City wire privite clients retreat 2013 compliance approved uk

Citywire Private Client Manager Retreat 2013

Top 5 questions we are asked about

ETFs

Ursula Marchioni, Director

iShares EMEA Investment Strategies & Insights team

FOR PROFESSIONAL AND INSTITUTIONAL INVESTOR USE ONLY

May 2013

Four Seasons Hotel, Dogmersfield Park, Hampshire

1. How do I describe an ETF to my clients & why do investors use them?

2. How big is the industry and who are the buyers of ETFs?

3. What things should I consider when investing in an ETF?

4. How do I assess the cost of an ETF?

5. Which asset classes / markets have been most popular recently?

6. Which themes shall I consider with my clients moving into H2 2013?

2

Top questions we are asked about ETFs

Top question # 1:

How do I describe an ETF to my clients & why do

investors use them?

4

How to describe ETFs & why investors use them

• ETFs are index funds, i.e. funds aimed at delivering a benchmark index’s returns, minus fees.

• ETFs are listed and traded like a stock on major stock exchanges, globally.

Therefore, they occupy a valuable position in the investment landscape:

the intersection between an index fund and a flow product

4

Index Fund

• Simplicity

• Transparency

• Risk control

• Cost control

• Consistency of returns

• Diversification

• Mutual Fund

• Open-End Fund

Flow Product (Single Stock /

Future)

• Trading flexibility on

exchange

• Intraday pricing

• Listed options

• Ability to borrow / short

• Any transaction size

• Variety of trading

strategies

Transparency • Investors can generally see the ETF composition at any given time

Liquidity

• ETFs offer two sources of liquidity

Liquidity measured by secondary market trading volume

The liquidity of the underlying assets via the creation and redemption

process

Diversification

• ETFs offer immediate exposure to a basket or group of securities for

diversification through a single trade

• Broad range of asset classes, including equities, bonds, commodities,

investment themes, etc.

Flexibility

• ETFs are listed on exchanges and can be traded at any time the

market is open

• Pricing is continuous throughout the day

Securities

Lending

• ETF units and underlying assets can be lent out to potentially offset

holding costs

Cost

Effectiveness • ETFs offer a cost-effective route to diversified market exposure

ETFs

For illustrative purposes only.

Top question # 2:

How big is the industry and who are the buyers of ETFs?

Global ETP Multi-Year Asset Growth and Top 10 Providers

6

At the end of April 2013, the global Exchange

Traded Products (ETPs) industry (ETFs + ETCs +

ETNs +ETI) comprises*:

• 4,852 products

• From 185 providers

• Listed on 55 regulated exchanges around the

world

• Assets of $2.11tn, of which:

• $1.49tn in US-domiciled ETP (71% of global

AUM)

• $377bn in Europe-domiciled ETP (18% of

global AUM)

Source: BlackRock ETP Research, ETP Landscape. 1: Data is as of April 29, 2013 for Europe and April 30, 2013 for the US, Canada, Latin

America, Israel, and some Asia ETPs. Some Asia ETP data is as of March 31, 2013. Global

ETP flows and assets are sourced using shares outstanding and net asset values from

Bloomberg for the US, Canada, Europe, Latin America and some ETPs in Asia. Middle East

ETP assets are sourced from the Bank of Israel. ETP flows and assets in China are sourced

from Wind. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Asset

classifications are assigned by the BlackRock based on product definitions from provider

websites and product prospectuses. Other static product information is obtained from

provider websites, product prospectuses, provider press releases, and provider surveys.

European ETP Multi-Year Asset Growth and Top 10 Providers

7

At the end of April 2013, the European Exchange

Traded Products (ETPs) industry (ETFs + ETCs +

ETNs +ETI) comprises*:

• 2,142 products

• From 43 providers

• Listed on 24 regulated exchanges around the

world

• Assets of $376.8bn, of which:

• $239.1bn in Equity ETPs (64% of total

European AUM)

• $74.8bn in Fixed Income ETPs (20% of total

European AUM)

• $60.9bn in Commodity ETPs (16% of total

European AUM)

Source: BlackRock ETP Research, ETP Landscape. 1: Data is as of April 29, 2013 for Europe and April 30, 2013 for the US, Canada, Latin

America, Israel, and some Asia ETPs. Some Asia ETP data is as of March 31, 2013. Global

ETP flows and assets are sourced using shares outstanding and net asset values from

Bloomberg for the US, Canada, Europe, Latin America and some ETPs in Asia. Middle East

ETP assets are sourced from the Bank of Israel. ETP flows and assets in China are sourced

from Wind. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Asset

classifications are assigned by the BlackRock based on product definitions from provider

websites and product prospectuses. Other static product information is obtained from

provider websites, product prospectuses, provider press releases, and provider surveys.

Greenwich Associates 2012 ETF Survey

• 80 US institutional investors that currently use exchange-

traded funds (ETFs): 62 institutional funds — corporate

funds, public funds, endowments, and foundations — and 18

asset managers with discretion for institutional assets;

• 57% of institutional ETF users employ ETFs to achieve

strategic allocation ranges;

• Institutions are often first drawn to ETFs for help with two

basic functions: manager transitions and cash

equitization/interim beta;

• Rebalancing, tactical adjustments and portfolio completions

also proved to be very popular uses of ETFs in 2012

Source: Greenwich Associates, 2012

8

Who are the buyers of ETFs? Both institutional investors (the US case) …

9

EMEA ETF AUM by segment

$220B

$100B

$20B

$10B

$350B

Direct Retail

Intermediary

Wealth Managers

Institutional

Note: Data as of June 30, 2012. AUM by client segment is estimated, source: BlackRock.

• European ETF clients are primarily Institutional; Retail

adoption has been much slower

• Institutional segment continues to be driven by asset

managers; regulatory review of the Insurance industry

(Solvency II) may require a tailored approach to drive

sub-segment growth

• Retail increasingly important in the next phase of ETF

growth

• Retail distribution dynamics dominated by banks, except

in the UK

• Many of the larger Private Banks have their own ETF

offering (UBS, Credit Suisse, HSBC etc.) and are both

clients and competitors

European client trends

Rising

investor

appetite for

ETFs

• Governments in Europe are moving

towards increased regulation to

protect investors and increase

transparency; RDR & MiFID II

• Scrutiny on investment fees has

grown and as a result, regulations on

pricing are driving a transition to

fee-based advisory

• Trend towards fee-based advisory

models and transparency, are

resulting in a focus on low-cost

products, such as ETFs

• ETFs have delivered impressive

growth despite still relatively low

awareness and adoption among

investors, advisors and institutional –

implies that significant growth

potential remains

• DB and DC plan sponsors,

endowments and foundations are just

starting to show meaningful interest

in ETFs

• Rising awareness of ETFs for Fixed

Income and with non-traditional users

Shift towards

fee-based

advisory &

transparency

ETFs

Who are the buyers of ETFs? … and an expanding retail client basis (the European case)

Top question # 3:

What things should I consider when investing in an ETF?

Key areas of consideration for ETP selection

Performance

Trading & Valuation

Total Cost of Ownership

Other (Dist’n, FX)

Domiciled / Registration / Listing

Tax

Structure and Risk

Index

Tax

11

North America ($ 1,548.1 bn)

AUM iShares: $ 652.4 bn

Products: 383

Market share – position: #1

US Market share – percentage:

41.1%

EMEA ($ 376.8 bn)


Products: 206


Market share – percentage: 40.1%

Latin America ($ 13.8 bn)


Products: 20



Asia Pacific ($ 147.1 bn)


Products: 27



ETP Provider’s commitment to the business iShares presence across different platforms and jurisdictions

• iShares is the world’s largest Exchange Traded Products (ETPs) provider globally, having championed these

products for the past 15 years

12

Source: BlackRock ETP Research, ETP Landscape. Data as of end April 2013.

ETP Provider’s commitment to the business EMEA iShares Product Overview: 206 Products

Source: Blackrock/iShares, range of Irish and German domiciled products as of Q1 2013.

13

Equities ($87.45Bn) Fixed Income ($39.91Bn) Alternatives ($5.25Bn)

Developed

$65,977 m

(Number of funds: 80)

Global

$5,743 m

((Number of funds: 9)

Emerging Markets

$14,874 m


Alternative weighted / Thematic

$864 m


Commodity Indices

$791 m


Physical Precious Metals

$354 m


Real Estate – REITS

$3,893 m


Listed Private Equity

$212 m


Credit (IG & HY)

$21,509 m


Government Bonds

$12,334 m


Inflation-Linked

$3,066 m


Emerging Markets

$3,005 m


Top question # 4:

How do I assess the cost of an ETF?


• In our view, assessing the cost of an ETF requires investors to look beyond the headline TER and take an

approach we call the Total Cost of Ownership (TCO).

• While the TER is the most often quoted ETF expense indicator, there are additional components which influence

the overall performance of an investment in ETFs – such as, but not limited to, the bid/offer spreads paid to trade

the product on the stock exchange; revenues from securities lending activities; swap spreads linked to

synthetically replicated funds, and taxation. The concept of TCO captures them all.

• At iShares, we perceive the TCO as a combination of factors internal and external to the ETF instrument. While

some of these factors are disclosed by ETF Providers, others are not public.

15

Source: BlackRock. Please note that the tax (External Factors) is a cost additional to the spreads and fees.


• At iShares, we pride ourselves to provide full transparency of all the components of TCO. When comparing our

products to competitors’ ETFs, we though acknowledge that some of the TCO components can be missing for the

peer products.

• Hence, we recommend clients to think about a Proxy TCO (pTCO), which allows the assessment of an

approximate Total Cost of Ownership of an ETF, when traded on an exchange (secondary market).

16

Source: BlackRock. Please note that the tax (External Factors) is a cost additional to the spreads and fees.

Cost of purchasing Cost of holding Cost of selling

Assuming the ETF is

bought on exchange, this

will be approximately

equal to ½ of the

Bid/Offer spread of the

ETF

To estimate the total cost of this

phase, we recommend using the

Tracking Difference (TD) – i.e. the

difference in the fund and

benchmark returns over the holding

period. The TD includes:

TER

Securities lending revenues

Swap spreads*

Rebalancing costs*

Assuming the ETF is

bought on exchange, this

will be approximately

equal to ½ of the

Bid/Offer spread of the

ETF

Proxy

TCO

*Please note that both swap spreads and rebalancing costs will be affected by the withholding tax difference between the ETF and the index.

TCO vs. TER – iShares S&P500 (IUSA)

Source: BlackRock, Bloomberg.

Data as at end of March 2012. TCO calculated over the 12 months period: 1 March 2012 – 28 February 2013.

17

• The Irish domiciled iShares S&P 500 (IUSA) has a TER of 40bps.

• Its TCO is noticeably lower and equal to TD + spreads = 5bps + 6.8bps = 11.8bps.

Top question # 5:

Which asset classes / markets have been most popular

recently?

April 2013 – YTD flows

Global ETP Cumulative Net Flows/ $Bn Europe ETP Cumulative Net Flows/ $Bn

19

Global ETP inflows of $79.9bn YTD continue to outpace the $66.3bn

from last year

• Equity funds lead with $74.1bn YTD.

• Developed Markets exposures accounted for nearly all of the flows (99%);

• Investors have also increasingly turned to non-market capitalisation

weighted over traditional Equity funds, - as these funds captured 42% of

YTD Equity flows despite representing just 16% of the asset base.;

• Yield remains the other noteworthy Equity theme this year, through strong

flows into Dividend Income ETPs;

• Japanese Equity exposure has been consistently in demand all year with

YTD flows are $12.8bn.

• Finally, nearly all of the Emerging Markets Equity inflows from January

have reversed in the past three months. YTD flows are now just $0.6bn

Unless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end of

April 2013.

-50

0

50

100

150

200

250

300

Start J F M A M J J A S O N D

2011

2010

0

10

20

30

40

50

60

Start J F M A M J J A S O N D

2010

2011

2012

2013

• Fixed Income funds have gathered $21.1bn YTD including more

than $7bn in each of the past two months. Short Maturity funds

have been the engine for Fixed Income growth this year

accumulating $15.1bn.

• Gold ETP outflows continued in April, to reach ($17.9bn) YTD.

The European ETP Industry recorded a more mixed result over the

first 4 months of 2013, with flows of $6.7bn.

• Flows remained above the $2.2bn level recorded at the end of

April 2012 – but feel short of both 2011 and 2010 levels.

ETP flow monthly rolling net flows and snapshot across exposures ($bn)

April YTD Monthly flow comparison – Global

Global ETP flows slowed in April to $10.3bn, although YTD

flows $79.9bn remained well ahead of last year’s record pace of

$66.3bn

April Equity flows accounted for $9.6bn, with investors

preferring US equities and non-market capitalisation weighted

funds. “New-beta” strategies captured 42% of Equity ETP flows

– with dividend income and minimum volatility ETPs recording

monthly inflows of $3.4bn and $2.5bn, respectively

Japan equities accumulated $4.8bn in April, as the

government's commitment to stimulus policies continued to

support investors’ appetite. Conversely, EM equity ETPs

continued the negative trend recorded over the previous

months

Fixed income flows were impressive in April, reaching $9.5bn –

the best month since May 2012. The trend was led by inflows

into US treasuries

Gold ETP outflows hit a monthly record in April at ($8.7bn)

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Apr-2013 Flows

Mar-2013 Flows

Unless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end of April 2013. 20

ETP flow monthly flows and snapshot across exposures ($bn)

April YTD Monthly flow comparison – Europe

European domiciled ETPs continued to experience mixed

results, ending the month of April in negative territory with

outflows of ($893.5mn). Nevertheless, YTD flows of $6.7bn

remained above the $2.2bn level recorded at the end of April

2012

2013 YTD result was primarily driven by outflows from

commodity and equity ETPs, with European equity exposures

continuing to be shunned by investors

European Fixed income ETPs remained in the bright spot, with

April flows at $1.9bn and YTD balance of $4.5bn. The positive

trend was led by inflows into developed countries sovereign

bond ETPs. EM debt equally recorded inflows, an interesting

contrast to the result posted by EM equity ETPs

Gold ETPs continued to experience the heaviest outflows

within commodity ETPs. Conversely, other precious metals

ETPs, such as Silver trackers, recorded moderate inflows

-$6 -$4 -$2 $0 $2 $4 $6 $8

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

Equity Fixed Income Commodity / Other

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Apr-2013 Flows

Mar-2013 Flows

-0.8

-0.3

1.3

6.5

5.8

2.5

4.7

4.4

4.2

3.6

2.2

3.1

-5.0

2.0

1.9

Unless otherwise specified, all information is sourced from BlackRock ETP Landscape. Data as at end of April 2013. 21

The Beta Continuum keeps expanding …

Corporate

Asset Backed

Securities

Baskets Property Short –Term

Treasuries

Developed

Markets

Global Global

Government

Index Linked Infrastructure Emerging

Markets

Large, Mid,

Small - Cap

Growth, Value,

Dividend

Sectors /

Industry Groups

Domestic

Government

Equities Fixed Income Alternatives Commodities Cash

Equivalents

Maturity

Buckets

Single

Regional,

Country

Investors can expand their portfolios beyond traditional investments with

ETFs aiming to track several areas of the market cap weighted space …

Private Equity

For illustrative purposes only.

… or moving in the “alternative”

weighting passive space

22

Top question # 6:

Which themes shall I consider with my clients moving

into H2 2013?

Our 2013 Spring Outlook

• As in recent years, the first quarter of 2013 delivered plenty of rally headlines and positive sentiment. However,

unlike previous years, this year’s performance across asset classes has been very mixed – with the rally and ETP

flows highly concentrated in developed equities, led by the US.

• Already in Q2, softening global economic data portends a more difficult time for markets. Divergence between the

outlooks for the US and Europe economies remains while emerging markets may continue to under-deliver on

expectations. Against this, central bank actions remain key. While focus is on the BoJ’s headline-grabbing steps

and the Fed’s QE ‘exit or not’ plans, the ECB continues to be the main pillar of confidence for markets amidst the

minicrises in the Eurozone. We highlight four investment themes for a more uncertain Q2:

24

1. Broad equity valuations remain attractive

compared to other asset classes, although risk

metrics are pointing to a receding investor

appetite. Dividend income and minimum volatility

strategies provide broad equity exposure with a

tilt to defensives.

2. As emerging market equities continue to struggle,

similar to developed equities, consider the

risk-reward characteristics of minimum volatility

EM equities, and dividends within the income

theme. Selective DM large cap indices, DAX and

FTSE, provide a way to play indirect EM exposure.

3. Japanese equities, currency-hedged, should

continue to outperform other markets driven by

the BoJ’s reflation attempt.

4. In fixed income, the search for income continues

amidst rising concerns over duration risk and the

volatility of core rates markets, favouring interest

rate hedged corporates. Local EM debt offers

better value than USD EM debt.

Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.

Theme 1: Developed equities through a softer Q2

While equity valuation remains attractive to cash and bonds, risk metrics which historically correlate with risk asset

performance are pointing to a receding investor appetite (Figure 8). Investors should consider more defensive ways

to maintain developed market equity exposure: dividend income and minimum volatility equity indices

25 Source: EMEA Investment Strategy and Insights Looking Glass series – Spring Outlook April 2013.

Theme 2: Alternative approaches for EM

Year-to-date, EM equities have underperformed their DM counterparts by 10%, cheapening their relative valuations on a

price-to-book basis by 20%. Poor performance is also echoed in the ETP market, where outflows from EM equity ETPs gathered

pace in February and March. Still, while lowering expectations, emerging economies do remain a source of growth relative to

developed economies (forecast to grow 3% above DM in 2013). With broad EM equities not delivering so far in 2013, investors

can look at alternative strategies such as minimum volatility and dividends. Additionally, investors who wish to stay within DM

equities, but are searching for higher growth given the lack of domestic demand in Europe, can access selective large cap DM

equities with large shares of EM revenue.


Theme 3: Japanese equities and QQE

Under the leadership of the new governor Kuroda-san, the BoJ has announced a series of easing measures that have

surpassed market expectations. The ‘Qualitative and Quantitative Monetary Easing’ programme includes major

expansion of the JGB (Japanese Government Bond) buying along with ETF/J-Reit purchases. It aims to double the

monetary base – referring to the BoJ balance sheet size – in order to achieve the 2% inflation target within two years.

The impact on the Japanese market has been two-fold. Equities have already rallied more than 40% since November

last year on expectations that the BoJ


Theme 4: Fixed income and risk mitigation

As highlighted in the BlackRock® Investment Institute piece, ‘Forget Rotation: Think Risk Mitigation’, bond portfolios carry

more risks than in the past and more risks than many investors realise. As an example, consider the rise in rate volatility in core

government bond markets. In Europe, rate volatility is near multiyear highs compared to equity and credit spread volatility still

down near pre-crisis lows (Figure 17). So far in 2013, rate movement has accounted for a very high percentage of monthly

investment grade index returns – both good and bad – in the US and Europe. Market participants face a skewed profile of

investing. After the recent safe-haven rally, core government yield levels are unattractive and elevated rate volatility and rising

duration skews the risk-return profile. While the rate portion of investment grade credit remains volatile, the credit spread

component, even if not cheap, remains technically supported – in particular by the low level of net issuance YTD. The iShares

Barclays Euro Corporate Bond Interest Rate Hedged [IRCP] aims to deliver exposure to European credit while hedging out the

rate risk of the broad index. As central banks keep yield curves anchored and flat, the search for yield goes on. One area that

continues to benefit is emerging market debt where local currency debt (iShares Barclays Emerging Markets Local Govt Bond

[IEML]) offers better value than external debt, especially given the duration risk of USD debt.


Summary of our Investment Themes


THANK YOU!

How can we help?

ETP Implementation

Risk/return and replication methodology analysis of our ETFs

Fund comparison reports

Analysis comparing ETFs following the same benchmark

ETP Portfolio Implementation

How to combine our ETFs to create a portfolio with a specific risk/return profile

How to add our ETFs to a pre-existing portfolio to modify its risk/return profile

ETF Research

ETP Landscape market trends: AUM growth and flows

ETF thought leadership: Due diligence framework; ETFs vs. futures etc.

Tax information

E.g. “Tax Implications of iShares”

Implementing asset class themes using ETFs

Investment strategy

Facilitating due diligence

Holdings, Fund fact sheets, Trading data

31

iShares Contacts

iShares EMEA Investment Strategy and Insights

Stephen Cohen

Managing Director, Head of

Investment Strategy and Insights, EMEA

+44 20 7743 5283

[email protected]

Ursula Marchioni

Investment Strategist

+44 20 7743 1456

[email protected]

Sofia Antropova


+44 20 7743 4078

[email protected]

Wei Li


+44 20 7743 1456

[email protected]

Vasiliki Pachatouridi


+44 20 7743 1431

[email protected]

Paula Niall


+44 20 7743 2586

[email protected]

Dr. Stephanie Lang


+49 89 42729 5841

[email protected]

Karim Chedid


+44 20 7743 1370

[email protected]

Regina Zalilova


+44 20 7743 3139

[email protected]

For iShares execution related queries please contact the following:

[email protected] / [email protected] / +44 20 7743 4050

For further information please e-mail [email protected]

iShares UK Sales contacts

Claire Perryman

Director

Head of iShares UK Wealth

+44 20 7743 1667

[email protected]

Amanda Rebello

Vice President

iShares UK

+44 20 7743 1620

[email protected]

mailto:[email protected]












Appendix

ETFs: replication methodologies

34

Indexing Strategies

• All securities within an index are

purchased according to their

weightings

• Ensures a minimal tracking error

(deviations) of the portfolio

• The full replication method may

result in many positions depending

on the index and requires a

portfolio construction tool

• It is used mostly for liquid and/or

narrow defined indexes and for

fixed income indexes without tax

implications.

• A limited number of securities are

considered. The number of

securities determines the tracking

error which can be forecasted. A

minimum risk optimization is

conducted by the use of a risk

optimization tool

• Ensures a controlled and low

expected tracking error (deviations)

of the portfolio eliminating

economical unattractive

investments.

• It is used mostly for indexes with

illiquid investments and/or broad

based equity and fixed income

indexes. It is also used for fixed

income indices with tax

implications

Physical, Full Replication Physical, Optimized Sampling

• Synthetic replication involves the

use of derivatives (e.g. Equity-

Linked Swaps “ELS”)

• The manager receives benchmark

performance in exchange of the

substitute basket return from the

counterparty (i.e. the ELS issuer)

• Through the ELS, the fund is

subject to counterparty risk. Should

the counterparty default, the

investment objective may not be

achieved

Synthetic Replication

Source: BlackRock

Replication methodologies: physical replication

The traditional replication methodology with physical index constituents requires sophisticated

indexing-know-how and state of the art portfolio management and optimization tools for trading and risk

management

Replication of the underlying index:

Handling of index changes

Handling of corporate actions ( e.g. stock splits)

Handling of coupon and dividend reinvestments

Withholding tax reclaims (double tax treaties)

Management of inventory (Securities Lending, etc.)

Optimization of transactions costs through order pooling, etc.

35

Source: BlackRock

Physically replicated ETF

Replication methodologies: synthetic replication

Synthetically replicated ETFs allow exposure to a broader investment universe

Counterparty risk of max. 10% of ETF NAV (under UCITS structures)

Due diligence needed for performance figures and swap structure (frequency of P&L clearing, # of

counterparts, swap costs, etc.)

36

Source: BlackRock

Synthetically replicated ETF – unfunded

Synthetically replicated ETF – fully funded

Regulatory Information

BlackRock Advisors (UK) Limited, which is authorised and regulated by the Financial Conduct Authority ('FCA'), having its registered office at 12 Throgmorton Avenue, London, EC2N 2DL,

England, Tel +44 (0)20 7743 3000, has issued this document for access by Professional Clients only and no other person should rely upon the information contained within it. iShares plc,

iShares II plc, iShares III plc, iShares IV plc, iShares V plc and iShares VI 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. The German domiciled funds are "undertakings for collective investment in

conformity with the directives" within the meaning of the German Law on the investments. These funds are managed by BlackRock Asset Management Deutschland AG which is authorised

and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht.

For investors in the UK

This document is directed at 'Professional Clients' only within the meaning of the rules of the FSA. Certain of the funds mentioned in this document are not registered for public distribution

in the UK. In respect of these funds, this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy

the funds described within and no steps may be taken which would constitute or result in a public offering of the funds in the UK. This document is strictly confidential and may not be

distributed without authorisation from BlackRock Advisors (UK) Limited. With respect to the funds that are registered for public distribution in the UK, most of the protections provided by the

UK regulatory system do not apply to the operation of the Companies, and compensation will not be available under the UK Financial Services Compensation Scheme on its default. The

Companies are recognised schemes for the purposes of the Financial Services and Markets Act 2000. Any decision to invest must be based solely on the information contained in the

Company’s Prospectus, Key Investor Information Document and the latest half-yearly report and unaudited accounts and/or annual report and audited accounts. Investors should read the

fund specific risks in the Key Investor Information Document and the Company’s Prospectus.

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/securities are not authorised or registered

for distribution and where no prospectus has been filed with any securities commission or regulatory authority. The companies/securities may not be acquired or owned by, or acquired with

the assets of, an ERISA Plan.

Risk Warnings

Investment in the products mentioned in this document may not be suitable for all investors. Past performance is not a guide to future performance and should not be the sole factor of

consideration when selecting a product. The price of the investments may go up or down and the investor may not get back the amount invested. Your income is not fixed and may

fluctuate. The value of investments 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.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. The data displayed provides summary information, investment should be

made on the basis of the relevant Prospectus which is available from BlackRock Advisors (UK) Limited.

In respect of the products mentioned this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy

the securities described within. This document may not be distributed without authorisation from BlackRock Advisors (UK) Limited.

37

Disclaimer

Index Disclaimers

"Barclays Capital Inc." and 'Barclays Emerging Markets Local Govt Bond' and 'iShares Barclays Euro Corporate Bond Interest Rate Hedged' are trademarks of Barclays Bank PLC and

have been licensed for use for certain purposes by BlackRock Fund Advisors or its affiliates. iShares® is a registered trademark of BlackRock Fund Advisors or its affiliates.The Underlying

Indices are maintained by Barclays Capital. Barclays Capital is not affiliated with the Funds, BFA, State Street, the Distributor or any of their respective affiliates.

BFA has entered into a license agreement with the Index Provider to use the Underlying Indices. BFA, or its affiliates, sublicenses rights in the Underlying Indices to the Company at no

charge.

DAX® is a registered trademark of Deutsche Börse AG.

'STOXX', 'EURO STOXX® Select Dividend 30' are proprietary and copyrighted material and trade marks and/or service marks of STOXX Limited and have been licensed for use for

certain purposes by BlackRock Advisors (UK) Limited. iShares EURO STOXX Select Dividend 30 is not sponsored, endorsed, sold or promoted by STOXX, and STOXX makes no

representation regarding the advisability of investing in such a fund.

S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones®” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”)

and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by BlackRock Fund Advisors or its affiliates (“BlackRock”). The Dow

Jones Emerging Markets Select Dividend is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by BlackRock. The iShares Dow Jones Emerging

Markets Select Dividend (the “Fund”) is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates, and none of S&P Dow

Jones Indices LLC, Dow Jones, S&P nor their respective affiliates makes any representation regarding the advisability of investing in the Fund. BlackRock is not affiliated with the

companies listed above. Index data source: S&P Dow Jones Indices LLC.

'FTSE®' is a trade mark jointly owned by the London Stock Exchange plc and the Financial Times Limited (the 'FT') and is used by FTSE International Limited ('FTSE') under licence. The

FTSE 100 Index and FTSE UK Dividend + Index are calculated by or on behalf of FTSE International Limited ('FTSE'). None of the Exchange, the FT nor FTSE sponsors, endorses or

promotes iShares FTSE 100 and iShares FTSE UK Dividend Plus nor is in any way connected to the funds or accepts any liability in relation to their issue, operation and trading. All

copyright and database rights within the index values and constituent list vest in FTSE. BlackRock Advisors (UK) Limited has obtained full licence from FTSE to use such copyright and

database rights in the creation of these products.

iShares funds are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or any index on which such funds are

based. The Prospectus contains a more detailed description of the limited relationship that MSCI has with BlackRock Advisors (UK) Limited and any related funds.

Standard & Poor’s®', 'S&P®', are registered trademarks and 'S&P 500' and 'S&P 500 Minimum Volatility' are trademarks of Standard & Poor’s Financial Services LLC and have been

licensed for use for certain purposes by BlackRock Fund Advisors or its affiliates. iShares® is a registered trademark of BlackRock Fund Advisors or its affiliates. iShares S&P 500 and

iShares S&P 500 Minimum Volatilityare not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in these products.

© 2013 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ALADDIN, iSHARES, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A

NEW WORLD, and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks

are those of their respective owners.

38

Disclaimer

Economy & Finance

City wire privite clients retreat 2013 compliance approved uk