For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 1

In association with

23rd October 2014 | ASX Auditorium

For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices.

Moderator

- Jonathan Morgan, S&P Dow Jones Indices

Panelists:

- Jonathan Shead, State Street Global Advisors

- Jonathan Howie, iShares by BlackRock

PANEL: Using ETFs to Access

International Markets

What You Need to Know

spdrs.com.au

International ETFs

State Street Global Advisors

p. 4

Adviser goal

• To cost effectively alter level of currency hedging in client model portfolios

Considerations

• Vehicles considered were unlisted managed funds and ETFs

• Impact of large cash flows on ETF

• Secondary market liquidity

• Ability to leverage relationship with own broker

• Costs of switching between hedged and unhedged exposures

Solution: Implemented a combination of hedged and unhedged international equity

ETFs

Case Study: Currency management with ETFs

p. 5

Case study: Income focused investor

Planner goal

• Deliver a portfolio for a client with 10 years till retirement

• Needs to diversify from Australian equities and property

• Wants to include international equities

• Focus on income

Considerations

• Portfolio is tilted to international equity strategies offering both income and growth

potential

• Due to clients risk averse nature, only a small allocation to emerging market

equities is appropriate

• A smaller broad based developed market equity allocation was used to provide

broad diversification across countries, sectors and companies

p. 6

Proposed asset allocation

Source: State Street Global Advisors, as of 28 February 2014. Asset classes are represented by underlying indices: Australian equities, S&P/ASX 200 index; broad global equities, S&P Developed ex-Australia

LargeMidCap index; global dividend equities, S&P Global Dividend Aristocrats index; emerging market equities, S&P Emerging Markets LargeMidCap index; global REITs, Dow Jones Global Select Real Estate Securities.

Solution: Income focused investor

EXPECTED

RETURN (%)

CURRENT

DIVIDEND YIELD

(%)

SHARPE RATIO

(%)

4.94 4.00 0.53

0.55

0.59

0.70

0.74

0.40 0.60 0.80 1.00

Global Real Estate

Global Dividend Equities

Developed InternationalEquities

Emerging Market EquitiesAustralian Equities,

15%

Bonds, 15%

Cash, 30%

Global Real Estate, 15%

Global Dividend

Equities, 10%

Developed International

Equities, 10%

Emerging Market

Equities, 5%

14.0%

7.3% 7.6%

2.8% 3.3% 3.9%

10.6% 8.7%

15.1%

0%

5%

10%

15%

20%

1 year 3 years(annualised)

5 years(annualised)

Income focused portfolio UBS Bank Bill Index

S&P/ASX 200 Index

Correlation (10 years)

Historical Performance

p. 7

Pricing International Equity ETFs

ASX

Open

AUS

TUE

8AM

USA

MON

6PM

USA

TUE

1AM

USA

TUE

5AM

USA

MON

9PM

USA

TUE

9AM

USA

TUE

1PM

USA

TUE

4PM

AUS

WED

12AM

AUS

WED

4AM

AUS

WED

8AM

AUS

TUE

8PM

AUS

TUE

4PM

AUS

TUE 12PM

ASX Close US

Close

Decision

point

NAV

calculate

d

Market and

Political events

Foreign

exchange

US

Open

Seeking international exposures with

iShares ETFs

iShares Australia

23/10/2014

Using ETFs to access international markets

JAPAN

IJP UNITED STATES

IVV

IRU

IJR

IJH

EUROPE

IEU

AUSTRALIA

IOZ

IHD

ISO

ILC

IAF

IGB

ILB

LARGE CAP ASIA

IAA

TAIWAN

ITW

KOREA

IKO

GLOBAL

IOO

IXI

IXJ

IXP

IEM

IBK

IVE

CHINA

IZZ

IHK

9

SINGAPORE

ISG

FOR FINANCIAL ADVISOR AND PROFESSIONAL INVESTOR USE ONLY - NOT FOR PUBLIC DISTRIBUTION

‘World’ exposure with just two trades

10

3.94%

8.03%

6.46%

45.13%

5.09%

6.99%

0.78%

16.39%

0.00%

5.45%

1.74%

7.74%

9.20%

7.05%

33.27%

8.67%

9.14%

6.57%

11.06%

0.09%

4.56%

2.64%

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Other

Telecommunication Services

Utilities

Before (S&P/ASX 200) After (World Portfolio)

Source: Bloomberg, as at 30 September 2014

S&P/ASX 200 Inde

x

Before

IOZ

IVV

IVE

After

‘World’ exposure with just two trades

11 FOR FINANCIAL ADVISOR AND PROFESSIONAL INVESTOR USE ONLY - NOT FOR PUBLIC DISTRIBUTION

$90

$100

$110

$120

$130

$140

$150

$160

$170

$180

Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14

Before After KEY

STATSTICS

Australian

Equities

Internationally

Diversified

Underlying Stocks 200 1413

Number of Countries

Represented 1 22

Average Annual

Return (%) 7.78 15.52

Annual Standard

Deviation (%) 11.32 9.31

Cumulative

Return (%) 32.44 71.76

Sharpe Ratio 0.38 1.29

MER (% pa) 0.19 0.1975

Trade when markets are most active

Pricing is likely to be most efficient when there are multiple liquidity providers active

Where possible, time orders when underlying markets are open

Use limit orders

Be a price maker, not a price taker and avoid potential price slippage

For larger orders

Liquidity providers can provide two way risk prices on screen

Authorised Participants are able to create (or redeem) units in the ETF to satisfy demand

Contact iShares Capital markets for assistance (02) 9272 2345

12

ETF trading best practices

FOR FINANCIAL ADVISOR AND PROFESSIONAL INVESTOR USE ONLY - NOT FOR PUBLIC DISTRIBUTION

Trading in international iShares

13

0

1000

2000

3000

4000

5000

6000

10:1

2:1

1 A

M10:1

7:4

6 A

M10:1

7:5

9 A

M10:1

9:3

0 A

M10:2

7:3

4 A

M10:4

9:2

5 A

M11:0

0:0

7 A

M11:0

9:2

1 A

M11:2

1:0

1 A

M11:2

8:3

6 A

M11:3

6:0

1 A

M11:4

8:3

8 A

M11:5

6:4

4 A

M12:0

4:2

8 P

M12:0

7:0

5 P

M12:1

2:3

9 P

M12:1

4:5

5 P

M12:2

6:1

5 P

M12:3

5:3

1 P

M12:3

7:4

1 P

M12:4

0:3

5 P

M12:4

0:3

5 P

M12:4

4:0

7 P

M12:4

7:2

6 P

M12:5

5:5

3 P

M12:5

9:2

0 P

M1:0

9:0

1 P

M1:1

0:3

8 P

M1:1

4:2

0 P

M1:3

4:4

6 P

M1:3

4:5

8 P

M1:4

3:0

0 P

M1:5

2:0

4 P

M1:5

4:0

2 P

M2:0

1:4

1 P

M2:1

0:4

8 P

M2:2

1:3

5 P

M2:2

4:1

5 P

M2:3

3:1

9 P

M2:4

1:3

3 P

M2:5

6:5

8 P

M2:5

7:3

2 P

M3:1

0:0

4 P

M3:1

8:1

9 P

M3:2

1:0

7 P

M3:2

2:5

3 P

M3:2

4:1

7 P

M3:3

1:2

7 P

M3:3

1:4

4 P

M3:4

9:3

5 P

M3:5

3:2

2 P

M3:5

4:0

3 P

M4:0

0:0

0 P

M

224.5

225

225.5

226

226.5

227

227.5

228

228.5

229

Trade Size (Units) Price (A$)

Source: Bloomberg, as at 1 October 2014

On 1 October 2014 an investor traded two lots of IVV on screen, each worth

approximately $1m, at 2.16pm and 3.54pm. What did that do to the price?

BlackRock’s iShares® Platform

14

iShares have delivered strong performance through

tight tracking, deep liquidity, and institutional-quality indices1

700+ funds globally–the most comprehensive range of choices for your portfolios

iShares give you versatility to build the core of your portfolio,

help meet specific goals, and implement your market views

Expert portfolio management actively seeks to optimize returns, risk, and cost

Risk-managed by Aladdin, BlackRock’s industry-leading technology platform

Specialized client teams who help you choose the right

iShares ETFs, trade efficiently, and build better portfolios

Serves investors of all sizes–wealth managers, banks, asset managers,

pensions, insurers, advisors, and personal investors

Brings you more than a decade of ETF innovation and expertise

The scale of iShares benefits you through indexing excellence, breadth of choice, and deep liquidity

1 See appendix. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

FOR FINANCIAL ADVISOR AND PROFESSIONAL INVESTOR USE ONLY – NOT FOR PUBLIC DISTRIBUTION

Important information

IMPORTANT INFORMATION

Before investing in an iShares exchange traded fund, you should carefully consider whether such products are appropriate for you, read the applicable prospectus or product

disclosure statement (“PDS”) available at iShares.com.au and consult an investment adviser.

Issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230523 (“BIMAL”). BIMAL is a wholly-owned subsidiary of BlackRock, Inc. (collectively

“BlackRock”).

BlackRock believes the information in this document is correct at the time of issue, but no warranty of accuracy or reliability is given and no responsibility arising in any way for errors or

omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock.

This information is general in nature, and has been prepared without taking into account any individual’s objectives, financial situation, or needs.

Transaction costs are incurred when buying or selling shares or units (as the case may be) of an iShares fund (“iShares secur ities”) on a market of the Australian Securities Exchange

(“ASX”) and brokerage commissions may be charged if such trades are done through a broker.

Neither the performance nor the repayment of capital or any income of an iShares fund is guaranteed by any BlackRock entity. Past performance is not a reliable indicator of future

performance.

iShares securities trade on ASX at market price (not, net asset value ("NAV")). iShares securities may only be redeemed directly by persons called “Authorised Participants”.

An iShares fund is not sponsored, endorsed, issued, sold or promoted by the provider of the index which a particular iShares fund seeks to track. No index provider makes any

representation regarding the advisability of investing in the iShares funds.

Australian iShares funds: BIMAL is the Responsible Entity for the managed investment scheme Australian iShares funds quoted on ASX, and is the issuer of units in those iShares funds.

Each fund constitution provides that the liability of each unit holder is limited to its investment in the fund. In addition to the normal risks associated with investing, there may be risks

associated with investments made by iShares funds in smaller companies and those whose activities are narrowly focused.

International iShares funds: BIMAL is the local agent and intermediary for international iShares funds issued by iShares (iShares, Inc. ARBN 125632 279 formed in Maryland, USA; iShares

Trust ARBN 125 632 411 organised in Delaware, USA. The liability of shareholders is limited). BlackRock Fund Advisors (“BFA”) serves as an advisor to the iShares funds that are

registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940. BFA is a subsidiary of BlackRock Institutional Trust Company, N.A

(“BTC”). BTC is a wholly-owned subsidiary of BlackRock, Trades on ASX in the shares of an international iShares fund are settled using CHESS Depositary Interests (or “CDIs"). An

investment in an international iShares fund has different risk, performance and return factors compared to investments in other listed securities that do not have international exposure.

© 2014 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective

owners.

15 FOR FINANCIAL ADVISOR AND PROFESSIONAL INVESTOR USE ONLY - NOT FOR PUBLIC DISTRIBUTION