2020 Prospectus - iShares
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Table of Contents
JANUARY 17, 2020
(as revised December 1, 2020)
2020 Prospectus
iShares Trust
• iShares ESG MSCI EM Leaders ETF | LDEM | NASDAQ
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities
and Exchange Commission (“SEC”), paper copies of the Fund’s shareholder reports
will no longer be sent by mail, unless you specifically request paper copies of the
reports from your financial intermediary, such as a broker-dealer or bank. Instead,
the reports will be made available on a website, and you will be notified by mail each
time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be
affected by this change and you need not take any action. If you hold accounts
through a financial intermediary, you may contact your financial intermediary to
enroll in electronic delivery. Please note that not all financial intermediaries may offer
this service.
You may elect to receive all future reports in paper free of charge. If you hold
accounts through a financial intermediary, you can follow the instructions included
with this disclosure, if applicable, or contact your financial intermediary to request
that you continue to receive paper copies of your shareholder reports. Please note
that not all financial intermediaries may offer this service. Your election to receive
reports in paper will apply to all funds held with your financial intermediary.
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.Table of Contents
Table of Contents
Table of Contents
Fund Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
More Information About the Fund . . . . . . . . . 1
A Further Discussion of Principal Risks . . 2
A Further Discussion of Other Risks . . . . . . 20
Portfolio Holdings Information . . . . . . . . . . . . . 26
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shareholder Information . . . . . . . . . . . . . . . . . . . . 30
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Index Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
“MSCI EM Extended ESG Leaders 5% Issuer Capped Index” is a servicemark of MSCI Inc. and has been
licensed for use for certain purposes by BlackRock Fund Advisors or its affiliates. iShares® and BlackRock® are
registered trademarks of BlackRock Fund Advisors and its affiliates. The Fund is not sponsored, endorsed, sold,
or promoted by MSCI Inc., nor does MSCI Inc. make any representation regarding the advisability of investing
in the Fund.
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iSHARES® ESG MSCI EM LEADERS ETF
Ticker: LDEM Stock Exchange: NASDAQ
Investment Objective
The iShares ESG MSCI EM Leaders ETF (the “Fund”) seeks to track the investment
results of an index composed of large and mid-capitalization stocks of emerging
market companies with high environmental, social, and governance performance
relative to their sector peers as determined by the index provider.
Fees and Expenses
The following table describes the fees and expenses that you will incur if you buy, hold
and sell shares of the Fund. The investment advisory agreement between iShares Trust
(the “Trust”) and BlackRock Fund Advisors (“BFA”) (the “Investment Advisory
Agreement”) provides that BFA will pay all operating expenses of the Fund, except the
management fees, interest expenses, taxes, expenses incurred with respect to the
acquisition and disposition of portfolio securities and the execution of portfolio
transactions, including brokerage commissions, distribution fees or expenses, litigation
expenses and any extraordinary expenses.
You may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables and examples below.
Annual Fund Operating Expenses
(ongoing expenses that you pay each year as a
percentage of the value of your investments)
Total Annual
Distribution and Fund
Management Service (12b-1) Other Operating
Fees Fees Expenses1 Expenses
0.16% None 0.00% 0.16%
1
The amount rounded to 0.00%.
Example. This Example is intended to help you compare the cost of owning shares of
the Fund with the cost of investing in other funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell 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
$16 $52
S-1Table of Contents
Portfolio Turnover. The Fund may pay Companies involved in very serious
transaction costs, such as commissions, business controversies based on scores
when it buys and sells securities (or assigned by MSCI ESG Research are
“turns over” its portfolio). A higher also excluded. MSCI ESG Research
portfolio turnover rate may indicate defines a controversy as an instance or
higher transaction costs and may result ongoing situation in which company
in higher taxes when Fund shares are operations and/or products allegedly
held in a taxable account. These costs, have a negative environmental, social
which are not reflected in the Annual and/or governance impact. Each
Fund Operating Expenses or in the controversy case is assessed for the
Example, affect the Fund’s severity of its impact on society.
performance. MSCI ESG Research rates the ESG
characteristics of securities on a scale
Principal Investment
of “CCC” (lowest) to “AAA” (highest).
Strategies MSCI ESG Research determines the
The Fund seeks to track the investment ESG ratings by evaluating the
results of the MSCI EM Extended ESG company’s risks and opportunities and
Leaders 5% Issuer Capped Index (the using a sector-specific ESG Key Issues
“Underlying Index”), which has been (“Key Issues”) (e.g. carbon emissions)
developed by MSCI Inc. (the “Index selection and weighting model. Each
Provider” or “MSCI”). The Underlying company is scored on a scale of 0 to 10,
Index is a free float-adjusted market with 10 being the most desirable, for
capitalization-weighted index designed each applicable Key Issue before being
to reflect the equity performance of provided an ESG rating based on
emerging market companies with average Key Issue score. ESG ratings
favorable environmental, social and are calculated in comparison to a
governance (“ESG”) characteristics (as company’s sector peers, and securities
determined by MSCI ESG Research LLC in one sector may have a lower average
(“MSCI ESG Research”)). The Index ESG rating than securities in another
Provider begins with the MSCI Emerging sector. Only securities of companies
Markets Index (the “Parent Index”) and with an ESG rating of “BB” or higher are
excludes securities of companies eligible for inclusion in the Underlying
involved in the business of alcohol, Index.
tobacco, gambling, and nuclear power Following these eligibility screens,
and weapons, thermal coal and companies are then ordered within each
unconventional oil and gas businesses Global Industry Classification Standard®
(e.g. thermal coal extraction and (“GICS”) sector, first based on ESG
generation or oil sands extraction), ratings, ESG rating trend, current index
companies involved with conventional membership, industry-adjusted ESG
and controversial weapons, and scores and then based on free float-
producers and major retailers of civilian adjusted market capitalization. MSCI
firearms based on revenue or selects companies from the ranked
percentage of revenue thresholds for universe until the constituents of the
certain categories (e.g. $1 billion or Underlying Index represent
50%) and categorical exclusions for approximately 50% of the free float-
others (e.g. nuclear weapons). adjusted cumulative market
S-2Table of Contents
capitalization of the respective sector of “Representative sampling” is an
the Parent Index. Once all constituents indexing strategy that involves investing
are selected, MSCI next weighs the in a representative sample of securities
constituents according to free float- that collectively has an investment
adjusted market capitalization, limiting profile similar to that of an applicable
individual issuers to 5% of index weight, underlying index. The securities
but does not revisit the 50% target selected are expected to have, in the
sector coverage based on any resultant aggregate, investment characteristics
reweighting. The Underlying Index is (based on factors such as market
reviewed annually in May to coincide capitalization and industry weightings),
with the semi-annual review of the fundamental characteristics (such as
Parent Index. The Underlying Index return variability and yield) and liquidity
includes large- and mid- capitalization measures similar to those of an
companies and may change over time. applicable underlying index. The Fund
As of November 29, 2019, the may or may not hold all of the securities
Underlying Index consisted of 446 in the Underlying Index.
securities and a significant portion of The Fund generally will invest at least
the Underlying Index is represented by 90% of its assets in the component
securities of companies in the financials securities of the Underlying Index and in
industry or sector. As of November 29, investments that have economic
2019, the Fund does not have principal characteristics that are substantially
exposure to mid-capitalization identical to the component securities of
companies. The components of the the Underlying Index (i.e., depositary
Underlying Index are likely to change receipts representing securities of the
over time. Underlying Index) and may invest up to
BFA uses a “passive” or indexing 10% of its assets in certain futures,
approach to try to achieve the Fund’s options and swap contracts, cash and
investment objective. Unlike many cash equivalents, including shares of
investment companies, the Fund does money market funds advised by BFA or
not try to “beat” the index it tracks and its affiliates, as well as in securities not
does not seek temporary defensive included in the Underlying Index, but
positions when markets decline or which BFA believes will help the Fund
appear overvalued. track the Underlying Index. The Fund
Indexing may eliminate the chance that seeks to track the investment results of
the Fund will substantially outperform the Underlying Index before fees and
the Underlying Index but also may expenses of the Fund.
reduce some of the risks of active The Fund may lend securities
management, such as poor security representing up to one-third of the value
selection. Indexing seeks to achieve of the Fund’s total assets (including the
lower costs and better after-tax value of any collateral received).
performance by aiming to keep portfolio The Underlying Index is sponsored by
turnover low in comparison to actively MSCI, which is independent of the Fund
managed investment companies. and BFA. The Index Provider determines
BFA uses a representative sampling the composition and relative weightings
indexing strategy to manage the Fund. of the securities in the Underlying Index
S-3Table of Contents
and publishes information regarding the less uniformity in accounting and
market value of the Underlying Index. reporting requirements, less reliable
Industry Concentration Policy. The securities valuations and greater risk
Fund will concentrate its investments associated with custody of securities
(i.e., hold 25% or more of its total than developed markets.
assets) in a particular industry or group Non-U.S. Securities Risk. Investments
of industries to approximately the same in the securities of non-U.S. issuers are
extent that the Underlying Index is subject to the risks associated with
concentrated. For purposes of this investing in those non-U.S. markets,
limitation, securities of the U.S. such as heightened risks of inflation or
government (including its agencies and nationalization. The Fund may lose
instrumentalities) and repurchase money due to political, economic and
agreements collateralized by U.S. geographic events affecting issuers of
government securities are not non-U.S. securities or non-U.S. markets.
considered to be issued by members of In addition, non-U.S. securities markets
any industry. may trade a small number of securities
and may be unable to respond
Summary of Principal Risks effectively to changes in trading volume,
As with any investment, you could lose potentially making prompt liquidation of
all or part of your investment in the holdings difficult or impossible at times.
Fund, and the Fund’s performance could The Fund is specifically exposed to
trail that of other investments. The Fund Asian Economic Risk.
is subject to certain risks, including the ESG Investment Strategy Risk. The
principal risks noted below, any of Fund’s ESG investment strategy limits
which may adversely affect the Fund’s the types and number of investment
net asset value per share (“NAV”), opportunities available to the Fund and,
trading price, yield, total return and as a result, the Fund may underperform
ability to meet its investment objective. other funds that do not have an ESG
Each risk noted below is considered a focus. The Fund’s ESG investment
principal risk of investing in the Fund, strategy may result in the Fund
regardless of the order in which it investing in securities or industry
appears. The significance of each risk sectors that underperform the market
factor below may change over time and as a whole or underperform other funds
you should review each risk factor screened for ESG standards. In addition,
carefully. companies selected by the Index
Risk of Investing in Emerging Provider may not exhibit positive or
Markets. The Fund’s investments in favorable ESG characteristics.
emerging market issuers may be Equity Securities Risk. Equity
subject to a greater risk of loss than securities are subject to changes in
investments in issuers located or value, and their values may be more
operating in more developed markets. volatile than those of other asset
Emerging markets may be more likely to classes. The Underlying Index is
experience inflation, political turmoil comprised of common stocks, which
and rapid changes in economic generally subject their holders to more
conditions than more developed risks than preferred stocks and debt
markets. Emerging markets often have
S-4Table of Contents
securities because common However, Chinese markets generally
stockholders’ claims are subordinated continue to experience inefficiency,
to those of holders of preferred stocks volatility and pricing anomalies resulting
and debt securities upon the bankruptcy from governmental influence, a lack of
of the issuer. publicly available information and/or
Financials Sector Risk. Performance of political and social instability. Internal
companies in the financials sector may social unrest or confrontations with
be adversely impacted by many factors, neighboring countries, including military
including, among others, changes in conflicts in response to such events,
government regulations, economic may also disrupt economic
conditions, and interest rates, credit development in China and result in a
rating downgrades, and decreased greater risk of currency fluctuations,
liquidity in credit markets. The extent to currency non-convertibility, interest rate
which the Fund may invest in a company fluctuations and higher rates of
that engages in securities-related inflation. China has experienced
activities or banking is limited by security concerns, such as terrorism
applicable law. The impact of changes in and strained international relations.
capital requirements and recent or Additionally, China is alleged to have
future regulation of any individual participated in state-sponsored
financial company, or of the financials cyberattacks against foreign companies
sector as a whole, cannot be predicted. and foreign governments. Actual and
In recent years, cyberattacks and threatened responses to such activity,
technology malfunctions and failures including purchasing restrictions,
have become increasingly frequent in sanctions, tariffs or cyberattacks on the
this sector and have caused significant Chinese government or Chinese
losses to companies in this sector, companies, may impact China’s
which may negatively impact the Fund. economy and Chinese issuers of
securities in which the Fund invests.
Risk of Investing in China. Incidents involving China’s or the
Investments in Chinese securities, region’s security may cause uncertainty
including certain Hong Kong-listed in Chinese markets and may adversely
securities, subject the Fund to risks affect the Chinese economy and the
specific to China. Investments in certain Fund’s investments. Export growth
Hong Kong-listed securities may also continues to be a major driver of
subject the Fund to exposure to China’s rapid economic growth.
Chinese companies. China may be Reduction in spending on Chinese
subject to considerable degrees of products and services, institution of
economic, political and social instability. additional tariffs or other trade barriers
China is an emerging market and (including as a result of heightened
demonstrates significantly higher trade tensions between China and the
volatility from time to time in U.S., or in response to actual or alleged
comparison to developed markets. Over Chinese cyber activity) or a downturn in
the last few decades, the Chinese any of the economies of China’s key
government has undertaken reform of trading partners may have an adverse
economic and market practices and has impact on the Chinese economy.
expanded the sphere of private Chinese companies, including Chinese
ownership of property in China. companies that are listed on U.S.
S-5Table of Contents
exchanges, are not subject to the same obligated to engage in creation and/or
degree of regulatory requirements, redemption transactions. The Fund has
accounting standards or auditor a limited number of institutions that
oversight as companies in more may act as Authorized Participants on
developed countries, and as a result, an agency basis (i.e., on behalf of other
information about the Chinese market participants). To the extent that
securities in which the Fund invests may Authorized Participants exit the
be less reliable or complete. There may business or are unable to proceed with
be significant obstacles to obtaining creation or redemption orders with
information necessary for investigations respect to the Fund and no other
into or litigation against Chinese Authorized Participant is able to step
companies and shareholders may have forward to create or redeem, Fund
limited legal remedies. The Fund is not shares may be more likely to trade at a
actively managed and does not select premium or discount to NAV and
investments based on investor possibly face trading halts or delisting.
protection considerations. Authorized Participant concentration
Asset Class Risk. Securities and other risk may be heightened for exchange-
assets in the Underlying Index or in the traded funds (“ETFs”), such as the Fund,
Fund’s portfolio may underperform in that invest in securities issued by non-
comparison to the general financial U.S. issuers or other securities or
markets, a particular financial market or instruments that have lower trading
other asset classes. Securities of volumes.
companies that have positive or Commodity Risk. The Fund invests in
favorable ESG characteristics may companies that are susceptible to
underperform other securities. fluctuations in certain commodity
Assets Under Management (AUM) markets and to price changes due to
Risk. From time to time, an Authorized trade relations, including the imposition
Participant (as defined in the Creations of tariffs by the U.S. and other importing
and Redemptions section of this countries. Any negative changes in
prospectus (the “Prospectus”)), a third- commodity markets that may be due to
party investor, the Fund’s adviser or an changes in supply and demand for
affiliate of the Fund’s adviser, or a fund commodities, market events, regulatory
may invest in the Fund and hold its developments or other factors that the
investment for a specific period of time Fund cannot control could have an
to allow the Fund to achieve size or adverse impact on those companies.
scale. There can be no assurance that Concentration Risk. The Fund may be
any such entity would not redeem its susceptible to an increased risk of loss,
investment or that the size of the Fund including losses due to adverse events
would be maintained at such levels, that affect the Fund’s investments more
which could negatively impact the Fund. than the market as a whole, to the
Authorized Participant Concentration extent that the Fund’s investments are
Risk. Only an Authorized Participant concentrated in the securities and/or
may engage in creation or redemption other assets of a particular issuer or
transactions directly with the Fund, and issuers, country, group of countries,
none of those Authorized Participants is region, market, industry, group of
industries, sector or asset class.
S-6Table of Contents
Currency Risk. Because the Fund’s adverse impact on the Fund’s
NAV is determined in U.S. dollars, the investments in, or which are exposed to,
Fund’s NAV could decline if the currency the affected region.
of a non-U.S. market in which the Fund Index-Related Risk. There is no
invests depreciates against the U.S. guarantee that the Fund’s investment
dollar or if there are delays or limits on results will have a high degree of
repatriation of such currency. Currency correlation to those of the Underlying
exchange rates can be very volatile and Index or that the Fund will achieve its
can change quickly and unpredictably. investment objective. Market
As a result, the Fund’s NAV may change disruptions and regulatory restrictions
quickly and without warning. could have an adverse effect on the
Custody Risk. Less developed Fund’s ability to adjust its exposure to
securities markets are more likely to the required levels in order to track the
experience problems with the clearing Underlying Index. Errors in index data,
and settling of trades, as well as the index computations or the construction
holding of securities by local banks, of the Underlying Index in accordance
agents and depositories. with its methodology may occur from
Cybersecurity Risk. Failures or time to time and may not be identified
breaches of the electronic systems of and corrected by the Index Provider for
the Fund, the Fund’s adviser, distributor, a period of time or at all, which may
the Index Provider and other service have an adverse impact on the Fund and
providers, market makers, Authorized its shareholders. Unusual market
Participants or the issuers of securities conditions may cause the Index
in which the Fund invests have the Provider to postpone a scheduled
ability to cause disruptions, negatively rebalance, which could cause the
impact the Fund’s business operations Underlying Index to vary from its normal
and/or potentially result in financial or expected composition.
losses to the Fund and its shareholders. Infectious Illness Risk. An outbreak of
While the Fund has established business an infectious respiratory illness, COVID-
continuity plans and risk management 19, caused by a novel coronavirus has
systems seeking to address system resulted in travel restrictions, disruption
breaches or failures, there are inherent of healthcare systems, prolonged
limitations in such plans and systems. quarantines, cancellations, supply chain
Furthermore, the Fund cannot control disruptions, lower consumer demand,
the cybersecurity plans and systems of layoffs, ratings downgrades, defaults
the Fund’s Index Provider and other and other significant economic impacts.
service providers, market makers, Certain markets have experienced
Authorized Participants or issuers of temporary closures, extreme volatility,
securities in which the Fund invests. severe losses, reduced liquidity and
Geographic Risk. A natural disaster increased trading costs. These events
could occur in a geographic region in will have an impact on the Fund and its
which the Fund invests, which could investments and could impact the
adversely affect the economy or the Fund’s ability to purchase or sell
business operations of companies in the securities or cause elevated tracking
specific geographic region, causing an error and increased premiums or
discounts to the Fund’s NAV. Other
S-7Table of Contents
infectious illness outbreaks in the future high volatility and disruptions in the
may result in similar impacts. creation/redemption process. ANY OF
Issuer Risk. The performance of the THESE FACTORS, AMONG OTHERS,
Fund depends on the performance of MAY LEAD TO THE FUND’S SHARES
individual securities to which the Fund TRADING AT A PREMIUM OR DISCOUNT
has exposure. Changes in the financial TO NAV.
condition or credit rating of an issuer of National Closed Market Trading Risk.
those securities may cause the value of To the extent that the underlying
the securities to decline. securities and/or other assets held by
Large-Capitalization Companies Risk. the Fund trade on foreign exchanges or
Large-capitalization companies may be in foreign markets that may be closed
less able than smaller capitalization when the securities exchange on which
companies to adapt to changing market the Fund’s shares trade is open, there
conditions. Large-capitalization are likely to be deviations between the
companies may be more mature and current price of such an underlying
subject to more limited growth potential security and the last quoted price for
compared with smaller capitalization the underlying security (i.e., the Fund’s
companies. During different market quote from the closed foreign market).
cycles, the performance of large- These deviations could result in
capitalization companies has trailed the premiums or discounts to the Fund’s
overall performance of the broader NAV that may be greater than those
securities markets. experienced by other ETFs.
Management Risk. As the Fund will not Non-Diversification Risk. The Fund
fully replicate the Underlying Index, it is may invest a large percentage of its
subject to the risk that BFA’s assets in securities issued by or
investment strategy may not produce representing a small number of issuers.
the intended results. As a result, the Fund’s performance may
depend on the performance of a small
Market Risk. The Fund could lose number of issuers.
money over short periods due to short-
term market movements and over Operational Risk. The Fund is exposed
longer periods during more prolonged to operational risks arising from a
market downturns. Local, regional or number of factors, including, but not
global events such as war, acts of limited to, human error, processing and
terrorism, the spread of infectious communication errors, errors of the
illness or other public health issue, Fund’s service providers, counterparties
recessions, or other events could have a or other third-parties, failed or
significant impact on the Fund and its inadequate processes and technology
investments and could result in or systems failures. The Fund and BFA
increased premiums or discounts to the seek to reduce these operational risks
Fund’s NAV. through controls and procedures.
However, these measures do not
Market Trading Risk. The Fund faces address every possible risk and may be
numerous market trading risks, inadequate to address significant
including the potential lack of an active operational risks.
market for Fund shares, losses from
trading in secondary markets, periods of
S-8Table of Contents
Passive Investment Risk. The Fund is cyberattacks on the Russian
not actively managed, and BFA generally government or Russian companies, may
does not attempt to take defensive impact Russia’s economy and Russian
positions under any market conditions, issuers of securities in which the Fund
including declining markets. invests.
Privatization Risk. Some countries in Securities Lending Risk. The Fund may
which the Fund invests have privatized, engage in securities lending. Securities
or have begun the process of lending involves the risk that the Fund
privatizing, certain entities and may lose money because the borrower
industries. Privatized entities may lose of the loaned securities fails to return
money or be re-nationalized. the securities in a timely manner or at
Reliance on Trading Partners Risk. all. The Fund could also lose money in
The Fund invests in countries or regions the event of a decline in the value of
whose economies are heavily collateral provided for loaned securities
dependent upon trading with key or a decline in the value of any
partners. Any reduction in this trading investments made with cash collateral.
may have an adverse impact on the These events could also trigger adverse
Fund’s investments. Through its tax consequences for the Fund.
holdings of securities of certain issuers, Security Risk. Some countries and
the Fund is specifically exposed to regions in which the Fund invests have
Asian Economic Risk, European experienced security concerns, such as
Economic Risk and U.S. Economic terrorism and strained international
Risk. relations. Incidents involving a country’s
Risk of Investing in Russia. Investing or region’s security may cause
in Russian securities involves significant uncertainty in its markets and may
risks, including legal, regulatory and adversely affect its economy and the
economic risks that are specific to Fund’s investments.
Russia. In addition, investing in Russian Small Fund Risk. When the Fund’s size
securities involves risks associated with is small, the Fund may experience low
the settlement of portfolio transactions trading volume and wide bid/ask
and loss of the Fund’s ownership rights spreads. In addition, the Fund may face
in its portfolio securities as a result of the risk of being delisted if the Fund
the system of share registration and does not meet certain conditions of the
custody in Russia. A number of listing exchange. Any resulting
jurisdictions, including the U.S., Canada liquidation of the Fund could cause the
and the European Union (the “EU”), Fund to incur elevated transaction costs
have imposed economic sanctions on for the Fund and negative tax
certain Russian individuals and Russian consequences for its shareholders.
corporate entities. Additionally, Russia Structural Risk. The countries in which
is alleged to have participated in state- the Fund invests may be subject to
sponsored cyberattacks against foreign considerable degrees of economic,
companies and foreign governments. political and social instability.
Actual and threatened responses to
such activity, including purchasing Tracking Error Risk. The Fund may be
restrictions, sanctions, tariffs or subject to tracking error, which is the
divergence of the Fund’s performance
S-9Table of Contents
from that of the Underlying Index. or other asset may differ from the
Tracking error may occur because of Fund’s valuation of the security or other
differences between the securities and asset and from the value used by the
other instruments held in the Fund’s Underlying Index, particularly for
portfolio and those included in the securities or other assets that trade in
Underlying Index, pricing low volume or volatile markets or that
differences (including, as applicable, are valued using a fair value
differences between a security’s price methodology as a result of trade
at the local market close and the Fund’s suspensions or for other reasons. In
valuation of a security at the time of addition, the value of the securities or
calculation of the Fund’s NAV), other assets in the Fund’s portfolio may
transaction costs incurred by the Fund, change on days or during time periods
the Fund’s holding of uninvested cash, when shareholders will not be able to
differences in timing of the accrual of or purchase or sell the Fund’s shares.
the valuation of dividends or interest, Authorized Participants who purchase or
the requirements to maintain pass- redeem Fund shares on days when the
through tax treatment, portfolio Fund is holding fair-valued securities
transactions carried out to minimize the may receive fewer or more shares, or
distribution of capital gains to lower or higher redemption proceeds,
shareholders, acceptance of custom than they would have received had the
baskets, changes to the Underlying Fund not fair-valued securities or used a
Index or the costs to the Fund of different valuation methodology. The
complying with various new or existing Fund’s ability to value investments may
regulatory requirements. This risk may be impacted by technological issues or
be heightened during times of increased errors by pricing services or other third-
market volatility or other unusual party service providers.
market conditions. Tracking error also
may result because the Fund incurs fees Performance Information
and expenses, while the Underlying As of the date of the Prospectus, the
Index does not. INDEX ETFs THAT Fund has been in operation for less than
TRACK INDICES WITH SIGNIFICANT one full calendar year and therefore
WEIGHT IN EMERGING MARKETS does not report its performance
ISSUERS MAY EXPERIENCE HIGHER information.
TRACKING ERROR THAN OTHER INDEX
ETFs THAT DO NOT TRACK SUCH
INDICES.
Valuation Risk. The price the Fund
could receive upon the sale of a security
S-10Table of Contents
Management Tax Information
Investment Adviser. BlackRock Fund The Fund intends to make distributions
Advisors. that may be taxable to you as ordinary
Portfolio Managers. Rachel Aguirre, income or capital gains, unless you are
Jennifer Hsui, Alan Mason, Greg Savage investing through a tax-deferred
and Amy Whitelaw (the “Portfolio arrangement such as a 401(k) plan or
Managers”) are primarily responsible for an individual retirement account (“IRA”),
the day-to-day management of the in which case, your distributions
Fund. Each Portfolio Manager generally will be taxed when withdrawn.
supervises a portfolio management Payments to Broker-Dealers
team. Ms. Aguirre, Ms. Hsui, Mr. Mason,
Mr. Savage and Ms. Whitelaw have been
and Other Financial
Portfolio Managers of the Fund since Intermediaries
inception (2020). If you purchase shares of the Fund
through a broker-dealer or other
Purchase and Sale of Fund financial intermediary (such as a bank),
Shares BFA or other related companies may
The Fund is an ETF. Individual shares of pay the intermediary for marketing
the Fund may only be bought and sold in activities and presentations, educational
the secondary market through a broker- training programs, conferences, the
dealer. Because ETF shares trade at development of technology platforms
market prices rather than at NAV, and reporting systems or other services
shares may trade at a price greater than related to the sale or promotion of the
NAV (a premium) or less than NAV (a Fund. These payments may create a
discount). An investor may incur costs conflict of interest by influencing the
attributable to the difference between broker-dealer or other intermediary and
the highest price a buyer is willing to your salesperson to recommend the
pay to purchase shares of the Fund (bid) Fund over another investment. Ask your
and the lowest price a seller is willing to salesperson or visit your financial
accept for shares of the Fund (ask) intermediary’s website for more
when buying or selling shares in the information.
secondary market (the “bid-ask
spread”).
S-11Table of Contents
[THIS PAGE INTENTIONALLY LEFT BLANK]Table of Contents
More Information About the Fund
This Prospectus contains important information about investing in the Fund. Please
read this Prospectus carefully before you make any investment decisions. Additional
information regarding the Fund is available at www.iShares.com.
BFA is the investment adviser to the Fund. Shares of the Fund are listed for trading on
The Nasdaq Stock Market (“NASDAQ”). The market price for a share of the Fund may
be different from the Fund’s most recent NAV.
ETFs are funds that trade like other publicly-traded securities. The Fund is designed to
track an index. Similar to shares of an index mutual fund, each share of the Fund
represents an ownership interest in an underlying portfolio of securities and other
instruments intended to track a market index. Unlike shares of a mutual fund, which
can be bought and redeemed from the issuing fund by all shareholders at a price based
on NAV, shares of the Fund may be purchased or redeemed directly from the Fund at
NAV solely by Authorized Participants and only in aggregations of a specified number of
shares (“Creation Units”). Also unlike shares of a mutual fund, shares of the Fund are
listed on a national securities exchange and trade in the secondary market at market
prices that change throughout the day.
The Fund invests in a particular segment of the securities markets and seeks to track
the performance of a securities index that is not representative of the market as a
whole. The Fund is designed to be used as part of broader asset allocation strategies.
Accordingly, an investment in the Fund should not constitute a complete investment
program.
An index is a financial calculation, based on a grouping of financial instruments, and is
not an investment product, while the Fund is an actual investment portfolio. The
performance of the Fund and the Underlying Index may vary for a number of reasons,
including transaction costs, non-U.S. currency valuations, asset valuations, corporate
actions (such as mergers and spin-offs), timing variances and differences between the
Fund’s portfolio and the Underlying Index resulting from the Fund’s use of
representative sampling or from legal restrictions (such as diversification
requirements) that apply to the Fund but not to the Underlying Index. From time to
time, the Index Provider may make changes to the methodology or other adjustments
to the Underlying Index. Unless otherwise determined by BFA, any such change or
adjustment will be reflected in the calculation of the Underlying Index performance on
a going-forward basis after the effective date of such change or adjustment. Therefore,
the Underlying Index performance shown for periods prior to the effective date of any
such change or adjustment will generally not be recalculated or restated to reflect
such change or adjustment.
“Tracking error” is the divergence of the Fund’s performance from that of the
Underlying Index. BFA expects that, over time, the Fund’s tracking error will not exceed
5%. Because the Fund uses a representative sampling indexing strategy, it can be
expected to have a larger tracking error than if it used a replication indexing strategy.
“Replication” is an indexing strategy in which a fund invests in substantially all of the
1Table of Contents
securities in its underlying index in approximately the same proportions as in the
underlying index.
The Fund may borrow as a temporary measure for extraordinary or emergency
purposes, including to meet redemptions or to facilitate the settlement of securities or
other transactions. The Fund does not intend to borrow money in order to leverage its
portfolio.
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, BFA or
any of its affiliates.
The Fund’s investment objective and the Underlying Index may be changed without
shareholder approval.
A Further Discussion of Principal Risks
The Fund is subject to various risks, including the principal risks noted below, any of
which may adversely affect the Fund’s NAV, trading price, yield, total return and ability
to meet its investment objective. You could lose all or part of your investment in the
Fund, and the Fund could underperform other investments. Each risk noted below is
considered a principal risk of investing in the Fund, regardless of the order in which it
appears. The significance of each risk factor below may change over time and you
should review each risk factor carefully.
Risk of Investing in Emerging Markets. Investments in emerging market issuers are
subject to a greater risk of loss than investments in issuers located or operating in
more developed markets. This is due to, among other things, the potential for greater
market volatility, lower trading volume, higher levels of inflation, political and economic
instability, greater risk of a market shutdown and more governmental limitations on
foreign investments in emerging market countries than are typically found in more
developed markets. Moreover, emerging markets often have less uniformity in
accounting and reporting requirements, less reliable securities valuations and greater
risks associated with custody of securities than developed markets. In addition,
emerging markets often have greater risk of capital controls through such measures as
taxes or interest rate control than developed markets. Certain emerging market
countries may also lack the infrastructure necessary to attract large amounts of
foreign trade and investment. Local securities markets in emerging market countries
may trade a small number of securities and may be unable to respond effectively to
changes in trading volume, potentially making prompt liquidation of holdings difficult or
impossible at times. Settlement procedures in emerging market countries are
frequently less developed and reliable than those in the U.S. (and other developed
countries). In addition, significant delays may occur in certain markets in registering
the transfer of securities. Settlement or registration problems may make it more
difficult for the Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities.
Investing in emerging market countries involves a higher risk of loss due to
expropriation, nationalization, confiscation of assets and property or the imposition of
2Table of Contents
restrictions on foreign investments and on repatriation of capital invested in certain
emerging market countries.
Non-U.S. Securities Risk. Investments in the securities of non-U.S. issuers are
subject to the risks of investing in the markets where such issuers are located,
including heightened risks of inflation, nationalization and market fluctuations caused
by economic and political developments. As a result of investing in non-U.S. securities,
the Fund may be subject to increased risk of loss caused by any of the factors listed
below:
䡲 A lack of market liquidity and market efficiency;
䡲 Greater securities price volatility;
䡲 Exchange rate fluctuations and exchange controls;
䡲 Less availability of public information about issuers;
䡲 Limitations on foreign ownership of securities;
䡲 Imposition of withholding or other taxes;
䡲 Imposition of restrictions on the expatriation of the funds or other assets of the
Fund;
䡲 Higher transaction and custody costs and delays in settlement procedures;
䡲 Difficulties in enforcing contractual obligations;
䡲 Lower levels of regulation of the securities markets;
䡲 Weaker accounting, disclosure and reporting requirements; and
䡲 Legal principles relating to corporate governance, directors’ fiduciary duties and
liabilities and stockholders’ rights in markets in which the Fund invests may differ
from and/or may not be as extensive or protective as those that apply in the U.S.
ESG Investment Strategy Risk. The Fund’s ESG investment strategy limits the types
and number of investment opportunities available to the Fund and, as a result, the
Fund may underperform other funds that do not have an ESG focus. The Fund’s ESG
investment strategy may result in the Fund investing in securities or industry sectors
that underperform the market as a whole or underperform other funds screened for
ESG standards. In addition, companies selected by the Index Provider may not exhibit
positive or favorable ESG characteristics.
Equity Securities Risk. The Fund invests in equity securities, which are subject to
changes in value that may be attributable to market perception of a particular issuer or
to general stock market fluctuations that affect all issuers. Investments in equity
securities may be more volatile than investments in other asset classes. The
Underlying Index is comprised of common stocks, which generally subject their holders
to more risks than preferred stocks and debt securities because common
stockholders’ claims are subordinated to those of holders of preferred stocks and debt
securities upon the bankruptcy of the issuer.
Financials Sector Risk. Companies in the financials sector of an economy 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 they must
maintain and, potentially, their size. The extent to which the Fund may invest in a
3Table of Contents
company that engages in securities-related activities or banking is limited by
applicable law. Governmental regulation may change frequently and may have
significant adverse consequences for companies in the financials sector, including
effects not intended by such regulation. Recently enacted legislation in the U.S. has
relaxed capital requirements and other regulatory burdens on certain U.S. banks. While
the effect of the legislation may benefit certain companies in the financials sector,
including non-U.S. financials sector companies, increased risk taking by affected banks
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 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, and may experience technology malfunctions and
disruptions. In recent years, cyberattacks and technology malfunctions and failures
have become increasingly frequent in this sector and have reportedly caused losses to
companies in this sector, which may negatively impact the Fund.
Risk of Investing in China. Investments in Chinese securities, including certain Hong
Kong-listed securities, subject the Fund to risks specific to China. The Chinese
economy is subject to a considerable degree of economic, political and social
instability. Investments in certain Hong Kong-listed securities may also subject the
Fund to exposure to Chinese companies.
Political and Social Risk. The Chinese government is authoritarian and has periodically
used force to suppress civil dissent. Disparities of wealth and the pace of economic
liberalization may lead to social turmoil, violence and labor unrest. In addition, China
continues to experience disagreements related to integration with Hong Kong and
religious and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency non-
convertibility, interest rate fluctuations and higher rates of inflation as a result of
internal social unrest or conflicts with other countries. Unanticipated political or social
developments may result in sudden and significant investment losses. China’s growing
income inequality, rapidly aging population and significant environmental issues also
are factors that may affect the Chinese economy.
Government Control and Regulations. The Chinese government has implemented
significant economic reforms in order to liberalize trade policy, promote foreign
investment in the economy, reduce government control of the economy and develop
market mechanisms. There can be no assurance these reforms will continue or that
they will be effective. Despite recent reform and privatizations, government control
over certain sectors or enterprises and significant regulation of investment and
4Table of Contents
industry is still pervasive, including restrictions on investment in companies or
industries deemed to be sensitive to particular national interests, and the Chinese
government may restrict foreign ownership of Chinese corporations and/or the
repatriation of assets by foreign investors. Limitations or restrictions on foreign
ownership of securities may have adverse effects on the liquidity and performance of
the Fund, and could lead to higher tracking error. Chinese government intervention in
the market may have a negative impact on market sentiment, which may in turn affect
the performance of the Chinese economy and the Fund’s investments. Chinese
markets generally continue to experience inefficiency, volatility and pricing anomalies
that may be connected to governmental influence, lack of publicly-available
information and/or political and social instability.
Infectious Illness Risk. From time to time and as recently as January 2020, China has
experienced outbreaks of infectious illnesses, and the country may be subject to other
public health threats, infectious illnesses, diseases or similar issues in the future. Any
spread of an infectious illness, public health threat or similar issue could reduce
consumer demand or economic output, result in market closures, travel restrictions or
quarantines, and generally have a significant impact on the Chinese economy, which in
turn could adversely affect the Fund’s investments.
Economic Risk. The Chinese economy has grown rapidly in the recent past and there is
no assurance that this growth rate will be maintained. In fact, the Chinese economy
may experience a significant slowdown as a result of, among other things, a
deterioration in global demand for Chinese exports, as well as contraction in spending
on domestic goods by Chinese consumers. In addition, China may experience
substantial rates of inflation or economic recessions, which would have a negative
effect on its economy and securities market. Delays in enterprise restructuring, slow
development of well-functioning financial markets and widespread corruption have also
hindered performance of the Chinese economy. China continues to receive substantial
pressure from trading partners to liberalize official currency exchange rates. Reduction
in spending on Chinese products and services, institution of additional tariffs or other
trade barriers (including as a result of heightened trade tensions between China and
the U.S. or in response to actual or alleged Chinese cyber activity) or a downturn in any
of the economies of China’s key trading partners may have an adverse impact on the
Chinese economy and the Chinese issuers of securities in which the Fund invests. For
example, the U.S. has added certain foreign technology companies to the U.S.
Department of Commerce’s Bureau of Industry and Security’s “Entity List,” which is a
list of companies believed to pose a national security risk to the U.S. Actions like these
may have unanticipated and disruptive effects on the Chinese economy. Any such
response that targets Chinese financial markets or securities exchanges could
interfere with orderly trading, delay settlement or cause market disruptions.
Expropriation Risk. The Chinese government maintains a major role in economic
policymaking and investing in China involves risk of loss due to expropriation,
nationalization, confiscation of assets and property or the imposition of restrictions on
foreign investments and on repatriation of capital invested.
Security Risk. China has strained international relations with Taiwan, India, Russia and
other neighbors due to territorial disputes, historical animosities, defense concerns
5Table of Contents
and other security concerns. Additionally, China is alleged to have participated in state-
sponsored cyberattacks against foreign companies and foreign governments. Actual
and threatened responses to such activity, including purchasing restrictions, sanctions,
tariffs or cyberattacks on the Chinese government or Chinese companies, may impact
China’s economy and Chinese issuers of securities in which the Fund invests. Relations
between China’s Han ethnic majority and other ethnic groups in China, including
Tibetans and Uighurs, are also strained and have been marked by protests and
violence. These situations may cause uncertainty in the Chinese market and may
adversely affect the Chinese economy. In addition, conflict on the Korean Peninsula
could adversely affect the Chinese economy.
Chinese Equity Markets. The Fund may invest in H-shares (securities of companies
incorporated in the People’s Republic of China (“PRC”) that are denominated in Hong
Kong dollars and listed on the Stock Exchange of Hong Kong), A-shares (securities of
companies incorporated in the PRC that are denominated in renminbi and listed on the
Shanghai Stock Exchange (“SSE”) and the Shenzhen Stock Exchange (“SZSE”)) and
B-shares (securities of companies incorporated in the PRC that are denominated in
U.S. dollars (in the case of the SSE) or Hong Kong dollars (in the case of the SZSE) and
listed on the SSE and the SZSE). The Fund may also invest in certain Hong Kong listed
securities known as Red-Chips (securities issued by companies incorporated in certain
foreign jurisdictions, which are controlled, directly or indirectly, by entities owned by
the national government or local governments in the PRC and derive substantial
revenues from or allocate substantial assets in the PRC) and P-Chips (securities issued
by companies incorporated in certain foreign jurisdictions, which are controlled,
directly or indirectly, by individuals in the PRC and derive substantial revenues from or
allocate substantial assets in the PRC). The issuance of B-shares and H-shares by
Chinese companies and the ability to obtain a “back-door listing” through Red-Chips or
P-Chips is still regarded by the Chinese authorities as an experiment in economic
reform. “Back-door listing” is a means by which a mainland Chinese company issues
Red-Chips or P-Chips to obtain quick access to international listing and international
capital. All of these share mechanisms are relatively untested and subject to political
and economic policies in China.
Hong Kong Political Risk. Hong Kong reverted to Chinese sovereignty on July 1, 1997 as
a Special Administrative Region (SAR) of the PRC under the principle of “one country,
two systems.” Although China is obligated to maintain the current capitalist economic
and social system of Hong Kong through June 30, 2047, the continuation of economic
and social freedoms enjoyed in Hong Kong is dependent on the government of China.
Since 1997, there have been tensions between the Chinese government and many
people in Hong Kong who perceive China as tightening control over Hong Kong’s semi-
autonomous liberal political, economic, legal, and social framework. Recent protests
and unrest have increased tensions even further. Due to the interconnected nature of
the Hong Kong and Chinese economies, this instability in Hong Kong may cause
uncertainty in the Hong Kong and Chinese markets. In addition, the Hong Kong dollar
trades at a fixed exchange rate in relation to (or, is “pegged” to) the U.S. dollar, which
has contributed to the growth and stability of the Hong Kong economy. However, it is
uncertain how long the currency peg will continue or what effect the establishment of
an alternative exchange rate system would have on the Hong Kong economy. Because
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