Session ii joseph nelesen

iShares Currency Hedged ETFs 2014

iS-11561

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Currency Management

Currency management

Passive currency hedging

Removes impact of currency fluctuations on the domestic value of international investments

Active currency management

Tactically adjusting currency exposure to add value with low additional risk

Investor wants to capture movements in asset markets, not currencies Not active management! Does not add alpha, only reduces risk

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iShares Currency Hedged Offerings iShares Currency Hedged ETFs will seek to provide the performance of stocks in Japan, Germany and EAFE while mitigating the impact of the local currency Japan

Germany

EAFE

Expansionary monetary policy to stimulate the local economy and fight deflation has led to a weakening yen

Largest economy in the euro zone, one of the few that remained resilient during the European financial crisis

Long-term growth potential following recovery, government reforms and increasing investments

Recent economic data and business indicators suggest further growth potential

HEWJ

EWJ

iShares Currency Hedged MSCI Japan ETF

iShares MSCI Japan ETF

HEWG

EWG

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iShares Currency Hedged MSCI Germany ETF

iShares MSCI Germany ETF

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

Diversify through international developed equities with modest global economic growth outlook Manage exposure to multicurrency risk in an international portfolio

HEFA

EFA

iShares Currency Hedged MSCI EAFE ETF

iShares MSCI EAFE ETF

3

Why Manage Currency Exposure: EAFE? Currency is a key driver of risk in MSCI EAFE In 16 out of the past 23 years, currency moves have had a +/- 5% or greater impact on the EAFE returns of USD investors Over 20 Years the overall currency impact has been negligible

1 Year

5 Years

10 Years

20 Years

Return (Local) (Hedged)

26.67%

11.67%

6.65%

5.54%

Return (USD) (Unhedged)

22.78%

12.44%

6.91%

5.67%

EAFE/USD Currency return

-3.89%

0.76%

0.26%

0.13%

* Through 31 December 2013 Past performance is not necessarily indicative of future performance

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Why Manage Currency Exposure: Japan?

Currency is a key driver of risk in MSCI Japan

JPYUSD

Unhedged

Hedged

* As of April 30, 2014. Source: Bloomberg Past performance is not necessarily indicative of future performance

5 iS-11561

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Japan

MSCI Japan 100% Hedged to USD Index

MSCI Japan 100% Hedged to USD Index Linked ETF

• iShares HEWJ

Index Inception

• December 31, 1992

Index Eligibility and Screening

• Large and mid cap segments of the Japanese market • Eligible exchanges: Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ, Nagoya Stock Exchange • Weights determined by free-float adjusted market cap

Currency Hedge

• Monthly “sell” of 1-month currency forward to offset JPY exposure

Market Cap / Liquidity Criteria

• Covers 85% of free-float adjusted market cap within universe • Investability and liquidity screens consistent with MSCI’s Global IMI methodology

Dividend Yield

• 2.07%

Valuation

• P/E: 16.6x • P/B: 1.4x

# Constituents

• 320

Rebalance Schedule

• Quarterly – February, May, August, November

As of December 31, 2013. Source: BlackRock, MSCI. Past performance does not guarantee future results. Index yields are for illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. Information on non-iShares Funds is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any funds other than the iShares Funds, that are described in this material.

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Fluctuations Between JPY and USD Demonstrate Different Environments for Owning Hedged and Unhedged Portfolios Historical Currency Impact Annualized Performance Difference between MSCI Japan USD and MSCI Japan Local Index Annualized USD / JPY Spot 50% • •

41%

40%

(+) when USD returns outperformed JPY returns (–) when USD returns underperformed JPY returns

34% 29%

30% 20%

21%

19%

29%

19% 14%15%

13%13%

10%

10%

9% 6%

5%

15%

8% 6%

5%

4%

2%

13%

13%

4%

0%

0% -2%

-10%

-4%

-6%

-7% -9%

-9% -11%

-10%

-1%

-3% -8% -10%

-13%

-15%

-20%

-3%

-19%

-20%

-30%

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

-27%

Source: MSCI, Bloomberg. As of December 31, 2013. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

The inception date of the MSCI Japan Index and the MSCI Japan Local Index is December 31, 1969. iS-11561

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Index Sector Breakdown MSCI Japan 100% Hedge to USD Index’s broad market exposure gives access to sectors such as Telecommunications and Utilities, and Financials, which results in a greater investment opportunity set 100% 90% 80%

1%

Energy

2% 6%

Utilities 20%

Telecommunication Services

70%

Financials

6% 60%

6%

Consumer Staples

6% 50%

Materials 11%

Health Care

40% 30%

Information Technology

21%

Consumer Discretionary

20% 10%

Industrials

19.0%

0%

MSCI Japan 100% Hedged to USD Index As of December 31, 2013. Source: MSCI. Index weights are subject to change. Indexes are unmanaged and one cannot invest directly in an index iS-11561

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Japanese Sector Returns (3 Years)

210

110 105

190

100 170

Financials

95

150

90

130

85 80

110

JPY/USD

Index Levels

JPY/USD

MSCI Japan

Telecomm Utilities Cons. Disc.

Cons.

Staples Info. Tech.

Health Care

75 90 70 70

50 May-11 Aug-11 Nov-11

Energy Industrials

65 60 Feb-12 May-12 Aug-12 Nov-12

Feb-13 May-13 Aug-13 Nov-13

Feb-14

As of April 30, 2014. Source: Bloomberg. Sector index in JPY. MSCI Japan index shown. Index weights are subject to change. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Information on non-iShares Funds is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any funds other than the iShares Funds, that are described in this material. iS-11561

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Historical Index Returns for Japanese Equities

Historical Performance MSCI Japan 100% Hedged to USD Index

MSCI Japan Index

14% 11.7%

12% 10%

7.6% 7.8%

Returns (%)

8% 6% 4.3% 4%

2.5% 2.5%

2%

0.8%

0% -2% -2.5%

-4% -6%

-3.7%

-4.2% -4.4% -5.9%

-8%

3-Month

6-Month

1-Year

3-Year

5-Year

10-Year

Source: Morningstar, BlackRock. As of April 30th, 2014. Returns less than 1 year represent actual numbers; returns greater than 1 year represent annualized numbers. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. iS-11561

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

11

Trading Currency Hedged ETFs – Japan

HEWJ

iShares Currency Hedged MSCI Japan (HEWJ)

Transition an existing EWJ position into HEWJ HEWJ consists of EWJ plus a currency forward contract which makes the creation/redemption process very simple and cost effective -

The creation fee is expected to be $100 irrespective of the size of the transition

-

The creation basket includes EWJ plus a cash component, similar to all other iShares ETFs

Initiate a position in HEWJ Since HEWJ will hold EWJ, it can leverage the vast liquidity of EWJ -

EWJ has an average daily volume of approximately $371.8M

-

The average bid/ask spread is $0.01 (9 bps)

-

Our internal pre-trade analytics plus feedback from the BD community suggests up to $60M of EWJ could be purchased on the offer

Source: BlackRock, Bloomberg, NYSE ArcaVision. As of April 30, 2014. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. iS-11561

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Germany

Fluctuations Between EUR and USD Demonstrate Different Environments for Owning Hedged and Unhedged Portfolios Historical Currency Impact Annualized Performance Difference between MSCI Germany USD and MSCI Germany Local Index Annualized USD / EUR Spot (prior to 1999: USD / DEM Spot) 60% 51%

• •

50%

(+) when USD returns outperformed EUR or DEM returns (–) when USD returns underperformed EUR or DEM returns

40% 29%

30% 20%

15% 13%

13%

17% 13% 11%

10%

14%13%

14% 10%

11%

7%

5%

3%

28%

10%

10%

9%

8%

6%

4%

2%

0% -2%

-10% -11%

-20%

-6% -10%

-7% -13%-12%

-15% -18%

-6%

-8%

-9%

-15%

-3%

-3%

-4%

-17% -21%

-21%

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

-30%

Source: MSCI, Bloomberg. As of December 31, 2013. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

The inception date of the MSCI Germany Index and the MSCI Germany Local Index is February 27, 1970. iS-11561

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Historical Volatility of German Equities Average Annual Volatility Volatility of the EUR relative to the USD has contributed to the total volatility of investing in German equities; a portfolio hedged back to USD may reduce some of the currency volatility

Equity Volatility

Currency Volatility

Total Volatility

Annualized Standard Deviation (%)

30% 27.1%

25% 7.4%

24.2%

24.0%

6.0%

20%

5.7% 19.8% 18.3%

18.2%

15% 3.9%

10%

14.3%

10.4%

5% 0% 1-Year

3-Year

5-Year

10-Year

Total volatility represents the annualized standard deviation of the MSCI Germany Index (USD). Equity volatility represents the annualized standard deviation of the MSCI Germany Local Index. The difference is attributed to volatility due to changes in the value of the foreign currency relative to the USD. Source: Bloomberg, BlackRock. As of December 31, 2013 iS-11561

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Germany Hedged Equity Index MSCI Germany 100% Hedged to USD Index Linked ETF

• iShares HEWG

Index Inception

• December 31, 1992

Index Eligibility and Screening

• Large and mid cap segments of the German equities market • Listed on Deutsche Börse Xetra • Weights determined by free-float adjusted market cap

Currency Hedge

• Monthly “sell” of 1-month currency forward to offset EUR exposure

Market Cap / Liquidity Criteria

• Covers 85% of free-float adjusted market cap within universe • Investability and liquidity screens consistent with MSCI’s Global IMI methodology

Dividend Yield

• 2.7%

Valuation

• P/E: 17.6x • P/B: 1.8x

# Constituents

• 55

Rebalance Schedule

• Quarterly – February, May, August, November

As of April 30th, 2013. Source: BlackRock, MSCI. Past performance does not guarantee future results. Index yields are for illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. Information on non-iShares Funds is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any funds other than the iShares Funds, that are described in this material. iS-11561

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Germany Index Sector Breakdown 100%

4.2% 4.0%

Utilities

16.6%

Telecommunicat ion Services

4.0%

Financials

90% 80% 70% 14.8%

Consumer Staples

60% 50%

13.2%

Materials

40%

7.3%

Health Care

21.9%

Information Technology

30% 20%

Consumer Discretionary

10% 14.0%

Industrials 0%

MSCI Germany 100% Hedged to USD Index

As of December 31, 2013. Source: MSCI. Index weights are subject to change. Indexes are unmanaged and one cannot invest directly in an index. iS-11561

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Historical Index Returns for German Equities

Historical Performance MSCI Germany 100% Hedged to USD Index

MSCI Germany Index

30% 26.9% 25%

Returns (%)

21.1% 20% 15.1% 15.4% 15%

9.3% 9.8%

9.0%

10% 7.7% 6.4% 5%

5.8%

5.8%

2.9%

0%

3-Month

6-Month

1-Year

3-Year

5-Year

10-Year

Source: Morningstar, BlackRock. As of April 30th, 2014. Returns less than 1 year represent actual numbers; returns greater than 1 year represent annualized numbers. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. iS-11561

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

18

Trading Currency Hedged ETFs – Germany

HEWG

iShares Currency Hedged MSCI Germany (HEWG)

Transition an existing EWG position into HEWG HEWG consists of EWG plus a currency forward contract which makes the creation/redemption process very simple and cost effective -

The creation fee is expected to be $100 irrespective of the size of the transition

-

The creation basket includes EWG plus a cash component, similar to all other iShares ETFs

Initiate a position in HEWG Since HEWG will hold EWG, it can leverage the vast liquidity of EWG -

EWG has an average daily volume of approximately $110.6M

-

The average bid/ask spread is $0.01 (3 bps)

-

Our internal pre-trade analytics plus feedback from the BD community suggests up to $20M of EWG could be purchased on the offer

1.

Source: BlackRock, Bloomberg, NYSE ArcaVision. As of January 30, 2014. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. iS-11561

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EAFE

EAFE Hedged Equity Index MSCI EAFE 100% Hedged to USD Index Linked ETF

• iShares HEFA

Index Inception

• December 31, 1992

Index Eligibility and Screening • Large and mid cap segments of the EAFE developed equities market (international developed ex-North America) • Weights determined by free-float adjusted market cap Currency Hedge

• Monthly “sell” of 1-month currency forwards to offset a basket of EAFE currencies

Market Cap / Liquidity Criteria • Covers 85% of free-float adjusted market cap within universe • Investability and liquidity screens consistent with MSCI’s Global IMI methodology Dividend Yield

• 3.07%

Valuation

• P/E: 18.2x • P/B: 1.7x

# Constituents

• 906

Rebalance Schedule

• Quarterly – February, May, August, November

As of December 31, 2013. Source: BlackRock, MSCI. Past performance does not guarantee future results. Index yields are for illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. Information on non-iShares Funds is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any funds other than the iShares Funds, that are described in this material. iS-11561

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21

Historical Volatility of International Developed Equities Average Annual Volatility Volatility of the international developed foreign currencies relative to the USD has contributed to the total volatility of investing in EAFE equities; a portfolio hedged back to USD may reduce some of the currency volatility

Equity Volatility

Currency Volatility

Total Volatility

Annualized Standard Deviation (%)

25%

20% 19.7% 5.4%

3.8%

16.8%

15%

18.2%

4.4% 14.4%

14.3% 2.6%

10%

11.7%

12.4%

9.1%

5%

0% 1-Year

3-Year

5-Year

10-Year

Total volatility represents the annualized standard deviation of the MSCI EAFE Index (USD). Equity volatility represents the annualized standard deviation of the MSCI EAFE Local Index. The difference is attributed to volatility due to changes in the value of the foreign currency relative to the USD. Source: Bloomberg, BlackRock. As of December 31, 2013. iS-11561

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EAFE Index Sector Breakdown 100%

Energy

7.3% 90%

3.7%

Utilities

5.0% 80%

70%

Telecommunication Services

25.5%

Financials 60%

50%

Consumer Staples

11.2%

Materials

8.2% 40%

Health Care

10.5% 30% 4.3% 20%

Information Technology

11.5%

Consumer Discretionary 10% 12.8%

Industrials

0%

MSCI EAFE 100% Hedged to USD Index As of December 31, 2013. Source: MSCI. Index weights are subject to change. Indexes are unmanaged and one cannot invest directly in an index. iS-11561

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Historical Index Returns for EAFE Equities

Historical Performance MSCI EAFE 100% Hedged to USD Index

MSCI EAFE Index

16% 14% 12%

Returns (%)

13.6%

13.4% 11.6%

11.3%

10% 8.6% 8%

6.9% 6.0%

6.2%

5.7%

6% 4.4%

4.0% 3.4%

4% 2% 0%

3-Month

6-Month

1-Year

3-Year

5-Year

10-Year

Source: Morningstar, BlackRock. As of April 30th, 2014. Returns less than 1 year represent actual numbers; returns greater than 1 year represent annualized numbers. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. iS-11561

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

24

Trading Currency Hedged ETFs – MSCI EFA iShares Currency Hedged MSCI EFA (HEFA)

HEFA

Transition an existing EFA position into HEFA HEFA will consist of EFA plus a currency forward contract which makes the creation/redemption process very simple and cost effective -

The creation fee is expected to be $100 irrespective of the size of the transition

-

The creation basket includes EFA plus a cash component, similar to all other iShares ETFs

Initiate a position in HEFA Since HEFA will hold EFA, it can leverage the vast liquidity of EFA -

EFA has an average daily volume of approximately $1.2B

-

The average bid/ask spread is $0.01 (1 bp)

-

Our internal pre-trade analytics plus feedback from the BD community suggests up to $200M of EFA could be purchased on the offer

1.

Source: BlackRock, Bloomberg, NYSE ArcaVision. As of January 30, 2014. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. iS-11561

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Appendix

Passive Currency Management at BlackRock BlackRock is a leading “passive” currency hedge manager with over *80 billion in developed market strategies globally and over 20 years of experience managing passive currency hedges Robust and disciplined risk management We focus on all forms of risk including investment, market, liquidity, operational, and counterparty risks Investment risk is closely monitored by the portfolio managers through our proprietary portfolio management system Internal Review Committee (IRC) provides independent and objective assurance to the integrity of portfolio management Operational risk is minimized by straight-through processing and rigorous back office processes The firm’s dedicated Risk & Quantitative Analysis (RQA) provides independent oversight to help portfolio managers identify, monitor and minimize risks throughout the investment process

Focus on best execution BlackRock trades approximately $400 billion of foreign exchange each year –allowing the firm to negotiate better spreads, net trades and minimize market footprint Best execution is sought for all trades, pursuing the lowest cost, most operationally efficient, and risk controlled execution possible This is especially important in foreign exchange transactions, where market opacity can result in significant mark ups on currency trades when a fiduciary is not present

* Includes BETA and BRS (global) hedged products

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Currency Hedged Portfolios - Breakdown

BlackRock manages $80 billion in notional hedged currency AUM for 150+ clients globally US: $35 billion; UK: $41 billion; Japan: $7 billion Trade volume: ~$38 billion per month / ~1600 trades per month Currency trading desk coverage located in New York & Singapore

Types of Hedges

7.6% 17.3%

Hedges for investments at BlackRock 10.2% Hedges for externally managed investments Hedged Canadian iShares

Feeder Funds 64.9%

65% of our AUM comes from hedges for assets managed outside of BlackRock

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Why BlackRock?

BlackRock provides expertise and capabilities in currency management Global market leader with proven ability in FX management Strong operational support and risk management throughout firm Business Continuity Management (BCM) Experienced and diverse team Internal Review Committee (IRC) provides independent and objective assurance to the integrity of portfolio management Performance attribution provides transparency to evaluate performance of the portfolio Advance IT infrastructure to support the ever increasing complexity of our clients’ solutions Currently manage $90+ billion in FX mandates for 100+ clients globally1

Investment capabilities

Expertise in currency management

Client

Market expertise

Risk management tools 1 As of 31 December 2013

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