|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
|
|
|
71
|
|
Notes to Financial Statements (continued)
5.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
Forward Foreign Currency Exchange Contracts: The iShares J.P. Morgan EM Local Currency Bond ETF uses forward foreign currency exchange contracts to offset the
Funds exposure to the component currencies of the non-U.S. dollar-denominated securities held in its portfolio. A forward foreign currency exchange contract is an agreement between two parties to buy and
sell a currency against another currency at an agreed upon price and quantity. The contracts are traded over-the-counter (OTC) and not on an organized
exchange.
The contract is marked-to-market daily and the change in market value is
recorded as unrealized appreciation or depreciation in the statement of assets and liabilities. When the contract is closed, a realized gain or loss is recorded in the statement of operations equal to the difference between the value at the time it
was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts (NDFs) are settled with the counterparty in cash without the delivery of foreign
currency. The use of forward foreign currency exchange contracts involves the risk that the value of a contract changes unfavorably due to movements in the value of the referenced foreign currencies. A funds risk of loss from counterparty
credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the fund.
6.
|
INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
|
Investment Advisory Fees: Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Funds assets. BFA is a California
corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except (i) interest and taxes; (ii) brokerage commissions and other expenses connected with
the execution of portfolio transactions; (iii) distribution fees; (iv) the advisory fee payable to BFA; and (v) litigation expenses and any extraordinary expenses (in each case as determined by a majority of the independent
directors).
For its investment advisory services to each Fund, BFA is entitled to an annual investment advisory fee, accrued daily and paid monthly by the Funds,
based on the average daily net assets of each Fund as follows:
|
|
|
|
|
|
|
iShares ETF
|
|
Investment Advisory Fee
|
|
|
|
Emerging Markets High Yield Bond
|
|
|
0.50%
|
|
International High Yield Bond
|
|
|
0.40
|
|
J.P. Morgan EM Corporate Bond
|
|
|
0.50
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
0.30
|
|
US & Intl High Yield Corp Bond
|
|
|
0.40
|
|
|
|
Sub-Adviser: BFA has entered into a sub-advisory
agreement with BlackRock International Limited (the Sub-Adviser), an affiliate of BFA, under which BFA pays the Sub-Adviser for services it provides to the
iShares International High Yield Bond ETF, iShares J.P. Morgan EM Local Currency Bond ETF and iShares US & Intl High Yield Corp Bond ETF.
Distributor:
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Securities Lending: The U.S. Securities and Exchange Commission (the SEC) has issued an exemptive order which permits BlackRock Institutional Trust
Company, N.A. (BTC), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each
Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, or its affiliates, however, BTC has agreed to reduce the amount of securities lending income it
receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the collateral investment fees). Securities lending income is equal to the total of income earned from the reinvestment of
cash collateral (excluding collateral investment fees), net of fees and other payments to and from borrowers of securities. Each Fund retains a portion of securities lending income and remits the remaining portion to BTC as compensation for its
services as securities lending agent.
Pursuant to the current securities lending agreement, each Fund retains 82% of securities lending income (which excludes
collateral investment fees), and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
In
addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the iShares ETF Complex) in that
calendar year exceeds a specified threshold, each Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income (which excludes collateral investment fees) and the amount
retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
Prior to January 1, 2019, each Fund retained
80% of securities lending income (which excludes collateral investment fees) and the amount retained was not less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day
following the date that the aggregate securities lending income plus the collateral investment fees generated across the iShares ETF Complex in a calendar year exceeded a specified threshold, each Fund, pursuant to the securities lending agreement,
retained for the remainder of that calendar year 85% of securities lending income (which excludes collateral investment fees), and the amount retained could never be less than 70% of the total of securities lending income plus the collateral
investment fees.
|
|
|
72
|
|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|
Notes to Financial Statements (continued)
The share of securities lending income
earned by each Fund is shown as securities lending income affiliated net in its statement of operations. For the year ended October 31, 2019, the Funds paid BTC the following amounts for securities lending agent services:
|
|
|
|
|
iShares ETF
|
|
Fees Paid
to BTC
|
|
J.P. Morgan EM Corporate Bond
|
|
$
|
13,647
|
|
US & Intl High Yield Corp Bond
|
|
|
39,947
|
|
Officers and Directors: Certain officers and/or directors of the Company are officers and/or directors of BlackRock or its
affiliates.
Other Transactions: Cross trading is the buying or selling of portfolio securities between funds to which BFA (or an affiliate) serves as
investment adviser. At its regularly scheduled quarterly meetings, the Board reviews such transactions as of the most recent calendar quarter for compliance with the requirements and restrictions set forth by Rule
17a-7.
For the year ended October 31, 2019, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares ETF
|
|
Purchases
|
|
|
Sales
|
|
|
Net Realized
Gain (Loss)
|
|
Emerging Markets High Yield Bond
|
|
$
|
2,663,202
|
|
|
$
|
2,279,026
|
|
|
$
|
(132,721
|
)
|
International High Yield Bond
|
|
|
115,820
|
|
|
|
506,951
|
|
|
|
(11,347
|
)
|
J.P. Morgan EM Corporate Bond
|
|
|
495,999
|
|
|
|
683,092
|
|
|
|
26,757
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
|
|
|
|
2,479,009
|
|
|
|
(290,563
|
)
|
US & Intl High Yield Corp Bond
|
|
|
115,820
|
|
|
|
1,208,577
|
|
|
|
40,122
|
|
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these
temporary cash investments is shown as dividends affiliated in the statement of operations.
A fund, in order to improve its portfolio liquidity and its
ability to track its underlying index, may invest in shares of other iShares funds that invest in securities in the funds underlying index.
For the year ended October 31, 2019, purchases and sales of investments, including TBA rolls and excluding in-kind
transactions and short-term investments, were as follows:
|
|
|
|
|
|
|
|
|
iShares ETF
|
|
Purchases
|
|
|
Sales
|
|
Emerging Markets High Yield Bond
|
|
$
|
102,783,256
|
|
|
$
|
106,265,764
|
|
International High Yield Bond
|
|
|
16,580,385
|
|
|
|
16,357,445
|
|
J.P. Morgan EM Corporate Bond
|
|
|
48,997,201
|
|
|
|
21,783,819
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
389,688,400
|
|
|
|
225,308,856
|
|
US & Intl High Yield Corp Bond
|
|
|
41,699,800
|
|
|
|
41,522,743
|
|
For the year ended October 31, 2019, in-kind transactions were as follows:
|
|
|
|
|
|
|
|
|
iShares ETF
|
|
In-kind
Purchases
|
|
|
In-kind
Sales
|
|
Emerging Markets High Yield Bond
|
|
$
|
80,972,370
|
|
|
$
|
150,655,940
|
|
International High Yield Bond
|
|
|
|
|
|
|
23,861,566
|
|
J.P. Morgan EM Corporate Bond
|
|
|
60,305,580
|
|
|
|
2,176,632
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
76,755,241
|
|
|
|
136,180,626
|
|
US & Intl High Yield Corp Bond
|
|
|
26,830,339
|
|
|
|
62,252,518
|
|
8.
|
INCOME TAX INFORMATION
|
Each Fund is treated as an entity separate from the Companys other funds for federal income tax purposes. It is the policy of each Fund to qualify as a regulated
investment company by complying with the provisions applicable to regulated investment companies, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute substantially all of its ordinary income and
any net capital gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes is required.
Management has analyzed tax laws and regulations and their application to the Funds as of October 31, 2019, inclusive of the open tax return years, and does not
believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds financial statements.
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
77
|
|
|
|
|
Important Tax Information (unaudited)
|
|
|
For the fiscal year ended October 31, 2019, the Funds
earned foreign source income and paid foreign taxes which they intend to pass through to their shareholders:
|
|
|
|
|
|
|
|
|
iShares ETF
|
|
Foreign Source
Income Earned
|
|
|
Foreign
Taxes Paid
|
|
Emerging Markets High Yield Bond
|
|
$
|
20,047,738
|
|
|
$
|
|
|
International High Yield Bond
|
|
|
1,419,207
|
|
|
|
|
|
J.P. Morgan EM Corporate Bond
|
|
|
5,148,181
|
|
|
|
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
39,112,793
|
|
|
|
275,741
|
|
For the fiscal year ended October 31, 2019, the Funds hereby designate the following maximum amounts allowable as interest-related
dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations:
|
|
|
|
|
iShares ETF
|
|
Interest-Related
Dividends
|
|
J.P. Morgan EM Local Currency Bond
|
|
$
|
60,463
|
|
US & Intl High Yield Corp Bond
|
|
|
4,789,831
|
|
The Funds hereby designate the following amounts of distributions from direct federal obligation interest for the fiscal year ended
October 31, 2019:
|
|
|
|
|
iShares ETF
|
|
Federal Obligation
Interest
|
|
Emerging Markets High Yield Bond
|
|
$
|
22,611
|
|
International High Yield Bond
|
|
|
284
|
|
J.P. Morgan EM Corporate Bond
|
|
|
9,934
|
|
J.P. Morgan EM Local Currency Bond
|
|
|
64,537
|
|
US & Intl High Yield Corp Bond
|
|
|
14,712
|
|
The law varies in each state as to whether and what percent of ordinary income dividends attribute to federal obligations is exempt from
state income tax. Shareholders are advised to check with their tax advisers to determine if any portion of the dividends received is exempt from state income tax.
|
|
|
78
|
|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|
Board Review and Approval
of Investment Advisory Contract
I. iShares Emerging Markets High Yield Bond
ETF and iShares J.P. Morgan EM Corporate Bond ETF (the Funds)
Under Section 15(c) of the Investment Company Act of 1940 (the 1940
Act), the Companys Board of Directors (the Board), including a majority of Directors who are not interested persons of the Company (as that term is defined in the 1940 Act) (the Independent Directors),
is required annually to consider and approve the Investment Advisory Contract between the Company and BFA (the Advisory Contract) on behalf of the Funds. The Boards consideration entails a year-long process whereby the Board and
its committees (composed solely of Independent Directors) assess BlackRocks services to the Funds, including investment management; fund accounting; administrative and shareholder services; oversight of the Funds service providers; risk
management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements. The Independent Directors requested, and BFA provided, such information as the Independent Directors, with advice from
independent counsel, deemed reasonably necessary to evaluate the Advisory Contract. At meetings on May 6, 2019 and May 17, 2019, a committee composed of all of the Independent Directors (the 15(c) Committee), with independent
counsel, met with management and reviewed and discussed information provided in response to initial requests of the 15(c) Committee and/or their independent counsel, and requested certain additional information, which management agreed to provide.
At a meeting held on June 17-19, 2019, the Board, including the Independent Directors, reviewed the additional information provided by management in response to these requests.
After extensive discussions and deliberations, the Board, including all of the Independent Directors, approved the continuance of the Advisory Contract for the Funds,
based on a review of qualitative and quantitative information provided by BFA and their cumulative experience as Directors. The Board noted its satisfaction with the extent and quality of information provided and its frequent interactions with
management, as well as the detailed responses and other information provided by BFA. The Independent Directors were advised by their independent counsel throughout the process, including about the legal standards applicable to their review. In
approving the Advisory Contract for the Funds, the Board, including the Independent Directors, considered various factors, including: (i) the expenses and performance of each Fund; (ii) the nature, extent and quality of the services
provided by BFA; (iii) the costs of services provided to each Fund and profits realized by BFA and its affiliates; (iv) economies of scale; (v) the fees and services provided for other comparable funds/accounts managed by BFA and its
affiliates; and (vi) other benefits to BFA and/or its affiliates. The material factors, no one of which was controlling, and conclusions that formed the basis for the Board, including the Independent Directors, to approve the Advisory Contract
are discussed below.
Expenses and Performance of the Funds: The Board reviewed statistical information prepared by Broadridge Financial Solutions Inc.
(Broadridge), an independent provider of investment company data, regarding the expense ratio components, including gross and net total expenses, fees and expenses of another fund in which each Fund invests (if applicable), and
waivers/reimbursements (if applicable) of each Fund in comparison with the same information for other ETFs (including, where applicable, funds sponsored by an at cost service provider), objectively selected by Broadridge as comprising
each Funds applicable peer group pursuant to Broadridges proprietary ETF methodology (the Peer Group). The Board was provided with a detailed description of the proprietary ETF methodology used by Broadridge to determine the
applicable Peer Groups. The Board further noted that due to the limitations in providing comparable funds in the various Peer Groups, the statistical information provided in Broadridges report may or may not provide meaningful direct
comparisons to the Funds in all instances.
The Board also noted that the investment advisory fee rates and overall expenses (net of any waivers and reimbursements)
for the Funds were higher than the median of the investment advisory fee rates and overall expenses (net of any waivers and reimbursements) of the funds in their respective Peer Group, excluding iShares funds. In addition, to the extent that any of
the comparison funds included in the Peer Group, excluding iShares funds, track the same index as any particular Fund, Broadridge also provided, and the Board reviewed, a comparison of such Funds performance for the one-, three-, five-, ten-year, and since inception periods, as applicable, and for the quarter ended December 31, 2018, to that of relevant comparison fund(s) for the
same periods. The Board noted that each Fund seeks to track its specified underlying index and that, during the year, the Board received periodic reports on each Funds short- and longer-term performance in comparison with its underlying index.
Such periodic comparative performance information, including additional detailed information as requested by the Board, was also considered. The Board noted that each Fund generally performed in line with its respective underlying index over the
relevant periods.
Based on this review, the other factors considered at the meeting, and their general knowledge of ETF pricing, the Board concluded that the
investment advisory fee rate and expense level and the historical performance of each Fund supported the Boards approval of the continuance of the Advisory Contract for the coming year.
Nature, Extent and Quality of Services Provided by BFA: Based on managements representations, including information about recent and proposed enhancements to
the iShares business, including with respect to capital markets support and analysis, technology, portfolio management, product design and quality, compliance and risk management, global public policy and other services, the Board expected that
there would be no diminution in the scope of services required of or provided by BFA under the Advisory Contract for the coming year as compared to the scope of services provided by BFA during prior years. In reviewing the scope of these services,
the Board considered BFAs investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to support the iShares funds and their shareholders and have
made significant investments into the iShares business. The Board also considered BFAs compliance program and its compliance record with respect to the Funds. In that regard, the Board noted that BFA reports to the Board about portfolio
management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary and appropriate, and has provided information and made relevant officers and other employees of
BFA (and its affiliates) available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the
day-to-day management of the Funds, as well as the resources available to them in managing the Funds. In addition to the above considerations, the Board reviewed and
considered detailed presentations regarding BFAs investment performance, investment and risk management processes and strategies provided at the June 17-19, 2019 meeting and throughout the year.
Based on review of this information, and the performance information discussed above, the Board concluded that the nature, extent and quality of services provided to the
Funds under the Advisory Contract supported the Boards approval of the continuance of the Advisory Contract for the coming year.
Costs of Services Provided
to the Funds and Profits Realized by BFA and its Affiliates: The Board reviewed information about the estimated profitability to BlackRock in managing the Funds, based on the fees payable to BFA and its affiliates (including fees under the
Advisory Contract), and other sources of revenue and expense to BFA and its affiliates from the Funds operations for the last calendar year. The Board reviewed BlackRocks methodology for calculating estimated profitability of the iShares
|
|
|
|
|
BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACT
|
|
|
79
|
|
Board Review and Approval of Investment Advisory
Contract (continued)
funds, noting that the 15(c) Committee and the Board had focused on the methodology and profitability presentation during their meetings. The Board recognized that
profitability may be affected by numerous factors including, among other things, fee waivers by the Adviser, the types of funds managed, expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at
individual fund levels is challenging. The Board discussed the sources of direct and ancillary revenue with management, including the revenues to BTC, a BlackRock affiliate, from securities lending by the Funds. The Board also discussed BFAs
estimated profit margin as reflected in the Funds profitability analysis and reviewed information regarding potential economies of scale (as discussed below).
Based on this review, the Board concluded that the profits realized by BFA and its affiliates under the Advisory Contract and from other relationships between the Funds
and BFA and/or its affiliates, if any, were within a reasonable range in light of the factors and other information considered.
Economies of Scale: The Board
reviewed information and considered the extent to which economies of scale might be realized as the assets of the Funds increase, noting that the issue of potential economies of scale had been focused on by the 15(c) Committee and the Board during
their meetings and addressed by management. The 15(c) Committee and the Board received information regarding BlackRocks historical estimated profitability, including BFAs and its affiliates estimated costs in providing services,
noting that such costs have increased over the past year. The estimated cost information distinguished, among other things, between fixed and variable costs, and showed how the level and nature of fixed and variable costs may impact the existence or
size of scale benefits, with the Board recognizing that potential economies of scale are difficult to measure. The 15(c) Committee and the Board reviewed information provided by BFA regarding the sharing of scale benefits with the iShares funds
through various means, including, as applicable, through relatively low fee rates established at inception, breakpoints, waivers, or other fee reductions, as well as through additional investment in the iShares business and the provision of improved
or additional infrastructure and services to the iShares funds and their shareholders. The Board noted that the Advisory Contract for the Funds did not provide for breakpoints in the Funds investment advisory fee rate as the assets of the
Funds increase. However, the Board would continue to assess the appropriateness of adding breakpoints in the future.
The Board concluded that this review of
potential economies of scale and the sharing of related benefits, as well as the other factors considered at the meeting, supported the Boards approval of the continuance of the Advisory Contract for the coming year.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates: The Board considered information regarding the investment
advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end funds registered under the 1940 Act
(including sub-advised funds), collective trust funds, and institutional separate accounts (collectively, the Other Accounts). The Board acknowledged BFAs representation that the iShares
funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates do not manage Other Accounts with substantially the same investment objectives and strategies as the Funds and that track the
same indexes. The Board further noted that BFA provided the Board with detailed information regarding how the Other Accounts generally differ from the Funds, including in terms of the types of services and generally more extensive services provided
to the Funds, as well as other significant differences. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific services to be
provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing and providing
other services to the Funds, as a publicly traded ETFs, as compared to the Other Accounts, particularly those that are institutional clients, in light of differing regulatory requirements and client-imposed mandates. The Board also acknowledged
managements assertion that, for certain iShares funds, and for client segmentation purposes, BlackRock has launched an iShares fund that may provide a similar investment exposure at a lower investment advisory fee rate. The Board also
considered the all-inclusive nature of the Funds advisory fee structure, and the Funds expenses borne by BFA under this arrangement. The Board noted that the investment advisory fee
rates under the Advisory Contract for the Funds was generally higher than the investment advisory/management fee rates for certain of the Other Accounts (particularly institutional clients) and concluded that the differences appeared to be
consistent with the factors discussed.
Other Benefits to BFA and/or its Affiliates: The Board reviewed other benefits or ancillary revenue received by BFA
and/or its affiliates in connection with the services provided to the Funds by BFA, both direct and indirect, such as payment of revenue to BTC, the Funds securities lending agent, for loaning portfolio securities (which was included in the
profit margins reviewed by the Board pursuant to BFAs estimated profitability methodology), payment of advisory fees or other fees to BFA (or its affiliates) in connection with any investments by the Funds in other funds for which BFA (or its
affiliates) provides investment advisory services or other services and BlackRocks increased profile in the investment community. The Board also noted the revenue received by BFA and/or its affiliates pursuant to an agreement that permits a
service provider to use certain portions of BlackRocks technology platform to service accounts managed by BFA and/or its affiliates, including the iShares funds. The Board noted that BFA generally does not use soft dollars or consider the
value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Funds. The Board further noted that any portfolio transactions on behalf of the Funds placed through a
BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates (including associated commissions) are reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Funds and thus would not alter the Boards conclusion with respect to the
appropriateness of approving the continuance of the Advisory Contract for the coming year.
Conclusion: Based on a review of the factors described above, as
well as such other factors as deemed appropriate by the Board, the Board, including all of the Independent Directors, determined that the Funds investment advisory fee rates under the Advisory Contract do not constitute fees that are so
disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arms-length bargaining, and concluded to approve the continuance of the
Advisory Contract for the coming year.
II. iShares International High Yield Bond ETF, iShares J.P. Morgan EM Local Currency Bond ETF, iShares US & Intl
High Yield Corp Bond ETF (the Funds)
Under Section 15(c) of the Investment Company Act of 1940 (the 1940 Act), the Companys
Board of Directors (the Board), including a majority of Directors who are not interested persons of the Company (as that term is defined in the 1940 Act) (the Independent Directors), is required annually to
consider and approve the Investment Advisory Contract between the Company and BFA (the Advisory Contract), and the Sub-Advisory Agreement between BFA and BlackRock International Limited
(BIL) (the Sub-Advisory Agreement), on behalf of the Funds. The Advisory Contract and the Sub-Advisory Agreement are referred to hereafter as the
Advisory Agreements.
|
|
|
80
|
|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|
Board Review and Approval of Investment Advisory
Contract (continued)
The Boards consideration entails a year-long process whereby the Board and its committees (composed solely of Independent Directors) assess BlackRocks
services to the Funds, including investment management; fund accounting; administrative and shareholder services; oversight of the Funds service providers; risk management and oversight; legal and compliance services; and ability to meet
applicable legal and regulatory requirements. The Independent Directors requested, and BFA provided, such information as the Independent Directors, with advice from independent counsel, deemed reasonably necessary to evaluate the Advisory Contract.
At meetings on May 6, 2019 and May 17, 2019, a committee composed of all of the Independent Directors (the 15(c) Committee), with independent counsel, met with management and reviewed and discussed information provided in
response to initial requests of the 15(c) Committee and/or their independent counsel, and requested certain additional information, which management agreed to provide. At a meeting held on June 17-19, 2019,
the Board, including the Independent Directors, reviewed the additional information provided by management in response to these requests.
After extensive discussions
and deliberations, the Board, including all of the Independent Directors, approved the continuance of the Advisory Contract for the Funds, based on a review of qualitative and quantitative information provided by BFA and their cumulative experience
as Directors. The Board noted its satisfaction with the extent and quality of information provided and its frequent interactions with management, as well as the detailed responses and other information provided by BFA. The Independent Directors were
advised by their independent counsel throughout the process, including about the legal standards applicable to their review. In approving the Advisory Contract for the Funds, the Board, including the Independent Directors, considered various
factors, including: (i) the expenses and performance of each Fund; (ii) the nature, extent and quality of the services provided by BFA; (iii) the costs of services provided to each Fund and profits realized by BFA and its affiliates;
(iv) economies of scale; (v) the fees and services provided for other comparable funds/accounts managed by BFA and its affiliates; and (vi) other benefits to BFA and/or its affiliates. The material factors, no one of which was
controlling, and conclusions that formed the basis for the Board, including the Independent Directors, to approve the Advisory Contract are discussed below.
Expenses and Performance of the Funds: The Board reviewed statistical information prepared by Broadridge Financial Solutions Inc. (Broadridge), an
independent provider of investment company data, regarding the expense ratio components, including gross and net total expenses, fees and expenses of another fund in which each Fund invests (if applicable), and waivers/reimbursements (if applicable)
of each Fund in comparison with the same information for other ETFs (including, where applicable, funds sponsored by an at cost service provider), objectively selected by Broadridge as comprising each Funds applicable peer group
pursuant to Broadridges proprietary ETF methodology (the Peer Group). The Board was provided with a detailed description of the proprietary ETF methodology used by Broadridge to determine the applicable Peer Groups. The Board
further noted that due to the limitations in providing comparable funds in the various Peer Groups, the statistical information provided in Broadridges report may or may not provide meaningful direct comparisons to the Funds in all instances.
The Board also noted that the investment advisory fee rates and overall expenses (net of any waivers and reimbursements) for the Funds were lower than the median of
the investment advisory fee rates and overall expenses (net of any waivers and reimbursements) of the funds in their respective Peer Group, excluding iShares funds. The Board also noted that BFA pays BIL for its
sub-advisory services, and that there are no additional fees imposed on the Fund in respect of the services provided under the Sub-Advisory Agreement.
In addition, to the extent that any of the comparison funds included in the Peer Group, excluding iShares funds, track the same index as any particular Fund, Broadridge
also provided, and the Board reviewed, a comparison of such Funds performance for the one-, three-, five-, ten-year, and since inception periods, as applicable,
and for the quarter ended December 31, 2018, to that of relevant comparison fund(s) for the same periods. The Board noted that each Fund seeks to track its specified underlying index and that, during the year, the Board received periodic
reports on each Funds short- and longer-term performance in comparison with its underlying index. Such periodic comparative performance information, including additional detailed information as requested by the Board, was also considered. The
Board noted that each Fund generally performed in line with its respective underlying index over the relevant periods.
Based on this review, the other factors
considered at the meeting, and their general knowledge of ETF pricing, the Board concluded that the investment advisory fee rate and expense level and the historical performance of each Fund supported the Boards approval of the continuance of
the Advisory Contract for the coming year.
Nature, Extent and Quality of Services Provided by BFA: Based on managements representations, including
information about recent and proposed enhancements to the iShares business, including with respect to capital markets support and analysis, technology, portfolio management, product design and quality, compliance and risk management, global public
policy and other services, the Board expected that there would be no diminution in the scope of services required of or provided by BFA under the Advisory Contract for the coming year as compared to the scope of services provided by BFA during prior
years. In reviewing the scope of these services, the Board considered BFAs investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to support the
iShares funds and their shareholders and have made significant investments into the iShares business. The Board also considered BFAs compliance program and its compliance record with respect to the Funds. In that regard, the Board noted that
BFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary and appropriate, and has provided information and made
relevant officers and other employees of BFA (and its affiliates) available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Funds, as well as the resources available to them in managing the Funds. In addition to the above considerations, the Board reviewed and
considered detailed presentations regarding BFAs investment performance, investment and risk management processes and strategies provided at the June 17-19, 2019 meeting and throughout the year.
Based on review of this information, and the performance information discussed above, the Board concluded that the nature, extent and quality of services provided to the
Funds under the Advisory Contract supported the Boards approval of the continuance of the Advisory Contract for the coming year.
Costs of Services Provided
to the Funds and Profits Realized by BFA and its Affiliates: The Board reviewed information about the estimated profitability to BlackRock in managing the Funds, based on the fees payable to BFA and its affiliates (including fees under the
Advisory Contract), and other sources of revenue and expense to BFA and its affiliates from the Funds operations for the last calendar year. The Board reviewed BlackRocks methodology for calculating estimated profitability of the iShares
funds, noting that the 15(c) Committee and the Board had focused on the methodology and profitability presentation during their meetings. The Board recognized that
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|
BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACT
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81
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|
Board Review and Approval of Investment Advisory
Contract (continued)
profitability may be affected by numerous factors including, among other things, fee waivers by the Adviser, the types of funds managed, expense allocations and business
mix. The Board thus recognized that calculating and comparing profitability at individual fund levels is challenging. The Board discussed the sources of direct and ancillary revenue with management, including the revenues to BTC, a BlackRock
affiliate, from securities lending by the Funds. The Board also discussed BFAs estimated profit margin as reflected in the Funds profitability analysis and reviewed information regarding potential economies of scale (as discussed below).
Based on this review, the Board concluded that the profits realized by BFA and its affiliates under the Advisory Contract and from other relationships between the
Funds and BFA and/or its affiliates, if any, were within a reasonable range in light of the factors and other information considered.
Economies of Scale: The
Board reviewed information and considered the extent to which economies of scale might be realized as the assets of the Funds increase, noting that the issue of potential economies of scale had been focused on by the 15(c) Committee and the Board
during their meetings and addressed by management. The 15(c) Committee and the Board received information regarding BlackRocks historical estimated profitability, including BFAs and its affiliates estimated costs in providing
services, noting that such costs have increased over the past year. The estimated cost information distinguished, among other things, between fixed and variable costs, and showed how the level and nature of fixed and variable costs may impact the
existence or size of scale benefits, with the Board recognizing that potential economies of scale are difficult to measure. The 15(c) Committee and the Board reviewed information provided by BFA regarding the sharing of scale benefits with the
iShares funds through various means, including, as applicable, through relatively low fee rates established at inception, breakpoints, waivers, or other fee reductions, as well as through additional investment in the iShares business and the
provision of improved or additional infrastructure and services to the iShares funds and their shareholders. The Board noted that the Advisory Contract for the Funds did not provide for breakpoints in the Funds investment advisory fee rate as
the assets of the Funds increase. However, the Board noted that it would continue to assess the appropriateness of adding breakpoints in the future.
The Board
concluded that this review of potential economies of scale and the sharing of related benefits, as well as the other factors considered at the meeting, supported the Boards approval of the continuance of the Advisory Contract for the coming
year.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates: The Board considered information regarding the
investment advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end funds registered under the
1940 Act (including sub-advised funds), collective trust funds, and institutional separate accounts (collectively, the Other Accounts). The Board acknowledged BFAs representation that the
iShares funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates do not manage Other Accounts with substantially the same investment objective and strategy as the Funds and that track
the same index. The Board further noted that BFA provided the Board with detailed information regarding how the Other Accounts generally differ from the Funds, including in terms of the types of services and generally more extensive services
provided to the Funds, as well as other significant differences. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific
services to be provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing
and providing other services to the Funds, as a publicly traded ETFs, as compared to the Other Accounts, particularly those that are institutional clients, in light of differing regulatory requirements and client-imposed mandates. The Board also
acknowledged managements assertion that, for certain iShares funds, and for client segmentation purposes, BlackRock has launched an iShares fund that may provide a similar investment exposure at a lower investment advisory fee rate. The Board
also considered the all-inclusive nature of the Funds advisory fee structure, and the Funds expenses borne by BFA under this arrangement. The Board noted that the investment advisory
fee rates under the Advisory Contract for the Funds was generally higher than the investment advisory/management fee rates for certain of the Other Accounts (particularly institutional clients) and concluded that the differences appeared to be
consistent with the factors discussed.
Other Benefits to BFA and/or its Affiliates: The Board reviewed other benefits or ancillary revenue received by BFA
and/or its affiliates in connection with the services provided to the Funds by BFA, both direct and indirect, such as payment of revenue to BTC, the Funds securities lending agent, for loaning portfolio securities (which was included in the
profit margins reviewed by the Board pursuant to BFAs estimated profitability methodology), payment of advisory fees or other fees to BFA (or its affiliates) in connection with any investments by the Funds in other funds for which BFA (or its
affiliates) provides investment advisory services or other services and BlackRocks increased profile in the investment community. The Board also noted the revenue received by BFA and/or its affiliates pursuant to an agreement that permits a
service provider to use certain portions of BlackRocks technology platform to service accounts managed by BFA and/or its affiliates, including the iShares funds. The Board noted that BFA generally does not use soft dollars or consider the
value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Funds. The Board further noted that any portfolio transactions on behalf of the Funds placed through a
BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates (including associated commissions) are reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Funds and thus would not alter the Boards conclusion with respect to the
appropriateness of approving the continuance of the Advisory Contract for the coming year.
Conclusion: Based on a review of the factors described above, as
well as such other factors as deemed appropriate by the Board, the Board, including all of the Independent Directors, determined that the Funds investment advisory fee rates under the Advisory Contract do not constitute fees that are so
disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arms-length bargaining, and concluded to approve the
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82
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|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|
|
|
|
Supplemental Information (unaudited)
|
|
|
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are being provided pursuant to regulatory requirements and are not being provided for tax reporting
purposes. The actual amounts and sources for tax reporting purposes will depend upon each funds investment experience during the year and may be subject to changes based on tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cumulative Distributions
for the Fiscal Year
|
|
|
|
|
|
% Breakdown of the Total Cumulative
Distributions for the Fiscal Year
|
|
iShares ETF
|
|
Net
Investment
Income
|
|
|
Net Realized
Capital Gains
|
|
|
Return of
Capital
|
|
|
Total Per
Share
|
|
|
|
|
|
Net
Investment
Income
|
|
|
Net Realized
Capital Gains
|
|
|
Return of
Capital
|
|
|
Total Per
Share
|
|
Emerging Markets High Yield Bond(a)
|
|
$
|
3.177781
|
|
|
$
|
|
|
|
$
|
0.069254
|
|
|
$
|
3.247035
|
|
|
|
|
|
|
|
98
|
%
|
|
|
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
J.P. Morgan EM Corporate
Bond(a)
|
|
|
2.225796
|
|
|
|
|
|
|
|
0.020438
|
|
|
|
2.246234
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
1
|
|
|
|
100
|
|
US & Intl High Yield Corp Bond(a)
|
|
|
2.569951
|
|
|
|
|
|
|
|
0.083403
|
|
|
|
2.653354
|
|
|
|
|
|
|
|
97
|
|
|
|
|
|
|
|
3
|
|
|
|
100
|
|
|
(a)
|
The Fund estimates that it has distributed more than its net investment income and net realized capital gains; therefore,
a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholders investment in the Fund is returned to the shareholder. A return of capital does not necessarily reflect
the Funds investment performance and should not be confused with yield or income. When distributions exceed total return performance, the difference will incrementally reduce the Funds net asset value per share.
|
|
Premium/Discount Information
The
Premium/Discount Information section is intended to present information about the differences between the daily market price on secondary markets for shares of a fund and that funds NAV. NAV is the price at which a fund issues and redeems
shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The Market Price of a fund generally is determined using the midpoint between the highest bid and the lowest ask on the primary securities
exchange on which shares of such fund are listed for trading, as of the time that the funds NAV is calculated. A funds Market Price may be at, above or below its NAV. The NAV of a fund will fluctuate with changes in the value of its
portfolio holdings. The Market Price of a fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.
Premiums or discounts are
the differences (expressed as a percentage) between the NAV and Market Price of a fund on a given day, generally at the time the NAV is calculated. A premium is the amount that a fund is trading above the reported NAV, expressed as a percentage of
the NAV. A discount is the amount that a fund is trading below the reported NAV, expressed as a percentage of the NAV.
Premium/discount information for the Funds
covering the most recently completed calendar year and the most recently completed calendar quarters since that year (or since the Fund began trading, if shorter) is publicly accessible, free of charge, at iShares.com.
The following information shows the frequency of distributions of premiums and discounts for the Funds for the immediately preceding five calendar years (or from the
date a Fund began trading on the secondary market, if less than five years) through the date of the most recent calendar quarter-end. Each line in each table shows the number of trading days in which the Fund
traded within the premium/discount range indicated. Premium/discount ranges with no trading days are omitted. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period
covered by each table. All data presented here represents past performance, which cannot be used to predict future results.
iShares
Emerging Markets High Yield Bond ETF
Period Covered: January 01, 2014 through September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/Discount Range
|
|
Number
of Days
|
|
|
Percentage of
Total Days
|
|
Greater than 1.0% and Less than 1.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
%
|
Greater than 0.5% and Less than 1.0%
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
14.87
|
|
Greater than 0.0% and Less than 0.5%
|
|
|
|
|
|
|
1,042
|
|
|
|
|
|
|
|
72.05
|
|
At NAV
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
1.04
|
|
Less than 0.0% and Greater than 0.5%
|
|
|
|
|
|
|
160
|
|
|
|
|
|
|
|
11.07
|
|
Less than 0.5% and Greater than 1.0%
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
0.76
|
|
Less than 1.0% and Greater than 1.5%
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION
|
|
|
83
|
|
|
|
|
Supplemental Information (unaudited) (continued)
|
|
|
iShares International High Yield Bond ETF
Period Covered: January 01, 2014 through September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/Discount Range
|
|
Number
of Days
|
|
|
Percentage of
Total Days
|
|
Greater than 2.5% and Less than 3.0%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
%
|
Greater than 2.0% and Less than 2.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
Greater than 1.5% and Less than 2.0%
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
0.35
|
|
Greater than 1.0% and Less than 1.5%
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
2.35
|
|
Greater than 0.5% and Less than 1.0%
|
|
|
|
|
|
|
359
|
|
|
|
|
|
|
|
24.83
|
|
Greater than 0.0% and Less than 0.5%
|
|
|
|
|
|
|
874
|
|
|
|
|
|
|
|
60.44
|
|
At NAV
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
0.90
|
|
Less than 0.0% and Greater than 0.5%
|
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
9.68
|
|
Less than 0.5% and Greater than 1.0%
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
1.24
|
|
Less than 1.0% and Greater than 1.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares J.P. Morgan EM Corporate Bond ETF
Period Covered: January 01, 2014 through September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/Discount Range
|
|
Number
of Days
|
|
|
Percentage of
Total Days
|
|
Greater than 6.0%
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
0.21
|
%
|
Greater than 4.5% and Less than 5.0%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
Greater than 4.0% and Less than 4.5%
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
0.28
|
|
Greater than 3.5% and Less than 4.0%
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
1.31
|
|
Greater than 3.0% and Less than 3.5%
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
0.69
|
|
Greater than 2.5% and Less than 3.0%
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
0.35
|
|
Greater than 2.0% and Less than 2.5%
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
0.69
|
|
Greater than 1.5% and Less than 2.0%
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
1.18
|
|
Greater than 1.0% and Less than 1.5%
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
3.67
|
|
Greater than 0.5% and Less than 1.0%
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
15.77
|
|
Greater than 0.0% and Less than 0.5%
|
|
|
|
|
|
|
715
|
|
|
|
|
|
|
|
49.44
|
|
At NAV
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
0.97
|
|
Less than 0.0% and Greater than 0.5%
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
16.52
|
|
Less than 0.5% and Greater than 1.0%
|
|
|
|
|
|
|
70
|
|
|
|
|
|
|
|
4.84
|
|
Less than 1.0% and Greater than 1.5%
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
3.53
|
|
Less than 1.5% and Greater than 2.0%
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares J.P. Morgan EM Local Currency Bond ETF
Period Covered: January 01, 2014 through September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/Discount Range
|
|
Number
of Days
|
|
|
Percentage of
Total Days
|
|
Greater than 2.0% and Less than 2.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
%
|
Greater than 1.5% and Less than 2.0%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
Greater than 1.0% and Less than 1.5%
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
1.11
|
|
Greater than 0.5% and Less than 1.0%
|
|
|
|
|
|
|
156
|
|
|
|
|
|
|
|
10.79
|
|
Greater than 0.0% and Less than 0.5%
|
|
|
|
|
|
|
820
|
|
|
|
|
|
|
|
56.70
|
|
At NAV
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
1.04
|
|
Less than 0.0% and Greater than 0.5%
|
|
|
|
|
|
|
388
|
|
|
|
|
|
|
|
26.83
|
|
Less than 0.5% and Greater than 1.0%
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
2.84
|
|
Less than 1.0% and Greater than 1.5%
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
0.48
|
|
Less than 3.0% and Greater than 3.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|
|
|
|
Supplemental Information (unaudited) (continued)
|
|
|
iShares US & Intl High Yield Corp
Bond ETF
Period Covered: January 01, 2014 through September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/Discount Range
|
|
Number
of Days
|
|
|
Percentage of
Total Days
|
|
Greater than 2.0% and Less than 2.5%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
%
|
Greater than 1.5% and Less than 2.0%
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
0.28
|
|
Greater than 1.0% and Less than 1.5%
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
4.36
|
|
Greater than 0.5% and Less than 1.0%
|
|
|
|
|
|
|
283
|
|
|
|
|
|
|
|
19.57
|
|
Greater than 0.0% and Less than 0.5%
|
|
|
|
|
|
|
885
|
|
|
|
|
|
|
|
61.19
|
|
At NAV
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
0.55
|
|
Less than 0.0% and Greater than 0.5%
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
9.27
|
|
Less than 0.5% and Greater than 1.0%
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
3.67
|
|
Less than 1.0% and Greater than 1.5%
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
0.97
|
|
Less than 1.5% and Greater than 2.0%
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulation under the Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (the Directive) imposes detailed and prescriptive obligations on fund managers established in the European
Union (the EU). These do not currently apply to managers established outside of the EU, such as BFA (the Company). Rather, non-EU managers are only required to comply with certain
disclosure, reporting and transparency obligations of the Directive if such managers market a fund to EU investors.
The Company has registered the iShares Emerging
Markets High Yield Bond ETF (the Fund) to be marketed to EU investors in the United Kingdom, the Netherlands, Finland, Sweden, and Luxembourg.
Report on Remuneration
The Company is required under the Directive to make
quantitative disclosures of remuneration. These disclosures are made in line with BlackRocks interpretation of currently available regulatory guidance on quantitative remuneration disclosures. As market or regulatory practice develops
BlackRock may consider it appropriate to make changes to the way in which quantitative remuneration disclosures are calculated. Where such changes are made, this may result in disclosures in relation to a fund not being comparable to the disclosures
made in the prior year, or in relation to other BlackRock fund disclosures in that same year.
Disclosures are provided in relation to (a) the staff of the
Company; (b) staff who are senior management; and (c) staff who have the ability to materially affect the risk profile of the Fund.
All individuals
included in the aggregated figures disclosed are rewarded in line with BlackRocks remuneration policy for their responsibilities across the relevant BlackRock business area. As all individuals have a number of areas of responsibilities, only
the portion of remuneration for those individuals services attributable to the Fund is included in the aggregate figures disclosed.
BlackRock has a clear and
well defined pay-for-performance philosophy, and compensation programmes which support that philosophy.
BlackRock operates a total compensation model for remuneration which includes a base salary, which is contractual, and a discretionary bonus scheme. Although all
employees are eligible to receive a discretionary bonus, there is no contractual obligation to make a discretionary bonus award to any employees. For senior management, a significant percentage of variable remuneration is deferred over time. All
employees are subject to a claw-back policy.
Remuneration decisions for employees are made once annually in January following the end of the performance year, based
on BlackRocks full-year financial results and other non-financial goals and objectives. Alongside financial performance, individual total compensation is also based on strategic and operating results and
other considerations such as management and leadership capabilities. No set formulas are established and no fixed benchmarks are used in determining annual incentive awards.
Annual incentive awards are paid from a bonus pool which is reviewed throughout the year by BlackRocks independent compensation committee, taking into account both
actual and projected financial information together with information provided by the Enterprise Risk and Regulatory Compliance departments in relation to any activities, incidents or events that warrant consideration in making compensation
decisions. Individuals are not involved in setting their own remuneration.
Each of the control functions (Enterprise Risk, Legal & Compliance, and Internal
Audit) each have their own organisational structures which are independent of the business units. Functional bonus pools for those control functions are determined with reference to the performance of each individual function and the remuneration of
the senior members of control functions is directly overseen by BlackRocks independent remuneration committee.
Members of staff and senior management of the
Company typically provide both AIFMD and non-AIFMD related services in respect of multiple funds, clients and functions of the Company and across the broader BlackRock group. Therefore, the figures disclosed
are a sum of each individuals portion of remuneration attributable to the Fund according to an objective apportionment methodology which acknowledges the multiple-service nature of the Company. Accordingly the figures are not representative of
any individuals actual remuneration or their remuneration structure.
|
|
|
|
|
SUPPLEMENTAL INFORMATION
|
|
|
85
|
|
Supplemental Information (unaudited) (continued)
The amount of the total remuneration awarded by the Company to its staff which has been attributed to the iShares Emerging Markets High Yield Bond ETF in respect of the
Companys financial year ending December 31, 2018 was USD 26.96 thousand. This figure is comprised of fixed remuneration of USD 11.65 thousand and variable remuneration of USD 15.31 thousand. There were a total of 469
beneficiaries of the remuneration described above.
The amount of the aggregate remuneration awarded by the Company, which has been attributed to the iShares Emerging
Markets High Yield Bond ETF in respect of the Companys financial year ending December 31, 2018, to its senior management was USD 3.74 thousand, and to members of its staff whose actions have a material impact on the risk profile of
the Fund was USD 0.49 thousand.
|
|
|
86
|
|
2019 ISHARES ANNUAL REPORT TO SHAREHOLDERS
|