Fund performance and yields are shown for illustrative purposes only. There is not guarantee that other iBonds funds will experience the
same investment results.
1. A contractual fee waiver of 12 bps is in effect for the remaining iBonds Muni Series ETFs for a net expense ratio of 18 bps.
The Investor Experience: A Closer Look at MUAC (2013)
Declining Duration Throughout the Funds Life and a Shift to Cash as Bonds Mature
At inception, MUAC had about 4.5 years until its target end date (January 2010 to August 2014) and a duration of 3.94. MUAC duration
declined as its holdings approached maturity and the fund approached its end date. When bonds matured between June and August of
2014, the proceeds were invested in short-term tax-exempt money market instruments (cash equivalents).
Chart 1: MUACs Duration Chart 2: MUACs Portfolio Shifted to Cash as Bonds Mature
100%
4.5
% Bonds
4.0
% Cash Equivalents
3.5 75%
3.0
Duration
2.5
2.0 50%
1.5
1.0
0.5 25%
-
4.5 4.0 3.6 3.2 2.8 2.4 2.0 1.5 1.1 0.7 0.3
0%
Time Remaining To Fund Maturity (years) 5/1/2014 6/1/2014 7/1/2014 8/1/2014
iBonds ETFs Experienced a Total Return Chart 3: MUAC vs. Comparable Muni Bonds Yields
Similar to Bond Yields of Similar Quality (At Fund Inception)
1.55%
1.60% 1.41%
MUAC held national investment grade rated muni 1.38%
bonds. The fund included general obligation, revenue 1.40% 1.25%
and pre-refunded (escrowed) bonds. Using data on May 1.20%
30, 2014, 23.5% of the fund was AAA-rated, 65.4% was
Return
1.00%
AA-rated, 10.5% was A-rated and 0.15% was BBB-rated
using the middle of three ratings from Moodys, S&P and 0.80%
Fitch. The fund was rated A+f by S&P2. 0.60%
0.40%
The bonds in MUACs portfolio had a weighted average
0.20%
yield to maturity of 1.38% after fees at inception. The
fund earned a total NAV return of 1.41% - within 4 bps of 0.00%
AAA-Rated MUAC YTM MUAC Total AA-Rated Muni
the initial YTM less fees. This return can be compared
Muni Bonds after fees Return Bonds
to data on 4-year muni bond yields on the funds
inception date (see chart 3). MUACs total return was in Source: BlackRock and Bloomberg as of 8/15/2014. Past
line with prevailing municipal bonds yields of similar performance does not guarantee future results. Bond yields
quality and maturity. based on averages for national general obligation municipal bonds
with 4 years to maturity on 1/7/2010.
Conclusion
The novel end-date fixed income ETF structure pioneered by iShares allowed investors a similar experience to owning a bond ladder,
with monthly income payments and a final payment upon liquidation. Investors who utilize the Muni Series funds are able to access
the broad, diversified exposure provided by a conventional ETF structure while obtaining the targeted maturity exposure provided by
individual bonds.
For corporate iBonds with Mar in the fund name, all the bonds mature within a 12-month period between April 1st of the prior
calendar year and March 31st of the calendar year in the funds name. For example, the iShares iBonds Mar 2016 Corporate ETF
(IBDA) holds bonds that mature between April 1, 2015 and March 31, 2016.
For corporate iBonds with Dec in the name, all the bonds mature within a 12-month period between January 1st and December 31st
of the calendar year in the funds name. For example, the iShares iBonds Dec 2016 Corporate ETF (IBDF) holds bonds that mature
between January 1, 2016 to December 31, 2016.
2. What happens to the principal value of bonds that mature prior to the fund end date?
In the last months of operation, as the bonds held by the fund mature, the proceeds will not be reinvested in bonds but instead will be
held in cash and cash equivalents, The municipal iBonds will purchase tax exempt instruments and the corporate ETFs will purchase
taxable instruments. Please review each funds prospectus and SAI for more information.
3. Will the performance of the funds diverge from the index as bonds mature?
The underlying index for each iBond ETF will also transition from bonds to cash equivalents as the bonds mature. During this time,
each fund will continue to track its underlying index. The municipal iBonds track S&P AMT-Free Municipal Series bond indices. The
corporate iBonds track Barclays Maturity Corporate bond indices.
5. When will investors receive their proceeds from the matured funds?
Investors will receive the entire amount of their proceeds in cash approximately three business days after the fund ceases trading.
Investors are encouraged to reach out to their specific brokerages to confirm timing.
6. When will an estimated payment be announced, and what will it be?
Shareholders will receive proceeds based on the net asset value (NAV) of the fund , which will be available after the close of on the last
day of trading on iShares.com and other financial websites. It is not possible to provide an estimated payment amount prior to the funds
maturity.
Carefully consider the Funds investment objectives, risk factors, The rate of Fund distribution payments may adversely affect the tax characterization of
and charges and expenses before investing. This and other an investors returns from an investment in the Fund relative to a direct investment in
information can be found in the Funds prospectuses and if municipal 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
available the summary prospectuses, which may be obtained by
experience a gain or loss for tax purposes.
visiting www.iShares.com or www.BlackRock.com. Read the
prospectus carefully before investing. Investment in the iShares iBonds Corporate ETFs is subject to the risks of the other
funds and ETFs (underlying funds) in which it invests. The iShares iBonds Corporate
Investing involves risk, including possible loss of principal. ETFs will incur acquired fund fees and expenses associated with its investments the
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there underlying funds and additional fees associated with turnover in the underlying funds
is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer that are not included in the acquired fund fees and expenses.
will not be able to make principal and interest payments. There may be less information on the Diversification may not protect against market risk. There can be no assurance that an
financial condition of municipal issuers than for public corporations. The market for municipal active trading market for shares of an ETF will develop or be maintained. Transactions
bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or in shares of the iShares Funds will result in brokerage commissions and will generate
state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are tax consequences. iShares Funds are obliged to distribute portfolio gains to
taxable. shareholders.
Funds that concentrate investments in specific industries, sectors, markets or asset classes may The iShares Funds are distributed by BlackRock Investments, LLC (together with its
underperform or be more volatile than other industries, sectors, markets or asset classes and affiliates, BlackRock).
than the general securities market.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by S&P Dow
The iShares iBonds ETFs (Funds) will terminate on or about March 31, September 1 or Jones Indices LLC. This company does not make any representation regarding the
December 31 of the year in the Funds name. An investment in the Fund(s) is not guaranteed, advisability of investing in the Funds. BlackRock is not affiliated with the company listed
and an investor may experience losses, including near or at the termination date. In the final above.
months of the Funds operation, as the bonds it holds mature, its portfolio will transition to cash
2015 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered
and cash-like instruments. Following the Funds termination date, the Fund will distribute
trademarks of BlackRock. All other marks are the property of their respective owners.
iS-14996-0315
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 do not seek to return any
predetermined amount. Not FDIC Insured No Bank Guarantee May lose Value
During the final three months prior to the Funds planned termination date, its yield will generally
tend to move toward prevailing money market rates, (or in the case of the Muni iBonds ETFs,
tax-exempt money market rates), may be lower than the yields of the bonds previously held by
the Fund and lower than prevailing yields for bonds in the market.