Benefits of iShares

iShares ETFs are managed funds listed or quoted on exchanges (including ASX) providing you with the opportunity to gain exposure to a diversified portfolio of assets in a single transaction.

The significant benefits of investing in the Cash Funds include:

• low cost access to a highly transparent diversified portfolio of liquid institutional-quality cash and money market securities; and

• the ability to achieve capital preservation and either regular or potentially enhanced regular income.

• The significant benefits of investing in the Fixed Income Funds include:

• low cost access to diversified portfolios of Australian fixed income securities;

• access to broad market investment grade, treasury and inflation-linked fixed income exposures; and

• benchmarked to institutional-quality indices provided by leading index providers.

Other benefits of investing in iShares ETFs generally include:

• Diversification: In contrast to a direct investment in a single company or bond, an iShares ETF provides, as far as possible and practicable, exposure to all of the securities or instruments within the index that the particular iShares ETF seeks to track.

• Access global markets: iShares ETFs let you achieve international diversification by investing in overseas equity and bond markets. With iShares ETFs you can gain exposure by asset class, market capitalisation, country and sector.

• Liquidity and transparency: Each iShares ETF seeks investment results that correspond generally to the performance (before fees and expenses) of a particular index. As a traded security, an iShares ETF enables you to enter and exit your holding on the ASX. You can easily track performance and trade during ASX trading hours (subject to ASX rules).

• Managing risk: Investing in an iShares ETF can assist you in establishing a portfolio appropriate to your investment needs and risk profile.

• Lower cost: As each iShares ETF is passively managed and designed to track the performance of a particular index, the expenses of managing an iShares ETF are generally lower compared to other forms of retail managed funds. However, brokerage or adviser fees may still apply when buying or selling units of an iShares ETF.

• Receipt of income: You will generally receive income from your investment in the form of distributions. Distributions may include dividends, coupons and other income. There may be years in which no distributions are made.

• Accessibility: iShares ETFs can offer a cost-effective way to gain exposure to a diversified portfolio of securities. They can be less costly than purchasing a large number of individual securities as there are less trading costs and they offer lower thresholds than an investor might otherwise be able to afford.

About the Fund

The Fund seeks to achieve its objective by employing a passive investment strategy that aims to outperform the performance of the S&P/ASX Bank Bill Index (before fees and expenses).

The Fund offers the ability to achieve capital preservation and potentially enhanced regular income with a diversified portfolio of higher-yielding high quality short-term money market instruments, including floating rate notes.

The Fund is truly liquid and only holds investments in instruments that can easily be sold to meet investor liquidity requirements.

Why ISEC?

1. Achieve capital preservation and maximise regular current income with a diversified portfolio of higher-yielding high quality short-term money market instruments, including floating rate notes.
2. Highly liquid and transparent institutional-quality exposure.
3. Gain cost-efficient access to enhanced yield for your portfolio's cash allocation.

How we invest your money

The Fund seeks to achieve its objective by employing a passive investment strategy that aims to outperform the performance of the S&P/ASX Bank Bill Index (referred to in this section 5 of the PDS as the Index).

The Fund will be managed using a buy and hold investment philosophy, similar to other passive investment strategies, with full daily portfolio transparency. A sampling methodology has been selected as the most appropriate investment technique, as it keeps trading costs to a minimum and provides the necessary flexibility to deliver investment returns that either meet or at times may exceed Index returns. Any outperformance of the Index will not be a result of active trading nor the investment expertise of the individual fund manager(s) in selecting particular investment securities that it considers will perform better relative to other securities. Rather, returns above the Index would typically result from prudent risk mitigation and diversification measures, including:

• issuer diversification, for example, rather than having issuer concentration to the four major Australian banks, diversification can be achieved by investing in similarly rated authorised deposit taking institutions (ADIs) who issue securities at a margin above the benchmark BBSW rates (the rates provided by the major Australian banks) - the overarching investment consideration is prudent risk management and credit risk mitigation and not active security selection by the individual fund manager(s) based on perceived credit quality, as the credit quality is the same; and

• investment of up to 20% in Floating Rate Notes (FRNs) which earn a higher yield relative to very short-term "cash-like securities - these investments will be "buy and hold and not actively traded, the overarching investment rationale for holding these securities is to further diversify credit risk in the portfolio.

The Fund is also expected to attract additional returns from attractive interest rates on Australian dollar cash deposits. The interest rate on cash deposits will most likely exceed the 24 hour Cash Rate that is used as a price input into the Index return calculation, as BlackRock has long established commercial relationships with several Australian ADIs, which allows cash to be placed on deposit at commercial rates.

What does the Fund invest in?

The Fund generally invests in Australian dollar cash deposits and NCDs, with the majority of such investments being with the four main Australian banks. The Fund may also invest in Australian dollar denominated treasury notes and commercial paper issued by the Australian Government and other semi-government entities, corporate issued commercial paper, and corporate issued floating rate notes.

The Fund may invest up to a maximum of 20% in FRNs with limits placed on single security exposure, credit rating exposure and maturity (maximum FRN maturity of 5 years). The Fund will not purchase any securities or invest in any deposits that have issuer- imposed repayment restrictions, such as term deposits or notice period deposit accounts. All securities will settle within the standard T+2 settlement timeframe for ETFs.

About the Index

The Index offers short-term exposure to Australian dollar- denominated bank bills with maturity profiles of up to 91 days.

For more information please see Section 5 of the PDS