iShares

Fixed Income and the Growing Bond Funds Market

At $36 trillion, the U.S. fixed income marketplace was over twice the size of the market capitalization of U.S. stocks as of December 2010.* Over the years, the size of the bond funds market has grown in both size and complexity, and investors today have a diversity of choices when it comes to structuring their fixed income allocations.

U.S. Bond Funds Market

*Sources: Securities Industry and Financial Markets Association and World Federation of Exchanges as of 12/31/2010.

The bond market can broadly be divided into the following sectors

  • U.S. government securities (Treasuries and TIPS)
  • Agency bonds
  • Municipal bonds
  • Securitized bonds (asset- and mortgage-backed securities)
  • Corporate bonds (investment grade and high yield)
  • International bonds (developed-country sovereign bonds and emerging market debt and international inflation-linked bonds)

Carefully consider the iShares Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737), or by viewing or downloading a prospectus. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Bonds and bond funds will decrease in value as interest rates rise. A portion of the Municipal Bond Fund’s income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains, if any, are subject to capital gains tax. TIPS can provide investors a hedge against inflation, as the inflation adjustment feature helps preserve the purchasing power of the investment. Because of this inflation adjustment feature, inflation protected bonds typically have lower yields than conventional fixed rate bonds and will likely decline in price during periods of deflation, which could result in losses. Government backing applies only to government issued securities, not iShares exchange traded funds. The funds may be subject to credit risk, which refers to the possibility that the debt issuers will not be able to make principal and interest payments. The inflation-linked bond funds' income may decline due to a decline in inflation (or deflation) or due to changes in inflation expectations. High yield securities may be more volatile, be subject to greater levels of credit or default risk, and may be less liquid and more difficult to sell at an advantageous time or price to value than higher-rated securities of similar maturity. Mortgage-backed securities are subject to prepayment and extension risk and therefore react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly and significantly reduce the value of certain mortgage-backed securities.

An investment in the fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments typically exhibit higher volatility and are subject to greater geographic or asset class risk.

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

© 2000-2013 BlackRock. All rights reserved. iSHARES® and BLACKROCK® are registered trademarks of BlackRock. All other marks are the property of their respective owners.

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