iBonds Muni Series ETFs

iBonds® Muni Series ETFs
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Muni Bond Market Access Vehicles
Traditionally, investors have used both funds and bonds to access the
municipal bond market
Designed to:
Benefits of municipal funds
MATURE, like a bond
 Professional management
TRADE, like a stock
 Diversification
DIVERSIFY, like a fund
 Daily liquidity
Benefits of individual municipal bonds
 Specified investment end-date
 Regular income
 Investors can observe the approximate average yield to maturity of the underlying bond
portfolio at the time of purchase
 The iBonds Muni Series ETFs offer the benefits of both funds and bonds
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iBonds Muni Series ETFs
 iBonds Muni Series is an innovative, first-of-its-kind suite of fixed income
ETFs that each have a planned end-date
 Six muni ETFs with planned end-dates ranging from 9/1/15 to 9/1/20
Distributions
Approximate
End-Date
Liquidated on
8/21/2012
Liquidated on
8/21/2013
Liquidated on
8/21/2014
Product Name
Ticker
Expense Ratio
iShares 2012 AMT-Free Muni Term ETF
MUAA
0.30%
Monthly
iShares 2013 AMT-Free Muni Term ETF
MUAB
0.30%
Monthly
iShares 2014 AMT-Free Muni Term ETF
MUAC
0.30%
Monthly
iBonds Sep 2015 AMT-Free Muni Bond ETF1
IBMD2
iBonds Sep 2016 AMT-Free Muni Bond ETF1
Monthly
Monthly
9/1/2015
9/1/2016
iBonds Sep 2017 AMT-Free Muni Bond ETF1
iBonds Sep 2018 AMT-Free Muni Bond ETF1
IBME2
IBMF2
IBMG2
0.30%
0.30%
0.30%
0.30%
Monthly
Monthly
9/1/2017
9/1/2018
iBonds Sep 2019 AMT-Free Muni Bond ETF1
IBMH2
0.30%
Monthly
9/1/2019
iBonds Sep 2020 AMT-Free Muni Bond ETF1
IBMI
0.30%
Monthly
9/1/2020
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The legal names of the funds are iShares® iBonds Sep 2014 AMT-Free Muni Bond ETF, iShares® iBonds Sep 2015 AMT-Free Muni Bond ETF, iShares® iBonds Sep 2016
AMT-Free Muni Bond ETF, iShares® iBonds Sep 2017 AMT-Free Muni Bond ETF, iShares® iBonds Sep 2018 AMT-Free Muni Bond ETF, iShares® iBonds Sep 2019 AMT-Free
Muni Bond ETF, iShares® iBonds Sep 2020 AMT-Free Muni Bond ETF
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Effective 7/7/14, the ticker for the iShares 2015 AMT-Free Muni Term ETF changed from MUAD to IBMD, the iShares 2016 AMT-Free Muni Term ETF changed from MUAE to
IBME, the iShares 2017 AMT-Free Muni Term ETF changed from MUAF to IBMF, the iShares 2018 AMT-Free Muni Term ETF changed from MUAG to IBMG, and the iShares
2019 AMT-Free Muni Term ETF changed from MUAH to IBMH.
Each Fund will terminate on or about September 1 of the year in the Fund's name. An investment in the Fund(s) is not guaranteed, and an investor may experience losses,
including near or at the termination date. In the final months of the Fund's operation, as the bonds it holds mature, its portfolio will transition to cash and cash-like
instruments. Following the Fund's 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 do not seek to return any predetermined amount.
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Features and Benefits of the iBonds Muni Series ETFs
Key features
 Planned end-date with distribution of proceeds
 Dividends from net investment income are generally distributed monthly
 National municipal bond diversification
 Exchange traded access
 Daily transparency of holdings
 Each fund tracks a specific maturity—S&P AMT-Free Municipal Series Index
Benefits for the advisor
 Use individual funds in the series to help fill gaps in existing ladders
 Construct ladder solutions for clients who have had difficulty accessing individual bonds
 Target specific points on the municipal yield curve
 Help manage cash flow needs, such as college or retirement
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Mechanics of the iBonds Muni Series
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iBonds Muni Series Mechanics
YTM Profile
iBonds2015
Muni Series
≈
YTM Profile
Portfolio of Bonds
Maturing 2015
 The funds are designed to provide a yield to maturity (YTM) profile comparable
to that of the underlying bond portfolio.
 If held until maturity, investors will receive a combination of distributions and enddate payout that is designed to result in a YTM similar to that of the underlying bond
portfolio.*
* Unlike a direct investment in municipal bonds, the breakdown of cash flows between fund distributions and returns at maturity will not be predictable at the time of
investment. Assumes purchase at NAV. Does not include transaction costs, fees, taxes, tracking error, the impact of credit events or the Maturity Transition Period
(three months before the fund’s end-date, bonds will begin to mature and transition to cash or tax-exempt cash equivalents). As with all YTM measures, actual
returns will vary based upon reinvestment rates for the fund and investor as well as market volatility. The allocation between monthly fund distribution payments and
end-date distribution payment may affect the tax characteristics of an investor’s returns from an investment in the fund relative to a direct investment in municipal
bonds. This final distribution will be treated as a sale for tax purposes. As a result, investors may have a capital gain or loss relative to their initial investment.
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iBonds Muni Series Mechanics
Monthly distributions and end-date payout mechanics
Individual Bond Cash Flows
Bond
Purchased
Year 1
Year 2
Year 3
Year 4
Year 5
Income
Income
Income
Income
Income
Fixed
Principal
Investor
= Yield to
Maturity
Fixed
Muni Series Cash Flows
ETF
Purchased
Year 1
Year 2
Year 3
Year 4
Year 5
End-Date
Distribution
Distribution Distribution Distribution Distribution Distribution
Variable
Investor
= Yield to
Maturity
Variable
For illustrative purposes only. There is no guarantee that distributions will be paid.
The Muni Series mechanics seek to preserve anticipated Investor Yield to Maturity
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iBonds Muni Series Mechanics
Monthly distributions and end-date payout relationship
End-Date
Distribution
Monthly
Distributions
Investor
YTM
As monthly distributions
decrease, end-date
payouts tend to increase
As monthly distributions
increase, end-date payouts
tend to decrease
Combination of Monthly Distributions and End-Date Distribution seeks to preserve
anticipated Investor YTM
For illustrative purposes only. Assumes purchase at NAV. Does not include transaction costs, fees, taxes, tracking error, the impact of credit events or the Maturity
Transition Period (three months before the fund’s end date, bonds will begin to mature and transition to cash or tax exempt cash equivalents). As with all
YTM measures, actual returns will vary based upon reinvestment rates for the fund and investor as well as market volatility. The allocation between monthly
fund distribution payments and end-date distribution payment may affect the tax characteristics of an investor’s returns from an investment in the fund relative
to a direct investment in municipal bonds. This final distribution will be treated as a sale for tax purposes. As a result, investors may have a capital gain or
loss relative to their initial investment.
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iBonds Muni Series Mechanics
What causes variability in distributions and end-date distribution?
Creation/Redemption
Activity
Interest Rate
Movements
Create occurs in fund
New bonds join existing
bonds in fund basket
Fund’s new average fund
purchase yield is reflected
in the monthly distribution
Creation Basket of
Bonds with
Market Yields*
Existing Fund
Basket of Bonds
New Fund Basket of
Bonds with New Yields
* Market yields are driven by interest rate movements.
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iBonds Muni Series Mechanics
Distribution variability example
Unchanged Average
Fund Purchase Yield
Fund Purchase Price
Year 1 Distributions
Year 2 Distributions
Year 3 Distributions
Year 4 Distributions
Year 5 Distributions
End-Date Payout
Investor YTM*
Increasing
Market Yields
Decreasing
Market Yields
Increasing Average
Fund Purchase Yield
Decreasing Average
Fund Purchase Yield
-$50.00
$1.00
$1.00
$1.00
$1.00
$1.00
$50.00
2.00%
-$50.00
$1.00
$1.10
$1.20
$1.30
$1.40
$48.98
2.00%
-$50.00
$1.00
$0.90
$0.80
$0.70
$0.60
$51.02
2.00%
For illustrative purposes only; not intended to represent actual fund or fund cash flows.
As distributions increase/decrease, end-date distribution tends to
decrease/increase respectively, maintaining investor’s anticipated YTM.*
* Assumes purchase at NAV. Does not include transaction costs, fees, taxes, tracking error, the impact of credit events or the Maturity Transition Period. As with all YTM
measures, actual returns will vary based upon reinvestment rates for the fund and investor as well as market volatility. The allocation between monthly fund distribution
payments and end-date distribution payment may affect the tax characteristics of an investor’s returns from an investment in the fund relative to a direct investment in
municipal bonds. This final distribution will be treated as a sale for tax purposes. As a result, investors may have a capital gain or loss relative to their initial investment.
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iBonds Muni Series Mechanics
June
July
August
September
Maturity Transition Period
End-Date
Distribution
Approximately
September 1*
Three months before the fund’s end-date, bonds will begin to mature
and transition to cash or tax-exempt cash equivalents.†
As a result, investors should evaluate the fund’s realized YTM up to the beginning
of the Maturity Transition Period.
* Proceeds are expected to be delivered to investors on or around September 1 of the respective year.
Cash equivalents are expected to include AMT-free tax-exempt muni notes, tax anticipation notes, bond anticipation notes
and variable rate demand notes and obligations.
†
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MUAA: A Case Study
 iShares 2012 AMT-Free Muni Term ETF (MUAA) launched in January
2010 at an initial NAV of $50.38 and a portfolio YTM of 66 bps after
fees.
MUAA Calendar of Events
Jan 8, 2010
MUAA is launched with a NAV of $50.38
 Similar to a conventional bond, investors realized MUAA’s yield to
maturity through a combination of cash flows
Feb 5, 2010
MUAA pays first monthly income distribution
Feb 2010 - Aug 2012
MUAA pays monthly income distributions
 Falling interest rates and fund growth resulted in a shift in the fund
cash flow composition from the monthly payments to the final payment
Jun 1, 2012
First bonds in MUAA mature
Aug 15, 2012
Last bond in MUAA matures. MUAA ceases
trading and the fund closes
 Shareholders received a final payment of $50.62, which was $0.24
greater than the initial NAV on August 21, 2012
Aug 21, 2012
MUAA holders receive a final lump sum
payment of $50.62
 The realized YTM over the life of the fund was 0.69% - within 3 bps of
the initial YTM.
MUAA Monthly Distributions
Yield to Maturity
Summary Table
Initial Outlay
Monthly Distribution
MUAA
$50.38
$0.000 - $0.036
Final Distribution
$50.62
Realized Yield to Maturity
0.69%
Monthly Distributions
$0.06
$0.05
$0.04
The amount of the final
fund distribution paid at
maturity in excess of
initial NAV
$0.03
$0.02
$0.01
$0.00
Source: BlackRock as of 8/30/12.
Source: BlackRock. For illustrative purposes only. Realized yield to maturity represents the yield an investor would have received if they invested at the initial outlay price and held the fund or bond through maturity.
The calculations for MUAA take into account fees and expenses for owning the ETF, but the hypothetical par bond does not. Does not include impact of taxes, which may vary by investor. Differences between an
investor’s purchase price and the final distribution may result in either a capital gain or loss.
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Investment Applications
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iBonds Muni Series Applications
Application: Help fill gaps in a client’s muni portfolio
 Plug holes in existing ladders where bonds are unavailable, have matured, called,
or defaulted
2016 Bond
2015 Bond Called
iBonds Sep 2015 AMT-Free
Muni Bond ETF
2014 Bond
Benefit:
• An efficient and diversified solution that allows advisors to spend more time on
value-added endeavors
The example above is for illustrative purposes only and does not represent any specific investment.
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iBonds Muni Series Applications
Application: Construct ladder cash flows
 Especially valuable for smaller accounts and for accounts in illiquid markets
$50k
iBonds Sep 2017 AMT-Free Muni Bond ETF
$50k
iBonds Sep 2016 AMT-Free Muni Bond ETF
$50k
iBonds Sep 2015 AMT-Free Muni Bond ETF
Benefit:
• Provides a valuable laddering solution to clients who may not have the scale or
access to liquidity
• Enhance and reinforce relationships with clients by tailoring ladders to their needs
The example above is for illustrative purposes only and does not represent any specific investment.
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iBonds Muni Series Applications
Application: Targeted muni exposure
 Target specific exposure on the muni yield curve
iBonds Sep 2017 AMT-Free
Muni Bond ETF
2015
1 Year
2 Year
iBonds Sep 2019 AMT-Free
Muni Bond ETF
3 Year
4 Year
Benefit:
• Advisor can instantly express their market view without having to search for
appropriate inventory
The example above is for illustrative purposes only and does not represent any specific investment.
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iBonds Muni Series Applications
Application: Manage cash flow needs
 Help meet planned cash flow needs in the future*
iBonds Sep 2016 AMT-Free
Muni Bond ETF
College Tuition
in 2016
Retirement
In 2016
Buying a Second
Home in 2016
The example above is for illustrative purposes only and does not represent any specific investment.
Benefit:
• More diversified, flexible and time-efficient solution for an advisor to use with
clients who need a payout at a specific time
* There is no guarantee that the stated goals can be reached by an investment in the funds. As discussed, end-date distribution is not known at time
of investment and will vary in relation to monthly distributions.
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iBonds Muni Series Applications
Advisors can use the iBonds Muni Series for a variety
of applications:
 Help fill gaps in a client’s muni portfolio
 Constructing cash flow ladders for clients who have had difficulty accessing
individual bonds
 Gaining exposure to targeted points of the muni yield curve
 Help manage future client cash flow needs, such as college or retirement
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Carefully consider the iShares Funds’ investment objectives, risk
factors, and charges and expenses before investing. This and other
information can be found in the Funds’ prospectuses, which may be
obtained by calling 1-800-iShares (1-800-474-2737) or by visiting
www.iShares.com. Read the prospectuses carefully before investing.
Investing involves risk, including possible loss of principal.
There is no guarantee that distributions will be paid.
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. 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. Narrowly focused investments
typically exhibit higher volatility and are subject to greater geographic or asset class risk. The Fund is
subject to credit risk, which refers to the possibility that the debt issuers will not be able to make principal
and interest payments. Shares of the Fund trade at market price, which may be greater or less than net
asset value.
Each Fund will terminate on or about September 1 of the year in the Fund’s name. An investment in the
Fund(s) is not guaranteed, and an investor may experience losses, including near or at the termination
date. In the final months of the Fund’s operation, as the bonds it holds mature, its portfolio will transition
to cash and cash-like instruments. Following the Fund’s 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 do not seek to return any predetermined amount.
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During the final three months prior to the Fund’s planned termination date, its yield will generally tend to
move toward prevailing tax-exempt money market rates, and may be lower than the yields of the bonds
previously held by the Fund and lower than prevailing yields for bonds in the market. The rate of Fund
distribution payments may adversely affect the tax characterization of an investor’s returns from an
investment in the Fund relative to a direct investment in municipal bonds. If the amount an investor
receives as liquidation proceeds upon the Fund’s termination is higher or lower than the investor’s cost
basis, the investor may experience a gain or loss for tax purposes. The information provided is not
intended to be a complete analysis of every material fact respecting any strategy and has been presented
for educational purposes only.
Asset allocation models and diversification do not promise any level of performance or guarantee against
loss of principal.
Shares of iShares Funds are bought and sold at market price (not NAV) and are not individually
redeemed from the Fund. There can be no assurance that an active trading market for shares of an ETF
will develop or be maintained.
All regulated investment companies are obliged to distribute portfolio gains to shareholders by year-end.
Trading shares of the iShares Funds will also generate tax consequences and transaction expenses. This
material is not intended to be tax advice. The tax consequences of dividend distributions may vary by
individual taxpayer. Please consult your tax professional or financial advisor for more information with
regard to your specific situation..
When comparing stocks or bonds and iShares Funds, it should be remembered that management fees
associated with fund investments, like iShares Funds, are not borne by investors in individual stocks or
bonds. The annual management fees of iShares Funds may be substantially less than those of most
mutual funds. Buying and selling shares of iShares Funds will result in brokerage commissions, but the
savings from lower annual fees can help offset these costs.
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The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital
Management, Inc., European Public Real Estate Association (“EPRA®”), FTSE International Limited (“FTSE”),
JPMorgan Chase & Co., MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc.,
National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell
Investment Group or S&P Dow Jones Indices, LLC, nor are they sponsored, endorsed or issued by Barclays
Capital Inc. None of these companies make any representation regarding the advisability of investing in the
Funds. BlackRock is not affiliated with the companies listed above.
Neither FTSE nor NAREIT makes any warranty regarding the FTSE NAREIT Real Estate 50/Residential/
Retail/Mortgage or Industrial/Office Index; all rights vest in NAREIT. Neither FTSE nor NAREIT makes any
warranty regarding the FTSE EPRA/NAREIT Developed Real Estate ex-US/North America/Europe/Asia Index;
all rights vest in FTSE, NAREIT and EPRA. All rights in the FTSE Developed Small Cap ex-North America
Index vest in FTSE. “FTSE®” is a trademark of London Stock Exchange Group companies and is used by
FTSE under license.
©2010-2014 BlackRock. All rights reserved. iSHARES, iBONDS, and BLACKROCK are registered
trademarks of BlackRock. All other marks are the property of their respective owners. iS-13219-0814
Not FDIC Insured • No Bank Guarantee • May Lose Value
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Thank you
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