For private investors in the UK only

Introducing iShares and ETFs

Join the investment revolution
Exchange Traded Funds (ETFs) have revolutionised the way
investors manage their portfolios. ETFs are simple, flexible,
cost-effective and offer opportunities to reduce risk.
These benefits have driven the popularity of ETFs with some of the
most demanding investors, from private banks and pension funds,
to government agencies, professional investment managers and
private investors.
This guide provides the information you need to understand ETFs
and how they can be included in your portfolio.
ETFs – simple, transparent
and efficient
An ETF is a pooled investment fund, similar to a unit trust or mutual
fund, which can be bought and sold on a stock exchange, like a
share in a company. For investors, ETFs blend the benefits of pooled
funds and shares.
+
Mutual fund Share
Exchange Traded Fund/iShares
ETFs are a type of index-tracking fund – they are managed to
accurately mirror the performance of an index, such as the FTSE 100
Index of leading UK blue-chip shares. This means that the aim of an
ETF is to provide investors with the same return as the underlying
market. For example, if the FTSE 100 Index goes up by 10% during a
year, an ETF tracking this index should provide investors with exactly
the same return, minus fees which in the case of an ETF is called the
Total Expense Ratio (TER). To deliver the same return as the market
index, ETFs hold a portfolio that replicates the holdings of the index.
ETFs are available that track most major indices for stocks and
shares, bonds, commodities and other asset types, providing
efficient access to many markets for investors.
ETF benefits
The growing popularity of ETFs demonstrates the value investors
place upon the following benefits:
 Lower costs – ETFs are cheaper than many traditional
pooled funds.
 Reduced risk – ETFs provide diversification – they avoid putting
all your eggs in one basket.
 Transparency – ETFs offer a high degree of transparency
regarding the ETF portfolio holdings, the ETF performance
and costs.
 Flexibility – there is a wide choice of ETFs available, and they
can be bought and sold simply and quickly.
iShares is the provider of the world’s leading ETF fund range. iShares
funds are managed to consistently provide these benefits and their
growth in assets, industry awards and leading market position reflect
a proven record of delivering exactly what investors expect.
Please remember that as with all investments there are risks
involved with buying and selling ETFs. Your investment can go up
and down and your capital is at risk.
 ETF industry growth The table below compares the costs (TER) of ETFs and traditional
mutual funds in Europe. ETFs are consistently cheaper than index-
The growth in the ETF industry has been phenomenal. Since tracking mutual funds as well as actively managed mutual funds,
the launch of the first ETF in 1993, the ETF industry has grown which aim for higher returns than a market or index.
to over US$774 billion in Assets Under Management (AUM)
TER of ETFs and Mutual Funds in Europe2
with over 1,650 ETFs available1.
ETFs Index-tracking Actively managed
mutual fund mutual fund
The graph below shows the global growth in ETF assets during
the past nine years1. Average stocks and
0.37% 0.86% 1.74%
shares fund

Assets Average bond fund 0.16% 0.47% 1.01%

(US$Bn)

900
800 Buying and selling costs also need to be considered with any
700 investment. Just like a company share traded on a stock exchange,
600
buying or selling an ETF incurs a transaction fee.
500
400
300 Your stock broker or financial adviser will be able to guide you
200
through this straightforward process and detail the transaction costs.
100
0 Again, there are no hidden charges and you have the assurance of
2000 2001 2002 2003 2004 2005 2006 2007 2008 May- knowing the exact price you pay when buying an ETF. Purchases and
09
US AUM Europe AUM Rest of World AUM sales can also be made instantly on-exchange, avoiding the possible
delays, generally wider spreads and unknown pricing that are still
common with other types of pooled investments.

Lower costs with ETFs Helping investors balance risk, cost and return

Keeping the cost of an investment down is important. Many
investment products promise to beat the market, and these are
often accompanied by higher costs. In reality the majority of
investment products do not consistently beat the market and your
returns can be eroded over time by higher fees.
iShares ETFs aim to deliver the performance of the market and
charge for delivering just that – no more, no less. The cost of owning
an ETF is measured by the TER, which shows the total cost to the
investor over a year. There are no hidden costs – iShares ETFs are
totally transparent and all TERs are available on www.iShares.co.uk.
Historically, many investment decisions have focused on
‘return’ in isolation. But there is growing recognition that
return must be considered in the context of ‘risk’ and ‘cost’.
This more comprehensive approach to investing may sound
complex, but it offers the prospect of more reliably meeting
financial goals.
The benefits of ETFs mean they are the ideal investment
tools to build highly effective portfolios that balance risk,
cost and return.

1. Source: BlackRock, ETF Landscape, Industry Review, June 2009.

2. Source: Morningstar and BlackRock, as at the end of February 2009.
Reduce risk with ETFs
Portfolio A: Portfolio B:
Concentrated Diversified

Number of shares held 4 45

Expected return (per annum) 7% 6%
Expected risk (per annum) 14% 9%
For illustrative purposes only. Past performance is not a guide to future performance and may not be repeated.

Understanding risk is fundamental to successful investing. A return
of 10% per annum with a high level of risk is less attractive than the
same return but with lower risk. The highest return for the lowest
risk is the ideal balance that investors seek. Achieving this ideal is
not easy, but ‘diversification’ is a widely recognised and highly
effective tool that you can use.
2. There is a broad range of iShares ETFs easily available, providing
you with access to many different markets and asset types
around the world. The table below provides a snapshot of some of
the iShares funds. Including a range of ETFs within a portfolio
allows you to quickly, simply and cost-effectively build a highly
diversified portfolio.

Diversification relies upon the age-old wisdom of not putting all your
eggs in one basket. By spreading investments across various assets,
the expected return can be achieved with less risk. The table below
illustrates the benefits of diversification for a simple portfolio of
stocks and shares.
The diversified portfolio B targets a similar level of return to
portfolio A, but importantly does this with considerably lower risk,
making it a more attractive investment.
iShares ETFs offer you the benefits of diversification in two ways:
Peace of mind with ETFs
With many types of investment, there is a lack of clarity as to exactly
where your money is actually invested. There may also be
considerable uncertainty as to the investment meeting its targets,
with little transparency to see how the investment is performing on
a daily basis.
iShares ETFs offer you transparency and they consistently achieve
their objective of closely tracking the performance of the market
they follow.

1. ETFs typically hold large numbers of individual securities Every iShares ETF publishes a full list of the securities (for example,
(for example, stocks and shares), which are the constituents of stocks and shares or bonds) that it holds on a daily basis. This
the index they track. This means ETFs are inherently diversified allows you to see exactly where your money is invested. These
and offer an attractive balance of risk and return. details are easily accessible on www.iShares co.uk.

Wide range of iShares ETFs across asset classes

You also have the confidence of knowing that the investment manager
Equities Fixed Income is working to provide a return that mirrors the index or market that the
European Single Country Single Country Government Bonds ETF follows – nothing more, nothing less. This makes ETFs very
Pan European European Government Bonds unlikely to disappoint you by not delivering what is promised. On the

International Developed
International Emerging
Dividend Tilt
Size/Style
Speciality/Thematic
Islamic/Shari’ah Compliant
Property
Global Government Bonds other hand, actively managed funds target returns that are greater
than the returns from the underlying market, but many of them have
Corporate Bonds
consistently disappointed investors by missing their targets.
Emerging Markets Bonds
Inflation-linked Bonds
At iShares, we make no secret of how well our ETFs are tracking
Covered Bonds
their benchmark indices. Performance information on
www.iShares.co.uk allows you to follow the performance of your
iShares ETFs on a daily basis.
Flexible solutions
with ETFs
The wide range of iShares ETFs available allows you and your adviser
to build portfolios that fulfill many investment goals. The ability to
simply and efficiently invest in many different asset types, from
stocks and shares, bonds, commodities, property and so on has
never been more accessible to investors.
iShares – the world’s number 1
ETF provider3
iShares is the leading ETF provider globally with over US$370 billion
in AUM. iShares pioneered making ETFs accessible to all types of
investors. With over 380 ETFs listed on exchanges worldwide and
over 45% market share globally iShares has been championing ETFs
as a better way of investing for the past 15 years3.

You can also invest around the world, via ETFs that provide global
coverage or by bringing together separate funds that follow
individual markets, from the major economies of the US and Europe,
to Asia and many more exotic emerging markets.
This level of choice gives you the power to build a portfolio that
targets your specific goals. And if these goals change over time as
your circumstances alter, the portfolio of ETFs can easily be altered
so it continues to suit you. The ability to buy and sell ETFs as and
when needed enables this flexibility, while also keeping transaction
costs low.
iShares ETFs are ideal portfolio building blocks, giving you access to
a wide range of asset types and markets.
For further information on iShares ETFs visit www.iShares.co.uk
where you will find fund data, fund factsheets, tools, more detailed
information on ETFs and how to purchase iShares ETFs.
Tools available to help you make investment decisions:
 Performance chart – measure iShares ETFs fund performance
relative to its index.
 Index returns chart – access ETF indices and their performance.
 Fund search tool – search for a specific fund.
ETFs are not risk free and before investing we recommend you:

Buying iShares ETFs  Assess your investment objectives.

iShares ETFs are listed on the London Stock Exchange and are  Select investments to match these or consult an adviser to
purchased as you would any single company stock. A stock broker help you do this.
or financial adviser will be able to explain how to set limits on the
purchase and sale prices that transactions are completed at. They  Spend time understanding your investment choices
can also advise on other features and benefits of ETFs, such as not before investing.
incurring stamp duty tax.

iShares ETFs listed on the London Stock Exchange are eligible to be

used in Self Invested Personal Pensions (SIPPs), Individual Savings
Accounts (ISAs) and Child Trust Funds (CTFs).

What to do next
To find about more about how these versatile, cost-efficient funds can help you achieve your investment goals, visit www.iShares.co.uk.
Alternatively you can speak to your financial adviser or visit the London Stock Exchange website, www.londonstockexchange.com.

3. Source: BlackRock, ETF Landscape, Industry Review, June 2009.

 Contact us
For more information on iShares ETFs, please visit our website on www.iShares.co.uk.
Alternatively, please email us at: info@iShares.co.uk or call us on 0845 357 7000.
Regulatory Information
BlackRock Advisors (UK) Limited, which is authorised and regulated by the Financial
Services Authority (‘FSA’), has issued this document for access in the UK only and no
other person should rely upon the information contained within it. iShares plc, iShares II
plc and iShares III plc (together ‘the Companies’) are open-ended investment companies
with variable capital having segregated liability between their funds organised under the
laws of Ireland and authorised by the Financial Regulator.
Restricted Investors
This document is not, and under no circumstances is to be construed as, an
advertisement, or any other step in furtherance of a public offering of shares in the United
States or Canada. This document is not aimed at persons who are resident in the United
States, Canada or any province or territory thereof, where the Companies are not
authorised or registered for distribution and where no prospectus for the Companies has
been filed with any securities commission or regulatory authority. The Companies may
not be acquired or owned by, or acquired with the assets of, an ERISA Plan.
50% Recycled post-consumer content.
50% Content from responsibly managed forests. www.iShares.co.uk
Risk Warnings
Shares in the Companies may or may not be suitable for all investors. BlackRock Advisors
(UK) Limited does not guarantee the performance of the shares or funds. The price of the
investments (which may trade in limited markets) may go up or down and the investor
may not get back the amount invested. Your income is not fixed and may fluctuate. Past
performance is not a reliable indicator of future results. The value of the investment
involving exposure to foreign currencies can be affected by exchange rate movements. We
remind you that the levels and bases of, and reliefs from, taxation can change. Affiliated
companies of BlackRock Advisors (UK) Limited may make markets in the securities
mentioned in this document. Further, BlackRock Advisors (UK) Limited and/or its affiliated
companies and/or their employees from time to time may hold shares or holdings in the
underlying shares of, or options on, any security included in this document and may as
principal or agent buy or sell securities. For data sourced prior to 1 December 2009 and
attributed to BlackRock, note that BlackRock Advisors (UK) Limited was previously known
as Barclays Global Investors Limited.
‘iShares’ is a registered trademark of BlackRock Institutional Trust Company, N.A. All other
trademarks, servicemarks or registered trademarks are the property of their respective
owners. © 2009 BlackRock Advisors (UK) Limited. Registered Company No. 00796793. All
rights reserved. Calls may be monitored or recorded.
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