DEVELOPING A STRATEGY FOR CASH

Sean Murphy, CFA

iShares Product Consultant

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Today’s agenda

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Today’s cash challenge

Why ETFsWays to invest excess cash

Cash segmentation strategy

iBonds ETFs

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3

TODAY’S CASH CHALLENGE

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-1.0

1.0

3.0

5.0

7.0

9.0

11.0

13.0

1960 1970 1980 1990 2000 2010

Inflation by Year

Even low inflation can hurt in the long run…

100

102

104

106

108

110

112

114

116

118

120

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Consumer Price Index

4

Source: Bureau of Labor Statistics, Morningstar 12/31/2019.

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Two primary risks to fixed income investing

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Interest Rates Credit Risk

A B C

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Bond ratings

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Investment Grade Standard & Poor’s

Strongest AAA

AA+

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

Non-investment grade Standard & Poor’s

BB+

BB

BB-

B+

B

B-

CCC+

CCC

CCC-

CC

Non-investment grade Standard & Poor’s

C

Weakest D

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1.2

1.4

1.6

1.8

2.0

2.2

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Federal Funds Interest Rate

Interest rate risk: 2018 case study (Q1 through Q3)

7

Jan Feb Mar April May Jun Jul Aug Sep Oct

Eff

ec

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e F

ed

Fu

nd

s R

ate

Cu

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Gro

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($

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94

95

96

97

98

99

100

101Treasury Performance

ICE U.S. Treasury 1-3 Year Bond TR USD IndexICE U.S. Treasury 3-7 Year Bond TR USD IndexICE U.S. Treasury 10-20 Year Bond TR USD Index

Source: Bloomberg, Morningstar for the period of 1/1/2018 – 9/30/2018. Index performance is for illustrative purposes only. Index performance does 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. Case study shown for illustrative purposes only. This is not meant as a guarantee of any future result or experience. This information should not be relied upon as research, investment advice or a recommendation regarding the iShares Funds or any security in particular.

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80

85

90

95

100

105

9/30/2018 10/30/2018 11/29/2018 12/29/2018

S&P 500 TR USD

Credit risk: 2018 case study (Q4)

8

Cu

mu

lati

ve

Gro

wth

($

)

Cu

mu

lati

ve

Gro

wth

($

)

94

95

96

97

98

99

100

101

102

103

9/30/2018 10/27/2018 11/24/2018 12/22/2018

Bond Returns

ICE U.S. Treasury Core Bond TR USD Index

ICE BofA US Corporate TR USD Index

ICE BofA US HY Constnd TR USD Index

Source: Morningstar for the period of 9/30/2018 – 12/31/2018. Index performance is for illustrative purposes only. Index performance does 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. Case study shown for illustrative purposes only. This is not meant as a guarantee of any future result or experience. This information should not be relied upon as research, investment advice or a recommendation regarding the iShares Funds or any security in particular.

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WHY ETFs

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ETFs (exchange traded funds) offer a diversified, low cost, and tax efficient way to invest

What are ETFs?

StockTradable duringthe day

Mutual fundDiversified

ETFsDiversified funds

that trade like stocks

Like a mutual fund, an ETFis a professionally

managed, diversifiedportfolio

Like a stock, an ETF can bebought and sold whenever

the market isopen

Transactions in shares of ETFs can result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders. For more information on the differences between traditional mutual funds and ETFs, see the end of this document.

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Why use ETFs?

DIVERSIFICATION

ETFs can hold hundreds of securities within a

single fund to easily diversify your portfolio

LOW COST

ETFs can keep fees lower than other diversified strategies because they largely track

indexes, reducing costs

TAX EFFICIENT

Because of their strategy and structure, ETFs can generally

help reduce tax consequences

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iShares Funds are obliged to distribute portfolio gains to shareholders by year-end. These gains may be generated due to index rebalancing or to meet diversification requirements. Trading shares of the iShares Funds may also generate tax consequences and transaction expenses.

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What commission free means for investors

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To have $1,200 at year-end, the fund chosen must have returned roughly:

-$5

11%For illustrative purposes only. Assumes a monthly $100 investment with a $5 transaction fee per monthly transaction.

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WAYS TO INVEST EXCESS CASH

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Key considerations

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Time Horizon

Interest Rates Risk

Credit Risk

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Tools for investing excess cash

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Cash Segmentation

Strategy

iShares® iBonds® ETFs

• Plan for expected cash flows

• Pick points on the yield curve

• Build bond ladders

• A framework for short, medium and longer-term income needs

• Match appropriate risk levels with time horizons

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Consider the purpose of the cash you plan to invest

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Time Horizon

Immediate-term0-3 months

Shorter-term3-6 months

Medium-term6-18 months

Longer-term18+ months

SHV

TFLO

ICSH FLOT

NEAR

MEAR

IGSB

SHY

The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash.

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Cash segmentation: Immediate-term

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iShares Short Treasury Bond ETF

• 100% Treasuries• 100% AAA Rated• Invests in Treasury bonds with less than 1yr to

maturity

iShares Treasury Floating Rate Bond ETF

• 100% Treasuries• 100% AAA Rated• Invests in Treasury bonds whose interest

payments adjust to reflect changes in interest rates

Time Horizon Immediate-term (less than 3 months)

Typical Use Immediate day to day

Objective Capital preservation and daily access

Investment Type

Short duration treasury market exposure

SHV

TFLO

Source: BlackRock. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash, including loss of principal.

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Cash segmentation: Short-term

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Time Horizon Short-term (3-6 months)

Typical Use Short-term expenses and emergency funds

Objective Stability with incremental income

Investment Type

Ultra-short duration bonds and cash alternatives

Seeks to provide income by investing in a broad range of short-term bonds and money market instruments. However, ICSH is not a money market fund

iShares Ultra Short-term Bond ETF (Active)

• All Investment Grade• Invests in securities with less than 2 years to

maturity

ICSH

CDs

Commercial Papers

Bonds

For illustrative purposes only. Not an indication of ETF holdings.Source: BlackRock. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash, including loss of principal.

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Cash segmentation: Medium-term

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Time Horizon Medium-term (6-18 months)

Typical Use Larger future purchases or unexpected expenses

Objective Incremental income and low risk

Investment Type

Ultra-short duration bonds

iShares Short Maturity Bond ETF

• All Investment Grade• Invests in bonds with both fixed and floating rate

coupon payments

iShares Floating Rate Bond ETF

• All Investment Grade• Invests in corporate bonds whose coupon

payments adjust to reflect changes in interest rates

FLOT

NEAR

iShares Short Maturity Municipal Bond ETF (Active)

• All Investment Grade• Put cash to work in a low yield environment, while

seeking to reduce both taxes and interest rate risk

MEAR

Seeks to maximize tax-free income through diversified exposure to short-term municipal bonds

Source: BlackRock. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash, including loss of principal.

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Cash segmentation: Longer-term

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iShares 1-3 Year Treasury Bond ETF

• 100% Treasuries• 100% AAA Rated• Invests in Treasury bonds between 1 and 3 years

to maturity

iShares Short-Term Corporate Bond ETF

• All Investment Grade• Invests in corporate bonds between 1 and 5 years

to maturity

Time Horizon Longer-term (18+ months)

Typical Use Longer-term savings

Objective Generate income or growth with some risk

Investment Type

Short duration bonds

SHY

IGSB

Source: BlackRock. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash, including loss of principal.

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MATURE LIKE A BOND

iBonds ETFs payout their NAV in their maturity year1

TRADE LIKE A STOCK

iBonds ETFs can be bought and sold like a share of stock

DIVERSIFY LIKE A FUND

iBonds ETFs hold hundreds of bonds from different

industries or states

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iBonds ETFs are designed to:

1 Proceeds are expected to be distributed to investors once all the underlying bonds have matured. During maturity transition period, some portion of the Fund’s assets will be in cash and cash equivalents, and is therefore subject to potential reinvestment risk.

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Applications of iBonds ETFs

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Asset-Liability Match

Use iBonds ETFs to invest proceeds for a specific cash flow event, such as buying a house or paying for education

2022 2025

An investment in the Fund(s) is not guaranteed, and an investor may experience losses, including near or at the termination date. Source: BlackRock 6/30/2020.

Maturity year

Investment Grade Corporate

Municipal

2020 IBDL IBMI

2021 IBDM IBMJ

2022 IBDN IBMK

2023 IBDO IBML

2024 IBDP IBMM

2025 IBDQ IBMN

2026 IBDR IBMO

2027 IBDS IBMP

2028 IBDT IBMQ

2029 IBDU

2030 IBDV

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IN SUMMARY

Why ETFs

Diversification Low cost Tax efficient

Ways to invest excess cash

23

Cash Segmentation Strategies

iBonds ETFs

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APPENDIX

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Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visitingwww.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. The iShares Floating Rate Bond ETF's income may decline when interest rates fall because most of the debt instruments held by the Fund will have floating or variable rates. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market. Shares of ETFs trade at market price, which may be greater or less than net asset value. Actively managed funds do not seek to replicate the performance of a specified index. Actively managed funds may have higher portfolio turnover than index funds. The iShares Short Maturity Bond ETF will invest in privately issued securities that have not been registered under the Securities Act of 1933 and as a result are subject to legal restrictions on resale. Privately issued securities are not traded on established markets and may be illiquid, difficult to value and subject to wide fluctuations in value. Delay or difficulty in selling such securities may result in a loss to the iShares Short Maturity Bond ETF. The fund may invest in asset-backed (“ABS”) and mortgage-backed securities (“MBS”) which are subject to credit, prepayment and extension risk, and react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly reduce the value of certain ABS and MBS.

The iShares iBonds ETFs will terminate in September or December of the year in the fund's name. An investment in the Fund(s) is not guaranteed, and an investor may experience losses, including near or at the termination date. In the final months of the Fund’s operation, as the bonds it holds mature, its portfolio will transition to cash and cash -like instruments. Following the Fund’s termination date, the Fund will distribute substantially all of its net assets, after deduction of any liabilities, to then -current investors without further notice and will no longer be listed or traded. The Funds do not seek to return any predetermined amount.

Important notes

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During the months prior to the Fund’s planned termination date, its yield will generally tend to move toward prevailing money market rates (or, the case of the Muni iBonds ETFs, tax-exempt money market rates), and may be lower than the yields of the bonds previously held by the Fund and lower than prevailing yields for bonds in the market. The rate of Fund distribution payments may adversely affect the tax characterization of an investor’s returns from an investment in the Fund relative to a direct investment in bonds. If the amount an investor receives as liquidation proceeds upon the Fund’s termination is higher or lower than the investor’s cost basis, the investor may experience a gain or loss for tax purposes.

This document contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.

Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.

Diversification and asset allocation may not protect against market risk or loss of principal. The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. eastern time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Markit Indices Limited or S&P Dow Jones Indices LLC. Neither of these companies make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the companies listed above.

©2020 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners.

The information provided in this communication is solely for educational purposes and should not be construed as advice or an investment recommendation. Fidelity Investments is a separate company, unaffiliated with BlackRock, Inc.. There is no form of partnership, agency affiliation, or similar relationship between BlackRock, Inc. and Fidelity Investments, nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by BlackRock, Inc. and does not guarantee or assume any responsibility for its accuracy or completeness.

Important notes

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