Us The Bond Investor S Guide To Etfs

THE BOND INVESTORS GUIDE TO ETFs
THE BOND INVESTORS GUIDE TO ETFs
iSHARES FIXED INCOME ETFs:

THE MOST COMPREHENSIVE ETF COVERAGE ACROSS THE YIELD CURVE
8.00
HIGH YIELD
CREDIT CURVE
7.00
6.00
YIELD
5.00
4.00
INVESTMENT
GRADE CREDIT
CURVE
3.00
US TREASURY
CURVE
2.00
1.00
0.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
DURATION
DIVERSIFIED BROAD MARKET
MUNICIPALS
GOVERNMENT
MUNICIPAL BULLET MATURITY
INFLATION PROTECTED
MORTGAGE BACKED
GOVERNMENT/CREDIT
FLOATING RATE
CREDIT
INTERNATIONAL/GLOBAL
CORPORATE SECTORS
EMERGING MARKETS USD DENOMINATED
CORPORATE BULLET MATURITY
EMERGING MARKETS LOCAL CURRENCY
US HIGH YIELD
INTEREST RATE HEDGED
Source: BlackRock,
as of 6/30/14. Past
performance is
not a guarantee of
future results. For
additional information
regarding the indices
represented in the
chart, refer to the
disclosures in the back
of the document.
EXCHANGE TRADED FUNDS

FOR THE BOND BUYER
Since iShares launched the first US fixed income exchange traded funds
(ETFs) in 2002, ETFs have become an increasingly important part of the US
and international bond markets.
Initially viewed as bond access vehicles for smaller investors, fixed income
ETFs are now being used more frequently by larger, more sophisticated
institutional investors.
This trend accelerated in the aftermath of the 2008 financial crisis as fixed
income markets grew in complexity. Despite record bond issuance, new
regulations have resulted in lower dealer inventories, thus driving down
trading volumes and liquidity for individual bonds.
Meanwhile, investors have become more familiar with trading fixed
income ETFs. Many fixed income ETFs have developed a robust level
of on-exchange liquidity, supplementing the underlying bond market.
Increasingly, institutional investors are turning to fixed income ETFs for
their flexibility, liquidity, cost-effectiveness, and exchange tradability.
iShares
Fixed
Income
ETFs
US fixed
income AUM1
Number of US fixed
income ETFs1
$131B
70
Despite significant growth over the last decade, the ETF market
remains small when compared to the cash bond and mutual fund
markets. However, we believe assets in fixed income ETFs could reach
$2 trillion globally over the next decade.
As a pioneer of fixed income ETFs, BlackRock continues to drive the
industrys innovation, from introducing the first corporate, Treasury,
high yield, municipal, and bullet maturity ETFs in the US, to offering
flagship products that have experienced tremendous growth in assets
and trading volume.
EXECUTIVE SUMMARY
As such, we have created The Bond Investors Guide to ETFs, the first
dedicated resource for investors interested in using ETFs in their
bond portfolios.
Matthew Tucker, CFA

HEAD OF BLACKROCKS iSHARES FIXED INCOME STRATEGY
Share of total industry

trading volume1
65%
10-yr growth rate in fixed 10-yr growth rate in fixed

income ETF assets2
income ETF trading volume2
39%
1. Source: BlackRock, as of 6/30/14.

2. Source: BlackRock. Compound annual growth rate as of 12/31/13.
32%
TABLE OF CONTENTS
INTRODUCTION
CHAPTER 1
BENEFITS OF iSHARES FIXED INCOME ETFs
13
CHAPTER 2
KEY ETF INVESTMENT TRENDS
27
2.1
FLEXIBLE CAPITAL MARKETS TOOLS
31
2.2
PREPARE FOR RISING RATES
57
2.3
BULLET MATURITY ETFs
75
2.4
PURSUE GLOBAL OPPORTUNITIES
93
CHAPTER 3
ETF MECHANICS
105
CHAPTER 4
TRADING AND ANALYSIS TOOLS
119
ADDITIONAL RESOURCES
130
PRODUCT GUIDE
132
FIXED INCOME ETFs:

THE BASICS
Fixed income ETFs are typically 1940 Act funds consisting of a portfolio
of bonds and are traded on an exchange like an equity security. iShares
Fixed Income ETFs are generally fully funded, unlevered vehicles that hold
cash bonds.
Most fixed income ETFs track market indices that follow targeted
segments of the markets, such as US Treasury, high yield, or emerging
market bonds.
Rather than trading fixed income through the over-the-counter (OTC) bond
market, investors can access these exposures on an exchange, which can
lower the cost of trading and improve price transparency.
Institutional investors primarily use fixed income ETFs as core longterm investment holdings, tools for targeting precision exposures,
and as financial instruments that serve as substitutes or complements
to derivatives.
2002
2003
2004
JUL
iShares launches the first
fixed income ETFs in the US
(LQD, SHY, IEF, TLT)
SEP/DEC
iShares launches first
aggregate bond ETF (AGG)
and first TIPS ETF (TIP)
DEC
Fixed income ETF
industry reaches $10B
INTRODUCTION | 6
CORE INVESTMENTS
PRECISION EXPOSURES
FINANCIAL INSTRUMENTS
DIVERSIFIED
LIKE A
PORTFOLIO
OF BONDS
2005
2006
2007
JUN
iShares Treasury ETF (TLT)
exceeds $500M in daily
trading volume
DEC
Fixed income ETF
industry reaches $25B
MAR
iShares first to
launch agency
MBS ETF (MBB)
INTRODUCTION
FIXED
INCOME
ETFs
PRIMARY USES
BOND ETF
FEATURES
EXCHANGE
LISTED
LIKE A
STOCK
GROWTH IN FIXED INCOME ETFs

HAS ACCELERATED SINCE 2008
The US fixed income ETF market is quickly becoming an integral part
of the fixed income landscape, with the liquidity crisis of 2008 serving
as a catalyst.
The subsequent growth in fund size, breadth of bond market
exposures, and liquidity has continued to drive increased adoption
of ETFs.
A wide cross section of investors, including endowments, asset
managers, insurance companies, and pension funds, are now
pioneering new investment approaches using ETFs to gain fixed
income exposure.
2007
APR
iShares first to launch
high yield bond ETF
(HYG)
INTRODUCTION | 8
2008
SEP
municipal ETF
(MUB)
JAN
TLT reaches $1B in
daily trading volume
US FIXED INCOME ETF AUM IS OVER $270B

300
OTHER
INTERNATIONAL/EM
250
ACTIVE
MORTGAGE
380
Assets have climbed

% since 2008
as investor adoption has increased and usage
has broadened
HIGH YIELD
IG CREDIT
150
BANK LOANS
INFLATION-LINKED
100
MUNICIPALS
GOVT/CREDIT
INTRODUCTION
TOTAL AUM ($B)
200
GOVERNMENT
50
AGGREGATE
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
YTD
Source: BlackRock, Bloomberg, as of 6/30/14.
SEP
iShares ETFs are a
source of liquidity in
frozen markets; HYGs
liquidity triples in week of
Lehmans default
2009
2010
APR/SEP
LQD reaches $10B
in AUM and iShares
launches first fixed
income ETF in
Latin America
JAN
iShares first to
launch bullet
maturity ETFs
9
MOMENTUM CONTINUES TO BUILD
In 2014, independent research provider Greenwich Associates released

a study titled, Institutional Investors Turning to Fixed-Income ETFs
in Evolving Bond Market. The study shed light on the current and
anticipated use of fixed income ETFs by institutions. Greenwich
Associates surveyed 110 institutional investors including investment
managers, pensions, foundations, endowments, insurance companies,
and registered investment advisors (RIAs).
The study confirmed that long-term structural challenges in the bond
market are driving institutional adoption of fixed income ETFs to
overcome obstacles in the post financial crisis environment.
Access the full Greenwich study at iShares.com/BIG
2011
JUN
floating rate note ETF (FLOT)
INTRODUCTION | 10
2012
JUL
US fixed income iShares
reaches $100B in AUM
FEB
CMBS ETF (CMBS)
KEY FINDINGS
TOP REASONS FOR ETF USE
Among institutions employing ETFs, 80% cite ease of use
and liquidity as top selection criteria.
GROWING USE OF ETFs AS CORE HOLDINGS

Nearly 50% of current users have transitioned from primarily
tactical applications to more long-term strategic holdings.
CURRENT USERS INCREASING ETF EXPOSURE

INTRODUCTION
Of those currently employing ETFs, 32% expect to increase

their allocations in the coming year.
NEW USERS INITIATING ETF POSITIONS

20% of non-users plan to begin using fixed income ETFs in
the next year, and 67% plan to allocate between 6-10%.
Source: Greenwich Associates, 2014. Institutional Investors Turning to Fixed-Income ETFs in

Evolving Bond Market. Based on 110 responses: 42 investment managers, 29 RIAs, 21 institutional
funds, and 18 insurance companies.
OCT
LQD reaches $25B in AUM
2013
2014
JUN
HYG and LQD exceed $1B in
daily trading volume
FEB
iBonds suite of
bullet maturity ETFs
expanded to 16 funds
11
BENEFITS OF
iSHARES FIXED INCOME ETFs
As institutional usage of fixed income ETFs

continues to grow, investors are recognizing their
many benefits over traditional bonds, including
trading flexibility and efficiency.
Mark Miller
HEAD OF BLACKROCKS iSHARES U.S. FIXED INCOME DISTRIBUTION
BENEFITS OF iSHARES
FIXED INCOME ETFs
Institutional investors are recognizing that fixed income ETFs can bring
flexibility, liquidity, cost-effectiveness, and efficiency to bond investing.
FLEXIBILITY
ETFs enable a variety of broad and targeted exposures.
LIQUIDITY
ETFs offer an additional source of liquidity for fixed income investors.
COST-EFFECTIVENESS
ETFs may provide bond investors with significant cost savings.
EFFICIENCY
ETFs help overcome the challenges in the OTC market.
CHAPTER 1 | 14
15
ETFs ENABLE A VARIETY OF

BROAD AND TARGETED EXPOSURES
FLEXIBILITY
ETFs enable investors to gain broad market exposure in a single trade,
or create highly customized solutions by targeting specific fixed
income sectors.
Investors may quickly increase or decrease exposures to target sectors
more precisely and efficiently through ETFs than could otherwise be
accomplished using the underlying OTC bond or derivative markets.
Conversely, some market participants may choose to express their views by
short selling ETFs.1 As short selling activity increases ETF demand, longterm ETF investors may elect to engage in a securities lending program to
help enhance portfolio yield.
The instantaneous diversification, targeted long and short exposures, and
lending opportunities provided by fixed income ETFs add flexibility to even
the most sophisticated investors.
iShares offers 70 fixed income ETFs including Treasury, corporate,
high yield, international, emerging markets, floating rate note, and
multi-sector exposures.
1. With short sales, an investor faces the potential for unlimited losses as the securitys price rises.
CHAPTER 1 | 16
DISAGGREGATING THE BARCLAYS AGGREGATE

Broad Exposure:
Build a portfolio in a single trade with

iShares Core U.S. Aggregate Bond ETF (AGG).
AGZ ABS
2.1% 0.5%
CMBS
3.6%
CRED
29.5%
SHY
14.6%
AGENCY
CMBS
IEI
13.2%
CORPORATE
TREASURY
AGG
IEF
3.2%
TLH
0.8%
MBS
TLT
3.5%
MBB
28.9%
Targeted Exposure:
Create a customized portfolio with components of the Barclays Aggregate Index.

Holding components allows for tactical portfolio tilts.
BARCLAYS 1-3 YEAR TREASURY (SHY)
BARCLAYS MBS (MBB)
BARCLAYS 3-7 YEAR TREASURY (IEI)
BARCLAYS CREDIT (CRED)
BARCLAYS 7-10 YEAR TREASURY (IEF)
BARCLAYS CMBS (CMBS)
BARCLAYS 10-20 YEAR TREASURY (TLH)
BARCLAYS AGENCY (AGZ)
BARCLAYS 20+ YEAR TREASURY (TLT)
ASSET-BACKED SECURITIES
Source: Barclays, BlackRock, as of 6/30/14. Holdings are subject to change. For illustrative purposes only.
17
ETFs OFFER AN ADDITIONAL SOURCE

OF LIQUIDITY FOR FIXED INCOME INVESTORS
LIQUIDITY
The growth of the fixed income ETF market has helped create a new,
incremental source of liquidity for investors, above and beyond what can
be accessed in the OTC market. Fixed income ETFs effectively provide an
additional trading venuethe exchangewhere shares can be transferred
among investors without accessing the OTC market. In this way, ETFs act as
an additional layer of liquidity for investors seeking bond exposure.
Through a unique set of circumstancesthe financial crisis, the US Treasury
downgrade, and the tapering of quantitative easingfixed income ETF
liquidity has increased relative to the OTC market. Since the beginning of
2008, trading volume has grown more than 700% as investors have turned to
ETFs in times of stress.
Today, trading in fixed income ETFs averages $3.5B per day and iShares
ETFs represent nearly 65% of total ETF trading volume.
CHAPTER 1 | 18
A SECOND LAYER
OF FIXED INCOME LIQUIDITY
140
TOTAL ETF TRADING VOLUME

iSHARES ETF TOTAL VOLUME
MONTHLY TRADING VOLUME ($B)
120
100
80
60
40
20
0
03
JUN
04
JUN
05
JUN
06
JUN
07
JUN
08
JUN
09
JUN
10
JUN
11
JUN
12
JUN
13
JUN
14
JUN
There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Source: BlackRock and Bloomberg, as of 6/30/14.
19
ETFs MAY PROVIDE BOND INVESTORS

WITH SIGNIFICANT COST SAVINGS
COST-EFFECTIVENESS
iShares ETFs generally offer price improvement, making the ETF less
expensive to trade than the underlying bonds of the respective index.
Relative to a basket of bonds, ETFs offer the benefit of on-exchange
liquidity, which often results in lower transaction costs.
As illustrated on the opposite page, the bid/offer spread of many fixed
income ETFs is tighter than their underlying bond baskets.
CHAPTER 1 | 20
ETFs MAY OFFER THE POTENTIAL

FOR PRICE IMPROVEMENT
78
80
iSHARES ETF BID/OFFER

UNDERLYING BASKET BID/OFFER1 (EST.)
70
BID/OFFER SPREAD (BPS)
60
50
50
40
40
25
30
15
20
10
15
AGG
SHY
5
1
15
15
5
1
12
11
LQD
HYG
EMB
iSHARES
iSHARES
1-3 YEAR
CORE U.S.
AGGREGATE TREASURY
BOND ETF
BOND ETF
TLT
TIP
MUB
iSHARES
20+ YEAR
TREASURY
BOND ETF
iSHARES
TIPS
BOND ETF
iSHARES
NATIONAL
AMT-FREE
MUNI
BOND ETF
CSJ
CIU
CLY
iSHARES
iSHARES
IBOXX $
iSHARES J.P. MORGAN
iSHARES
iSHARES
iSHARES INVESTMENT IBOXX $
USD
1-3 YEAR INTERMEDIATE 10+ YEAR
GRADE
HIGH YIELD EMERGING
CREDIT
CREDIT
CREDIT BOND CORPORATE CORPORATE MARKETS
BOND ETF
BOND ETF
ETF
BOND ETF
BOND ETF
BOND ETF
iSHARES
ADV ($M)
106
55
876
61
19
127
28
112
252
112
iSHARES
AUM ($M)
17,600
7,931
3,788
13,181
3,316
11,870
5,877
500
17,804
13,727
5,191
1. Underlying basket bid/offer spread refers to the underlying securities of the respective index. 20-day
average daily volume, as of 6/30/14. For illustrative purposes only. Source: BlackRock, Bloomberg,
Barclays, NYSE Arca, as of 6/30/14.
21
ETFs HELP OVERCOME THE CHALLENGES

IN THE OTC MARKET
EFFICIENCY
Much of the cost savings that fixed income ETFs offer arise from
the fact they trade on an exchange. This allows for efficient trading,
which alleviates many of the impediments caused by dislocations in
the OTC market.
The OTC market creates a number of challenges for an investor. First, it
is difficult to determine best execution. An investor can solicit market
bids or offers from a selection of dealers, but that investor has no way of
knowing whether they executed at the best available price in the market.
Second, OTC markets generally provide either the bid or offer price for a
transaction, making it difficult to directly observe trading spreads.
Finally, issues can be difficult to find as lower dealer inventories and
the fragmented structure of the OTC bond market make sourcing bonds
operationally intensive.
CHAPTER 1 | 22
OTC MARKETS
EXCHANGE MARKETS
(FRAGMENTED MARKETPLACE)
EXCHANGE
(CENTRALIZED MARKETPLACE)
BROKER
INVESTOR
In contrast to bonds, fixed income ETFs are traded on a centralized

exchange such as the NYSE. Through the exchange, investors can easily
see execution prices throughout the trading day. Unlike the OTC bond
market, the exchange provides a high level of visibility into trading
volumes, two-sided market levels (both bid and offer), and transaction
costs. It also offers investors more control over trade execution by
allowing them to execute limit, stop loss, and short orders.
Fixed income ETFs bring efficiency and transparency to bond trading,
allowing investors to transact bonds as easily as listed equity securities.
23
STRATEGY
CORE EXPOSURE
APPLICATIONS OF
FIXED INCOME ETFs
Due to their numerous
benefitsflexibility, liquidity,
cost-effectiveness, and trading
efficiencyinvestors are
employing iShares Fixed Income
ETFs in innovative ways to achieve
both long-term strategic and
short-term tactical objectives.
TACTICAL
ADJUSTMENTS
PORTFOLIO
COMPLETION
REBALANCING
INTERIM BETA
TRANSITIONS
ETF OVERLAY/
LIQUIDITY SLEEVE
1. Source: Greenwich Associates 2014 U.S. Fixed-Income ETF Study. Investor usage defined as
percent of investors who employed the strategy with an ETF in the past two years. Based on 59
responses: 21 investment managers, 21 RIAs, 9 insurance companies, and 8 institutional funds.
Institutional funds are defined as pensions, foundations, and endowments.
CHAPTER 1 | 24
OBJECTIVE
INVESTOR USAGE1
Long-term exposure as part of a

strategic asset allocation
Over- or under-weight certain

exposures based on short-term views
or market conditions
Minimize benchmark risk while

maintaining portfolio objectives
Manage portfolio risk between

rebalancing cycles
Maintain beta exposure while

searching for a manager
Efficiently transition portfolio holdings

with an in-kind exchange
Improve liquidity of a portfolio while

maintaining strategic asset allocation
0%
INSTITUTIONAL FUNDS
INSURERS
RIAs
20%
40%
60%
80%
INVESTMENT MANAGERS
25
The most innovative changes in the ETF industry

arise not from product providers, but from clients
who are finding new ways that ETFs can improve
investment results.
Daniel Gamba, CFA
HEAD OF BLACKROCKS iSHARES AMERICAS INSTITUTIONAL BUSINESS
Institutions are making sizeable portfolio allocation shifts and are looking
for new exposures to express their investment views.
Consequently, The Bond Investors Guide to ETFs focuses on four
major ETF investment trends. To illustrate these themes, the book is
constructed to highlight relevant ETF research and insights, spotlight
specific ETF solutions, and reveal how institutions are employing ETFs
through a series of case studies.
CHAPTER 2 | 28
Liquid fixed income vehicles to efficiently gain market exposure
ETF strategies to manage duration in a rising interest rate cycle
ETFs designed to mature like a bond,

trade like a stock, and that are diversified like a fund
Seek yield and diversify domestic bond portfolios with ETFs
29
KEY ETF INVESTMENT TRENDS:
ETFs present an incredibly efficient way to buy and

sell market beta, allowing us to put risk on or off and
manage our cash positions.
James Keenan, CFA

PORTFOLIO MANAGER
AND HEAD OF BLACKROCK AMERICAS CREDIT
2.1
INTRODUCTION:
A NEED FOR SOLUTIONS AS

BOND MARKET LIQUIDITY HAS DECLINED
Investors face a number of liquidity challenges in the corporate bond
market. Liquidity, measured by both trading volumes and average trade
size, has been declining since 2007.
At the same time, the 2008 financial crisis and subsequent reforms led to a
reduction in the amount of capital that banks, brokers, and other traditional
liquidity providers commit to supporting secondary bond trading. This
further reduced the tradable supply of bonds, impacting investors efforts
to source and get bids on specific issues.
In addition, the OTC corporate bond market has experienced rising
fragmentation of issuance, whereby dozens or even hundreds of unique
securities are issued by the same entity. This fragmentation dilutes
security-level liquidity as investors are forced to grapple with a myriad
of bonds from a given issuer with different coupon levels, seniority, call
features, and maturity dates.
As a result, corporate bonds face discontinuous liquidity, where some
individual securities trade infrequently, or not at all, during a given month.
In 2013, 37% of the 37,000+ TRACE eligible bonds did not trade once, which
made it difficult for investors to liquidate or purchase securities.
The net impact of these recent challenges has resulted in the rapid increase
in fixed income ETF assets.
CHAPTER 2.1 | 32
DEALER BOND INVENTORIES

HAVE BEEN DECLINING SINCE 2007
250
200
Credit ETFs help bridge the liquidity gap

created by lower dealer inventories
ASSETS ($B)
150
100
50
SEP02
DEC02
MAR03
JUN03
SEP03
DEC03
MAR04
JUN04
SEP04
DEC04
MAR05
JUN05
SEP05
DEC05
MAR06
JUN06
SEP06
DEC06
MAR 07
JUN07
SEP07
DEC07
MAR08
JUN08
SEP08
DEC08
MAR09
JUN09
SEP09
DEC09
MAR10
JUN10
SEP10
DEC10
MAR11
JUN11
SEP11
DEC11
MAR12
JUN12
SEP12
DEC12
MAR13
PRIMARY DEALER POSITIONS
CREDIT ETF ASSETS
Source: BlackRock, Bloomberg, as of 3/31/13. Primary dealer inventory is measured by the primary dealer
positions outright level of corporate securities due greater than one year. Credit ETF assets include US
listed corporate and credit bond ETFs, excluding leveraged or inverse funds, bank loan funds, floating rate
funds, and convertible funds.
33
ETF SPOTLIGHT:
iSHARES ETFs AS
CAPITAL MARKETS TOOLS
ETFs have proven to be effective fixed income exposure vehicles. iShares
offers some of the largest and most liquid fixed income ETFs available.
These ETFs are ideal for institutional investors requiring flexible capital
markets tools in less liquid bond markets. Many iShares Fixed Income ETFs
have sufficiently long track records, assets, and liquidity to be used for
institutional trading purposes.
BROAD
AGG
iShares Core U.S. Aggregate Bond ETF
TREASURIES
TIP
iShares TIPS Bond ETF
SHV
iShares Short Treasury Bond ETF
SHY
iShares 1-3 Year Treasury Bond ETF
IEI
IEF
TLT
iShares 20+ Year Treasury Bond ETF
CREDIT
LQD
iShares iBoxx $ Investment Grade Corporate Bond ETF
HYG
iShares iBoxx $ High Yield Corporate Bond ETF
CSJ
iShares 1-3 Year Credit Bond ETF
CIU
iShares Intermediate Credit Bond ETF
SPECIALTY
MBB
iShares MBS ETF
FLOT
iShares Floating Rate Bond ETF
MUB
iShares National AMT-Free Muni Bond ETF
EMB
iShares J.P. Morgan USD Emerging Markets Bond ETF
CHAPTER 2.1 | 34
SPEAKING VOLUMES:
iSHARES OFFERS SOME OF THE MOST LIQUID ETFs IN THE MARKET
20-DAY ADV ($M)
HISTORICAL MAX ADV ($M)
800
MAX AVERAGE DAILY VOLUME ($M)
600
4000
400
3000
200
2000
20-DAY AVERAGE DAILY VOLUME ($M)
5000
1000
AG
G
TIP
SH
V
SH
Y
IEI
IEF
TLT
LQ
D
HY
G
CS
J
CIU
MB
B
FL
OT
MU
B
EM
B
AGG
TIP
SHV
SHY
IEI
IEF
TLT
LQD
HYG
CSJ
CIU
MBB
FLOT
MUB
EMB
20-DAY
ADV ($M)
106
61
31
55
28
272
876
112
252
127
28
44
22
19
112
HIST. MAX
ADV ($M)
471
873
1,255
4,604
5,208
1,553
4,988
1,273
1,494
1,159
302
446
459
150
526
TRACK
RECORD
(YRS)
11
11
12
12
12
12
DV01
($)1
518
769
39
189
456
762
1,687
779
391
192
424
410
14
613
710
Source: BlackRock, as of 6/30/14. 1. DV01, also known as dollar value 01 or basis point value,
represents the change in dollar value of a fund investment given a 1 basis point move in interest rates.
The figure is derived from a funds effective duration and assumes a $1M investment.
35
INSIGHT:
GROWING TRADE SIZES

IN CREDIT ETFs
As fund liquidity increases, large trades are becoming more frequent. Using
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and iShares
iBoxx $ High Yield Corporate Bond ETF (HYG) as proxies for investment
grade and high yield corporate credit, there is evidence of an uptick in the
frequency of large institutional tradesdefined as single trades greater
than $10Mas a portion of total ETF trading activity.
In 2009, large trades accounted for 10% of LQDs and 8% of HYGs total
trading volume. Trades of this size have steadily climbed to over 20% of
trading activity for both LQD and HYG.
CHAPTER 2.1 | 36
HIGHER FREQUENCY OF
LARGE ETF TRADES
35
LARGE TRADE VALUE AS % OF ALL TRADES
30
25
20
15
10
INVESTMENT GRADE (LQD)
DEC13
SEP13
JUN13
MAR13
DEC12
SEP12
JUN12
MAR12
DEC11
SEP11
JUN11
MAR11
DEC10
SEP10
JUN10
MAR10
DEC09
SEP09
JUN09
MAR09
HIGH YIELD (HYG)
Source: BlackRock, Bloomberg, as of 12/31/13. Graph shows the total value of single trades over $10M
as a percentage of total dollar trading volume for the previous three months.
37
INSIGHT:
TRADES OF ALL SIZES CAN

BENEFIT FROM ETF LIQUIDITY
Fixed income ETFs offer
an important additional
layer of liquidity that may
reduce total transaction
costs. In many cases, ETF
purchases can be satisfied
by existing ETF market
liquidity on the exchange.
Large institutional trades
exceeding the exchange
liquidity result in the
creation of new ETF shares
to complete the remainder
of an order.
$100M HIGH YIELD ETF TRADE

ETF LIQUIDITY
(ADV: $252M)
$100M trade is executed accessing the

liquidity of the available ETF shares
$100M BUY
$300M HIGH YIELD ETF TRADE

ETF LIQUIDITY
(ADV: $252M)
$252M of the trade is executed through

the liquidity of available ETF shares
$300M BUY
CHAPTER 2.1 | 38
OTC MARKET LIQUIDITY

(ADV: $7.1B)
OTC market is not accessed
OTC MARKET LIQUIDITY

(ADV: $7.1B)
$48M of the trade is executed through creating

new ETF shares using the OTC market
100% of the trade benefits

from transaction savings of
available ETF liquidity
Over 80% of the trade benefits

from transaction savings of
available ETF liquidity
The remainder of the trade
is filled at prevailing OTC
market costs
The total weighted average
cost of the trade would be
lower than sourcing exclusively
from the OTC market
Source: Bloomberg, Barclays Capital TRACE, NYSE Arca, BlackRock. ETF liquidity represented by 20-day
average daily volume data as of 6/30/14 for the iShares iBoxx $ High Yield Corporate Bond ETF. There
can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Example is for illustrative purposes only.
39
INSIGHT:
HIGH YIELD ETFs

IN STRESSED MARKETS
During periods of increased market volatility, OTC bond market liquidity
generally declines as trading becomes concentrated in a subset of larger
and more liquid issues, and investors encounter difficulty transacting in less
liquid securities.
A recent example occurred between May and July 2013 when the Federal
Reserve hinted at a plan to taper quantitative easing measures. This
resulted in large outflows and significant volatility across fixed income
markets, particularly in the high yield sector.
Interestingly, most of the outflows that occurred during the period were
through traditional pooled vehicles rather than ETFs. In fact, exchange
liquidity increased dramatically for iShares iBoxx $ High Yield Corporate Bond
ETF (HYG). HYG breached the $1B in trading volume threshold five times during
this period, allowing investors to meet and trade high yield exposure without
tapping the OTC market. In fact, most of the trading occurred on the exchange,
roughly ten shares traded for every one that was redeemed. The ETFs ability
to absorb the spike in volume highlights the value the additional layer of
liquidity that credit ETFs can provide during a period of market volatility.
The behavior of HYG during bouts of market stress serves as evidence that
ETFseven in less liquid marketscan be a robust vehicle for managing
and transferring risk. It is because of these exchange liquidity attributes that
liquid fixed income ETFs, such as HYG, have become key indicators of cash
bond market movements.
Fixed Income ETFs and the

Corporate Bond Liquidity Challenge
Access the full whitepaper at iShares.com/BIG
CHAPTER 2.1 | 40
FIXED INCOME ETFs AND THE CORPORATE

BOND LIQUIDIT Y CHALLENGE
IN TIMES OF STRESS, ETFs PROVIDE

ACCESS TO ILLIQUID MARKETS
TAPERING
FEARS
14
Trading volumes increased sharply as

investors utilized the liquidity of the ETF
12
10
TREASURY
DOWNGRADE
8
6
2008
CRISIS
4
2
DEC13
SEP13
MAR13
JUN13
DEC12
SEP12
MAR12
JUN12
SEP11
DEC11
MAR11
JUN11
SEP10
DEC10
JUN10
MAR10
SEP09
DEC09
MAR09
JUN09
SEP08
DEC08
MAR08
JUN08
0
DEC07
HYG VOLUME/CASH BOND VOLUME (%)
HYG DOLLAR VOLUME AS A PERCENT OF HIGH YIELD CASH BONDS
EXCHANGE VOLUME TO CREATE/REDEEM RATIO

(20-DAY ROLLING)
TAPERING FEARS:
HYG EXCHANGE VOLUME VERSUS CREATION/REDEMPTION ACTIVITY
30
On average, 10 shares of HYG were traded on the

exchange for every one share that was redeemed
25
20
15
10
5
0
13
JAN
13
FEB
13
MAR
13
APR
13
MAY
13
JUN
13
JUL
Source: BlackRock, Bloomberg, as of 12/31/13. Rolling 20-day average shown for each. Cash bonds are
measured by FINRA TRACE Market Breadth High Yield and High Grade Bond Dollar Indexes and ETF
volume is ADV. The case study references 5/29/13. Case studies are for illustrative purposes only; they
are not meant as a guarantee of any future results of experience. There can be no assurance that an
active trading market for shares of an ETF will develop or be maintained.
41
INSIGHT:
EXPLORING CREDIT ACCESS VEHICLES

Investors may gain credit exposure through a variety of means,
including cash bonds, credit default swaps (CDS/CDX), total return
swaps (TRS), and ETFs.
Institutional investors who receive large inflows of cash are faced with
access, liquidity, and timing issues related to their investments. Delays
in full allocation can create yield drag and tracking error. Alternatively,
institutions may need to hedge credit positions as they attempt to shift
allocations or alter risk profiles.
Each of these credit access vehicles offers unique attributes, giving
investors choice and flexibility in their investment approach.
An investors preference for one approach over another is a function of
the following considerations:
Desire for cash or synthetic exposure

Preference of interest rate vs. credit spread composition
Leverage and liquidity requirements
Direction (long vs. short)
Holding period
Operational, accounting, and regulatory considerations
Relative cost of each vehicle
CHAPTER 2.1 | 42
EXCHANGE
TRADED FUNDS
(ETFs)
TOTAL RETURN
SWAPS
(TRS)
CREDIT DEFAULT
SWAPS
(CDS/CDX)
Exchange traded bond portfolios are generally

designed to track specified indices
Increasing rates of adoption and liquidity
OTC swap products designed to pay the total

return on specified credit indices
Generally lower levels of liquidity and higher
transaction costs (strike premiums and bid/
offer spreads) relative to CDX and ETFs
Derivative contracts designed to target

credit spreads
Most liquid and actively traded credit products
Significant differences in performance vs. cash
bonds can arise for sustained periods of time
43
INSIGHT:
COMPARING CREDIT ETFs, TOTAL RETURN

SWAPS, AND CREDIT DEFAULT SWAPS
TOTAL RETURN SWAPS AND CREDIT ETFs
Credit ETFs and total return swaps TRS on Markit iBoxx indices are both
used by investors who are seeking to obtain long or short exposure to the
investment grade or high yield credit markets.
Credit ETFs are portfolios of bonds that trade on exchange and track a
specified benchmark, while iBoxx TRS are synthetic, unfunded derivative
index products. An investors preference for one product over the other
will be a function of desired leverage, the direction of the exposure (long
vs. short), holding period, on-demand liquidity requirements, operational
constraints, and the relative cost and attractiveness of each vehicle in given
market conditions.
Investors who do not require leverage should evaluate the relative cost and
liquidity of credit ETFs and TRS. Larger credit ETFs with longer track records
may offer ample exchange liquidity, while TRS liquidity varies depending on
participating counterparties and risk appetites. Market impact for larger
trades in more liquid credit ETFs can be 10 bps or less, whereas TRS quoted
bid/offer spreads are typically between 40-50 bps at initiation.
TRS are OTC bilateral contracts, which expose investors to the credit risk of
the dealer counterparty, though this risk may be managed through the use of
margin/collateral requirements. As ETFs are exchange traded, counterparty
risk is negligible and there are no collateral requirements.
The historical performance of ETFs and TRS has been similar through time
for both long and short market exposures.
CHAPTER 2.1 | 44
CREDIT DEFAULT SWAPS AND CREDIT ETFs

Credit default swaps (CDX) are unfunded derivative index products that allow
investors to access levered investment grade and high yield credit spreads
across standardized tenors. CDX contracts are highly liquid but trade at a
basis to cash bonds and do not provide exposure to interest rates.
CDX contracts provide investors with the ability to get long or short exposure
to credit spreads synthetically. The standardization and fungibility of CDX
contracts have led them to become the most liquid credit exposure vehicles
in the market.
Alternatively, credit ETFs provide a means to attain bond exposure in a
fully-funded, exchange traded format. The liquidity of credit ETFs has grown
as a result of exchange transparency and tight execution cost relative to the
underlying OTC market. While not as liquid as CDX, credit ETFs are typically
more liquid than individual cash bonds.
An investors vehicle preference is a function of leverage and liquidity
requirements, preferred composition of interest rate vs. credit spread
exposure, position direction, and operational, accounting, and regulatory
considerations. Investors that can trade derivatives may prefer the leverage
provided by CDX. Conversely, investors who employ fully funded strategies
may prefer ETFs.
Performance differences (adjusted for interest rate exposure) between
credit ETFs and CDX are often driven by changes in the basis between the
cash and synthetic credit markets.
Comparing
Credit ETFs and
Credit Index Total
Return Swaps
Comparing
Credit ETFs and
Credit Default
Swap Indices
Access the full whitepapers at iShares.com/BIG

45
CREDIT ETFs
ETFs hold a basket of cash bonds designed to track
a reference index and trade on an exchange
MECHANICS
Reference index and ETFs typically rebalance monthly

no investor action required
Investor may go long or short an ETF
ETFs pay out income earned by fund in
periodic distributions
INTEREST RATE EXPOSURE
Yes
CASH/CDS BASIS
No
HOLDINGS
LQD: > 1,200

HYG: > 900
INDEX REBALANCING
Monthly
ABILITY TO LEND
Yes
ABILITY TO TRADE OPTIONS
Yes
LIQUIDITY
LQD ADV1: $112M

HYG ADV1: $252M
ETFs can access liquidity of underlying
TRANSACTION COSTS
Bid/offer spread, commissions, expense ratio
FUNDING/LEVERAGE
Fully funded
COLLATERAL
No collateral requirements
OPERATIONAL RISK
Exchange
DOCUMENTATION
No documentation requirements
COUNTERPARTY RISK
Exchange traded
BENEFITS
Liquid, inexpensive execution to gain diversified cash

bond exposure
CONSIDERATIONS
Large trades may need to be tactically

managed and may have market impact
Expense ratio and equity commissions may
add to total costs
CHAPTER 2.1 | 46
INDEX TOTAL RETURN SWAPS

Dealer counterparty pays/receives total return
of index on specified notional value
Investor receives/pays LIBOR x notional value
over specified term
Swap must be rolled by investor periodically
to maintain exposure
Total return based on an initial index strike vs.
final index level
CDX
Consists of reference basket of
equally weighted single-name CDS
(100 for HY; 125 for IG)
Dealer counterparty pays/receives quarterly
premium on specified notional vs. contingent
payments based on specified credit events
Investor may go long or short
Yes
No
No
Yes
IG: > 3,900

HY: > 900
IG: 125
HY: 100
Monthly
Semi-annually
No
No
No
Yes
Data not reported
IG: $5.8B
HY: $2.2B
Index strike vs. actual index level,

bid/offer spread
Bid/offer spread, roll costs
Synthetic/unfunded
Synthetic/unfunded
Collateral requirements
Exchange collateral requirements
Payments, settlements, documentation
Exchange cleared
International Swaps and Derivatives

Association (ISDA), Credit Support Annex
(CSA), and trade confirmations
Cleared Derivatives Execution Agreements

(CDEA)
Bilateral counterparty risk
Exchange cleared
Diversified cash bond exposure; leverage
Liquid basket of CDS exposures
Higher transaction costs

Contracts must be rolled
Inconsistent liquidity
Can have sustained periods of significant

tracking error vs. bonds
Contracts must be rolled
Source: Blackrock, Bloomberg, JPMorgan.

1. 20-Day ADV as of 6/30/14.
47
CASE STUDY:
MINIMIZE CASH DRAG WITH FIXED INCOME ETFs

A high yield asset manager generated a 5-year cumulative return that
slightly underperformed the strategy benchmark. After analyzing the
portfolios performance, the manager found the 5% cash allocation had
resulted in a cumulative 6% drag on performance.
The analysis showed that the manager could have significantly reduced the
impact of cash drag by allocating 3% to iShares iBoxx $ High Yield Corporate
Bond ETF (HYG) and only 2% to cash. The solution would have reduced
cash drag during the prior 5-year period to 2.9%, inclusive of transaction
costs. This would have made the difference between outperforming and
underperforming the strategy benchmark.
Given the managers need to meet cash flows, liquidity was a key
consideration when selecting an ETF. With an ADV of approximately $250M,
HYG acts as a liquidity tool in a sector of the market that can suffer from low
trading volumes.
By holding HYG, the manager will lower the impact of cash drag while
maintaining flexibility for cash flow needs.
CHAPTER 2.1 | 48
REDUCE THE EFFECT OF

CASH DRAG WITH AN ETF
0
CUMULATIVE CASH DRAG
-1
-2
-3
-2.91%
-4
ETF minimized the effects of cash

drag while maintaining liquidity for
cash flow needs
-5
-6
-6.01%
PORTFOLIO WITH 5% CASH
JUN14
MAR14
DEC13
SEP13
JUN13
MAR13
DEC12
SEP12
JUN12
MAR12
DEC11
SEP11
JUN11
MAR11
DEC10
SEP10
JUN10
MAR10
DEC09
SEP09
JUN09
-7
PORTFOLIO WITH 2% CASH & 3% ETF
Sources: Morningstar, BlackRock, as of 6/30/14. For illustrative purposes only. Not indicative of any
actual portfolio or asset allocation model. Portfolio with 5% Cash assumes allocation of 95% to
BAML High Yield Master II Index and 5% invested in a money market fund, rebalanced monthly. No
additional transaction costs are assumed. Portfolio with 2% Cash & 3% ETF assumes allocation of
95% to BAML High Yield Master II Index, 2% invested in a money market fund, and 3% invested in Markit
iBoxx USD Liquid High Yield Index, rebalanced monthly, and assumes 2 bps of round-trip transaction
costs for the Markit iBoxx USD Liquid High Yield Index investment per month.
Past performance does not guarantee future results. There can be no assurance that an active trading
market for shares of an ETF will develop or be maintained. Case studies are for illustrative purposes only;
they are not meant as a guarantee of any future results or experience.
Index returns are for illustrative purposes only and do not represent actual iShares Fund performance.
Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices
are unmanaged and one cannot invest directly in an index.
49
ETF SPOTLIGHT:
iSHARES NAIC-DESIGNATED ETFs

FOR INSURERS
iShares offers 60+ National Association of Insurance Commissioners
(NAIC) designated ETFs, more than any other provider.1 NAIC-designated
ETFs help insurers:
Overcome regulatory hurdles by allowing more favorable Risk-Based

Capital (RBC) treatment
Permit the ETF to be considered Long-term Bond Issuer Obligations

as opposed to Common Stock on the statutory (Schedule D) filings
Maintain lower capital requirements to back their investments

Learn more at iShares.com/insurance
1. Source: NAIC Purposes and Procedures Manual of the NAIC Securities Valuation Office.
July 2013 Volume/Issue: 12/02.
The NAIC does not endorse or recommend any securities or products, including iShares ETFs. NAIC
designations are issued for specific regulatory purposes and these designations are not equivalent to
credit ratings issued by nationally recognized statistical rating organizations. NAIC designations are
suitable only for NAIC members.
Source for NAIC definitions: NAIC Publicly Traded Securities Listing Definitions.
For further NAIC definitions, please refer to the appendix or www.naic.org for additional information,
as of 6/30/14.
CHAPTER 2.1 | 50
60+ iSHARES NAIC-DESIGNATED ETFs COVERING A VARIETY OF SECTORS:

DESIGNATION
iSHARES ETFs
SECTOR
iSHARES ETFs
NAIC 1
32
Broad
NAIC 2
18
Government
11
NAIC 3
Government/Credit
NAIC 4
Credit
NAIC P2
Corporate
TOTAL
61
Mortgage Backed Securities
High Yield
Emerging Markets Debt
Municipals
Inflation-Linked
Bullet Maturity
10
Short Duration
Preferred Equity
LARGEST AND MOST COMMONLY USED NAIC-DESIGNATED ETFs:

TICKER
NAIC
RATING
AUM ($M)
LQD
$17,804
$112
AGG
$17,600
$106
HYG
$13,727
$252
TIP
$13,181
$61
CSJ
$11,870
$127
EMB
$5,191
$112
FLOT
$3,568
$22
MUB
$3,316
$19
NAME
20-DAY
ADV ($M)
Source: BlackRock, Bloomberg, as of 6/30/14.
51
CASE STUDY:
TRANSITION MANAGEMENT USING ETFs

A CIO of a pension plan was transitioning $1.7B in investment grade bond
assets from a separate account to be managed in-house. However, the
portfolio had thousands of holdings, with a large number of thinly traded
securities. The CIO considered transitioning the portfolio into ETFs due to
their operational efficiencies, including comparatively low management
fees, monthly rebalancing to account for credit downgrades, and
reinvestment of maturing issues.
BlackRock mapped the existing securities to an appropriate mix of

iShares ETFs:
NAME
iSHARES
BID/OFFER
SPREAD1
UNDERLYING
BID/OFFER
SPREAD1
PRICE
IMPROVEMENT
TICKER
ALLOCATION
iShares Barclays 1-3 Year

Credit Bond ETF
CSJ
10%
15
14
CIU
20%
12
iShares 10+ Year Credit Bond ETF
CLY
15%
11
50
39
iShares iBoxx $ Investment Grade

Corporate Bond ETF
LQD
55%
25
24
CHAPTER 2.1 | 52
A strategy was developed to transition the entire portfolio of bonds utilizing

the ETF structure, which allows for units to be created through an in-kind
transfer process. The client delivered $1.5B in fragmented fixed income
assets to their broker and in turn received ETF shares. The new ETF portfolio
allows for transactional savings due to the tighter trading spreads of ETFs.
The remaining bondsapproximately $200M in less-liquid securitieswere
sold by BlackRocks transition team, which used the proceeds to purchase
additional shares of the ETFs for the client.
The customized ETF transition strategy helped pare the portfolio down
from approximately 2,700 securities to 4 positions while providing
broad exposure and the necessary diversification for the investment
grade credit mandate. The resulting portfolio represented a substantial
improvement in liquidity and operational efficiency.
1. Underlying bid/offer spread refers to the underlying securities of the respective index.
Source: BlackRock, Bloomberg, Barclays, NYSE Arca, as of 6/30/14.
53
CASE STUDY CONTINUED:

TRANSITION MANAGEMENT USING ETFs
IMPROVING OPERATIONAL EFFICIENCY BY TRANSITIONING TO AN ETF PORTFOLIO
BLACKROCK
Bonds
INVESTMENT
GRADE BOND
PORTFOLIO
BLACKROCK
OPTIMIZER
iShares
ETFs
AUTHORIZED
PARTICIPANT (AP)
TRANSITION
ACCOUNT
1. BlackRock Optimizer mapped existing bond portfolio
1. Client delivered bonds to AP
2. Residual bonds sent to transition account
2. AP delivered bonds to BlackRock

3. BlackRock delivered iShares ETFs to AP
4. Residual bonds liquidated in transition account
CHAPTER 2.1 | 54
CSJ
CIU
CLY
CLIENT
PORTFOLIO
LQD
CASH
1. AP delivered iShares ETFs to client

2. BlackRocks transition management team purchases additional
shares of ETF with remaining cash and delivers to portfolio
For illustrative purposes only. The strategies discussed are strictly for illustrative and educational
purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a
solicitation of an offer to buy any security. There is no guarantee that any of the strategies discussed will
be effective. There can be no assurance that an active trading market for shares of an ETF will develop or
be maintained.
55
Recent ETF innovations have provided investors with the

tools to better target duration risk and manage interest
rate risk and credit exposure independently, providing
greater flexibility in portfolio management.
Steve Laipply
BLACKROCK FIXED INCOME STRATEGIST
2.2
INTRODUCTION:
NAVIGATING AN UNCERTAIN
RATE ENVIRONMENT
Long- and short-term interest rates have been in decline for the past 30
years, resulting in a sustained bull market for bonds. With global interest
rates near historic lows, many investors have become concerned about
the impact of rising interest rates on their fixed income portfolios.
While the timing, magnitude, and effects of a shift in the yield curve
remain unclear, investors are exploring new ways to adjust their
portfolios in the years ahead.
CHAPTER 2.2 | 58
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
INTEREST RATES (%)
30 YEARS OF DECLINING INTEREST RATES

20
15
10
10 YEAR TREASURY
FED FUNDS TARGET RATE
Source: Bloomberg, as of 6/30/14.
59
ETF SPOTLIGHT:
TOOLS FOR MANAGING DURATION

iShares ETFs allow investors to select the appropriate mix of duration risk,
income potential, credit quality, and sector selection to implement their
investment views.
FLOATING RATE
Portfolios of bonds with coupons that reset with changes in a reference rate
Potential for coupon payments to keep up with inflation
Less interest rate sensitive than fixed coupon bonds
Most effective when short-term interest rates are increasing
TFLO
CHAPTER 2.2 | 60
iShares Treasury Floating

Rate Bond ETF
Effective Duration: 0.01 years
FLOT
iShares Floating Rate

Bond ETF
SHORT MATURITY
Portfolios of bonds with maturities less than 5 years
Offer precise exposure to credit, high yield, or Treasuries
SHV

SLQD
iShares 0-5 Year Investment

Grade Corporate Bond ETF
iShares 0-5 Year High Yield

Corporate Bond ETF
SHY
iShares 1-3 Year

Treasury Bond ETF
SHYG
CSJ
iShares 1-3 Year

Credit Bond ETF
ISTB
iShares Core Short-Term USD

Bond ETF
Source: BlackRock, as of 6/30/14.
61
INTEREST RATE HEDGED

Hedged bond portfolios that seek to mitigate interest rate risk
Exposure to entire spread curve
Reduce yield but lessen interest rate volatility
LQDH
iShares Interest Rate Hedged

Corporate Bond ETF
Modified Duration: 0.13 years
HYGH

High Yield Bond ETF
Modified Duration: 0.04 years
NEAR
iShares Short Maturity

Bond ETF
MULTI-SECTOR
Actively managed multi-sector exposure
Potential to enhance yield relative to cash
ICSH
iShares Liquidity Income ETF

Source: BlackRock, as of 6/30/14. Modified duration is shown for LQDH and HYGH, which uses a
cash flow to worst calculation to match the hedge ratio in the fund.
CHAPTER 2.2 | 62
BULLET MATURITY
Designed with a defined maturity date and monthly income payments
Exhibit declining durations over time
Yield to maturity visible at time of purchase
CORPORATE
IBDA
iBonds Mar 2016

Corporate ETF
IBDB
iBonds Mar 2018

Corporate ETF
IBDF
iBonds Dec 2016

Corporate ETF
IBDH
iBonds Dec 2018

Corporate ETF
IBCC
iBonds Mar 2018

Corporate Ex-Financials ETF
CORPORATE EX-FINANCIALS
IBCB
iBonds Mar 2016

Corporate Ex-Financials ETF
MUNICIPAL
IBMD
iBonds Sep 2015 AMT-Free

Muni Bond ETF
IBME

Muni Bond ETF
IBMF

Muni Bond ETF
IBMG

Muni Bond ETF
63
CASE STUDY:
REDUCING INTEREST RATE RISK

A portfolio manager at a large registered investment advisor (RIA) wanted to
reduce duration across her clients investment grade bond portfolios. At the
same time, she wanted future income payments that would keep pace with
short-term rates. The portfolio manager initially looked at bank loan ETFs as
a way to lower duration, but was concerned about the liquidity risks and did
not want to lower the credit quality of the portfolio.
After analyzing possible options, the portfolio manager implemented an
allocation to iShares Floating Rate Bond ETF (FLOT), which holds securities
that provide:
Investment grade credit quality
Coupon payments that reset with changes in LIBOR
Minimal interest rate risk
Additionally, the structure of the ETF offers:
Diversified exposure to more than 250 investment grade short-term
floating rate bonds
Enhanced on-exchange liquidity relative to purchasing floating rate
bonds in the OTC market
By reallocating 20% of investment grade bonds into FLOT, the duration
of the portfolio was reduced from seven years to five years. In addition,
FLOT has the potential to benefit from rising interest rates in the future.
CHAPTER 2.2 | 64
FLOT CAN LOWER DURATION AND POTENTIALLY

BENEFIT FROM RISING RATES
6
INTEREST RATES (%)
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
BARCLAYS US FLOATING RATE NOTE INDEX - AVERAGE COUPON

FED FUNDS TARGET RATE1
3 MONTH LIBOR
Source: Barclays Capital, Bloomberg, as of 6/30/14.

1. Fed Funds Target Rate is the interest rate that banks charge each other to borrow money.
The strategies discussed are strictly for illustrative and educational purposes and should not be
construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy
any security. There is no guarantee that any of the strategies discussed will be effective.
65
INSIGHT:
HEDGE INTEREST RATE RISK

TO MANAGE DURATION
Investors have traditionally accepted bundled interest rate and credit risk
when investing in corporate bonds. This has made it challenging to directly
express views on credit spreads.
While some investors attempt to isolate credit spreads with interest rate
swaps and Treasury futures, managing these hedged portfolios can be timeand resource-intensive. Further, such strategies create additional costs and
operational risks for investors.
The advent of interest rate hedged ETFs provides a simple instrument to
efficiently separate interest rate and credit exposure. These strategies
enable more precise control over a portfolios mix of interest rate and credit
risk relative to short duration strategies.
CHAPTER 2.2 | 66
FIXED INCOME RISK COMPOSITION PROFILES
RISK COMPOSITION
Interest rate hedged bonds

offer access to credit spread
exposure directly
CREDIT
RISK
CREDIT
RISK
INTEREST
RATE RISK
INTEREST
RATE RISK
CREDIT
RISK
INTEREST
RATE RISK:
Mitigated with
short Treasury
futures
INTERMEDIATE
DURATION BOND
SHORT
DURATION BOND
INTEREST RATE
HEDGED BOND
For illustrative purposes only. There is no guarantee that the Funds short positions will completely
eliminate the interest rate risk of the long positions in bonds.
67
ETF SPOTLIGHT:
HEDGE INTEREST RATE RISK

WITH THE SIMPLICITY OF AN ETF
iShares Interest Rate Hedged ETFs offer diversified access to high yield
and investment grade corporate bonds while seeking to mitigate interest
rate exposure.
By actively managing a hedging strategy with short positions in Treasury
futures, iShares Interest Rate Hedged Corporate Bond ETF (LQDH) and
iShares Interest Rate Hedged High Yield Bond ETF (HYGH) provide a single
trade vehicle to achieve targeted credit exposure.
Interest rate hedged ETFs can be used to diversify risk exposure in
rate-sensitive portfolios, express credit spread views, and reduce the
operational resources necessary to employ an in-house hedging strategy.
LQDH

Corporate Bond ETF
HYGH

High Yield Bond ETF
CHAPTER 2.2 | 68
DYNAMICALLY MANAGE PORTFOLIO DURATION

WITH HEDGED ETFS
LESS
MORE
INTEREST RATE RISK
INTEREST RATE RISK
Hedged Portfolio
Duration=0
Unhedged Portfolio
Duration=7.7
For illustrative purposes only.
69
INSIGHT:
LIQUIDITY TIERING FRAMEWORK

FOR INCREMENTAL YIELD
With short-term rates close to 0%, cash investments may return negative
real yields after inflation. Employing a liquidity tiering framework with
ETFs can help investors meet cash flows while earning incremental yield
with short duration investments. Investors should consider the following
framework when balancing their need for principal protection and yield.
Tier 1 liquidity should be available for immediate use. The primary goal
of Tier 1 cash is to protect against a principal shortfall.
Tier 2 liquidity does not need to be used immediately, but should be
available over the next 6 to 18 months. The primary goal is income or
yield, with a secondary consideration of principal protection. Tier 2
investments will likely contain some credit, liquidity, or interest rate risk
in order to seek a potentially higher rate of return.
Tier 3 liquidity is reserved for longer-term (18+ month) liabilities and
should have limited interest rate risk. The primary goal of this allocation
is income, with the potential for capital appreciation.
Tier 2 and Tier 3 cash investments can be allocated to ETFs in order to
increase yield and meet liquidity needs without sacrificing the principal
protection in Tier 1.
CHAPTER 2.2 | 70
TIERING CASH ALLOCATIONS
PRIMARY
GOAL
LIQUIDITY
TIER
INVESTMENT
HORIZON
INVESTMENT
OPTION
PRINCIPAL
PROTECTION
TIER 1
Near-term
0-6 months
Cash and stable

NAV funds
Cash equivalents
Managed cash account
Money market funds
INCOME
OR YIELD
TIER 2
Intermediate
-term
6-18 months
Short duration
bond fund with
variable NAV but
with potential to
generate higher
income
ICSH: iShares Liquidity Income ETF
POTENTIAL SOLUTION
NEAR: iShares Short Maturity Bond ETF

FLOT: iShares Floating Rate Bond ETF
TFLO: iShares Treasury Floating
Rate Bond ETF
SHV:
INCOME
WITH
GROWTH
TIER 3
Longer-term
18+ months
Short to intermediate
duration bond fund
with variable NAV but
with potential to
generate higher
income with growth
ISTB: iShares Core Short-Term

USD Bond ETF
CSJ:
iShares1-3 Year Credit Bond ETF
SHY:
IBDA: iBonds Mar 2016 Corporate ETF

IBCB: iBonds Mar 2016 Corporate
Ex-Financials ETF
SLQD: iShares 0-5 Year Investment
Grade Corporate Bond ETF
SHYG: iShares 0-5 Year High Yield
Corporate Bond ETF
LQDH: iShares Interest Rate Hedged
Corporate Bond ETF
HYGH: iShares Interest Rate Hedged
High Yield Bond ETF
71
ETF SPOTLIGHT:
SEEKING YIELD WITH LIMITED DURATION

iShares Short Maturity Bond ETF (NEAR) is an actively managed strategy
that seeks to maximize income through a multi-sector approach. The fund
targets an effective duration of one year or less and is composed of at least
80% investment grade holdings.
The fund has the flexibility to invest in Treasuries, agencies,
supranationals, corporates, MBS, CMBS, ABS, municipals, money market
funds, investment companies, non-US dollar securities, 144A securities,
and repurchase agreements.
NEAR is managed by a team of eight that have an average of more
than a decade of portfolio management experience and are backed
by BlackRocks Short Duration Portfolio Team, which has $55B
under management.
CHAPTER 2.2 | 72
PUT CASH TO WORK
REDUCE DURATION
Invest frictional cash in NEAR to target a

higher return than money market vehicles
while maintaining intraday liquidity
Prepare for higher rates by shifting from

longer duration exposures into NEAR
to get a potentially higher yield versus
short Treasuries
LONG FIXED INCOME

INVESTORS
YIELD
NEAR
CASH
INVESTORS
SHORT DURATION
DURATION
CHARACTERISTICS
EFFECTIVE DURATION
0.88 years
AVERAGE CREDIT QUALITY
BBB+f
For illustrative purposes only. An investment in NEAR is not equivalent to and involves risks not associated
with an investment in cash. Money market funds typically seek to maintain a net asset value of $1.00 per
share. NEAR does not have a similar objective. Data as of 6/30/14 and subject to change. Past performance
is no indication of future performance.
NEAR will invest in privately issued securities that have not been registered under the Securities Act of
1933 and as a result are subject to legal restrictions on resale. Privately issued securities are not traded
on established markets and may be illiquid, difficult to value, and subject to wide fluctuations in value.
Delay or difficulty in selling such securities may result in a loss to the iShares Short Maturity Bond ETF. The
fund may invest in asset-backed (ABS) and mortgage-backed securities (MBS) which are subject to credit,
prepayment and extension risk, and react differently to changes in interest rates than other bonds. Small
movements in interest rates may quickly reduce the value of certain ABS and MBS.
73
We have seen growing interest in the bullet maturity

ETF structure. Investors are using these funds in their
existing fixed income portfolios, much the same way
they use individual bonds.
Raman Suri
HEAD OF BLACKROCKS iSHARES INSURANCE CLIENT GROUP
2.3
INTRODUCTION:
COMPLEXITIES OF BUILDING BOND PORTFOLIOS
BUILDING AND MONITORING

PORTFOLIO POSITIONS
PERFORMANCE DISPERSION
SINGLE ISSUE ILLIQUIDITY
PRICING TRANSPARENCY
CASH FLOW MANAGEMENT
CHAPTER 2.3 | 76
Building portfolios is time-consuming in the fragmented OTC market

Portfolios must be continuously monitored to account for credit
downgrades and defaults
Limited bond issue sizes pose obstacles to allocating the

same security consistently across portfolios
Many bonds trade infrequently in secondary markets

Difficult to receive best execution in OTC market
Must contact multiple dealers to estimate a fair market price
Trading odd lots can be expensive
Bonds are often called away, requiring replacement
Liquidating to meet unexpected cash flows can be costly
77
ETF SPOTLIGHT:
iBONDS: FEATURES OF A BOND,

EFFICIENCIES OF AN ETF
iBonds combine the features of a bond with the efficiencies of an ETF.
iBonds are bullet maturity ETFs that provide diversified exposure to
hundreds of bonds with maturities falling within specific years.
The unique combination of a defined maturity with the exchange tradability
and diversification of an ETF makes iBonds ideal holdings to build new, or
enhance existing, fixed income portfolios.
FEATURES OF A BOND:
BENEFITS OF AN ETF:
Regular income
Diversification across
hundreds of bonds in a
single trade
Final distribution
at maturity
Clarity of yield at time
of purchase
iBONDS
MATURE, LIKE A BOND

TRADE, LIKE A STOCK
DIVERSIFIED, LIKE A FUND
More flexible trade

lot sizes than
individual bonds
Potential transactional
savings versus buying
individual bonds
Daily liquidity and
trading efficiencies
CHAPTER 2.3 | 78
iBONDS CORPORATE ETFs
IBDA IBDF IBDB IBDH IBDC IBDD

MAR 2016
DEC 2016
MAR 2018
DEC 2018
MAR 2020
MAR 2023
iBONDS CORPORATE EX-FINANCIALS ETFs
IBCB IBCC IBCD IBCE

MAR 2016
MAR 2018
MAR 2020
MAR 2023
iBONDS AMT-FREE MUNI BOND ETFs
IBMD IBME IBMF IBMG IBMH I B M I

SEP 2015
SEP 2016
SEP 2017
SEP 2018
SEP 2019
SEP 2020
79
ETF SPOTLIGHT:
iBONDS HELP SIMPLIFY THE COMPLEXITIES

OF BUILDING PORTFOLIOS
iBONDS ETFs
BUILDING AND MONTORING

PORTFOLIO POSITIONS
PERFORMANCE DISPERSION
SINGLE ISSUE LIQUIDITY
PRICING TRANSPARENCY
CASH FLOW MANAGEMENT
CHAPTER 2.3 | 80
Avoid sourcing in the OTC market

Diversification across hundreds of bonds in a single trade
Professional portfolio management monitors credit quality of
individual issues
Monthly rebalancing to account for downgrades
Listed ETFs may be consistently allocated across portfolios
ETFs trade intraday on exchange
Trading spreads (bid/offer) are observable and measurable

Pricing and fees are transparent
Customizable trade size makes trading smaller allocations
cost-efficient
iBonds will not be called prior to maturity

ETFs can be sold pro-rata to satisfy cash flows
81
INSIGHT:
SEEKING BEST EXECUTION FOR

SMALLER FIXED INCOME TRADES
Investors seeking the economics of a bond, such as regular income and a
final principal payment for liability matching or bond laddering strategies,
have historically turned to the OTC market. However, best execution may not
be available when sourcing individual bonds in smaller trade sizes.
The potential transaction savings of investing in a diversified bullet maturity
ETF can help preserve portfolio performance that would otherwise be
eroded by high transaction costs.
The unique ability to buy/sell hundreds of bonds through bullet
maturity ETFs at a lower cost relative to the OTC market can make iBonds a
worthy alternative for investors trading smaller blocks.
CHAPTER 2.3 | 82
EXECUTION COSTS
DEPENDENT ON TRADE SIZE
100
AVERAGE REALIZED BID/OFFER SPREAD
90
95
On average, small trades were more

than 4X more costly than large trades
when purchasing the same issues
80
69
70
60
46
50
40
30
21
20
10
13
6
15
0
BONDS MATURING
IN 2016
TRADES OVER $1M
BONDS MATURING
IN 2018
BONDS MATURING
IN 2020
BONDS MATURING
IN 2023
TRADES UNDER $1M
Source: BlackRock, TRACE, and Bloomberg. Average realized bid/offer spreads based on investment
grade corporate bond trades tracked by TRACE between 1/1/14 and 5/31/14.
83
ETF SPOTLIGHT:
APPLICATIONS FOR iBONDS

iShares offers 16 iBonds ETFs that allow investors to:
Target points on the yield curve
Shift duration in a changing rate environment
Build bond ladders
Implement a liability-driven investment framework
IBDD
IBCE
IBDC
IBCD
IBDH
IBMI
IBDB
IBCC
IBDA
IBMG
IBDF
IBCB
IBMH
IBMF
IBME
IBMD
DURATION
CORPORATE
CHAPTER 2.3 | 84
CORPORATE EX-FINANCIALS
MUNICIPALS
BUILD OR ENHANCE BOND LADDERS

iBonds bring trading and operational efficiency to bond laddering. Investors
can easily access a diversified portfolio of investment grade corporate or
municipal bonds in an exchange-listed security. By selecting an iBonds ETF
to fit a specific maturity rung in a ladder, an investor can quickly allocate the
same security across hundreds of portfolios without searching in the OTC
market. If existing bonds in a ladder are called away, they can be replaced with
a broadly diversified iBonds ETF.
BUILD LADDERED PORTFOLIOS
STRENGTHEN BOND LADDERS
iBONDS SEP 2019

AMT-FREE MUNI BOND ETF
2019 BONDS
iBONDS SEP 2018

iBONDS MAR 2018

CORPORATE ETF
2018 BONDS:
CALLED
iBONDS SEP 2017

2017 BONDS
iBONDS SEP 2016

2016 BONDS
iBONDS SEP 2015

2015 BONDS
5 ETFs = exposure
to hundreds
of individual bonds
Replace single issues

with a diversified
portfolio using an ETF
85
CASE STUDY:
LIABILITY-DRIVEN INVESTING
WITH BULLET MATURITY ETFs
The CIO of a corporate pension adopted a liability-driven investment
(LDI) strategy in order to meet regular pension benefit obligations. The
CIO chose to use iBonds ETFs because they are designed to deliver
the economics of a held-to-maturity bond with the liquidity and trading
efficiency of an ETF.
The ability to view the expected yield to maturity at time of purchase
allowed the CIO to precisely match the plans expected beneficiary
payment obligations. Additionally, because iBonds trade on an exchange,
the CIO was able to execute trades of all sizes quickly and efficiently.
The CIO reinvested each of the iBonds monthly distributions by
purchasing more shares of the respective ETF. This avoided the common
problem of trading odd-lot-sized positions or being forced to hold excess
frictional cash when individual bonds make coupon payments or are
called away. Additionally, iBonds are professionally managed and any
underlying bonds that are downgraded are removed from the ETF on a
monthly basis, requiring less operational oversight.
Utilizing iBonds ETFs, the client implemented and maintained a
complex LDI framework consisting of broadly diversified,
investment grade corporate bonds in an operationally efficient
and cost-effective manner.
CHAPTER 2.3 | 86
LIABILITY MATCHING WITH iBONDS ETFs
iBonds Mar 2016

Corporate ETF (IBDA)
Matures
2016
Beneficiary
Payment
iBonds Mar 2018

Corporate ETF (IBDB)
Matures
2018
Beneficiary
Payment
iBonds Mar 2020

Corporate ETF (IBDC)
Matures
2020
Beneficiary
Payment
87
ETF SPOTLIGHT:
MECHANICS OF iBONDS
iBonds are designed to provide a yield to maturity (YTM) profile comparable
to that of the underlying bond portfolio. While individual corporate bonds pay
interest semi-annually, iBonds provide monthly income payments and seek
to preserve an investors anticipated YTM through a combination of monthly
distributions and a final end-date distribution.
Unlike a bond, iBonds have neither a stated coupon nor a fixed par value
due at maturity. If monthly distributions decline, the final distribution would
be expected to help preserve the investors anticipated YTM. While the
composition of cash flows may change, the yield that investors realize should
be equivalent to their estimated acquisition yield (i.e., the yield at the time of
purchase based upon the ETFs market price).1
Each iBonds ETF will terminate on its expiration date in the year of the fund
name. As the underlying bond holdings mature in the final 12 months, the
portfolio will gradually transition to cash and cash equivalents. After all the
bonds in the portfolio mature, the ETF will delist from the exchange and make
a final distribution to shareholders.
The regular income and final distribution payment of an iBonds ETF provide a
similar experience to owning an individual bond.2
CHAPTER 2.3 | 88
iBONDS CASH FLOW EXAMPLE3

$100.50
$9.50
$-100
~ 2%
INVESTOR
YIELD TO
MATURITY
INDIVIDUAL BOND CASH FLOW EXAMPLE3

$100
$10
$-100
1. The ultimate realized yield to maturity would be impacted by the ETF price at the time of purchase,
fund expenses, tracking error, credit events, and reinvestment of maturing proceeds through the end
of the funds life. 2. An investment in the Fund(s) is not guaranteed, and an investor may experience
losses, including near or at the termination date. The Funds do not seek to return any predetermined
amount. 3. A schematic illustration representing the monthly distributions and final distribution of
iShares iBonds and the semi-annual coupon payments and maturity distribution of corporate bonds.
89
ETF SPOTLIGHT:
ESTIMATING THE YIELD TO MATURITY OF iBONDS

ESTIMATED NET ACQUISITION YIELD CALCULATOR
Unlike a traditional ETF or mutual fund, the defined maturity profile
of iBonds allows investors to estimate their expected annualized total
return for the life of the investment.1
The iShares Estimated Net Acquisition Yield Calculator provides
estimates of the total return of an iBonds ETF assuming it is held
to maturity.
The tool to calculate the net acquisition yield is located on each

iBonds product page at iShares.com.
Input potential purchase price to see the estimated breakdown of

total net acquisition yield over the life of the holding.
The calculator takes the funds YTM, adjusts for any premium or
discount relative to the NAV, and then subtracts the fund expense ratio
to provide an estimated net acquisition yield.
1.Subject to risks assumed when investing in the fund or underlying securities.
CHAPTER 2.3 | 90
ESTIMATED NET
ACQUISITION
YIELD CALCULATOR
Calculate the Estimated Net Acquisition Yield
(ENA Yield) based on the projected market purchase
price that you input. This estimate also reflects the
deduction of the expense ratio (10 basis points).
The NAV (as of 8/21/14) used in the calculation is
$105.35. The value you enter should correspond
to your estimated market purchase price as of
8/21/14.
Please note that the results generated by the
Estimated Net Acquisition Yield Calculator are for
illustrative purposes only and are not representative
of any specific investment outcome.
The Average Yield to Maturity shown is the
weighted average yield to maturity of the individual
bonds. During the final year of the funds life, the
underlying bonds will mature and the proceeds will
be held in cash equivalents until the liquidation of
the fund. The investors total realized yield to fund
maturity will be influenced by the yield earned on
these proceeds during the final year. If the future
yield on cash equivalents is lower than the current
Average Yield to Maturity for the portfolios bonds,
the realized yield to fund maturity is also expected
to be lower and vice versa.
Enter Price $
101.59
CALCULATE
Average Yield to Maturity

+ Price Adjustment
= Price Adjusted Yield
3.19%
+0.74%
3.93%
- Expense ratio (10 basis points)
-0.10%
Estimated Net Acquisition Yield
3.83%
91
The desire for yield and enhanced diversification has

led institutions to increasingly consider non-US fixed
income investments. ETFs break down the barriers
investors face when buying international bonds.
Brett Olson
HEAD OF BLACKROCKS iSHARES EMEA FIXED INCOME
2.4
INTRODUCTION:
UNLOCK GLOBAL INVESTMENT OPPORTUNITIES

Given the backdrop of historically low US interest rates, international
debt may offer an attractive investment opportunity. Adding international
exposure has the potential to increase yield without assuming high levels of
duration, which would be associated with similar-yielding domestic bonds.
The inclusion of uncorrelated assets may reduce volatility and increase
return potential for the overall portfolio.
However, investing internationally is rarely straightforward. Investors often
face difficulties sourcing bonds, such as:
Establishing local custodial or brokerage relationships
Understanding and meeting requirements for owning

local currency bonds
Navigating the restrictive tax policies of many countries
Because of these challenges, investors are increasingly turning to ETFs to

gain exposure to international or emerging market debt. Fixed income ETFs
allow investors to access difficult-to-reach areas of the global debt market
through diversified and liquid vehicles.
CHAPTER 2.4 | 94
EXPOSURE
CHARACTERISTICS
INTERNATIONAL
DEVELOPED
Potentially higher yields relative to US bonds

Low correlation to US bonds
Diversification across countries and sectors
EMERGING MARKETS
Potentially higher yields relative to developed markets

Low correlation to US bonds
Higher exposure to credit risk
Local currency exposure may increase returns, but adds volatility
Increased price appreciation potential due to improving credit quality
of emerging market countries
95
ETF SPOTLIGHT:
DIVERSIFY WITH A GLOBAL OPPORTUNITY SET

International fixed income often exhibits correlations under 0.50 relative to US
bonds. iShares offers a variety of exposures including US and local currencies,
developed and emerging countries, and government and corporate sectors.
GLOBAL AND INTERNATIONAL DEVELOPED

TICKER
iSHARES ETF FUND NAME
ITIP
iShares International Inflation-Linked Bond ETF
GTIP
iShares Global Inflation-Linked Bond ETF
IGOV
iShares International Treasury Bond ETF
ISHG
iShares 1-3 Year International Treasury Bond ETF
GHYG
iShares Global High Yield Corporate Bond ETF
HYXU
iShares Global ex USD High Yield Corporate Bond ETF
EMERGING MARKETS
TICKER
EMB
iShares J. P. Morgan USD Emerging Markets Bond ETF
LEMB
iShares Emerging Markets Local Currency Bond ETF
CEMB
iShares Emerging Markets Corporate Bond ETF
EMHY
iShares Emerging Markets High Yield Bond ETF
CHAPTER 2.4 | 96
IG/HY
CORRELATION
TO BARCLAYS
AGGREGATE
IG
0.15
Local/USD
IG
0.44
Local
Local
IG
0.32
DM
Local
Local
IG
0.16
DM
Local/USD
Local/USD
HY
-0.02
DM
Local
Local
HY
-0.03
DM/EM
CURRENCY
EXPOSURE
RATE
EXPOSURE
GOVERNMENT
CORPORATE
IG/HY
CORRELATION
TO BARCLAYS
AGGREGATE
EM
USD
US
Both
0.26
EM
Local
Local
Both
0.13
EM
USD
US
Both
0.23
EM
USD
US
HY
0.13
DM/EM
CURRENCY
EXPOSURE
RATE
EXPOSURE
GOVERNMENT
Both
Local
Local
Both
Local/USD
DM
CORPORATE
Source: BlackRock, Bloomberg. Weekly correlations to the Barclays US Aggregate Bond Index are from
7/1/096/30/14. Correlation for LEMBs benchmark is calculated since 2/22/11, GTIP as of 12/31/09, and
EMHY as of 12/7/11 because earlier data is not available.
97
ETF SPOTLIGHT:
iSHARES ETFs SIMPLIFY ACCESS

TO EMERGING MARKET DEBT
DESCRIPTION
The investable emerging

market debt universe is $2.8T,
nearly 80% the size of the US
investment grade corporate
bond market.
iShares offers four ETFs to
efficiently access diversified
exposure to emerging
market bonds.
BENCHMARK INDEX
SECTOR
CURRENCY
NUMBER OF COUNTRIES
NUMBER OF HOLDINGS
CREDIT EXPOSURE
S&P FUND CREDIT RATING
INCEPTION DATE
EXPENSE RATIO
AUM ($M)
NAIC RATING
DURATION (YEARS)
CHAPTER 2.4 | 98
EMB
LEMB
CEMB
EMHY
DOLLAR-DENOMINATED
EM DEBT
LOCAL CURRENCY
EM SOVEREIGN
DOLLAR-DENOMINATED
EM CORPORATE
DOLLAR-DENOMINATED
EM HIGH YIELD
J.P. Morgan EMBI

Global Core Index
Barclays Emerging
Markets Broad Local
Currency Bond Index
Morningstar
Emerging Markets
Corporate Bond Index
Morningstar
Emerging Markets
High Yield Bond Index
100% Government
100% Government
100% Corporate
Government
and Corporate
USD
Local
USD
USD
45
21
35
39
258
166
161
284
Investment grade
and high yield
Investment grade
and high yield
Investment grade
and high yield
High yield
BB-f
BBB-f
BB-f
Bf
12/17/2007
10/18/2011
4/17/2012
4/3/2012
0.60%
0.60%
0.60%
0.65%
5,191
608
21
206
7.10
4.20
5.47
5.75
iShares J.P. Morgan

USD Emerging
Markets Bond ETF
iShares Emerging
Markets Local Currency
Bond ETF
iShares Emerging
Markets Corporate
Bond ETF
iShares Emerging
Markets High Yield
Bond ETF
Source: JPMorgan, Morningstar, and Barclays, as of 6/30/14.
99
CASE STUDY:
ENHANCING DIVERSIFICATION AND YIELD

An insurance company sought to add a 10% allocation to emerging
market debt to improve diversification and enhance the yield of a $50M
subsidiary account.
The $5M proposed allocation presented an operational challenge as it would
require buying hundreds of individual bonds across dozens of countries,
some of which had restrictive tax policies and prefunding requirements for
trades in foreign currencies. However, the insurance company found hiring
an investment firm to manage the allocation would be cost-prohibitive.
Consequently, the insurance company purchased $2.5M of iShares
J.P. Morgan USD Emerging Markets Bond ETF (EMB) and $2.5M of iShares
Emerging Markets Local Currency Bond ETF (LEMB). These ETFs provided
immediate diversified exposure to emerging market debt across dozens
of countries.
Another key benefit was the dual exposure to bonds denominated in
US dollars (EMB) and local currencies (LEMB). This provided the insurer
dollar diversification and an additional level of flexibility to adjust
currency exposure.
EMB and LEMB also have NAIC 3 and 2 designations, respectively, assigned
by the National Association of Insurance Companies, which assesses the
credit quality of securities owned by insurers. A fixed income ETF that has
been assigned an NAIC designation can be reported as a bond as opposed
to a common stock, which is the default. This distinction allows for a more
favorable risk-based capital (RBC) treatment.1
CHAPTER 2.4 | 100
The ETFs allowed the insurance company to access difficult-to-source

emerging market debt. The addition of the new asset class resulted in
reduced portfolio volatility and enhanced yield.
SECTOR
CURRENCY
EXPOSURE
# OF
COUNTRIES
DURATION
NAIC
DESIGNATION
iShares J.P. Morgan USD

Emerging Markets Bond ETF
Government
USD
45
7.10
iShares Emerging Markets

Local Currency Bond ETF
Government
Local
21
4.20
TICKER
EMB
LEMB
1. Source: BlackRock, based on NAIC guidance. The NAIC does not endorse or recommend any securities
or products, including iShares ETFs. NAIC designations are issued for specific regulatory purposes and
these designations are not equivalent to credit ratings issued by nationally recognized statistical rating
organizations. NAIC designations are suitable only for NAIC members.
101
CASE STUDY CONTINUED:

ENHANCING DIVERSIFICATION AND YIELD
IMPLEMENTING A 10% ALLOCATION

TO EMERGING MARKET DEBT
AFTER
BEFORE
LOCAL EM DEBT
5%
EM DEBT
5%
AGENCIES
AGENCIES
1%
1%
MBS
23%
CREDIT
47%
TREASURIES
29%
MBS
21%
CREDIT
42%
TREASURIES
26%
The NAIC does not endorse or recommend any securities or products, including iShares ETFs. NAIC
designations are issued for specific regulatory purposes and these designations are not equivalent to
credit ratings issued by nationally recognized statistical rating organizations. NAIC designations are
suitable only for NAIC members. Source for NAIC definitions: NAIC Publicly Traded Securities Listing
Definitions. For further NAIC definitions, please refer to the appendix or www.naic.org for additional
information.
Note: The following indexes were used in the portfolios above: CreditBarclays Capital US Credit Bond Index;
TreasuriesBarclays Capital US Treasury Bond Index; MBSBarclays US MBS Index; EM DebtJPMorgan
EMBI Global Core Index, Barclays Emerging Markets Broad Local Currency Bond Index; AgenciesBarclays
US Agency Bond Index. The example provided is strictly for illustrative purposes only and should not be
construed as investment advice. The scenario is based on a firms specific request and outcomes are unique
based on the firms situation. The information provided here may not be representative of other firms
experiences. Past performance does not guarantee future results.
CHAPTER 2.4 | 102
PORTFOLIO COMPARISON
No EM Bond
Exposure
10% EM Bond
Exposure
3-YEAR
STANDARD DEVIATION
4.31
3.92
5-YEAR
STANDARD DEVIATION
4.67
3.89
2.15%
2.38%
YIELD TO MATURITY
Sources: BlackRock, MPI, as of 6/30/14. Index performance data as of 6/30/14. Index returns are for
illustrative purposes only and do not represent actual iShares Fund performance. Index performance
returns do not reflect management fees, transaction costs, or expenses. Indexes are unmanaged and
one cannot invest directly in an index. Past performance does not guarantee future results.
103
ETF MECHANICS
Portfolio managers must balance art and science in

navigating the bond markets to ensure ETFs track
their benchmarks.
Karen Schenone, CFA
CREATION/REDEMPTION PROCESS
OF FIXED INCOME ETFs
The supply of fixed income ETF shares accessible on an equity
exchange is determined by a unique mechanism called the
creation/redemption process.
Broker-dealers who create or redeem shares of ETFs are known as
authorized participants (APs). Authorized participants generally work
with both investors and ETF providers to maintain liquidity in the market.
THE CREATION/REDEMPTION PROCESS IN ACTION:
INVESTOR/BUYER
ETF
shares
Investor purchases a fixed income

ETF listed on an exchange
CHAPTER 3 | 106
TWO SOURCES OF
LIQUIDITY TO FILL ORDER
Cash
MARKET MAKER/AUTHORIZED
PARTICIPANT
BEHIND THE SCENES
Behind the scenes, an authorized participant

(AP) can fill or partially fill the order with:
When strong buying demand occurs on the exchange, an AP can fill

the order with available inventory, often resulting in tighter bid/offer
spreads for the investor versus buying the individual bonds in the
respective index. If ETF inventory becomes depleted, APs will purchase
the underlying bonds that make up the ETF in the OTC market and
deliver these securities in-kind to BlackRock, which will then create
new ETF shares. The AP will then deliver the shares to fill outstanding
client orders.
The ability for investors to utilize an ETFs on-exchange liquidity can
result in much tighter bid/offer spreads than would generally be
possible through the OTC bond market.
ON-EXCHANGE
ETF LIQUIDITY
OTC BOND MARKET

LIQUIDITY
In-kind delivery
of underlying
portfolio basket
BLACKROCK
1. Existing ETF liquidity on the exchange market, and/or

2. Gathering the bonds that make up the ETF in the OTC bond market and transferring
them in-kind to BlackRock which creates new ETF shares and delivers to AP.
107
UNDERSTANDING FIXED INCOME ETF

PRICE BEHAVIOR
The price at which an ETF trades is primarily a function of the value
of the underlying securities in the portfolio. It is also influenced by
market flows, liquidity, and market volatility.
The net asset value (NAV) of an ETF is equal to the total fund assets
divided by the total shares outstanding. When an ETF trades at a
price above the NAV, it is said to be trading at a premium; when the
ETF is trading below the NAV, it is said to be trading at a discount.
The NAV of a fixed income ETF is calculated using the bid side prices
for the underlying bonds in the ETF as of the end of the day. The
market price of the ETF will generally fluctuate between the bid and
offer price of the underlying bonds as the fund trades through the
day. Under most market conditions, a fixed income ETF will trade at
a premium to (above) this bid-side NAV to reflect a market clearing
price for the fund.
During periods of strong demand for an ETF, the price is bid up in the
market. If the ETF price is sufficiently higher than the value of the
underlying securities held within the ETF, an arbitrage opportunity
may exist. Authorized participants could purchase the underlying
fixed income securities, deliver them to the ETF provider in
exchange for new ETF shares (i.e., create new shares), and then sell
the newly created ETF shares in the market for a small profit.
The creation of new ETF shares helps balance supply and demand,
which brings the NAV and the ETF price back into alignment.
CHAPTER 3 | 108
ETF PRICING IN A BALANCED MARKET
ETF PREMIUM TO NAV
Portfolio bid (NAV)
Portfolio offer
ETF BID/OFFER (LIQUIDITY LAYER)
ETF PRICING WITH STRONG BUY DEMAND
ETF PREMIUM TO NAV
BUYING PRESSURE
Portfolio bid (NAV)
Portfolio midmarket
ETF BID/OFFER (LIQUIDITY LAYER)
For illustrative purposes only. Although market makers will generally take advantage of differences
between the NAV and the trading price of shares of ETFs through arbitrage opportunities, there is no
guarantee that they will do so.
109
UNDERSTANDING DIFFERENT
MEASURES OF YIELD
The four most common measures of fixed income ETF yield:
MEASURE OF YIELD
30-DAY SEC YIELD
YIELD TO MATURITY (YTM)
DISTRIBUTION YIELD
12-MONTH YIELD
CHAPTER 3 | 110
A measure developed by the SEC to provide a standardized yield

calculation among funds. This yield includes the most recent 30 days of
interest income-less fund fees and expenses expressed as an annualized
percentage of the funds most recent net asset value (NAV).
The discount rate that equates the present value of a bonds cash
flows with its market price (including accrued interest). An ETFs yield
to maturity is calculated by taking the weighted average of the funds
underlying holding YTMs, divided by the funds NAV. The measure does
not include fees and expenses.
The annual yield an investor would receive if the most recent fund
distribution and current price stayed the same going forward. It is
calculated by annualizing the most recent distribution and dividing by
the funds NAV.
The yield an investor would have received if they had held the fund
over the last 12 months based on the current NAV. The measure is
calculated by summing any income distributions over the past year
and dividing by the sum of the most recent NAV and any capital gain
distributions made over the period.
111
COMPARING FIXED INCOME

QUOTE CONVENTIONS
Bond market participants quote
securities in a variety of ways,
including using dollar prices,
yields, and spreads. Fixed
income ETFs are exchange
traded and quoted in price terms
like equity securities.
The following table provides a
framework for the interpretation
and comparison of bond and
fixed income ETF quotes.
INSTRUMENT
FIXED INCOME ETFs
INVESTMENT
GRADE BONDS
HIGH YIELD BONDS
CREDIT DEFAULT SWAPS
(CDX)
TREASURY BONDS
TREASURY BILLS
FLOATING RATE NOTES
EMERGING MARKET DEBT
(USD)
CHAPTER 3 | 112
QUOTE
CONVENTION
UNITS
QUOTE EXAMPLE
(BID/OFFER)
Price
Dollars
$114.76/$114.77
Spread (over US
Treasuries)
Basis points
137/131
Price, but may trade

on spread
Dollars
$91.00/$92.00
IG = Cost for protection

HY = Cost for protection
IG = Basis points
HY = Dollar and basis point spread
IG = 65.875/65.250
HY = $107/$107.125 or
317.6/316.3
Price in 1/32 increments
Ticks =1/32nd of a point

+ = 1/64th of a point
97-23/97-23+
Yield (known as
discount yield)
Percentage points
0.06/0.05
Spread (known as
discount margin)
Basis points
62/58
Spread (over US
Treasuries) or price
Basis points and dollars
120/117 or $99.25/$99.75
113
iSHARES FIXED INCOME PORTFOLIO

MANAGEMENT PROCESS
In most instances, the primary goal of an ETF is to track the funds
designated benchmark. A common misconception is that all ETFs are
managed by simply holding each security in the respective benchmark index.
In reality, holding every security in the benchmark is nearly impossible in
less liquid, over-the-counter bond markets. To solve this issue, many fixed
income ETFs employ some form of optimization or sampling.
iShares portfolio managers aim to construct ETF portfolios that are
diversified while also minimizing sources of performance drag, such as
transaction costs. The index portfolio management process optimizes
marginal contribution to tracking error with transaction costs.
CHAPTER 3 | 114
BALANCING TRACKING ERROR AND COSTS
TRANSACTION
COSTS
BASIS POINTS
TRACKING
ERROR
OPTIMIZED PORTFOLIO
NUMBER OF ISSUES
Source: BlackRock. For illustrative purpose only.
115
iSHARES FIXED INCOME PORTFOLIO

MANAGEMENT PROCESS CONTINUED
When full replication is not practical, portfolio managers may employ a
stratified sampling strategy. This approach seeks to deliver index risk and
return characteristics by holding a subset of securities.
Each index is first divided into groups of bonds, called cells, with specific
risk factors such as maturity, credit rating, or sector. Second, representative
bonds from each cell are selected to balance liquidity, transaction costs,
and overall portfolio tax efficiency.
Most fixed income indices are rebalanced monthly to take into account the
cash flows inherent in fixed income securities.
Portfolio managers receive the forward index from the index provider a few
days prior to month-end, allowing them to adjust portfolios to match the
new index weights. Since the portfolios are sampled, the funds are
not forced sellers or buyers of securities during the rebalancing process.
The portfolio managers have discretion as to which bonds to include in
the funds.
Fixed income indices are rebalanced monthly to account for:
New issuance
Maturities
Bonds no longer in the
maturity range
CHAPTER 3 | 116
Calls or refinancing
MBS paydowns
Coupon payments
Defaults, downgrades, or upgrades
SAMPLING AN INDEX
MATURITY
SECTOR
CELL
1 BBB RATED
2 INDUSTRIAL
3 7-10 YEARS
MATURITY
The diagram above demonstrates stratified sampling for an

investment grade credit ETF.
The portfolio management process is ongoing and must account
for changes in index composition and asset levels in the funds.
117
TRADING AND ANALYSIS TOOLS
Third-party data providers are responding to investor

demand by introducing new tools to analyze fixed income
ETFs at the individual holding and total portfolio level.
Joseph Cavatoni
HEAD OF BLACKROCKS iSHARES AMERICAS CAPITAL MARKETS
BLOOMBERG YAS FUNCTION
The Bloomberg Yield and Spread Analysis (YAS) tool enables users to analyze
yield spread and interest rate sensitivity. Originally developed for individual
bonds, YAS has been enhanced for analyzing select iShares ETFs.
Using YAS, Bloomberg users can:
Analyze a fixed income ETF the same way single bond instruments
are analyzed
View a last-traded ETF price, converted to yield
Perform traditional yield analysis vs. a selected benchmark
Input custom parameters to analyze the relationship between price,

yield, and spread
Measure risk based on custom inputs to determine if an ETF meets

pre-determined investment criteria
CHAPTER 4 | 120
iSHARES FIXED INCOME ETFs AVAILABLE FOR YAS ANALYSIS

TREASURY
TICKER
CREDIT
iSHARES ETF
TICKER
iSHARES ETF
SHV
CRED
iShares Core U.S. Credit Bond ETF
TIP
CLY
STIP
iShares 0-5 Year TIPS Bond ETF
GVI
SHY
iShares Intermediate
Government/Credit Bond ETF
IEI
LQD
IEF
iShares iBoxx $ Investment Grade

Corporate Bond ETF
TLH
QLTA
iShares Aaa - A Rated Corporate

Bond ETF
TLT
MONY
iShares Financials Sector Bond ETF
GOVT
iShares Core U.S. Treasury Bond ETF
ENGN
iShares Industrials Sector Bond ETF
AGZ
iShares Agency Bond ETF
CSJ
CIU
HIGH YIELD
TICKER
HYG
iSHARES ETF
iShares iBoxx $ High Yield

Corporate Bond ETF
BULLET MATURITY
TICKER
MUNICIPAL BONDS
TICKER
iSHARES ETF
MUB
iShares National AMT-Free Municipal

Bond ETF
CMF
iShares California AMT-Free Municipal

Bond ETF
iSHARES ETF
IBCB
iBonds Mar 2016

Corporate ex-Financials Term ETF
IBCC
iBonds Mar 2018

IBCD
iBonds Mar 2020

IBCE
iBonds Mar 2023

EMERGING MARKETS
TICKER
EMB
iSHARES ETF
iShares J.P. Morgan USD Emerging

Markets Bond ETF
121
ANALYZING AN iSHARES FIXED INCOME ETF

WITH YAS FUNCTION
Input iShares ticker:
HYG
iShares Ticker
EQUITY
Bloomberg
Command
YAS
Bloomberg
Function
GO
Enter
The ETFs last-traded price is displayed, with corresponding yield,

spread, and risk characteristics.
Modify spread, price, or yield fields to identify target ETF trading

price, then press <GO>.
CHAPTER 4 | 122
For further YAS customization, modify:

Maturity year, ticker, and coupon of the benchmark bond using the
vs. field
Curve from which the benchmark bond is selected using the
G-Sprd field
Swap curve from which the benchmark is selected using the
I-Sprd field
CDS spread using the
Basis field
Screenshot for illustrative purposes only.
123
REPLICATING PORTFOLIOS WITH iSHARES ETFs
Bloomberg allows users to analyze an existing portfolio and replicate

a similar portfolio using iShares ETFs.
LOAD CASH BOND PORTFOLIO:

Users may load their portfolio either manually or by accessing 13F filings.
PORTFOLIO REPLICATION WITH ETFs:

Once the portfolio is loaded, an optimization process can be run
that replicates the cash bond portfolio with a portfolio of ETFs.
COMPARING CASH BOND AND ETF PORTFOLIO:

Using the <PORT> command, the two portfolios can be analyzed
across a series of attributes, including:
Total return comparison

Tracking error
Scenario analysis
Key characteristics
Liquidity risk
(days to liquidate position)
Key rate exposure analysis

VAR analysis
CONTACT YOUR iSHARES RELATIONSHIP MANAGER FOR A DEMONSTRATION
CHAPTER 4 | 124
1 LOAD CASH BOND PORTFOLIO
2 PORTFOLIO REPLICATION WITH ETFs
3 COMPARING CASH BOND AND ETF PORTFOLIOS
Sample screenshots are for illustrative purposes only. Data on any sample screenshot is as of a certain
date, and there is no representation that it is current, accurate, or complete, and it should not be relied
on as such.
125
ADDITIONAL ANALYSIS TOOLS
iShares Fixed Income ETFs are available on The Yield Book

analytics system.
EVALUATE ETFs AND THEIR COMPONENTS:
Access comprehensive bond ETF holdings and their corresponding

indicative pricing, historical pricing, and yield curves
Determine risk characteristics, including effective duration,

effective convexity, partial durations, and OAS
UNDERSTAND THE IMPACT OF USING ETFs:
Assess your combined

portfolios sector-level exposures
to industry, rating, and geography
Perform total return / horizon

analysis on ETF and portfolio
holdings, assuming various
interest rate, spread, volatility,
foreign exchange, and
prepayment scenarios
The Yield Book is a registered service mark of The Yield Book Inc.
and is registered in the US and other countries.
CHAPTER 4 | 126
BondEdge offers a look through analysis feature of select iShares ETFs

at the total portfolio holding and underlying holdings level.
Incorporates fixed income ETFs into portfolio analytics reporting, total

return simulations, and what-if analyses
Proactively measures how transactions in ETFs affect overall portfolio

risk levels and allocations
Generates ongoing, periodic risk reports of ETF holdings combined

with a broader bond portfolio
127
iSHARES TRADING EXECUTION GUIDANCE
The iShares Capital Markets team consists of 30 professionals who help

our clients to better navigate the capital markets. The team provides
dedicated trading desk coverage and offers in-house pre-trading analytics
for clients.
In addition, the team partners with market makers, authorized
participants, and exchanges to help clients tap into greater liquidity,
achieve tighter spreads, and seek best execution.
CHAPTER 4 | 128
PRE-TRADE GUIDANCE
Uses proprietary models
to deliver ETF trade
guidance to clients
MARKET
PARTICIPANT
RELATIONS
Leverages relationships
with broker/dealers,
market makers, and
exchanges to help clients
achieve best execution
iSHARES
CAPITAL
MARKETS
TEAM
MARKET QUALITY
SURVEILLANCE
Monitors the market quality
of iShares ETFs throughout
the trading day
BASKET OPTIMIZATION
Manages the optimization
process to design custom
baskets in line with
constraints of the portfolio
129
iSHARES INSTITUTIONAL FIXED INCOME CONTACTS

Matthew Tucker, CFA
HEAD OF BLACKROCKS iSHARES FIXED INCOME STRATEGY
PHONE: 415-670-2123
EMAIL: MATT.TUCKER@BLACKROCK.COM
Stephen Laipply
PHONE: 415-670-2324
EMAIL: STEVE.LAIPPLY@BLACKROCK.COM
Mark Miller
HEAD OF BLACKROCKS iSHARES U.S. FIXED INCOME DISTRIBUTION
PHONE: 212-810-3194
EMAIL: MARK.MILLER@BLACKROCK.COM
Raman Suri
HEAD OF BLACKROCKS iSHARES INSURANCE CLIENT GROUP
PHONE: 415-670-7601
EMAIL: RAMAN.SURI@BLACKROCK.COM
Brett Olson
HEAD OF BLACKROCKS iSHARES EMEA FIXED INCOME
PHONE: + 44 207 743 4221
EMAIL: BRETT.OLSON@BLACKROCK.COM
ADDITIONAL RESOURCES | 130
WHITEPAPERS
A series of papers that explore ETF topics,
such as performance in stressed markets,
comparisons of CDX and TRS, trading behavior,
and premium and discounts
Examples of fixed income ETFs strategies

that institutional investors are employing in
their portfolios
FIXED INCOME MARKET OUTLOOKS

Monthly fixed income market outlook and
conference call with Rick Rieder, BlackRocks
Chief Investment Officer of Fundamental
Fixed Income
FIXED INCOME MARKET STRATEGY

In-depth reports on global fixed income markets
from Jeffrey Rosenberg, BlackRocks Chief
Investment Strategist for Fixed Income
Additional Resources at iShares.com/BIG
CASE STUDIES
iSHARES PRODUCT GUIDE

BROAD MARKET
TICKER
BOND FUND NAME
AGG
IUSB
iShares Core Total USD Bond Market ETF
BYLD
iShares Yield Optimized Bond ETF
TREASURY
TICKER
BOND FUND NAME
AGZ
STIP
TIP
TFLO
iShares Treasury Floating Rate Bond ETF
SHV
SHY
IEI
IEF
TLH
TLT
GOVT
iShares Core U.S. Treasury Bond ETF
IGOV
ISHG
SHORT DURATION
PRODUCT GUIDE | 132
TICKER
BOND FUND NAME
ISTB
iShares Core Short-Term USD Bond ETF
ICSH
iShares Liquidity Income ETF
NEAR
iShares Short Maturity Bond ETF
SLQD
iShares 0-5 Year Investment Grade Corporate Bond ETF
LQDH
iShares Interest Rate Hedged Corporate Bond ETF
SHYG
iShares 0-5 Year High Yield Corporate Bond ETF
HYGH
iShares Interest Rate Hedged High Yield Bond ETF
SHV
SHY
STIP
CSJ
FLOT
TFLO
iShares Treasury Floating Rate Bond ETF
ISHG
SUB
iShares Short-Term National AMT-Free Muni Bond ETF
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
09/22/03
$17,600.2
$106.1
5.18
Af
06/10/14
15
$25.2
$0.4
5.07
BB+f
04/22/14
28
$7.6
$0.1
4.69
BBf
INCEPTION DATE
MGMT FEE (BPS)*
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
11/05/08
20
$354.6
$1.1
3.65
AAf
12/01/10
10
$507.2
$5.5
2.38
AAf
12/04/03
20
$13,180.8
$60.8
7.69
AAf
02/03/14
$5.0
$0.1
0.01
AAf
01/05/07
15
$2,050.7
$31.3
0.39
AAAf
07/22/02
15
$7,931.3
$55.2
1.89
AAf
01/05/07
15
$2,984.0
$28.0
4.56
AAf
07/22/02
15
$6,239.1
$271.6
7.62
AAf
01/05/07
15
$297.4
$4.0
9.77
AAf
07/22/02
15
$3,788.1
$876.2
16.87
AAf
02/14/12
15
$161.1
$1.9
5.08
AAf
01/21/09
35
$568.5
$5.0
7.01
A-f
01/21/09
35
$182.7
$1.0
1.83
A-f
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
MGMT FEE (BPS)*
10/18/12
12
$150.2
$1.1
2.71
BBB-f
12/11/13
18
$25.0
$ < 0.1
0.33
A-f
09/25/13
25
$296.4
$3.2
0.88
BBB+f
10/15/13
15
$15.1
$0.3
2.52
BBB+f
05/27/14
25
$10.0
$ < 0.1
0.12
BBB+f
10/15/13
30
$76.1
$0.7
2.18
B-f
05/27/14
55
$10.1
$0.1
0.49
B-f
01/05/07
15
$2,050.7
$31.3
0.39
AAAf
07/22/02
15
$7,931.3
$55.2
1.89
AAf
12/01/10
10
$507.2
$5.5
2.38
AAf
01/05/07
20
$11,869.7
$126.5
1.92
A-f
06/14/11
20
$3,568.4
$22.3
0.14
Af
02/03/14
$5.0
$0.1
0.01
AAf
01/21/09
35
$182.7
$1.0
1.83
A-f
11/05/08
25
$876.2
$3.9
2.04
A+f
PRODUCT GUIDE
INCEPTION DATE

BULLET MATURITY
iBONDS CORPORATE
TICKER
BOND FUND NAME
IBDA
iShares iBonds Mar 2016 Corporate ETF
IBDF
iShares iBonds Dec 2016 Corporate ETF
IBDB
IBDH
iShares iBonds Dec 2018 Corporate ETF
IBDC
IBDD
iBONDS CORPORATE EX-FINANCIALS

TICKER
BOND FUND NAME
IBCB
iShares iBonds Mar 2016 Corporate ex-Financials ETF
IBCC
IBCD
IBCE
iBONDS AMT-FREE MUNI BOND

TICKER
BOND FUND NAME
IBMD
iShares iBonds Sep 2015 AMT-Free Muni Bond ETF
IBME
IBMF
IBMG
IBMH
IBMI
iShares iBonds Sep 2020 AMT-Free Muni Bond ETF1
GOVERNMENT/CREDIT
PRODUCT GUIDE | 134
TICKER
BOND FUND NAME
ILTB
iShares Core Long-Term USD Bond ETF
AGZ
GBF
iShares Government/Credit Bond ETF
GVI
iShares Intermediate Government/Credit Bond ETF
MGMT FEE (BPS)*
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
07/09/13
10
$30.3
$0.3
1.27
BBB+f
05/28/14
10
$10.0
$ < 0.1
1.87
BBB+f
07/09/13
10
$56.6
$0.3
3.07
BBB+f
05/28/14
10
$10.0
$ < 0.1
3.57
BBB+f
07/09/13
10
$20.9
$0.1
4.51
BBB+f
07/09/13
10
$15.8
$0.1
7.04
BBB+f
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
04/17/13
10
$34.9
$0.2
1.28
A-f
04/17/13
10
$163.3
$0.2
3.08
A-f
04/17/13
10
$49.2
$0.2
4.57
A-f
04/17/13
10
$48.0
$0.1
7.16
A-f
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
01/07/10
18
$106.0
$0.6
0.99
A+f
01/07/10
18
$123.1
$0.6
1.94
A+f
01/07/10
18
$135.2
$0.6
2.82
A+f
03/19/13
18
$61.2
$0.3
3.66
A+f
02/04/14
18
$15.1
$0.3
4.49
A+f
08/12/14
18
$2.5
$0.1
4.49
A+f
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
12/08/09
12
$45.6
$0.6
13.18
BB+f
11/05/08
20
$354.6
$1.1
3.65
AAf
01/05/07
20
$112.9
$1.7
5.71
A-f
01/05/07
20
$1,357.2
$6.5
3.83
Af
1. iShares iBonds Sep 2020 AMT-Free Muni Bond ETF listed on 8/14/14. Data displayed for the ETF is as
of its listing date.
PRODUCT GUIDE
INCEPTION DATE

CREDIT
TICKER
BOND FUND NAME
LQD
SLQD
iShares 0-5 Year Investment Grade Corporate Bond ETF
LQDH
iShares Interest Rate Hedged Corporate Bond ETF
CSJ
FLOT
CRED
iShares Core U.S. Credit Bond ETF
CIU
CLY
QLTA
iShares Aaa - A Rated Corporate Bond ETF
QLTB
iShares Baa - Ba Rated Corporate Bond ETF
QLTC
iShares B - Ca Rated Corporate Bond ETF
AMPS
iShares Utilities Bond ETF
ENGN
iShares Industrials Bond ETF
MONY
iShares Financials Bond ETF
HIGH YIELD
TICKER
BOND FUND NAME
HYG
SHYG
iShares 0-5 Year High Yield Corporate Bond ETF
HYGH
iShares Interest Rate Hedged High Yield Bond ETF
EMHY
GHYG
HYXU
INTERNATIONAL/GLOBAL
PRODUCT GUIDE | 136
TICKER
BOND FUND NAME
ITIP
iShares International Inflation-Linked Bond ETF
GTIP
iShares Global Inflation-Linked Bond ETF
IGOV
ISHG
GHYG
HYXU
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
07/22/02
15
$17,804.1
$111.7
7.79
BBB+f
10/15/13
15
$15.1
$0.3
2.52
BBB+f
05/27/14
25
$10.0
$ < 0.1
0.12
BBB+f
01/05/07
20
$11,869.7
$126.5
1.92
A-f
06/14/11
20
$3,568.4
$22.3
0.14
Af
01/05/07
15
$779.9
$2.0
6.72
BBB+f
01/05/07
20
$5,877.0
$28.3
4.24
BBB+f
12/08/09
20
$500.3
$7.0
12.73
BBB+f
02/14/12
15
$426.9
$1.7
6.48
A-f
04/24/12
30
$21.3
$0.3
6.57
BBB-f
04/24/12
55
$21.4
$0.1
3.56
B-f
02/14/12
30
$10.1
$0.2
8.98
BBBf
02/14/12
30
$10.1
$0.2
7.31
BBB+f
02/14/12
30
$10.6
$0.2
5.42
BBB+f
INCEPTION DATE
MGMT FEE (BPS)*
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
04/04/07
50
$13,727.1
$252.1
3.91
B-f
10/15/13
30
$76.1
$0.7
2.18
B-f
05/27/14
55
$10.1
$0.1
0.49
B-f
04/03/12
65
$206.1
$1.0
5.75
Bf
04/03/12
40
$98.3
$0.6
3.73
B-f
04/03/12
40
$199.8
$1.6
3.21
Bf
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
MGMT FEE (BPS)*
05/18/11
40
$122.9
$0.7
0.00
A-f
05/18/11
40
$26.4
$0.3
0.00
Af
01/21/09
35
$568.5
$5.0
7.01
A-f
01/21/09
35
$182.7
$1.0
1.83
A-f
04/03/12
40
$98.3
$0.6
3.73
B-f
04/03/12
40
$199.8
$1.6
3.21
Bf
PRODUCT GUIDE
INCEPTION DATE

EMERGING MARKETS
TICKER
BOND FUND NAME
EMB
LEMB
iShares Emerging Markets Local Currency Bond ETF
EMHY
CEMB
iShares Emerging Markets Corporate Bond ETF
MUNICIPAL BOND
TICKER
BOND FUND NAME
MUB
CMF
iShares California AMT-Free Muni Bond ETF
NYF
iShares New York AMT-Free Muni Bond ETF
SUB
iShares Short-Term National AMT-Free Muni Bond ETF
IBMD
IBME
IBMF
IBMG
IBMH
IBMI
iShares iBonds Sep 2020 AMT-Free Muni Bond ETF1
MORTGAGE BACKED
TICKER
BOND FUND NAME
MBB
iShares MBS ETF
CMBS
iShares CMBS ETF
GNMA
iShares Core GNMA Bond ETF
1. iShares iBonds Sep 2020 AMT-Free Muni Bond ETF listed on 8/14/14.
Data displayed for the ETF is as of its listing date.
PRODUCT GUIDE | 138
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
12/17/07
60
$5,191.3
$111.8
7.10
BB-f
10/18/11
60
$607.5
$1.5
4.20
BBB-f
04/03/12
65
$206.1
$1.0
5.75
Bf
04/17/12
60
$20.8
$0.1
5.47
BB-f
INCEPTION DATE
MGMT FEE (BPS)*
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
09/07/07
25
$3,315.9
$19.3
6.13
Af
10/04/07
25
$277.1
$1.2
6.54
Af
10/04/07
25
$137.1
$0.6
6.02
A+f
11/05/08
25
$876.2
$3.9
2.04
A+f
01/07/10
18
$106.0
$0.6
0.99
A+f
01/07/10
18
$123.1
$0.6
1.94
A+f
01/07/10
18
$135.2
$0.6
2.82
A+f
03/19/13
18
$61.2
$0.3
3.66
A+f
02/04/14
18
$15.1
$0.3
4.49
A+f
08/12/14
18
$2.5
$0.1
5.19
A+f
AUM ($M)
ETF ADV ($M)
Effective Duration
S&P Fund Rating
NAIC Des.
INCEPTION DATE
MGMT FEE (BPS)*
MGMT FEE (BPS)*
03/13/07
27
$5,878.1
$44.2
4.10
AAf
02/14/12
25
$87.6
$0.3
3.70
A-f
02/14/12
15
$34.9
$0.2
4.43
AAf
DISCLOSURES
ETFs highlighted in GREEN are part of the iShares Core Series.
Options are available on these iShares products.
* Management Fees are paid to BlackRock Fund Advisors, the Funds investment advisor and are as of 6/30/14.
A Fund may also incur indirect expenses on its investments, if any, in other companies. Please see the Funds
prospectuses for more information on such expenses.
Source: BlackRock, Bloomberg, ETF ADV calculated as 20-day average through 6/30/14.
For these Funds, the net expense ratio, which reflects waivers of certain fees by the Funds investment
manager, is shown. See the Funds prospectuses for more complete information on fund fees and expenses.
PRODUCT GUIDE
INCEPTION DATE
Note on the inside cover graphic: Index returns are shown for illustrative purposes only. It is not
possible to invest directly in an index. Diversified Broad Market represented by the Barclays
US Aggregate Bond Index, Barclays U.S. Universal Index, and Morningstar U.S. Bond Market
Yield-Optimized Index. Government represented by the Barclays U.S. 1-3 Year Treasury Bond
Index, Barclays U.S. 20+ Year Treasury Bond Index, Barclays U.S. 3-7 Year Treasury Bond Index,
Barclays U.S. 7-10 Year Treasury Bond Index, Barclays U.S. Agency Bond Index, Barclays U.S.
10-20 Year Treasury Bond Index, Barclays U.S. Treasury Bond Index, and Barclays U.S. Short
Treasury Bond Index. Inflation Protected represented by the Barclays U.S. Treasury Inflation
Protected Securities (TIPS) Index, Barclays U.S. Treasury Inflation-Protected Securities (TIPS)
0-5 Years Index, BofA Merrill Lynch Global Diversified Inflation-Linked Index, and BofA Merrill
Lynch Global ex-US Diversified Inflation-Linked Index. Government/Credit represented by
the Barclays U.S. Universal 10+ Year Index, Barclays U.S. Universal 1-5 Year Index, Barclays
U.S. Government/Credit Bond Index, and the Barclays U.S. Intermediate Government/Credit
Bond Index. Credit represented by the Markit iBoxx USD Liquid Investment Grade 0-5 Index,
Barclays U.S. Long Credit Index, Barclays U.S. 1-3 Year Credit Bond Index, Barclays U.S. Credit
Bond Index, Markit iBoxx USD Liquid Investment Grade Index, Barclays U.S. Intermediate Credit
Bond Index, Barclays U.S. Corporate Aaa - A Capped Index, and Barclays U.S. Corporate Baa Ba Capped Index. Corporate Sectors represented by the Barclays U.S. Utility Bond Index,
Barclays U.S. Financial Institutions Capped Bond Index, and Barclays U.S. Industrial Bond Index.
Corporate Bullet Maturity represented by the Barclays 2018 Maturity High Quality Corporate
Index, Barclays 2018 Maturity Corporate Index, Barclays 2020 Maturity High Quality Corporate,
Barclays 2023 Maturity High Quality Corporate Index, Barclays 2016 Maturity Corporate Index,
Barclays 2016 Maturity High Quality Corporate Index, Barclays 2020 Maturity Corporate Index,
Barclays 2023 Maturity Corporate Index, Barclays December 2016 Maturity Corporate Index, and
Barclays December 2018 Maturity Corporate Index. US High Yield represented by the Markit
iBoxx USD Liquid High Yield 0-5 Index, Markit iBoxx USD Liquid High Yield Index, and Barclays
U.S. Corporate B - Ca Capped Index. Municipals represented by the S&P National AMT-Free
Municipal Bond Index, S&P Short Term National AMT-Free Municipal Bond Index, S&P New York
AMT-Free Municipal Bond Index, and S&P California AMT-Free Municipal bond Index. Municipal
Bullet Maturity represented by the S&P AMT-Free Municipal Series 2014 Index, S&P AMT-Free
Municipal Series 2015 Index, S&P AMT-Free Municipal Series 2016 Index, S&P AMT-Free Municipal
Series 2017 Index, S&P AMT-Free Municipal Series 2018 Index, and S&P AMT-Free Municipal
Series 2019 Index. Mortgage Backed represented by the Barclays U.S. MBS Index, Barclays
U.S. CMBS Index, and Barclays Capital U.S. GNMA Bond Index. Floating Rate represented by
the Barclays US Floating Rate Note < 5 Years Index, and Barclays US Treasury Floating Rate
Index. International/Global represented by the S&P/Citigroup International Treasury Bond
Index Ex-US 1-3 Year Index, Morningstar Emerging Markets High Yield Bond Index, Markit iBoxx
Global Developed Markets ex-US High Yield Index, Markit iBoxx Global Developed Markets High
Yield Index, and S&P/Citigroup International Treasury Bond Index Ex-US. Emerging Markets
USD Denominated represented by the Morningstar Emerging Markets Corporate Bond Index,
and J.P. Morgan EMBI Global Core Index. Emerging Markets Local Denominated represented
by the Barclays Emerging Markets Broad Local Currency Bond Index. Interest Rate Hedged
represented by the Markit iBoxx USD Liquid High Yield IR Hedged Index, and Markit iBoxx USD
Liquid Investment Grade IR Hedged Index.
NAIC DESIGNATIONS DEFINITIONS

NAIC 1 is assigned to obligations exhibiting the highest quality. Credit risk is at its
lowest and the issuers credit profile is stable. This means that interest, principal, or
both will be paid in accordance with the contractual agreement and that repayment
of principal is well protected. An NAIC 1 obligation should be eligible for the most
favorable treatment provided under the NAIC Financial Conditions Framework.
NAIC 2 is assigned to obligations of high quality. Credit risk is low but may increase in the
intermediate future and the issuers credit profile is reasonably stable. This means that for the
present, the obligations protective elements suggest a high likelihood that interest, principal or
both will be paid in accordance with the contractual agreement, but there are suggestions that
an adverse change in circumstances or economic, financial, or business conditions will affect
the degree of protection and lead to a weakened capacity to pay. An NAIC 2 obligation should
be eligible for relatively favorable treatment under the NAIC Financial Conditions Framework.
NAIC 3 is assigned to obligations of medium quality. Credit risk is intermediate and the issuers
credit profile has elements of instability. These obligations exhibit speculative elements.
This means that the likelihood that interest, principal, or both will be paid in accordance
with the contractual agreement is reasonable for the present, but an exposure to an adverse
change in circumstances or economic, financial, or business conditions would create an
uncertainty about the issuers capacity to make timely payments. An NAIC 3 obligation should
be eligible for less favorable treatment under the NAIC Financial Conditions Framework.
NAIC 4 is assigned to obligations of low quality. Credit risk is high and the issuers credit profile
is volatile. These obligations are highly speculative, but currently the issuer has the capacity to
meet its obligations. This means that the likelihood that interest, principal or both will be paid in
accordance with the contractual agreement is low and that an adverse change in circumstances
or business, financial or economic conditions would accelerate credit risk, leading to a
significant impairment in the issuers capacity to make timely payments. An NAIC 4 obligation
should be accorded stringent treatment under the NAIC Financial Conditions Framework.
NAIC 5 is assigned to obligations of the lowest credit quality, which are not in or near
default. Credit risk is at its highest and credit profile is highly volatile, but currently
the issuer has the capacity to meet its obligations. This means that the likelihood that
interest, principal, or both will be paid in accordance with the contractual agreement
is significantly impaired given any adverse business, financial, or economic conditions.
An NAIC 5 Designation suggests a very high probability of default. An NAIC 5 obligation
should incur more stringent treatment under the NAIC Financial Conditions Framework.
NAIC 6 is assigned to obligations that are in or near default. This means that payment of interest,
principal or both is not being made, or will not be made, in accordance with the contractual
agreement. An NAIC 6 obligation should incur the most severe treatment under the NAIC
Financial Conditions Framework.
Source: Publicly Traded Securities Listing Definitions.
Carefully consider the Funds investment objectives, risk factors, and charges and expenses
before investing. This and other information can be found in the Funds prospectuses or, if
available, the summary prospectuses which may be obtained by visiting www.iShares.com or
www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed
from the Fund. Brokerage commissions will reduce returns.
There is no guarantee that dividends will be paid. Diversification and asset allocation may not
protect against market risk or loss of principal.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there
is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer
will not be able to make principal and interest payments. Funds that concentrate investments
in a single sector will be more susceptible to factors affecting that sector and more volatile than
funds that invest in many different sectors. International investing involves risks, including risks
related to foreign currency, limited liquidity, less government regulation, and the possibility of
substantial volatility due to adverse political, economic, or other developments. These risks
often are heightened for investments in emerging/developing markets or in concentrations of
single countries.
Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market

fluctuations, risk of default or loss of income and principal than higher-rated securities. There may
be less information on the financial condition of municipal issuers than for public corporations.
The market for municipal bonds may be less liquid than for taxable bonds. Some investors may
be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains
distributions, if any, are taxable. Securities with floating or variable interest rates may decline in
value if their coupon rates do not keep pace with comparable market interest rates. The Funds
income may decline when interest rates fall because most of the debt instruments held by the
Fund will have floating or variable rates. Mortgage-backed securities (MBS) and commercial
mortgage-backed securities (CMBS) are subject to prepayment and extension risk and therefore
react differently to changes in interest rates than other bonds. Small movements in interest rates
may quickly and significantly reduce the value of certain mortgage-backed securities. TIPS can
provide investors a hedge against inflation, as the inflation adjustment feature helps preserve
the purchasing power of the investment. Because of this inflation adjustment feature, inflation
protected bonds typically have lower yields than conventional fixed rate bonds and will likely
decline in price during periods of deflation, which could result in losses. Government backing
applies only to government issued securities, and does not apply to the funds.
The iShares iBonds ETFs (Funds) will terminate on or about March 31 of the year in each
Funds name. An investment in the Fund(s) is not guaranteed, and an investor may experience
losses, including near or at the termination date. Unlike a direct investment in a bond that has
a level coupon payment and a fixed payment at maturity, the Fund(s) will make distributions of
income that vary over time. In the final months of each Funds operation, as the bonds it holds
mature, its portfolio will transition to cash and cash-like instruments. As a result, its yield will
tend to move toward prevailing money market rates, and may be lower than the yields of the
bonds previously held by the Fund and lower than prevailing yields in the bond market. Following
the Funds termination date, the Fund will distribute substantially all of its net assets, after
deduction of any liabilities, to then-current investors without further notice and will no longer
be listed or traded. The Funds distributions and liquidation proceeds are not predictable at the
time of investment and the Funds do not seek to return any predetermined amount. The rate
of Fund distribution payments may adversely affect the tax characterization of an investors
returns from an investment in the Fund relative to a direct investment in bonds. If the amount an
investor receives as liquidation proceeds upon the Funds termination is higher or lower than the
investors cost basis, the investor may experience a gain or loss for tax purposes.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by JPMorgan Chase &
Co. or Markit Indices Limited. None of these companies make any representation regarding the
advisability of investing in the Funds. BlackRock is not affiliated with the companies listed above.
2014 BlackRock, Inc. All rights reserved. BLACKROCK, iSHARES, and iBONDS, are registered
trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other
marks are the property of their respective owners. iS-12890-1014
FOR FINANCIAL PROFESSIONAL USE ONLYNOT FOR PUBLIC DISTRIBUTION
Published by BlackRock
400 Howard St.
San Francisco, CA 94105
www.blackrock.com
iS-13828-1014
2014/2015 BlackRock.
For more information call:

1-800 iShares (1-800-474-2737)
www.iShares.com
iS-13828-1014
2014/2015 BlackRock.
All rights reserved. iSHARES
and BLACKROCK are registered
trademarks of BlackRock. All other
marks are the property of their
respective owners.
2014/2015 FOR FINANCIAL PROFESSIONAL USE ONLYNOT FOR PUBLIC DISTRIBUTION

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THE BOND INVESTORS GUIDE TO ETFs

THE BOND INVESTORS GUIDE TO ETFs

iSHARES FIXED INCOME ETFs:

MUNICIPAL BULLET MATURITY

EMERGING MARKETS USD DENOMINATED

CORPORATE BULLET MATURITY

EMERGING MARKETS LOCAL CURRENCY

INTEREST RATE HEDGED

EXCHANGE TRADED FUNDS

Matthew Tucker, CFA

Share of total industry

10-yr growth rate in fixed 10-yr growth rate in fixed

1. Source: BlackRock, as of 6/30/14.

BENEFITS OF iSHARES FIXED INCOME ETFs

KEY ETF INVESTMENT TRENDS

FLEXIBLE CAPITAL MARKETS TOOLS

PREPARE FOR RISING RATES

BULLET MATURITY ETFs

PURSUE GLOBAL OPPORTUNITIES

TRADING AND ANALYSIS TOOLS

FIXED INCOME ETFs:

GROWTH IN FIXED INCOME ETFs

US FIXED INCOME ETF AUM IS OVER $270B

Assets have climbed

TOTAL AUM ($B)

Source: BlackRock, Bloomberg, as of 6/30/14.

MOMENTUM CONTINUES TO BUILD

In 2014, independent research provider Greenwich Associates released

Access the full Greenwich study at iShares.com/BIG

GROWING USE OF ETFs AS CORE HOLDINGS

CURRENT USERS INCREASING ETF EXPOSURE

Of those currently employing ETFs, 32% expect to increase

NEW USERS INITIATING ETF POSITIONS

Source: Greenwich Associates, 2014. Institutional Investors Turning to Fixed-Income ETFs in

As institutional usage of fixed income ETFs

ETFs ENABLE A VARIETY OF

DISAGGREGATING THE BARCLAYS AGGREGATE

Build a portfolio in a single trade with

Create a customized portfolio with components of the Barclays Aggregate Index.

BARCLAYS MBS (MBB)

BARCLAYS 3-7 YEAR TREASURY (IEI)

BARCLAYS CREDIT (CRED)

BARCLAYS 7-10 YEAR TREASURY (IEF)

BARCLAYS CMBS (CMBS)

BARCLAYS 10-20 YEAR TREASURY (TLH)

BARCLAYS AGENCY (AGZ)

BARCLAYS 20+ YEAR TREASURY (TLT)

ETFs OFFER AN ADDITIONAL SOURCE

TOTAL ETF TRADING VOLUME

MONTHLY TRADING VOLUME ($B)

ETFs MAY PROVIDE BOND INVESTORS

ETFs MAY OFFER THE POTENTIAL

iSHARES ETF BID/OFFER

BID/OFFER SPREAD (BPS)

ETFs HELP OVERCOME THE CHALLENGES

In contrast to bonds, fixed income ETFs are traded on a centralized

Long-term exposure as part of a

Over- or under-weight certain

Minimize benchmark risk while

Manage portfolio risk between

Maintain beta exposure while

Efficiently transition portfolio holdings

Improve liquidity of a portfolio while