ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment. |
A-7
| ∎ |
Shares
purchased from the proceeds of redeemed shares of BlackRock Funds so long
as the following conditions are met: the proceeds are from the sale of
shares within 60 days of the purchase, the sale and purchase are made from
a share class that charges a front load and one of the
following: |
| ∎ |
The
redemption and repurchase occur in the same
account. |
| ∎ |
The
redemption proceeds are used to process an: IRA contribution, return of
excess contributions, conversion, recharacterizing of contributions, or
distribution, and the repurchase is done in an account within the same
Edward Jones grouping for ROA. |
| ∎ |
Shares
exchanged into Investor A Shares from another share class so long as the
exchange is into the same fund and was initiated at the discretion of
Edward Jones. Edward Jones is responsible for any remaining CDSCs due to
BlackRock, if applicable. Any future purchases are subject to the
applicable sales charge as disclosed in the
prospectus. |
| ∎ |
Exchanges
from Investor C Shares to Investor A Shares of the same fund, generally,
in the 84th month following the anniversary of the purchase date or
earlier at the discretion of Edward Jones. |
Contingent
Deferred Sales Charge (“CDSC”) Waivers
If
the shareholder purchases shares that are subject to a CDSC and those shares are
redeemed before the CDSC is expired, the shareholder is responsible to pay the
CDSC except in the following conditions:
| ∎ |
The
death or disability of the shareholder. |
| ∎ |
Systematic
withdrawals with up to 10% per year of the account
value. |
| ∎ |
Return
of excess contributions from an IRA. |
| ∎ |
Shares
redeemed as part of a required minimum distribution for IRA and retirement
accounts if the redemption is taken in or after the year the shareholder
reaches qualified age based on applicable IRS
regulations. |
| ∎ |
Shares
redeemed to pay Edward Jones fees or costs in such cases where the
transaction is initiated by Edward Jones. |
| ∎ |
Shares
exchanged in an Edward
Jones fee‑based program. |
| ∎ |
Shares
acquired through a NAV Reinstatement. |
| ∎ |
Shares
redeemed at the discretion of Edward Jones for Minimum Balances, as
described below. |
Other Important Information Regarding Transactions
Through Edward Jones
Minimum
Purchase Amounts for Investor A and Investor C Shares
| ∎ |
Initial
purchase minimum: $250 |
| ∎ |
Subsequent
purchase minimum: none |
Minimum
Balances
Edward
Jones has the right to redeem at its discretion fund holdings with a balance of
$250 or less. The following are examples of accounts that are not included in
this policy:
| ∎ |
A fee‑based account
held on an Edward Jones platform |
| ∎ |
A
529 account held on an Edward Jones platform |
| ∎ |
An
account with an active systematic investment plan or
LOI |
Exchanging
Share Classes
| ∎ |
At
any time it deems necessary, Edward Jones has the authority to exchange at
NAV a shareholder’s holdings in a fund to Investor A Shares of the same
fund at NAV, provided that Edward Jones will be responsible for any
remaining CDSC due to BlackRock, if applicable, and that the shareholders
meet the eligibility requirements of the new share
class. |
A-8
Robert
W. Baird & Co. (“Baird”):
Effective
June 15, 2020, shareholders purchasing Fund shares through a Baird platform
or account will only be eligible for the following sales charge waivers
(front‑end sales charge waivers and CDSC waivers) and discounts, which may
differ from those disclosed elsewhere in this Fund’s prospectus or SAI
Front‑End Sales Charge Waivers on Investor A Shares
available at Baird
| ∎ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing share of the same
fund |
| ∎ |
Shares
purchased by employees and registered representatives of Baird or its
affiliates and their family members as designated by
Baird |
| ∎ |
Shares
purchased from the proceeds of redemptions from another BlackRock Fund,
provided (1) the repurchase occurs within 90 days following the
redemption, (2) the redemption and purchase occur in the same
account, and (3) redeemed shares were subject to a front‑end or
deferred sales charge (known as Rights of
Reinstatement) |
| ∎ |
A
shareholder in the Fund’s Investor C shares will have their shares
converted at net asset value to Investor A shares of the fund if the
shares are no longer subject to CDSC and the conversion is in line with
the policies and procedures of Baird |
| ∎ |
Shares
purchased by employer-sponsored retirement plans or charitable accounts in
a transactional brokerage account at Baird, including 401(k) plans, 457
plans, employer-sponsored 403(b) plans, profit sharing and money purchase
pension plans and defined benefit plans. For purposes of this provision,
employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs
or SAR‑SEPs |
CDSC Waivers on Investor A and C Shares available at
Baird
| ∎ |
Shares
sold due to death or disability of the
shareholder |
| ∎ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus |
| ∎ |
Shares
bought due to returns of excess contributions from an IRA
account |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the shareholder reaching the qualified age based on
applicable Internal Revenue Service regulations as described in the Fund’s
prospectus |
| ∎ |
Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird |
| ∎ |
Shares
acquired through a right of reinstatement |
Front‑End Sales Charge Discounts available at Baird:
Breakpoints, Rights of Accumulation, & Letters of Intent
| ∎ |
Breakpoints
as described in this prospectus |
| ∎ |
Rights
of Accumulation (“ROA”) which entitle shareholders to breakpoint discounts
will be automatically calculated based on the aggregated holding of
BlackRock Fund assets held by accounts within the purchaser’s household at
Baird. Eligible BlackRock Fund assets not held at Baird may be included in
ROA calculation only if the shareholder notifies his or her financial
advisor about such assets |
| ∎ |
Letters
of Intent (“LOI”) allow for breakpoint discounts based on anticipated
purchases of BlackRock Funds through Baird, over a 13‑month period of
time |
A-9
D.A.
Davidson & Co. (“D.A. Davidson”):
Effective
March 1, 2021, shareholders purchasing Fund shares including existing Fund
shareholders, through a D.A. Davidson platform or account, or through an
introducing broker-dealer or independent registered investment advisor for which
D.A. Davidson provides trade execution, clearance, and/or custody services, will
be eligible for the following sales charge waivers (front‑end sales charge
waivers and contingent deferred, or back‑end, sales charge waivers) and
discounts, which may differ from those disclosed elsewhere in this Prospectus or
the Funds’ SAI.
Front‑End Sales Charge Waivers on Investor A Shares
available at D.A. Davidson
| ∎ |
Shares
purchased of the same Fund or another BlackRock Fund through a systematic
reinvestment of capital gains and dividend
distributions. |
| ∎ |
Shares
purchased by employees and registered representatives of D.A. Davidson or
its affiliates and their family members as designated by D.A.
Davidson. |
| ∎ |
Shares
purchased from the proceeds of redemptions of the same Fund or another
BlackRock Fund, provided (1) the repurchase occurs within 90 days
following the redemption, (2) the redemption and purchase occur in
the same account, and (3) redeemed shares were subject to a front‑end
or deferred sales charge (known as Rights of
Reinstatement). |
| ∎ |
A
shareholder in the Fund’s Investor C Shares will have their shares
converted at net asset value to Investor A Shares (or the appropriate
share class) of the Fund if the shares are no longer subject to a CDSC and
the conversion is consistent with D.A. Davidson’s policies and
procedures. |
CDSC Waivers on Investor A and C Shares available at
D.A. Davidson
| ∎ |
Shares
sold due to the death or disability of the
shareholder. |
| ∎ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus. |
| ∎ |
Shares
bought due to return of excess contributions from an IRA
account. |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA or other
qualifying retirement accounts pursuant to the Internal Revenue
Code. |
| ∎ |
Shares
acquired through a Right of Reinstatement. |
Front‑end Sales Charge Discounts available at D.A.
Davidson: Breakpoints, Rights of Accumulation and/or Letters of Intent
| ∎ |
Breakpoints
as described in this Prospectus. |
| ∎ |
Rights
of accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of BlackRock Fund
assets held by accounts within the purchaser’s household at D.A. Davidson.
Eligible BlackRock Fund assets not held at D.A. Davidson may be included
in the calculation of rights of accumulation only if the shareholder
notifies his or her financial advisor about such
assets. |
| ∎ |
Letters
of intent which allow for breakpoint discounts based on anticipated
purchases of BlackRock Funds, over a 13‑month time period. Eligible
BlackRock Fund assets not held at D.A. Davidson may be included in the
calculation of letters of intent only if the shareholder notifies his or
her financial advisor about such assets. |
A-10
J.P.
MORGAN SECURITIES LLC
Effective
September 29, 2023, if you purchase or hold Fund shares through an
applicable J.P. Morgan Securities LLC brokerage account, you will be eligible
for the following sales charge waivers (front‑end sales charge waivers
and contingent deferred sales charge (“CDSC”), or back‑end sales
charge, waivers), share class conversion policy and discounts, which may differ
from those disclosed elsewhere in this Fund’s prospectus or SAI.
Front‑end Sales Charge Waivers on Investor A
Shares available at J.P. Morgan Securities LLC
| ∎ |
Shares
exchanged from Investor C (i.e., level-load) Shares of the same Fund
pursuant to J.P. Morgan Securities LLC’s policies relating to sales load
discounts and waivers. |
| ∎ |
Qualified
employer-sponsored defined contribution and defined benefit retirement
plans, nonqualified deferred compensation plans, other employee benefit
plans and trusts used to fund those plans. For purposes of this provision,
such plans do not include SEP IRAs, SIMPLE IRAs, SAR‑SEPs or 501(c)(3)
accounts. |
| ∎ |
Shares
of Funds purchased through J.P. Morgan Securities LLC Self-Directed
Investing accounts. |
| ∎ |
Shares
purchased through rights of reinstatement. |
| ∎ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other
fund within the fund family). |
| ∎ |
Shares
purchased by employees and registered representatives of J.P. Morgan
Securities LLC or its affiliates and their spouse or financial
dependent. |
Investor C to Investor A Share Conversion
| ∎ |
A
shareholder in the Fund’s Investor C Shares will have their shares
converted by J.P. Morgan Securities LLC to Investor A Shares (or the
appropriate share class) of the same Fund if the shares are no longer
subject to a CDSC and the conversion is consistent with J.P. Morgan
Securities LLC’s policies and procedures. |
CDSC Waivers on Investor A and C Shares available at
J.P. Morgan Securities LLC
| ∎ |
Shares
sold upon the death or disability of the
shareholder. |
| ∎ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus. |
| ∎ |
Shares
purchased in connection with a return of excess contributions from an IRA
account. |
| ∎ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts pursuant to the Internal Revenue Code. |
| ∎ |
Shares
acquired through a right of reinstatement. |
Front‑end Load Discounts available at J.P.
Morgan Securities LLC: Breakpoints, Rights of Accumulation & Letters of
Intent
| ∎ |
Breakpoints
as described in the prospectus. |
| ∎ |
Rights
of Accumulation (ROA) which entitle shareholders to breakpoint discounts
as described in the Fund’s prospectus will be automatically calculated
based on the aggregated holding of fund family assets held by accounts
within the purchaser’s household at J.P. Morgan Securities LLC. Eligible
fund family assets not held at J.P. Morgan Securities LLC (including 529
program holdings, where applicable) may be included in the ROA calculation
only if the shareholder notifies his or her financial advisor about such
assets. |
| ∎ |
Letters
of Intent (LOI) which allow for breakpoint discounts based on anticipated
purchases within a fund family, through J.P. Morgan Securities LLC, over a
13‑month period of time (if applicable). |
A-11
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For
More Information
Funds and Service Providers
THE
FUNDS
BlackRock
Funds III
BlackRock
LifePath® Dynamic
Retirement Fund
BlackRock
LifePath® Dynamic 2025
Fund
BlackRock
LifePath® Dynamic 2030
Fund
BlackRock
LifePath® Dynamic 2035
Fund
BlackRock
LifePath® Dynamic 2040
Fund
BlackRock
LifePath® Dynamic 2045
Fund
BlackRock
LifePath® Dynamic 2050
Fund
BlackRock
LifePath® Dynamic 2055
Fund
BlackRock
LifePath® Dynamic 2060
Fund
BlackRock
LifePath® Dynamic 2065
Fund
400
Howard Street
San
Francisco, California 94105
(800)
441-7762
MANAGER
BlackRock
Fund Advisors
400
Howard Street
San
Francisco, California 94105
SUB-ADVISERS
BlackRock
International Limited
Exchange
Place One
1
Semple Street
Edinburgh,
EH3 8BL, United Kingdom
BlackRock
(Singapore) Limited
20
Anson Road #18-01
079912
Singapore
ADMINISTRATOR
BlackRock
Advisors, LLC
100
Bellevue Parkway
Wilmington,
Delaware 19809
TRANSFER
AGENT
BNY
Mellon Investment Servicing (US) Inc.
301
Bellevue Parkway
Wilmington,
Delaware 19809
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers
LLP
Two
Commerce Square
2001
Market Street, Suite 1800
Philadelphia,
Pennsylvania 19103
ACCOUNTING
SERVICES PROVIDER
State
Street Bank and Trust Company
One
Congress Street, Suite 1
Boston,
MA 02114-2016
DISTRIBUTOR
BlackRock
Investments, LLC
50
Hudson Yards
New
York, New York 10001
CUSTODIAN
State
Street Bank and Trust Company
One
Congress Street, Suite 1
Boston,
MA 02114-2016
COUNSEL
Sidley
Austin LLP
787
Seventh Avenue
New
York, New York 10019
Additional Information
For
more information:
This
prospectus contains important information you should know before investing,
including information about risks. Please read it before you invest and keep it
for future reference. More information about the Funds is available at no charge
upon request. This information includes:
Annual/Semi-Annual
Reports
These
reports contain additional information about each Fund’s investments. The annual
report describes the Funds’ performance, lists portfolio holdings, and discusses
recent market conditions, economic trends and Fund investment strategies that
significantly affected the Funds’ performance for the last fiscal year.
Statement
of Additional Information
A
Statement of Additional Information (“SAI”), dated April 29, 2024, has been
filed with the Securities and Exchange Commission (the “SEC”). The SAI, which
includes additional information about each Fund, may be obtained free of charge,
along with each Fund’s annual and semi-annual reports, by calling
(800) 441‑7762. The SAI, as amended and/or supplemented from time to time,
is incorporated by reference into this prospectus.
Questions
If
you have any questions about the Funds, please call: (800) 441-7762
(toll-free) 8:00 a.m. to 6:00 p.m. (Eastern time) on any business
day.
World
Wide Web
General
Fund information and specific Fund performance, including the SAI and
annual/semi-annual reports, can be accessed free of charge at
www.blackrock.com/prospectus. Mutual fund prospectuses and literature can also
be requested via this website.
Written
Correspondence
BlackRock
Funds III
P.O.
Box 534429
Pittsburgh,
Pennsylvania 15253-4429
Overnight
Mail
BlackRock
Funds III
Attention:
534429
500
Ross Street 154-0520
Pittsburgh,
Pennsylvania 15262
Internal
Wholesalers/Broker Dealer Support
Available
on any business day to support investment professionals. Call:
(800) 882-0052.
Portfolio
Characteristics and Holdings
A
description of the Funds’ policies and procedures related to disclosure of
portfolio characteristics and holdings is available in the SAI.
For
information about portfolio holdings and characteristics, BlackRock fund
shareholders and prospective investors may call (800) 882-0052.
Securities
and Exchange Commission
You
may also view and copy public information about a Fund, including the SAI,
by visiting the EDGAR database on the SEC’s website (http://www.sec.gov). Copies
of this information can be obtained, for a duplicating fee, by electronic
request at the following e‑mail address: [email protected].
You
should rely only on the information contained in this prospectus. No one is
authorized to provide you with information that is different from information
contained in this prospectus.
The
SEC has not approved or disapproved these securities or passed upon the adequacy
of this prospectus. Any representation to the contrary is a criminal
offense.
INVESTMENT
COMPANY ACT FILE # 811-07332
|
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PRO-LP-0424 |