FOR PROFESSIONAL CLIENTS ONLY

Managing iShares Equity ETFs

The key objective of an iShares® portfolio manager is to ensure that the ETF closely tracks the benchmark. However, it is not simply a mechanistic buy and hold decision. Rather, we consider every aspect of the investment process and take advantage of all available opportunities within pre-determined risk and cost limits. Across our comprehensive range of iShares products, our investment management strategies are designed to extract optimal value from trading opportunities, index changes and securities lending, ensuring that tracking targets are met systematically and consistently.

Managing iShares Equity ETFs  [ 1 ]

Managing iShares Equity ETFs Minimising Cost Index providers do not include trading costs when they calculate an index. As a result, portfolio managers need to minimise trading costs to ensure fund returns closely match the benchmark. Equity crossing as well as BlackRock’s scale in the market both help to minimise cost and risk to the successful execution of trades, thus aiding and improving performance of our iShares funds. Equity crossing1 – Crossing equities enables portfolio managers to execute ‘share exchanges’ for securities they wish to buy in one fund and sell in another. These share exchanges happen at zero or minimal cost. This has the advantage of reducing trading costs, as transactions can be completed with other investors without having to go to market. If the two trade sizes do not perfectly match, then any residual shares can be bought or sold as normal. Crossing not only removes the need to go to the market but can also reduce stamp duty liability in markets such as the UK. BlackRock® has been crossing securities both internally between its own funds and externally with other institutional investors for several years. Given our diverse client base, BlackRock frequently has opportunities to cross ‘internally’ among existing clients. These internal crosses significantly reduce transaction costs. BlackRock has developed in-house trading systems to identify these trading opportunities. Market trading of equities – When we trade through brokers, we do so strictly on a ‘best execution’ basis, in line with our fiduciary duty. The size of BlackRock’s assets under management and the diverse nature of our client portfolios mean that, even after internal and external crossing, our trading activities remain substantial. This volume has allowed us to build strong working relationships with the world’s leading brokers and ensures that they provide us with the lowest trading rates possible and the best access to market liquidity. In recent years we have been at the forefront of investing heavily in Direct Market Access (DMA) and Algorithmic Trading systems. These provide direct and anonymous access

to the electronic order books of all the major equity markets instead of outsourcing it to brokers. Such systems can generate benefits in terms of carrying out trades more quickly, while ensuring greater control over order information and flow. In the UK, nearly 75% of trades now use algorithmic or DMA trading systems, with broker-directed trading now accounting for just 10% of equity trading. The primary benefit of DMA trading is that it represents the most cost-effective way of achieving the benchmark for equity ETFs.

Improving Returns Securities lending – BlackRock’s extremely competitive securities lending programme adds value to iShares portfolios. Our scale and position in the market, the close integration of securities lending and portfolio management, superior collateral management and a commitment to investing in the technology that underpins our quantitative approach, allows BlackRock to provide clients with consistent returns and low risks. Managing index events – Index changes and other corporate actions require careful management to minimise costs and to take advantage of potential opportunities. When navigating these events, BlackRock aims to track the index in line with investment objectives, minimise the impact of price distortions around events, and add value for funds. Trading conditions are monitored closely and risk-controlled strategies are developed to add to returns when opportunities arise.

Controlling Investment Risks Delivering returns that accurately match the performance of the index is a core element of our portfolio construction process. In certain circumstances BlackRock uses exchangetraded equity index futures in a number of iShares equity ETFs such as the iShares Euro STOXX 50 and the iShares S&P 5002. Index futures are used to reduce risk relative to the benchmark by equitising cash flows that might otherwise cause performance drag. The futures positions are unleveraged as they are fully backed by cash and dividends accrued. By maintaining a fully invested fund the portfolio manager can ensure the close tracking of the benchmark in a risk-controlled manner.

1 Please note: For German domiciled equity funds, crossing is not permitted due to regulatory requirements. 2 For German domiciled equity funds, no equity index futures are used.

[ 2 ]  Managing iShares Equity ETFs

iShares Portfolio Management Techniques There are three main techniques that ETF managers use to deliver index returns. These are: full index replication, optimisation and synthetic replication. The first two are usually referred to as ‘physical’ methods as they require that the ETF physically holds either all or a sample of the securities within its underlying benchmark. The third approach has evolved more recently and relies on a swap agreement between an investment bank and the fund provider. iShares ETFs use all three approaches, based on our view of which is the most efficient for that fund. In this section we focus on the two physical methods of ETF construction. Full replication is the simplest portfolio management technique from a risk management perspective. Full index replication (or, simply, replication) involves tracking the performance of an index by buying all of the index’s securities in exactly the same weight as the index. It also requires that the portfolio is rebalanced when the index rebalances and that the portfolio also mirrors other index changes, such as corporate actions. This approach is typically used for concentrated indices with liquid constituents and when there are sufficient assets under management to fully replicate. iShares Euro STOXX 50 is a typical example of this type of index tracking.

The following chart shows the incremental reduction in predicted TE resulting from adding additional stocks to a new fund based on a broad equity benchmark, such as the MSCI World, which includes 1,600+ securities. Assuming the original stock portfolio had 350 securities, one year ex-ante TE stands at 0.70% per annum. Adding an additional 400 stocks to the portfolio reduces the ex-ante TE to 0.25%.

Figure 1: One-Year Ex-ante Tracking Error Predicted one-year tracking error % 0.8 0.6 0.4 0.2 0.0 350

550

750

950

1,150

1,350

Number of stocks Source: BlackRock. For illustrative purposes only.

However, sometimes full replication is not efficient from a cost or liquidity point of view. For example, some markets are small or illiquid and it may be difficult to trade local stocks. In such instances, iShares uses optimisation techniques which do not require the purchase of all index securities. Optimisation aims to create an optimal portfolio by balancing several objectives such as minimising risk while limiting transaction costs. iShares adopts a model-driven approach to optimisation that uses the industry standard risk model from MSCI BARRA. The BARRA Aegis application combines a multi-factor risk model (which encapsulates risk factors such as size, country and industry) with quadratic programming software to ‘solve’ complex optimisations. BARRA Aegis is also used to determine the ex-ante TE (or predicted TE) for a particular ETF in the future, usually over one year.

Prior to running the optimisation risk model, iShares equity portfolio managers set a number of constraints, usually around turnover, liquidity, and portfolio size, as shown below: `` Tolerances on allowable stock, sector and country deviations. `` Maximum number of stocks to be included in the optimised basket. `` Target turnover within the fund. `` Minimum trade thresholds (in order to avoid small trades). Once satisfactory results are generated, a trade list is exported to BlackRock’s proprietary portfolio management system for further liquidity analysis. If liquidity is sufficient, then the trades are executed. If stock liquidity is insufficient, then corresponding trades are reduced in size and the resultant ex-ante TE is evaluated. This process is repeated and the portfolio is re-optimised until the most economically efficient basket of stocks is found.

Managing iShares Equity ETFs  [ 3 ]

Evaluating the Tracking Difference and Tracking Error of ETFs Tracking error is defined as the volatility of the differences in returns between a fund and its benchmark index. Different investors understand TE in different ways. Some focus on the absolute return difference, or tracking difference, between the index and the fund. Others look at the ex-post or ex-ante TE. In this section, we examine the differences between the various ways of calculating TE.

Tracking Difference Tracking difference is simply the difference in returns between an ETF and its benchmark over a given time period. As an example, the iShares MSCI Europe returned 26.13% over a three year period as at the end of July 2012. The Index returned 26.49%, implying an annualised tracking difference of 0.10%. Tracking difference can be influenced by the following factors: `` Any costs borne by the fund (such as TER, transaction and rebalancing costs) can lead to a negative tracking difference, which means that the ETF is underperforming the index. Indices typically assume zero transaction and rebalancing costs. `` Additional income generated by the fund (such as securities lending income) can contribute positively towards tracking difference. It can either lower a negative tracking difference or even, in some cases, lead to a positive tracking difference, in which case the ETF is outperforming the index. `` Cash drag occurs when the fund holds a cash position that performs differently to the index. This could have a negative or positive effect on tracking difference depending on whether the index moves up (negative cash drag) or down (positive cash drag). `` Imperfect tracking, due to the fund not holding all index securities in exactly the same weight as the index, can have a positive or negative effect on tracking difference. `` Different tax treatments within the fund and the index can have a positive or negative impact on return differences. For example, indices typically assume a standard withholding tax to be paid for dividends, however the tax borne by the fund depends on its domicile and any applicable double tax treaties.

Ex-ante Tracking Error Ex-ante tracking error (TE) is the predicted TE for an ETF that portrays the expected tracking difference over a certain time period with a confidence interval of 68%. It is often calculated by risk models, such as BARRA Aegis, using historic volatility as a proxy for future volatility. Ex-ante TE is primarily influenced by imperfect index tracking and therefore it is most often used with optimised ETFs.

Ex-post Tracking Error Ex-post TE also known as historic TE, is a positive number that measures the volatility of daily tracking differences between a fund and its benchmark. It shows how stable the tracking is over time. Ex-post TE can be calculated by the standard deviation of daily tracking differences between the return of the fund and the return of the benchmark. In order to make TE comparable, it should be annualised. TE measures the volatility of return differences. TE is not influenced by constant tracking differences that can lead to fund underperformance, such as the daily deduction of management fees. As a result, an ETF could have a historic TE of 0%. However, its TER (taking into account management fees) could be 0.20%. Ex-post TE is influenced by any tracking difference that is not stable, such as: `` Transaction and rebalancing costs. `` Additional income generated by the fund. `` Cash drag. `` Imperfect tracking. `` Tax differences. Furthermore, ex-post TE for a particular ETF will vary greatly if monthly data is examined rather than daily data. For a statistically significant TE, at least 30 data points should be used.

[ 4 ]  Managing iShares Equity ETFs

Finding the Appropriate Tracking Measure Finding the appropriate risk measure depends on various factors. Below are three questions investors should ask in order to select the most appropriate risk measure for the type of product as well as their investment objectives: `` Is the fund fully replicating or optimised? `` Why should I look at ex-ante TE and ex-post TE separately? `` What is my investment horizon? For fully replicating funds, we believe that the most appropriate tracking measures to use are the tracking difference and the ex-post TE. However, for optimised funds based on broader benchmarks, tracking difference and ex-ante TE are better measures to use. Comparing the ex-ante with ex-post TE is not appropriate, given the different assumptions and calculation techniques of the two measures. As we stated earlier, ex-ante TE uses historic volatility as a proxy for future volatility, while ex-post TE uses realised volatility over a certain period. In addition, ex-ante TE does not take in consideration any transaction costs, tax differences or additional income generated by the fund, while all of that can be sources of ex-post TE. Lastly, when looking at ex-post TE, investors have to decide whether daily or monthly figures are the right data to use. For short periods of time, daily data are probably best, while for longer periods of time, monthly data are more representative.

Evaluating the Reasons for Deviation From the Index in iShares MSCI Emerging Markets This section looks at the main source of ex-post TE for the iShares MSCI Emerging Markets. The iShares MSCI Emerging Markets is an optimised fund that holds 481 stocks versus 819 stocks in the index, as at the end of June 2012. The main objective behind the fund’s optimisation is to maintain liquidity and minimise transaction costs. In order to achieve this, the fund holds a number of American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs), instead of the underlying local securities that are quoted by the MSCI Emerging Markets index. ADRs and GDRs typically improve liquidity as they have historically created a price continuity and discovery momentum when local stock markets are closed for extended periods. However, ADRs and GDRs can perform differently to local securities and so can also become the biggest source of tracking error for the ETF. In other words, when using ADRs and GDRs there is a trade off between higher liquidity and lower trading costs against higher tracking error.

ADRs and GDRs Sometimes it is either not feasible or economically efficient to hold the securities listed on local exchanges. In such cases, the portfolio manager may choose to gain exposure to those countries via Depositary Receipts (DRs), which are physical certificates representing shares in local companies but trading on foreign exchanges. ADRs trade in the US, while GDRs are usually listed in London. Both ADRs and GDRs are primarily denominated in U.S. Dollars, but can also be denominated in Euros. Although DRs are priced in USD or EUR, they are not hedged into these currencies and so fully reflect the underlying foreign-exchange risk to the investor of investing in the respective emerging market. DRs are good instruments for gaining exposure to higher-risk, higher-return equities, without having to go directly into foreign markets, which can be less transparent or stable and subject to changing regulatory procedures. Instead, they are traded on major global exchanges under familiar settlement and clearing mechanisms.

Managing iShares Equity ETFs  [ 5 ]

Table 1 shows the trading hours of ADRs in the US versus their underlying stocks on local exchanges. For example, an ADR on an Indian stock closes at 9:00 PM (GMT) on the NYSE, while the underlying stock exchange closes at 10:30 AM (GMT). The ADR is therefore trading in the US for a number of hours after the local market closes, which can lead to the return on the ADR differing from the return on the local stock.

Table 1: Closing Time of Underlying Securities in Local Exchanges Versus ADRs in US Land

Region

Local (Underlying) Trading Time (GMT)

ADR Trading Time (GMT)

India

Pacific RIM/Asia

10:30 AM

9:00 PM

Russia

Europe/Middle East/Africa

2:30 PM

9:00 PM

Chile

Americas

9:30 PM (Apr–Oct) 10:30 PM (otherwise)

9:00 PM 9:00 PM

Peru

Americas

7:00 PM

9:00 PM

Source: BlackRock.

In the context of the iShares MSCI Emerging Markets fund any deviation in returns between ADRs/GDRs and local stocks contribute to the daily tracking error. However, in most cases, such differences in returns are temporary and timing related, due to the differering trading hours on each exchange, and therefore have only a small impact on the tracking error of the fund. In general, tracking error figures that are based on daily data tend to be higher as they are affected more by market noise and short term fluctuations. In most cases, the deviation in returns between ADRs/GDRs and local stocks is temporary and timing-related, due to the differing trading hours on each exchange. To conclude, there is a trade off between the higher liquidity obtained by using ADRs and GDRs at the expense of tracking error. However, over time trading these instruments helps to keep the fund performing in line with its benchmark.

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. For investors in Austria The funds mentioned in this document are registered for public offer in Austria. The sales prospectuses for the Companies, Key Investor Information Document and other documents as well as the annual and semi-annual reports have been published in Austria and are available free of charge from Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, 1030 Vienna, the Austrian paying and information agent and are also available on the website www.ishares.com. 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. In respect of the Irish-domiciled funds, the Companies intend to fulfil the requirements for treatment of all of their sub-funds as ‘white’ funds. Therefore the Companies have an Austrian tax representative who calculates the Austrian Deemed Distributed Income figures once a year and files an electronic tax return with the Austrian Ministry of Finance. However, it cannot be guaranteed that the requirements will be met in the future. The Companies reserve the right to give up the ‘white’ status and to not undertake such tax filings. For investors in Belgium Unless indicated otherwise, any decision to invest must be based solely on the information contained in the Company’s Prospectus, Key Investor Information Document and the latest halfyearly report and unaudited accounts and/or annual report and audited accounts copies of which can be obtained free of charge form the Fund’s Belgian Paying Agent (J.P.Morgan Europe Ltd, 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium). Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. For investors in Denmark This document is directed at Professional Investors in Denmark only and are authorised by Finanstilsynet, the Danish Financial Supervisory Authority.

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. Copies of all documentation can be obtained free of charge from (i) offices of the local agent in Denmark, Nordea Bank Danmark A/S, Strandgade 3, DK 0900 Copenhagen C, Denmark Tel: +45 33 33 33 01 Fax: +45 33 33 10 31 email: [email protected] and (ii) on the Companies’ internet website at the address www.iShares.com (http://www.ishares.com/ global/content/europe/ishares_danish_country_supplement.pdf and http://www.ishares. com/global/content/europe/ishares_2_danish_country_supplement.pdf).This document is strictly confidential and may not be distributed without authorisation from BlackRock Advisors (UK) Limited. In line with most other non-Danish funds, the iShares range will not have distributor status under Danish tax law, for which reason investors will generally be subject to tax based on the annual change in value of their investment irrespective of whether iShares are sold or not (mark-to-market taxation). For individuals this may be less tax efficient than upon investment in a comparable Danish investment fund with distributor status. For investors in Finland The funds mentioned are registered for public distribution in Finland and are authorised by the Finanssivalvonta (Fiva), the Financial Supervisory Authority (FIN-FSA), in Finland. 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. This document is strictly confidential and may not be distributed without authorisation from BlackRock Advisors (UK) Limited. For investors in France This document does not constitute an offer or solicitation in relation to the shares of the Companies. All subscriptions for shares in a sub-fund of one of the Companies are carried out on the terms of the Company’s Prospectus, Key Investor Information Document and other documents, the French addendum and the Supplements of the Companies as the case may be. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. These documents can be obtained by contacting the paying agent of the Companies: BNP Paribas Securities Services, 3 rue d’Antin, 75002 Paris, tel: 00

33 1 42 98 10 00 or by visiting the French section of www.iShares.com. The Companies are undertakings for collective investment in transferable securities (“UCITS”) governed by foreign laws and authorised by the Central Bank of Ireland as UCITS complying with European regulations on 14 February 2000 and 23 December 1999 respectively. The European Directive on collective investment schemes (UCITS), n° 85-611 dated 20 December 1985, established a set of common rules in order to permit the cross border marketing of collective investment schemes complying with the directive. This common foundation did not prohibit different methods of implementation. This is why a European collective investment scheme may be marketed in France even though the activity of such scheme would not respect rules identical to those which govern the approval of this type of product in France. Please note that the distribution of shares in certain sub-funds of the Companies is not authorised in France.

Please read the prospectus and ensure that you are eligible to invest under the local regulatory and financial rules, and comply with restrictions on foreign currency investments, that exist for Icelandic investors. We recommend that you seek independent financial advice before making any investment decision. This document is for your information only. Accordingly, this document and relevant information may not be used for any other purpose or passed on to any other person in Iceland. The funds described in this document are not registered for public distribution in Iceland and may not be offered, sold or resold to the public in Iceland. 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.

For investors in Germany The sales prospectus and Key Investor Information Document, as well as the annual and semiannual reports are available free of charge from Commerzbank AG, Jürgen-Ponto-Platz 1, 60301 Frankfurt. In respect of the Irish-domiciled funds, the Companies intend to fulfil the prerequisites for treatment of their sub-funds as so-called “transparent funds” pursuant to §§ 2 and 4 of the German Investment Tax Act (Investmentsteuergesetz – InvStG). 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. However, it cannot be guaranteed that the requirements will be met. The Companies reserve the right to give up the “transparent status” and to not undertake the necessary publications.

For investors in Israel BlackRock Advisors (UK) Limited is not licensed under Israel’s Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995. No action has been or will be taken in Israel that would permit a public offering or distribution of the Funds mentioned in this document to the public in Israel. The Funds mentioned in this document have not been approved by the Israeli Securities Authority. In addition, the Funds mentioned in this document are not regulated under the provisions of Israel’s Joint Investment Trusts law, 5754-1994 (the “Joint Investment Trusts Law”). This document has not been approved by the Israel Securities Authority and will only be distributed to Israeli residents in a manner that will not constitute “an offer to the public” under sections 15 and 15a of the Israel Securities Law, 5728-1968 (the “Securities Law”) or section 25 of the Joint Investment Trusts Law, as applicable.

For investors in Iceland The funds mentioned in this document are not registered for public distribution in Iceland. The investment described in this memorandum is not a public offering of securities. It is not registered for public distribution in Iceland with the Financial Supervisory Authority pursuant to the Icelandic Act on Undertakings for Collective Investment in Transferable Securities (UCITS) and investment Funds No. 30/2003 and supplementary regulations. The investment may not be offered or sold by means of this memorandum or anyway later resold otherwise than in accordance with Article 13 of the Regulation on UCITS and Investment Funds No. 792/2003. 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 Iceland. This document is strictly confidential and may not be distributed without authorisation from BlackRock Advisors (UK) Limited.

The document is being offered to those categories of investors listed in the First Addendum (the “Addendum”) to the Securities Law, (“Institutional Investors”); in all cases under circumstances that will fall within the private placement or other exemptions of the Joint Investment Trusts Law, the Securities Law and any applicable guidelines, pronouncements or rulings issued from time to time by the Israel Securities Authority. This document may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this document should be considered investment advice or investment marketing as defined in the Regulation of Investment Counselling, Investment Marketing and Portfolio Management Law, 5755-1995. This document does not constitute an offer to sell or solicitation of an offer to buy any securities, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation.

For investors in Italy Any application for shares in the funds is on the terms of the prospectus, Key Investor Information Document, for the Companies. The Shares of certain sub-funds in the Companies have been admitted to listing in Italy and are currently listed on the Mercato Telematico Fondi of Borsa Italiana S.p.A. The list of the sub-funds listed in Italy, the Prospectus, of the Companies, the Documento di quotazione of the iShares funds, the latest annual and semi annual report of the Companies are published (i) on the Companies’ internet website at the address www.iShares.com (ii) on the Irish Stock Exchange internet website at the address www.ise.ie and (iii) on Borsa Italiana S.p.A’s website at the address www.borsaitalia.it. These documents are available for the public in Italian version with certification that such documents are a faithful translation of the original documents. Investors are entitled to receive free of charge, even at home, a copy of the above documents, upon written request forwarded to the Companies. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. For comprehensive information on the expenses charged to a fund and fees applicable to investors, see the Documento di quotazione and the Prospectus. For investors in Luxembourg The Companies have been notified to the Commission de Surveillance du Secteur Financier in Luxembourg in order to market their shares for sale to the public in Luxembourg and the Companies are notified Undertaking in Collective Investment for Transferable Securities (UCITS). The Companies have not been listed on the Luxembourg Stock Exchange, investors should contact their broker for further information. Investment is subject to the Prospectus, Key Investor Information Document and all documents (the main/umbrella Prospectus, the Supplement[s], the latest and any previous annual and semi-annual reports of the Companies and the Memorandum and Articles of Association of the Companies) will be available in the Luxembourg, free of charge, from the offices of the Local Agent, BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich Howald – Hesperange L-2085 Luxembourg or by visiting the website on www.iShares.com. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. For investors in Norway The funds mentioned are registered for public distribution in Norway and are authorised by Kredittilsynet, the Financial Supervisory Authority of Norway. Any application for shares in the funds is on the terms of the prospectus, Key Investor Information Document for the Companies.

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. This document is strictly confidential and may not be distributed without authorisation from BlackRock Advisors (UK) Limited. For investors in Spain The funds mentioned are registered for public distribution in Spain the sales prospectus has been registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores (‘CNMV’)). The funds which are registered in the official registry of the Spanish Securities and Exchange Commission (CNMV) are iShares plc (registration number 801), iShares II plc (registration number 802) and iShares III plc (registration number 806). In order to check which subfunds pertaining to the aforementioned funds are registered for public distribution in Spain, the official registry CNMV must be always previously checked. 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, copies of which can be obtained free of charge on the Companies’ internet website at the address www.iShares.es. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. For investors in Sweden The funds mentioned are registered for public distribution in Sweden and are authorised by Finansinspektionen, the Swedish Financial Supervisory Authority. Any application for shares in the funds is on the terms of the prospectus, Key Investor Information Document, for the Companies. Important information on the Companies is contained in the relevant Prospectus, Key Investor Information Document and other documents, copies of which can be obtained free of charge from offices of the local agent SEB, Merchant Banking, Custody Services, Global Funds, RB6, Rissnelden 110, SE-106 40 Stockholm, Sweden, Telephone: +46 8 763 5960, Fax + 46 8 20 10 96. 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.

For investors in Switzerland The Swiss Financial Market Supervisory Authority FINMA has authorised BlackRock Asset Management Schweiz AG, Claridenstrasse 25, 8002 Zurich, to act as Swiss Representative and JPMorgan Chase Bank, National Association, Columbus, Zurich branch, Dreikönigstrasse 21, 8002 Zurich, to act as Swiss Paying Agent of the Company. The prospectus, Key Investor Information Document, the Articles of Incorporation, the latest and any previous annual and semi-annual reports of the Company are available free of charge from the Swiss representative. Investors should read the fund specific risks in the Key Investor Information Document and the Company’s Prospectus. For investors 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. Index Disclaimers ‘STOXX’, ‘EURO STOXX 50®’ 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 and iShares II plc. iShares EURO STOXX 50 is not sponsored, endorsed, sold or promoted by STOXX, and STOXX makes no representation regarding the advisability of investing in such a fund. 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’ is a trademark 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 500is not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in this product. © 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.

Contact us For more information on iShares ETFs, please visit our website on www.iShares.com Alternatively, please call us on: • From Switzerland: 0800 33 66 88 • From the UK: 0845 357 7000 • From Germany and Austria: +49 (0) 89 42729 5858 • From Luxembourg: +31 20 560 09 33 • From Italy: 800 898085 • From Belgium: +32 2 4024914 • From Israel: +44 207 743 1659 • From Spain: +34 91 788 94 00 • From Denmark: 80 88 48 45 • From Finland: 0800 918 277 • From Norway: 800 14 324 • From Sweden: 020 79 62 38

www.iShares.com • ISHARES IS-MIEE-SUGLIFABIsSpIr-DeFiIcNoSw-I-SEP12-EN-HOR