Benefits of investing in the iShares Global Bond Index Fund

• Index tracking: The Fund is an index tracker and seeks to provide investors with similar returns, before fees, to those of its benchmark index.

• Diversification: In contrast to a direct investment in a single company or bond, the Fund provides, as far as practicable and possible, exposure to all of the securities or instruments within its benchmark index.

• Lower cost: As the Fund is passively managed and designed to track a particular index, the expenses of managing the Fund are generally lower compared to other forms of retail managed funds.

Risk level

Low

Investor suitability

The Fund may be suitable for long-term investors seeking a broad exposure to global bonds.

About the Fund

The Fund aims to provide investors with the performance of the market, before fees less interest withholding taxes and the cost of currency hedging, as measured by the Bloomberg Barclays Global Aggregate Index (hedged in AUD) (Index).

Investment approach

Our investment style is based on our belief that people, leveraged by technology, are central to the consistent achievement of our clients' investment goals. We believe that a focus on total performance management is the best way to achieve superior investment results. Through total performance management, we aim to understand; measure; forecast; and manage the three dimensions of investment performance — return, risk and cost.

How we invest your money

We believe that stratified sampling is the most appropriate investment strategy to track the performance of the Index as it takes into account liquidity, transaction cost impact and overall risk relative to the Index.

Stratified sampling involves choosing a subset of Index eligible securities to create a portfolio that behaves like the Index. In many cases, holding every security in the Index is not cost effective, as illiquid or thinly traded securities incur higher transaction costs and wider bid-ask spreads. By investing in a subset of securities that combine to match the overall risk profile of the Index the Fund avoids incurring unnecessary trading costs, which can detract from total Fund returns.

A stratified sampling approach is usually accomplished by dividing the Index into strata or "cells along some of the more common fixed income security attributes such as maturity, sector and credit quality. Securities are then chosen that have similar risk and return characteristics that replicate each of the cells and in units consistent with Index exposures.

Once the portfolio is determined, we have two objectives, to add value subject to our tolerated tracking error and to minimise transaction costs. To this end, we look to trade consistently with the Index. It also means that we monitor the Index structure to anticipate changes.

Value-adding strategies: Stratified sampling allows value to be added through relative-value analysis within cells. Our investment managers have discretion to switch securities within the portfolio, provided that they do not alter the overall risk- return characteristics of the portfolio. These switches are based on identifying the best value security to hold within a cell.

A passive currency hedge is applied, which seeks to minimise the effect of currency fluctuations on returns by converting the currency exposures of the Fund back to Australian dollars. This type of hedging strategy involves the forward sale of a set of currencies in amounts that correspond to the beginning of period value of the international assets in the portfolio. The hedge is then reset periodically or as required, to account for any changes in the value of the international assets in the portfolio.

The Fund implements its passive currency hedge via the use of currency forwards and may also hold a small allocation of cash (or cash equivalents that may include units in other BlackRock funds) for cash flow management purposes.

Derivatives, such as futures, forwards and options can be used to manage risk and return. When derivative positions are established, they will always be backed by cash holdings and/or underlying assets. Derivative securities will not be used to gear the Fund.

While the constitution of the Fund allows the Responsible Entity to borrow, it is our intention that no borrowing arrangements will be entered into, other than temporary overdrafts, which may be used as a means of managing certain cash flows.