APRIL 30, 2013
SUMMARY PROSPECTUS
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BlackRock Funds
II | Investor and Institutional Shares
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BlackRock Strategic Income Opportunities Portfolio
Investor A:
BASIX Investor C: BSICX Institutional: BSIIX
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Before you invest, you may want to
review the Funds prospectus, which contains more information about the Fund and its risks. You can find the Funds prospectus (including
amendments and supplements) and other information about the Fund, including the Funds statement of additional information and shareholder report,
online at http://www.blackrock.com/prospectus. You can also get this information at no cost by calling (800) 441-7762 or by sending an e-mail request
to
prospectus.request@blackrock.com
, or from your financial professional. The Funds prospectus and statement of additional information,
both dated April 30, 2013, as amended and supplemented from time to time, are incorporated by reference into (legally made a part of) this Summary
Prospectus.
This Summary 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 Summary Prospectus. Any representation to the contrary
is a criminal offense.
Not FDIC Insured No Bank Guarantee May Lose Value
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Summary Prospectus
Key Facts about BlackRock Strategic Income Opportunities
Portfolio
The BlackRock Strategic Income Opportunities Portfolio
(Strategic Income Opportunities Portfolio or the Fund) seeks total return as is consistent with preservation of
capital.
Fees and Expenses of the
Fund
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. 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 BlackRock-advised fund complex. More information about these and other discounts is available from your financial professional and in
the Details about the Share Classes section on page 29 of the Funds prospectus and in the Purchase of Shares section on
page II-71 of the Funds statement of additional information.
Shareholder Fees
(fees paid
directly from your investment)
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Investor A
Shares
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Investor C
Shares
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Institutional
Shares
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Maximum Sales Charge (Load) Imposed on Purchases
(as percentage of offering price)
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4.00
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%
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None
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None
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Maximum Deferred Sales Charge (Load) (as percentage of offering price or redemption proceeds, whichever is
lower)
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None
1
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1.00
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%
2
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None
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Annual Fund Operating Expenses
(expenses that you pay each year as a
percentage of the value of your investment)
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Investor A
Shares
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Investor C
Shares
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Institutional
Shares
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Management Fee
3
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0.49
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%
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0.49
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%
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0.49
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%
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Distribution (12b-1) and/or Service Fees
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0.25
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%
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1.00
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%
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None
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Other Expenses
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0.41
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%
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0.46
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%
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0.40
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%
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Interest Expense
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0.19%
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0.19%
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0.19%
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Other Expenses of the Fund
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0.22%
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0.27%
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0.21%
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Other Expenses of the Subsidiary
4
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Acquired Fund Fees and Expenses
5
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0.04
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%
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0.04
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%
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0.04
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%
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Total Annual Fund Operating Expenses
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1.19
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%
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1.99
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%
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0.93
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%
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Fee Waivers and/or Expense Reimbursements
6
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(0.06
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)%
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(0.11
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)%
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(0.05
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)%
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Total Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursement
6
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1.13
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%
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1.88
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%
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0.88
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%
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1
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A contingent deferred sales charge
(CDSC) of 0.75% is assessed on certain redemptions of Investor A Shares made within 18 months after purchase where no initial sales charge
was paid at time of purchase as part of an investment of $1,000,000 or more.
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There is no CDSC on Investor C Shares after one
year.
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The management fee payable by the Fund is based on
assets estimated to be attributable to the Funds direct investments in fixed income and equity securities and instruments, including
exchange-traded funds (ETFs) advised by BlackRock or other investment advisers, other investments and cash and cash equivalents (including
money market funds, whether advised by BlackRock or other investment advisers) and excludes investments in other BlackRock equity and/or fixed income
mutual funds (the Underlying Funds).
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The Other Expenses of the BlackRock Cayman Strategic
Income Opportunities Portfolio I, Ltd. (the Subsidiary) were less than 0.01% for the most recent fiscal year.
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The Total Annual Fund Operating Expenses do not
correlate to the ratios of expenses to average net assets given in the Funds most recent annual report which does not include the Acquired Fund
Fees and Expenses.
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As described in the Management of the
Fund section on page 44, BlackRock has contractually agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund
Operating Expenses After Fee Waivers and/or Expense Reimbursements (excluding Dividend Expense, Interest Expense, Acquired Fund Fees and Expenses and
certain other Fund expenses) to 0.90% (for Investor A Shares), 1.65% (for Investor C Shares) and 0.65% (for Institutional Shares) of average daily net
assets until May 1, 2014. The Fund may have to repay some of these waivers and reimbursements to BlackRock in the following two years. These
contractual agreements may be terminated upon 90 days notice by a majority of the non-interested trustees of the Fund or by a vote of a majority of the
outstanding voting securities of the Fund.
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Example:
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the
Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would
be:
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1 Year
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3 Years
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5 Years
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10 Years
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Investor A Shares
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$
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511
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$
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757
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$
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1,023
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$
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1,780
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Investor C Shares
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$
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291
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$
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614
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$
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1,063
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$
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2,308
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Institutional Shares
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$
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90
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$
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291
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$
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510
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$
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1,138
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You would pay the following expenses if you did not redeem your
shares:
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1 Year
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3 Years
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5 Years
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10 Years
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Investor C Shares
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$
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191
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$
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614
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$
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1,063
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$
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2,308
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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 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 Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was 807% of the average value of its
portfolio.
Principal Investment Strategies
of the Fund
Under normal market conditions, the Strategic Income Opportunities
Portfolio will invest in a combination of fixed income securities, including, but not limited to: high yield securities, international securities,
emerging markets debt and mortgages. Depending on market conditions, the Fund may invest in other market sectors. Fixed income securities are debt
obligations such as bonds and debentures, U.S. Government securities, debt obligations of domestic and non-U.S. corporations, debt obligations of
non-U.S. governments and their political subdivisions, asset-backed securities, various mortgage-backed securities (both residential and commercial),
other floating or variable rate obligations, convertible securities, municipal obligations and zero coupon debt securities. The Fund may invest in
preferred securities, illiquid securities, exchange-traded funds (ETFs), including affiliated ETFs, and corporate loans. The Fund may
engage in short sales for hedging purposes or to enhance total return. In implementing its strategy, the Fund may short up to 15% of the market value
of the Funds total assets. However, the Fund may make short sales of to-be-announced (TBA) mortgage-backed securities and may make
short sales against-the-box without regard to this restriction. In a short sale against-the-box, at the time of the sale, the Fund owns or
has the immediate and unconditional right to acquire the identical security at no additional cost.
The Fund may invest significantly in non-investment grade bonds
(high yield or junk bonds). Non-investment grade bonds acquired by the Fund will generally be in the lower rating categories of the major rating
agencies (BB or lower by Standard & Poors, a division of the McGraw Hill Companies (S&P), or Ba or lower by Moodys
Investors Service, Inc. (Moodys)) or will be determined by the management team to be of similar quality. Split rated bonds will be
considered to have the higher credit rating. The Fund may invest up to 15% of its net assets in collateralized debt obligations (CDOs), of
which 10% (as a percentage of the Funds net assets) may be collateralized in loan obligations (CLOs).
The Fund may also invest significantly in non-dollar denominated
bonds and bonds of emerging market issuers. The Funds investment in non-dollar denominated bonds may be on a currency hedged or unhedged
basis.
The management team may, when consistent with the Funds
investment goal, buy or sell indexed and inverse floating rate securities and options or futures on a security or an index of securities, or enter into
swap agreements, including total return, interest rate and credit default swaps, or foreign currency transactions (collectively, commonly known as
derivatives). The Fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed
to reduce exposure to other risks, such as currency risk. The Fund may also use derivatives for leverage, in which case their use would involve
leveraging risk. 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, which involves a sale by the fund of a
mortgage-backed or other security concurrently with an agreement by the fund to repurchase a similar security at a later date at an agreed-upon
price).
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The Fund may seek to provide exposure to the investment returns of
real assets that trade in the commodity markets through investment in commodity-linked derivative instruments and investment vehicles that exclusively
invest in commodities such as exchange traded funds, which are designed to provide this exposure without direct investment in physical commodities. The
Fund may also gain exposure to commodity markets by investing up to 25% of its total assets in the Subsidiary, a wholly owned subsidiary of the Fund
formed in the Cayman Islands, which invests primarily in commodity-related instruments.
The Fund is a non-diversified portfolio under the Investment
Company Act of 1940 (the Investment Company Act).
The Fund may engage in active and frequent trading of portfolio
securities to achieve its primary investment strategies.
Principal Risks of Investing in
the Fund
Risk is inherent in all investing. The value of your investment in
the 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. The following is a summary description
of principal risks of investing in the Fund.
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Collateralized Debt Obligations Risk
In
addition to the typical risks associated with fixed income securities and asset-backed securities, CDOs 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) risk of forced
fire sale liquidation due to technical defaults such as coverage test failures; and (viii) the CDOs manager may perform poorly. In
addition, investments in CDOs may be characterized by the Fund as illiquid securities.
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Commodities Related Investments Risks
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 interest rates,
or sectors affecting a particular industry or commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and
regulatory developments.
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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 or dividends when due, and
their market value may change based on changes in the issuers credit rating or the markets perception of the issuers
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.
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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 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, wide bid/ask spreads and extended trade settlement periods.
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Credit Risk
Credit risk refers to the
possibility that the issuer of a security will not be able to make payments of interest and principal when due. Changes in an issuers credit
rating or the markets perception of an issuers creditworthiness may also affect the value of the Funds investment in that
issuer.
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Derivatives Risk
The Funds use of
derivatives may reduce the Funds 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 Funds use of derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Derivatives are also subject to counterparty risk, which is the risk that the
other party in the transaction will not fulfill its contractual obligation. 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. Valuation may be more difficult in times of market turmoil since many investors and market makers may be
reluctant to purchase complex
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instruments or quote prices for them. Derivatives also may 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. Recent legislation calls for new regulation of the derivatives markets. The
extent and impact of the regulation is not yet known and may not be known for some time. New regulation may make derivatives more costly, may limit the
availability of derivatives, or may otherwise adversely affect the value or performance of derivatives.
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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.
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Extension Risk
When interest rates rise,
certain obligations will be paid off by the obligor more slowly than anticipated, causing the value of these securities to fall.
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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:
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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.
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Changes in foreign currency exchange rates can affect the value of
the Funds portfolio.
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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.
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The governments of certain countries may prohibit or impose
substantial restrictions on foreign investments in their capital markets or in certain industries.
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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.
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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.
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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. These
events may spread to other countries in Europe, including countries that do not use the Euro. These events may affect the value and liquidity of
certain of the Funds investments.
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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.
In addition, investment in mortgage dollar rolls and participation in TBA transactions may significantly increase the Funds portfolio turnover
rate. A TBA transaction is a method of trading mortgage-backed securities where the buyer and seller agree upon general trade parameters such as
agency, settlement date, par amount, and price.
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Interest Rate Risk
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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Investment in Other Investment Companies Risk
As with other investments, investments in other investment companies, including ETFs, are subject to market risk and, for non-index strategies,
selection risk. In addition, if the Fund acquires shares of investment companies, including ETFs advised by BlackRock or other investment advisers,
shareholders bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of the
investment companies (including management and advisory fees). If the Fund acquires shares of one or more BlackRock mutual funds (the Underlying
Funds), shareholders bear both their proportionate share of expenses in the Fund (excluding management and advisory fees attributable to those
assets of the Fund invested in the Underlying Funds) and, indirectly, the expenses of the Underlying Funds (including management and advisory fees). 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.
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Investing in an ETF will give the Fund exposure to the securities
comprising the index on which the ETF is based. Shares of ETFs are traded on an exchange throughout a trading day, and bought and sold based on market
values and not at the ETFs net asset value. For this reason, shares of an ETF could trade at either a premium or discount to its net asset value.
However, the trading prices of index-based ETFs tend to closely track the actual net asset value of the ETF. The Fund will pay brokerage commissions in
connection with the purchase and sale of shares of ETFs, in addition to a spread (i.e., the difference between what professional investors are willing
to pay for ETF shares (the bid price) and the price at which they are willing to sell ETF shares (the ask price)).
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Junk Bonds Risk
Although junk bonds generally
pay higher rates of interest than investment grade bonds, junk bonds are high risk investments that may cause income and principal losses for the
Fund.
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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 any required asset segregation requirements. Increases and decreases in the value of the Funds portfolio will be magnified when the Fund
uses leverage.
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Liquidity Risk
Liquidity risk exists when
particular investments are difficult to purchase or sell. The Funds investments in illiquid securities may reduce the returns of the Fund because
it may be difficult to sell the illiquid securities at an advantageous time or price. To the extent that the Funds principal investment
strategies involve derivatives or securities with substantial market and/or credit risk, the Fund will tend to have the greatest exposure to liquidity
risk. Liquid investments may become illiquid after purchase by the Fund, particularly during periods of market turmoil. 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. 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.
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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. 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.
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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.
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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. These risks
include:
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General Obligation Bonds Risks
Timely payments depend on the issuers 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 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
a 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.
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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.
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Non-Diversification Risk
The Fund is a
non-diversified fund. Because the Fund may invest in securities of a smaller number of issuers, it may be more exposed to the risks associated with and
developments affecting an individual issuer than a fund that invests more widely.
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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 companys 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 companys financial condition or prospects. Preferred securities of smaller companies may be more vulnerable to adverse
developments than preferred stock of larger companies.
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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.
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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, the amount of new construction in a particular area, the laws and regulations (including zoning
and tax laws) affecting real estate and the costs of owning, maintaining and improving real estate. The availability of mortgages and changes in
interest rates may also affect real estate values. If the Funds 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.
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Repurchase Agreements, Purchase and Sale Contracts
Risks
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.
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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 securities. These events could also trigger adverse tax consequences to the
Fund.
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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 may 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.
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n
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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.
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Subsidiary Risk
By investing in the
Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiarys investments. The commodity-related instruments held by
the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar
investments if held directly by the Fund (see Commodities Related Investment Risks above). There can be no assurance that the investment
objective of the Subsidiary will be achieved. The Subsidiary is not registered under the Investment Company Act, and, unless otherwise noted in the
prospectus, is not subject to all the investor protections of the Investment Company Act. However, the Fund wholly owns and controls the Subsidiary,
and the Fund and the Subsidiary are both managed by BlackRock, making it unlikely that the Subsidiary will take action contrary to the interests of the
Fund and its shareholders. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the
Subsidiary to operate as described in the prospectus and the Statement of Additional Information (SAI) and could adversely affect the
Fund.
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Treasury Obligations 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.
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7
n
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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.
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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 holders 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.
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The information shows you how the Funds performance has
varied year by year and provides some indication of the risks of investing in the Fund. The table compares the Funds performance to that of the
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index and the Barclays U.S. Universal Index. As with all such investments, past performance (before and
after taxes) is not an indication of future results. Sales charges are not reflected in the bar chart. If they were, returns would be less than those
shown. However, the table includes all applicable fees and sales charges. If the Funds investment manager and its affiliates had not waived or
reimbursed certain Fund expenses during these periods, the Funds returns would have been lower. Updated information on the Funds
performance can be obtained by visiting http://www.blackrock.com/funds or can be obtained by phone at 800-882-0052.
Investor A Shares
ANNUAL TOTAL RETURNS
Strategic
Income Opportunities Portfolio
As of 12/31
During the period shown in the bar chart, the highest return for a
quarter was 8.67% (quarter ended September 30, 2009) and the lowest return for a quarter was 2.53% (quarter ended September 30, 2011). The
year-to-date return as of March 31, 2013 was 1.04%.
8
As of 12/31/12
Average
Annual Total Returns
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1 Year
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Since Inception
(February
5, 2008)
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BlackRock Strategic Income Opportunities Portfolio Investor A
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Return Before Taxes
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5.21
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%
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4.61
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%
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Return After Taxes on Distributions
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4.05
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%
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2.76
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%
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Return After Taxes on Distributions and Sale of Shares
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3.36
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%
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2.81
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%
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BlackRock Strategic Income Opportunities Portfolio Investor C
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Return Before Taxes
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7.84
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%
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4.70
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%
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BlackRock Strategic Income Opportunities Portfolio Institutional
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Return Before Taxes
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9.91
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%
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5.76
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%
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BofA Merrill Lynch 3-Month U.S. Treasury Bill Index
(Reflects no deduction for fees, expenses or
taxes)
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0.11
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%
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0.43
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%
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Barclays U.S. Universal Index
(Reflects no deduction for fees, expenses or taxes)
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5.53
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%
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5.94
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%
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After-tax returns are calculated using the historical highest
individual Federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the
investors tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares
through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Investor A Shares only, and
the after-tax returns for Investor C and Institutional Shares will vary.
The Funds investment manager is BlackRock Advisors, LLC
(BlackRock). The Funds sub-advisers are BlackRock Financial Management, Inc., BlackRock International Limited and BlackRock
(Singapore) Limited. Where applicable, the use of the term BlackRock also refers to the Funds sub-advisers.
Name
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Portfolio Manager
of the
Fund Since
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Title
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Rick Rieder
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2010
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Chief Investment Officer of Fixed Income, Fundamental Portfolios of BlackRock,
Inc.
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Bob Miller
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2011
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Managing Director of BlackRock, Inc.
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Purchase and Sale of Fund
Shares
You may purchase or redeem shares of the Fund each day the New
York Stock Exchange (NYSE) is open. To purchase or sell shares you should contact your financial intermediary or financial professional,
or, if you hold your shares through the Fund, you should contact the Fund by phone at (800) 441-7762, by mail (c/o BlackRock Funds, P.O. Box 9819,
Providence, Rhode Island 02940-8019), or by the Internet at www.blackrock.com/funds. The Funds initial and subsequent investment minimums
generally are as follows, although the Fund may reduce or waive the minimums in some cases:
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Investor A and Investor C
Shares
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Institutional
Shares
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Minimum Initial Investment
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$1,000 for all accounts except:
· $250
for certain fee-based programs.
· $100 for certain employer-sponsored retirement
plans.
· $50, if establishing Automatic Investment Plan.
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$2 million for institutions and individuals.
Institutional Shares are available to
clients
of registered investment advisors
who have $250,000 invested in the Fund.
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Minimum Additional Investment
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$50 for all accounts (with the exception of certain employer-sponsored retirement plans which may
have a lower minimum).
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No subsequent minimum.
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9
The Funds dividends and distributions may be subject to
Federal income taxes and may be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or are investing through a retirement
plan, in which case you may be subject to Federal income tax upon withdrawal from such tax deferred arrangements.
Payments to Broker/Dealers and
Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or
other financial intermediary, the Fund and BlackRock Investments, LLC, the Funds distributor, or its affiliates may pay the intermediary for the
sale of Fund shares and other services. These payments may create a conflict of interest by influencing the broker-dealer or other financial
intermediary and your individual financial professional to recommend the Fund over another investment. Ask your individual financial professional or
visit your financial intermediarys website for more information.
10
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INVESTMENT COMPANY ACT FILE #811-22061
© BlackRock Advisors, LLC
SPRO-SIO-0413
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