iShares U.S. ETF Trust

·   iShares Evolved U.S. Consumer Staples ETF | IECS | Cboe BZX

·   iShares Evolved U.S. Discretionary Spending ETF | IEDI | Cboe BZX

·   iShares Evolved U.S. Financials ETF | IEFN | Cboe BZX

·   iShares Evolved U.S. Healthcare Staples ETF | IEHS | Cboe BZX

·   iShares Evolved U.S. Innovative Healthcare ETF | IEIH | Cboe BZX

·   iShares Evolved U.S. Media and Entertainment ETF | IEME | Cboe BZX

·   iShares Evolved U.S. Technology ETF | IETC | Cboe BZX

Table of Contents

Market Overview

iShares U.S. ETF Trust

Domestic Market Overview

U.S. stocks declined for the 12 months ended July 31, 2022 (“reporting period”), when the Russell 3000^® Index, a broad measure of U.S. equity market performance, returned -7.35%. Equities advanced early in the reporting period as strong household balance sheets and robust job growth supported rising consumer spending. Increased economic activity led to strong corporate earnings as companies reaped the benefits amid a recovery from the effects of the coronavirus pandemic. However, significant challenges emerged as the reporting period continued, including high inflation, rising interest rates, slower economic growth, and the impacts of Russia’s invasion of Ukraine. These factors drove stock prices sharply lower, erasing prior gains and leading to significantly negative performance for the reporting period overall.

The U.S. economy grew briskly over the final half of 2021, powered primarily by consumer spending. Record-high personal savings rates allowed consumers to spend at an elevated level, releasing pent-up demand for goods and services. Growth subsequently stalled in the first half of 2022, and the economy contracted amid lower inventories and faltering business investment. Despite the economic downturn, indicators were mixed, showing evidence of a slowdown in some areas while others remained positive. Hiring continued to increase as businesses restored capacity, and unemployment declined substantially, falling to 3.5% in July 2022 — identical to the pre-pandemic rate in February 2020. Although high inflation negatively impacted consumer sentiment, which declined significantly, consumer spending continued to rise.

The rapid increase in consumer spending drove a significant rise in inflation. Supply chains for many goods were disrupted by the pandemic and could not quickly adapt to the rapid rebound in demand. Oil prices also rose significantly as demand increased and a lack of investment constrained the supply of oil. The strong job market led to higher wages, particularly at the lower end of the market. These factors drove prices higher in many areas of the economy.

Rising inflation led to a shift in policy from the U.S. Federal Reserve (“the Fed”). As the reporting period began, the Fed was using accommodative monetary policy to stimulate the economy. Short-term interest rates were kept at near-zero levels, and the Fed used bond-buying programs to stabilize debt markets. However, rising prices led the Fed to tighten monetary policy during the reporting period in an attempt to prevent runaway inflation. The Fed slowed and then ended its bond-buying activities, finally reversing course as it began to reduce its balance sheet in June 2022.

In March 2022, the Fed began to raise short-term interest rates, followed by three more increases for a total increase of 225 basis points, the most rapid rise in decades. Interest rates rose significantly in response, leading to higher borrowing costs for businesses. The effect of higher inflation and interest rates on equities varied significantly based on equity class. Growth stocks, which derive much of their value from expectations of future growth, declined significantly more than value stocks.

Russia’s invasion of Ukraine in late February 2022 led to substantial disruptions to the global economy and increased uncertainty in financial markets, exacerbating inflation and impacting U.S. businesses with operations in Russia. The invasion was met with widespread condemnation, and many countries imposed sanctions on the Russian state, businesses, and individuals. As Russia is a top producer of both oil and natural gas, global supply concerns led to sharp volatility in U.S. energy markets.

Investment Objective

The iShares Evolved U.S. Consumer Staples ETF (the “Fund”) seeks to provide access to U.S. companies with consumer staples exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

Consumer staples stocks in the U.S. advanced for the reporting period as investors, amid turbulent financial markets, sought equities generally viewed as less volatile than the broader market. Businesses within the sector offer relatively steady income and attractive dividend payouts that further enticed investors amid the increased market and economic uncertainty of early 2022. As a sector, staples outperformed all but two other U.S equity sectors (energy and utilities) for the reporting period, based on S&P Dow Jones Indices.

Large beverage companies Coca-Cola and Pepsico contributed the most to the Fund’s return. The companies benefited as sales volumes at restaurants and other public venues continued to rebound from the coronavirus pandemic. Price increases bolstered revenue gains and partly helped offset higher costs and business disruptions in Russia due to sanctions after the invasion of Ukraine. Pepsico, which has a complementary product line of snacks, benefited by combatting cost inflation for supplies with higher prices and smaller package sizes, which increased revenues.

Prepared food and snacks manufacturer, such as General Mills, also contributed to the Fund’s performance. Sales in the industry increased as companies absorbed rising input costs by increasing prices. Candy makers, including Hershey Foods, also advanced as increased production capacity failed to meet the strong demand for those products. Meanwhile, Archer Daniels Midland and other agricultural commodities processors benefited from tight global grain supplies and corresponding higher market prices, in addition to rising demand for their ingredients.

The Fund’s evolved investment process looks beyond the traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several consumer staples companies with similar businesses that have traditionally been categorized in other sectors. For example, the Fund held positions in Starbucks and Chipotle Mexican Grill, which are typically classified as companies in the consumer discretionary sector. These global quick service restaurant companies detracted from the Fund’s return as consumers’ overall discretionary spending declined during the reporting period, while food and ingredient costs rose.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Discretionary Spending ETF (the “Fund”) seeks to provide access to U.S. companies with discretionary spending exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

Stocks related to U.S. discretionary spending declined for the reporting period amid a variety of economic concerns, including rising inflation, Fed interest rate increases, and the war between Russia and Ukraine. As U.S. economic output contracted, consumers contemplated the possibility of a recession. Discretionary spending decreased during the reporting period, and the outlook for a near-term rebound appeared uncertain, weighing on stocks within the sector.

The commerce industry detracted the most from the Fund’s return, driven by internet commerce and direct marketers. Large e-commerce retailer Amazon declined as rising inflation led to increased labor costs and decreasing sales. Supply-chain problems further exacerbated a reduction in profit margins. Amazon’s addition of warehouse space and expansion of transportation networks during the height of the coronavirus pandemic yielded excess capacity that added to expenses when sales declined in the first half of 2022. As many investors associate e-commerce retailers with the information technology sector, that sector’s overall decline in early 2022 also weighed on companies like Amazon.

Traditional in-store retail outlets likewise detracted from the Fund’s performance. Many large chains canceled orders and marked down merchandise they had purchased during the height of the pandemic — merchandise that consumers no longer found attractive as pandemic-related restrictions disappeared and inflation increased. Sales for discount outlets Ross Stores and Burlington Stores, which cater to more cost-conscious consumers, also increasingly declined amid rising inflation, while inventory levels rose substantially. Nike a leading footwear marketer, also detracted amid a withdrawal from Russia, China’s pandemic-related lockdowns, rising freight and logistics costs, questions about the North American market outlook, and concerns about labor practices in western China.

The Fund’s evolved investment process looks beyond the traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several companies with similar businesses that traditionally have been categorized in other sectors. For example, the Fund held positions in warehouse general merchandise chains, such as Costco, which is generally classified in the consumer staples sector. Costco advanced as it profited from shoppers seeking the benefits of bulk pricing.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Financials ETF (the “Fund”) seeks to provide access to U.S. companies with financials exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

U.S. financials stocks declined for the reporting period amid a steep decline in the broader stock market and myriad economic challenges. Rising inflation, Fed interest rate increases, and the war between Russia and Ukraine created significant economic headwinds.

A diverse group of financial services companies, including asset managers, investment banks, and credit ratings agencies detracted from the Fund’s performance. Asset management companies, such as T. Rowe Price Group, declined alongside the broader equity market. Cash inflows into equity investment funds declined considerably in the first half of 2022, and bond funds posted net outflows, reducing fees and profitability. Investment banks Morgan Stanley and Goldman Sachs detracted amid substantial decreases in revenue and in deal-making in capital markets. Investors reacted negatively to the disappointing near-term revenue outlook. In addition, stock underwriting for initial public offerings all but halted. Meanwhile, investment ratings agency Moody’s Corporation declined following a sharp decrease in corporate debt issuance amid a rising interest rate environment, which led to reduced earnings visibility.

Credit card issuers also detracted from the Fund’s return as the U.S. economy slowed. For example, Capital One Financial Corporation declined, despite benefiting both from increased consumer spending in the wake of pent-up, pandemic-induced demand and from assets yielding higher interest income. Investors grew cautious about the uncertain outlook for continued consumer spending amid mounting recession concerns, as credit card fee revenue highly correlates with customer transactions.

The Fund’s evolved investment process looks beyond traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several financials companies with similar businesses that traditionally have been categorized in other sectors. For example, Fidelity National Information Services, which is traditionally categorized in the information technology sector, declined from relative performance as mobile and e-commerce payment gateway providers faced a challenging business outlook. On the upside, companies in the healthcare sector, such as UnitedHealth Group, a large managed healthcare company, contributed to the Fund’s relative performance. UnitedHealth benefited from lower expenses for coronavirus-related care and increased insurance enrollment.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Healthcare Staples ETF (the “Fund”) seeks to provide access to U.S. companies with healthcare staples exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

U.S. healthcare staples stocks declined modestly for the reporting period as inflationary pressures, labor shortages, and resurging coronavirus waves outweighed favorable spending trends and pent-up demand for elective surgeries. Healthcare equipment stocks detracted the most from the Fund’s return, due to continuing supply-chain challenges and pandemic-related delays. Medtronic reported lower sales as recurring lockdowns in China constrained supply of raw materials and added to logistics delays. The shortage of nurses in the U.S. further limited the number of medical procedures conducted at hospitals. Deferred procedures due to COVID-19 also lowered sales volumes and increased near-term spending for Intuitive Surgical despite increased adoption of the firm’s robotic surgical platform. Stryker also reported a rise in sales for its surgical robots; however, the company’s revenue growth slowed overall as hospital clients increasingly shifted away from outright purchases in favor of rental or longer-term financing contracts. The resurging COVID-19 waves drove sales higher for at-home antigen tests, but test-maker Abbott Laboratories’ stock declined after a recall of baby formula products halted factory production and exacerbated a nationwide shortage.

Life sciences tools and services stocks also weighed on the Fund’s return. China’s lockdowns led to significantly lowered sales for gene-sequencing supplier Illumina. Regulatory pressure in the U.S. and Europe regarding a recent acquisition also dampened investor enthusiasm for the firm’s stock.

On the upside, managed healthcare companies contributed to the Fund’s performance as investors sought out businesses with less exposure to inflation impacts. UnitedHealth Group was the largest contributor as the managed healthcare conglomerate increased revenue through diversified business strategies, including expanding low-cost telehealth offerings and other non-hospital-based health services.

The Fund’s evolved investment process looks beyond traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activities. During the reporting period, the evolved process identified several healthcare companies with similar businesses that have traditionally been categorized in other sectors. In the real estate investment trust (“REIT”) industry, Healthpeak Properties, which owns and develops private healthcare facilities, declined due to weakness in its continuing care residential community segment due to a one-time repayment of CARES Act relief funds.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Innovative Healthcare ETF (the “Fund”) seeks to provide access to U.S. companies with innovative healthcare exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market IndexTM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

U.S. innovative healthcare stocks declined modestly during the reporting period as the rising interest rate environment weighed on high-valuation stocks and cooled capital flows. Recurring COVID-19 outbreaks added to the uncertain market environment as drugmakers struggled with mismatches between vaccine supply and demand. Merger and acquisition activity within the pharmaceutical industry dropped to one of the lowest levels in the last decade amid heightened regulatory scrutiny.

Biotechnology stocks detracted the most from the Fund’s return as declining COVID-19 vaccine sales and research funding pressured the earnings of companies such as Moderna and Novavax. Moderna announced the development of a new vaccine targeting the omicron variant even as declining case rates raised doubts about the necessity of variant-specific vaccines. Competition from the introduction of new treatments for COVID-19 weighed particularly hard on less diversified companies such as Moderna, which derive nearly all their revenue from vaccines.

Other biotechnology companies reported disappointing drug sales. Biogen’s highly anticipated Alzheimer’s treatment, widely criticized for its initial high price point, encountered multiple distribution hurdles with insurance companies and prominent medical centers. Gilead Sciences’ stock also trended lower due to falling sales of its COVID-19 antiviral drug for hospitalized patients, despite increased revenue from its cancer and HIV drug divisions. In addition, clinical-stage oncology company Mirati Therapeutics reported mixed clinical trial results for its new KRAS-mutation targeting cancer drug. Competitive category pressure and management turnover further marred the stock’s performance.

On the upside, pharmaceuticals companies such as Pfizer and Eli Lilly contributed to the Fund’s return. These broadly diversified companies hold large amounts of cash on their balance sheets and generated revenue gains across multiple categories, making them less dependent on COVID-19 related drug sales alone.

The Fund’s evolved investment process looks beyond the traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several healthcare companies with similar businesses that have traditionally been categorized in other sectors. In the information technology sector, Universal Display Corporation detracted from the Fund’s return due to rising commodities prices and increased competition.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Media and Entertainment ETF (the “Fund”) seeks to provide access to U.S. companies with media and entertainment exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

U.S. media and entertainment stocks declined sharply during the reporting period amid slowing global economic growth and a consumer shift from digital back to in-person experiences. Rising inflation increased costs, and relatively high valuations led investors to closely scrutinize corporate earnings.

Entertainment media companies detracted the most from the Fund’s return. Profits decreased as operating costs increased at Roku, a streaming and television interface company, while revenue from digital advertising declined. Increased competition also weighed on Roku as Microsoft Corporation announced plans to enter the streaming device market. Streaming service Netflix also detracted significantly, losing subscribers as customers in search of new content switched services frequently. Furthermore, Netflix incurred high costs from creating original programming to attract subscribers. The Walt Disney Company, a media conglomerate, also declined as increased competition, slowing growth, and rising costs reduced profits from its Disney Plus streaming media service. While its theme parks showed strength following the loosening of coronavirus-related restrictions, a conflict with Florida’s state government negatively impacted the company.

Broadband service companies also detracted meaningfully from the Fund’s return. New high speed internet options, such as fiberoptic services offered by wireless companies, led to increased competition for broadband service. While revenues rose at Charter Communications, a provider of cable and internet service, subscriber growth slowed markedly. Telecommunications conglomerate Comcast Communications declined due to weak growth in its streaming service, Peacock, and its broadband service, as home buying slowed, and customers switched to mobile broadband services. In the social media industry, uncertainty about billionaire Elon Musk’s plans to purchase microblogging platform Twitter led to significant price volatility for Twitter’s stock.

The Fund’s evolved investment process looks beyond the traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several consumer discretionary companies with similar businesses that have traditionally been categorized in other sectors. For example, Caesars Entertainment, a hotel and casino company, detracted from the Fund’s return. Profits from alcohol sales and gambling declined as customers reduced spending amid rising inflation.

Portfolio Information

Investment Objective

The iShares Evolved U.S. Technology ETF (the “Fund”) seeks to provide access to U.S. companies with technology exposure, as classified using a proprietary classification system. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was March 21, 2018. The first day of secondary market trading was March 23, 2018.

The S&P Total Market Index^TM is an unmanaged index designed to track the broad equity market, including large-, mid-, small-, and micro-cap stocks.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

U.S. technology stocks declined significantly during the reporting period. As in-person work and commerce resumed, demand weakened for certain software and online services that facilitated business during pandemic-related restrictions. Amid rising inflation, higher interest rates negatively impacted the highest valuation growth-oriented technology stocks by lowering the current value of future earnings, decreasing demand and cash flows, and raising financing costs.

The specialized software industry detracted the most from the Fund’s performance as the need for digital solutions for online learning and working diminished. Adobe Incorporated led the decline as growth in sales of its creative software platform declined. The company suspended business in Russia due to that country’s invasion of Ukraine, negatively impacting revenues. Despite strong earnings, cloud-based customer relationship management specialist Salesforce declined as investors generally turned away from high-growth stocks. Docusign Incorporated also detracted as growth in demand for digital signatures slowed sharply with many businesses returning to in-person work.

Technology service providers also detracted substantially from the Fund’s return. Online payment company PayPal declined, reflecting ongoing disruptions to supply chains and a decrease in online shopping. Earnings slowed as the company faced difficulty in growing its active user base. The high interest rate environment weighed on Block, a financial technology company, reducing demand for loans among its small business customers. A sharp decline in the price of Bitcoin also negatively impacted Block’s balance sheet.

The Fund’s evolved investment process looks beyond the traditional sector definitions by applying machine learning and natural language processing to group individual companies with related business activity. During the reporting period, the evolved process identified several technology companies with similar businesses that have traditionally been categorized in other sectors. For example, the Fund held positions in Meta and Alphabet Inc., Facebook and Google’s parent companies, respectively, both traditionally classified as communication services companies. Meta’s revenues declined as growth in demand for digital advertisements contracted amid the global economic slowdown and ongoing supply chain disruptions. Although revenue from Google search advertising fared relatively well, Alphabet declined amid disappointing sales in its YouTube and Google Cloud businesses. Currency effects due to the strong U.S. dollar also weighed on Alphabet as the majority of its sales originate outside the U.S.

Portfolio Information

About Fund Performance

Past performance is not an indication of future results. Financial markets have experienced extreme volatility and trading in many instruments has been disrupted. These circumstances may continue for an extended period of time and may continue to affect adversely the value and liquidity of each Fund’s investments. As a result, current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at iShares.com. Performance results assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. Beginning August 10, 2020, the price used to calculate market return (“Market Price”) is the closing price. Prior to August 10, 2020, Market Price was determined using the midpoint between the highest bid and the lowest ask on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of a fund may not trade in the secondary market until after the fund’s inception, for the period from inception to the first day of secondary market trading in shares of the fund, the NAV of the fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower.

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (1) transactional expenses, including brokerage commissions on purchases and sales of fund shares and (2) ongoing expenses, including management fees and other fund expenses. The expense examples shown (which are based on a hypothetical investment of $1,000 invested at the beginning of the period and held through the end of the period) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other funds.

The expense examples provide information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in a Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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