2-Minute Guide to Fixed Income Investing

There’s now more money invesTed in fixed income securiTies Than in equiTy securiTies.

and that market hasn’t just grown —it’s grown more diverse, which means new opportunities for you.

Any Marketplace Worth Over $1.1 trillion Is Obviously Important

That’s a lot of government and corporate bonds. in fact, today’s fixed income market is just as large as the canadian equity market.

and yet, many investors don’t realize how varied the fixed income world has become. in 1994, trading in Government of canada bonds represented 90% of all secondary trading in the canadian bond market, but by 2010, their share had fallen to 78%. over that same period, secondary trading in real return bonds increased by 174%, and secondary trading in canadian corporate bonds increased by 366%.1

markets change. and so too can the strategies for investing in them.

W h y F I x e d I n c O M e ?

1. Source: Investment Industry Association of Canada, as of December 2010.

4

500

1000

1500

2000

2500

Tota

l Ret

urn

1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11

MSCI EAFE Index MSCI Emerging Markets IndexDEX Universe Bond Index

S&P 500 Index S&P®/TSX® Composite Index

Many investors still approach the fixed income marketplace with a goal of capital

preservation and income. But fixed income investments may also be utilized as an

effective tool for managing overall portfolio volatility. The differences in fixed income

market performance relative to equities create that opportunity.

Generally speaking, holding a greater percentage of fixed income equates to reducing

the overall volatility of a portfolio. So adding fixed income may help you strike the right

balance between risk and return.

Source: PC-Bond, a business unit of TSX Inc., Bloomberg L.P. and BlackRock Asset Management Canada Limited (“BlackRock Canada”). Data as of 7/29/11.

A Potential Antidote to VolatilityIndex Returns: 2000–2011 (Base Value: 1000)

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Why iShares® exchange Traded Funds (eTFs) for Fixed Income?

Liquidity, Easy to Get into and Out ofwhen you want to purchase a bond, you’re often at the mercy of whatever’s available at the bond desk on any given day. ishares fixed income eTfs are highly liquid, allowing you to buy in and get out with ease, whenever you want.

Diversification, for Stable Returnsyou often find fixed income funds holding a few bonds, offering little protection against fluctuating returns. ishares fixed income eTfs, however, hold hundreds of bonds offering you a good deal of protection against volatility and a steady stream of income for your clients.

Dependability of a Laddering Methodology, Built Right Inishares fixed income eTfs have advanced the concept of bond laddering to a whole new level. unlike a bond ladder with five or ten bonds, ishares fixed income eTfs hold hundreds of bonds that mature and are replaced in an infinite cycle, ensuring stability and mitigating risk. Best of all, it happens continuously and automatically.

Benefit from the Buying Power of BlackRockBlackrock canada and its affiliates (“Blackrock”) has over us$1.3 trillion in fixed income assets under management, which gives it unrivalled purchasing power and cost savings, resulting in ishares eTfs that offer a wider variety of holdings at a lower cost.

M A n A G I n G R I S k A n d R e T u R n

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Source: PC-Bond, a business unit of TSX Inc and BlackRock Canada, as of 6/30/11.

Laddering: It’s Part of Our DNAiShares dex Short Term Bond Index Fund (xSB)

Portfolio Breakdown

iShares fixed income eTFs have the methodology of bond laddering built right into every fund.

Access professional bond selection and management through BlackRock canada.

Most iShares fixed income eTFs provide income on a monthly basis.

Mat

urit

y

3 to 4 years

Yield: 2.34%

Duration: 3.4 years

Number of Bonds: 54

Weight: 22.1%2 to 3 years

Yield: 2.01%

Duration: 2.5 years

Number of Bonds: 66

Weight: 25.0%1 to 2 years

Yield: 1.65%

Duration: 1.5 years

Number of Bonds: 65

Weight: 32.6%

4 to 5 years

Yield: 2.71%

Duration: 4.3 years

Number of Bonds: 64

Weight: 19.9%

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The Returns of Fixed Income Aren’t Fixed

over the past ten years, the returns of different fixed income investments have varied substantially. one year, short term bonds made an investor look like a genius. The next, real return bonds did.

so instead of embracing a single solution that may (or may not) be this year’s winner, diversifying within fixed income may create more consistent risk-adjusted returns over the long term.

and unlike investors of the not-too-distant past, you have an option that makes it simple to access a wide range of asset classes within the fixed income market: ishares eTfs.

A n O T - S O - S I M P l e A S S e T c l A S S

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Annual Index Total Returns by Asset Class

Recent history shows that the performance of different fixed income sectors

varies from year to year, which may create a case for diversification within

your fixed income portfolio.

Source: PC-Bond, a business unit of TSX Inc., Bloomberg L.P. and BlackRock Canada.

Index returns are for illustrative purposes only and do not represent actual iShares Fund performance. Index performance 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.

9.4% 15.3% 13.3% 17.5% 15.2% 5.9% 4.4% 9.0% 18.9% 12.5%

9.3% 11.1% 11.2% 10.3% 13.8% 4.4% 4.1% 8.6% 16.3% 11.4%

8.1% 8.8% 9.1% 10.2% 6.6% 4.1% 3.7% 6.4% 14.5% 11.1%

7.7% 8.7% 8.5% 7.3% 6.5% 4.1% 3.4% 2.7% 5.5% 7.3%

6.1% 8.6% 6.7% 7.1% 6.0% 4.0% 2.5% 0.4% 5.4% 6.7%

0.5% 7.0% 6.0% 7.1% 5.1% 3.9% 1.8% 0.2% 4.5% 6.5%

n/a 6.3% 5.1% 5.1% 2.4% –2.9% 1.6% –0.9% 1.6% 3.6%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

dex All corporate Bond Index dex hyBrid Bond Index

dex All Government Bond Index dex long Term Bond Index

dex Real Return Bond Index

dex Short Term Bond Index

dex universe Bond Index

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An Innovative Approach to Fixed Income Investing

There’s a remarkable range of fixed income ishares eTfs now available to investors—and the options continue to grow.

fixed income ishares eTfs are diversified like traditional bond mutual funds, but are traded on an exchange similar to individual stocks. ishares eTfs tend to have low management fees and historically have had low capital gains distributions.2 costs and taxes can have a significant impact on portfolio performance over time.

The new world of fixed income investing is rapidly evolving. Talk to your advisor about how to harness it with ishares eTfs.

2. Past distributions are not necessarily indicative of future distributions.

M A n y B O n d S , O n e T R A d e

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Top 20 Issuers iShares DEX All Corporate Bond Index Fund (XCB)

BANK OF NOVA SCOTIA

ROYAL BANK OF CANADA

GE CAPITAL CANADA FUNDING COMPANY

TORONTO DOMINION BANK

CANADIAN IMPERIAL BANK OF COMMERCE

HYDRO ONE INC

GREATER TORONTO AIRPORTS AUTHORITY

BANK OF MONTREAL

BELL CANADA

ROGERS COMMUNICATIONS INC

TRANSCANADA PIPELINES LIMITED

TELUS CORPORATION

SHAW COMMUNICATIONS INC

MANULIFE FINANCIAL CORPORATION

WELLS FARGO FINANCIAL CANADA CORPORATION

407 INTERNATIONAL INC

NATIONAL BANK OF CANADA

ENBRIDGE INC

LOBLAW CO LTD

SUN LIFE FINANCIAL INC

The iShares dex All corporate Bond Index Fund reflects a range of underlying

issuances. Similar diversification is delivered by many of the fixed income

iShares eTFs.

Source: PC-Bond, a business unit of TSX Inc. and BlackRock Canada, as of 6/30/11.

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For more information visit www.iShares.ca or call 1-866-iShares (1-866-474-2737)

iShares® Funds are managed by BlackRock Asset Management Canada Limited. Commissions, management fees and expenses all may be associated with investing in iShares Funds. Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

DEX Universe Bond Index™, DEX All Corporate Bond Index™, DEX All Government Bond Index™, DEX HYBrid Bond Index™, DEX Long Term Bond Index™, DEX Real Return Bond Index™, and DEX Short Term Bond Index™ are trademarks of TSX Inc. and have been licensed for use for certain purposes to BlackRock Asset Management Canada Limited by PC-Bond, a business unit of TSX Inc. XBB, XCB, XGB, XHB, XLB, XRB and XSB are not sponsored, endorsed, sold or promoted by PC-Bond, TSX Inc., its affiliates or third party data providers and they make no representation, warranty, or condition regarding the advisability of investing in the funds.

© 2012 BlackRock Asset Management Canada Limited. All rights reserved. iShares® is registered trademark of BlackRock Institutional Trust Company, N.A. Used under license. BlackRock® is a registered trademark of BlackRock, Inc. Used with permission. All other trademarks, service marks or registered trademarks are the property of their respective owners. 130-02/12

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