Annual report and audited financial statements

Annual report and audited financial statements

iSHARES PLC

For the financial year ended 28 February 2019

iSHARES PLC

Contents

Overview

General information

2

Chairman's Statement

4

Background

6

Performance

Investment Manager's report

9

Governance

Board of Directors

25

Corporate Governance Statement

27

Audit Committee Report

33

Statement of Directors' Responsibilities

36

Directors' Report

38

Depositary's report to the shareholders

40

Independent Auditors report

41

Financial Statements

Income statement

48

Statement of changes in net assets attributable to redeemable participating shareholders

59

Balance sheet

70

Notes to the financial statements

81

Schedules of Investments

151

Additional Information and Regulatory Disclosures (unaudited)

Schedules of material purchases and sales

468

Calendar year performance

510

Transactions with connected parties

512

Global exposure

512

Leverage

512

Transaction costs

512

Report on remuneration

514

Supplementary Information

518

Glossary

553

Disclaimers

554

This annual report and audited financial statements (the "Report and Accounts") may be translated into other languages. Any such translation shall only contain the same information and have the same meaning as the English language Report and Accounts. To the extent that there is any inconsistency between the English language Report and Accounts and the Report and Accounts in another language, the English language Report and Accounts will prevail, except to the extent (and only to the extent) that it is required by law of any jurisdiction where the shares are sold, that in an action based upon disclosure in a Report and Accounts in a language other than English, the language of the Report and Accounts on which such action is based shall prevail. Any disputes as to the terms of the Report and Accounts, regardless of the language of the Report and Accounts, shall be governed by and construed in accordance with the laws of Ireland.

iSHARES PLC ANNUAL REPORT [1]

iSHARES PLC

General information

Board of Directors1 Paul McNaughton (Chairman) (Irish) Paul McGowan (Irish) Barry O'Dwyer (Irish) Jessica Irschick (British) Ros O'Shea (Irish) Deirdre Somers (Irish)

Audit Committee Members Paul McGowan (Chairman) Paul McNaughton Ros O'Shea Deirdre Somers

Nomination Committee Members Paul McNaughton (Chairman) Paul McGowan Barry O'Dwyer

Manager BlackRock Asset Management Ireland Limited 1st Floor 2 Ballsbridge Park Ballsbridge Dublin 4 D04 YW83 Ireland

Administrator and Registrar State Street Fund Services (Ireland) Limited 78 Sir John Rogerson's Quay Dublin 2 Ireland

Company Secretary Sanne Corporate Administration Services Ireland Limited Fourth Floor 76 Baggot Street Lower Dublin 2 Ireland

Investment Manager, Promoter and Securities Lending Agent BlackRock Advisors (UK) Limited 12 Throgmorton Avenue London EC2N 2DL England

Sub-Investment Managers BlackRock Financial Management Inc. 40 East 52nd Street New York NY 10022 United States

1All Directors are non-executive Directors.

Sub-Investment Managers (continued) BlackRock (Singapore) Limited 20 Anson Road #18-01 Singapore 079912 Singapore

BlackRock Asset Management North Asia Limited 16/F Champion Tower Three Garden Road Central Hong Kong

BlackRock Asset Management Deutschland AG Lenbachplatz 1 1st Floor Munich 80333-MN3 Germany

Depositary State Street Custodial Services (Ireland) Limited 78 Sir John Rogerson's Quay Dublin 2 Ireland

Registered office of the Company J.P. Morgan 200 Capital Dock 79 Sir John Rogerson's Quay Dublin 2 D02 RK57 Ireland

Legal Advisors to the Company William Fry 2 Grand Canal Square Dublin 2 Ireland

Independent Auditors PricewaterhouseCoopers Chartered Accountants and Registered Auditors One Spencer Dock North Wall Quay Dublin 1 Ireland

Paying Agent Citibank N.A., London Branch Citigroup Centre 25 Canada Square Canary Wharf London E14 5LB England

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iSHARES PLC

General information (continued)

Representative in Switzerland BlackRock Asset Management Schweiz AG Bahnhofstrasse 39 8001 Zurich Switzerland

German Information Agent State Street Bank International GmbH Briennerstrasse 59 80333 Munich Germany

Paying Agent in Switzerland State Street Bank International GmbH Munich Zurich Branch Beethovenstrasse 19 CH-8027 Zurich Switzerland

Austrian Paying and Information Agent UniCredit Bank Austria AG Attn: 8398/Custody Julius Tandler Platz 3 1090 Vienna Austria

The Company is duly registered with the Comisi?n Nacional de Mercado de Valores in Spain under number 801.

iSHARES PLC ANNUAL REPORT [3]

iSHARES PLC

Chairman's Statement

The Board of Directors considers corporate governance matters and adherence to codes of best practice to be of the utmost importance. As Chairman of the Board, I believe that it has operated effectively throughout the financial year and that its role and its composition are well defined, appropriate and support the long-term development of the Company.

Overview of the Company

iShares public limited company (the Company) is organised as an open-ended Investment Company with variable capital (an "Investment Company"). The Company was incorporated in Ireland on 21 January 2000 with limited liability and segregated liability between its Funds and is organised under the laws of Ireland as a Public Limited Company ("PLC") pursuant to the Companies Act 2014 (the Companies Act) and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulation 2011 (as amended) (the "UCITS Regulations") and is regulated by the Central Bank of Ireland (the CBI).

The Company is structured as an umbrella Fund and comprises separate Funds ("Funds") of the Company.

The term "Fund" shall be deemed to mean either a Fund of the Company, or if the context so requires, BlackRock Asset Management Ireland Limited (the "Manager") or its delegate acting for the account of the relevant Fund. The term "BlackRock" is used to represent BlackRock Advisors (UK) Limited. The investment objectives and policies of each Fund are set out in the prospectus and the relevant supplemental prospectus.

The Funds of the Company pursue strategies of either tracking or replicating the performance of a benchmark index in order to deliver the objectives of each Fund.

The Manager has delegated the administration of the Company and its Funds to State Street Fund Services (Ireland) Limited (the "Administrator") including the calculation of the daily net asset value (NAV), and the preparation of the financial statements of the Company subject to the overall supervision of the Directors and the Manager. The Administrator has also been appointed as the registrar of the Company. The Company has appointed State Street Custodial Services (Ireland) Limited (the "Depositary") as Depositary of the assets with responsibility for the safe keeping of such assets, pursuant to the UCITS Regulations. As part of its fiduciary responsibility to the Company, the Depositary provides a certain level of ongoing oversight of the Company, as well as reporting on the conduct of the Company in each annual accounting period as set out in the Statement of the Depositary's Responsibilities.

In accordance with Guidance Note 4/07 on the Organisation of Management Companies issued by the CBI, the Board of the Manager has identified BlackRock group personnel who monitor and control the management functions as outlined therein. These BlackRock group personnel report to the Board of the Manager and the Company on a regular basis. The management functions delegated by the Manager are subject to appropriate reporting and ratification procedures, which are designed to ensure that the appropriate reports are received in a timely fashion such that the Manager and the Board can discharge their duties, as part of the governance framework put in place by the Manager and the Company. The Board reviews risk reporting on a regular basis together with an annual review of internal controls and risk management from the Manager.

The Board

The Board currently comprises six Directors, four of whom are independent. The members of the Board were chosen for their range of skills and experience. Paul McGowan has extensive experience in the area of tax, financial services and corporate governance, Barry O'Dwyer has extensive knowledge and experience in corporate governance, Jessica Irschick has considerable experience in Exchange Traded Funds (ETFs), index investments, trading, financing, securities lending and foreign exchange, Ros O'Shea also has considerable experience in governance and accountancy, Deirdre Somers has extensive experience in the financial services industry and tax and I have over twenty-five years' experience in the banking and finance, fund management and securities processing industries.

Teresa O'Flynn resigned as a non-executive Director on 30 November 2018. David Moroney resigned as a non-executive Director on 26 April 2019.

Ros O'Shea and Deirdre Somers were appointed as non-executive Directors on 3 May 2019.

Matters relating to the Company during the financial year

There were 40 Funds in operation at 28 February 2019.

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iSHARES PLC

Chairman's Statement (continued)

Matters relating to the Company during the financial year (continued)

It is the opinion of the Board that all Funds have performed in line with their objectives and that any tracking differences have been explained in the Investment Manager's report. Additional information on the Funds' performance can be found in the Investment Manager's report. Paul McNaughton Chairman 26 June 2019

iSHARES PLC ANNUAL REPORT [5]

iSHARES PLC

Background

iShares public limited company (the Company) is organised as an open-ended Investment Company with variable capital. The Company was incorporated in Ireland on 21 January 2000 with limited liability and segregated liability between its Funds and is organised under the laws of Ireland as a Public Limited Company ("plc") pursuant to the Companies Act and the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2011 (as amended) (the "UCITS Regulations") and is regulated by the CBI.

The term "Fund" shall be deemed to mean either a fund of the Company, or if the context so requires, the Manager or its delegate acting for the account of the relevant Fund. The term "BlackRock" is used to represent BlackRock Advisors (UK) Limited. The investment objectives and policies of each Fund are set out in the prospectus and supplement.

The Company is structured as an umbrella Fund and comprises separate Funds of the Company. Each Fund of the Company comprises a distinct portfolio of investments. The shares of each Fund may be issued with different rights, features and on different terms and conditions to those of other Funds. Shares of a Fund may be divided into different share classes with different dividend policies, currency hedging and valuation currencies and may therefore have different fees and expenses.

While assets and liabilities that are specific to a share class within a Fund would be attributable to (and should be borne by) only that share class, there is no segregation of liabilities between share classes as a matter of Irish law. Due to the lack of segregation of liabilities as a matter of law, there is a risk that the creditors of a share class may bring a claim against the assets of the Fund notionally allocated to other share classes. The financial instruments and risks section of the financial statements provides more details on the management of foreign currency risk in relation to the currency hedged share classes.

The Investment Manager may use derivatives (for example, forward currency contracts, futures, options and swaps, or such other instruments as are permitted) to hedge the rate of exchange between the currency of all or some of the currencies in which the assets of a Fund (including cash and income) are dominated and the share class valuation currency.

The transactions, costs and related liabilities and benefits arising from instruments entered into for the purposes of hedging the currency exposure for the benefit of any particular currency hedged share classes shall be attributed only to the relevant currency hedged share classes. Currency exposures of different share classes may not be combined or offset and currency exposures of the assets of a Fund may not be allocated to separate share classes.

Changes to the Company

On 31 May 2018, an updated prospectus was issued by the Company to revise the Total Expense Ratio (TER) for iShares Core MSCI EM IMI UCITS ETF from 0.25% to 0.18% for both the USD (Acc) and USD (Dist) classes.

On 22 November 2018, an updated prospectus was issued by the Company to incorporate the change in name of iShares S&P 500 UCITS ETF to iShares Core S&P 500 UCITS ETF USD (Dist).

Teresa O'Flynn resigned as a non-executive Director on 30 November 2018.

Effective 10 December 2018, the registered address of the Manager was updated to 1st Floor, 2 Ballsbridge Park, Ballsbridge, Dublin 4, D04 YW83, Ireland.

Effective 10 December 2018, the registered office address was updated to 200 Capital Dock, 79 Sir John Rogerson's Quay, Dublin 2, D02 RK57, Ireland.

On 20 December 2018, iShares $ Treasury Bond 1-3yr UCITS ETF MXN Hedged (Acc) transacted in a reverse stock split. Please see note 9 for further details.

On 25 January 2019, a supplement to the prospectus was issued to reflect the authorisation for the launch of iShares $ Treasury Bond 0-1yr UCITS ETF.

On 20 February 2019, iShares $ Treasury Bond 0-1yr UCITS ETF was launched.

New share classes were launched on the following Funds during the financial year as detailed in the table below:

Fund

Share Class

iShares Core MSCI EM IMI UCITS ETF USD (Dist)

Launch Date 12 March 2018

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iSHARES PLC

Background (continued)

Changes to the Company (continued)

Fund

iShares $ Corp Bond UCITS ETF

iShares Global Corp Bond UCITS ETF

iShares $ Treasury Bond 1-3yr UCITS ETF

iShares $ Treasury Bond 1-3yr UCITS ETF

iShares Global Corp Bond UCITS ETF

iShares $ Corp Bond Interest Rate Hedged UCITS ETF

iShares $ Treasury Bond 1-3yr UCITS ETF

iShares European Property Yield UCITS ETF

Share Class GBP Hedged (Dist) GBP Hedged (Dist)

EUR Hedged (Acc)

GBP Hedged (Dist) USD (Acc)

USD (Acc)

MXN Hedged (Acc)

EUR (Acc)

Launch Date 23 March 2018 23 March 2018

12 April 2018

12 April 2018 14 May 2018

03 July 2018

30 August 2018

14 December 2018

Potential Implications of Brexit

In the referendum held on 23 June 2016 the United Kingdom ("UK") voted to leave the European Union ("EU"). This has been followed by a continued period of political and economic uncertainty, culminating in the resignation of Prime Minister Theresa May, and triggering a summer election of a new Conservative Party leader who will need to appeal to a Eurosceptic membership.

BlackRock is implementing a number of steps to prepare for various outcomes, including effecting organisational, governance and operational changes, applying for and receiving licenses and permissions in the EU, and engaging in client communications. Depending on the terms of the UK's exit from the EU, BlackRock may experience organisational and operational challenges, incur additional costs or face other execution risks in connection with its European operations post-Brexit.

Following the Emergency EU Summit held on 10 April 2019, an agreement was reached to provide an extension for the UK to leave the EU. This extension will only be as long as necessary and no longer than 31 October 2019 unless another extension is agreed. If the withdrawal agreement is ratified before this date, the withdrawal will take place on the first day of the following month. It will be for the new Prime Minister to steer a way forward when he/she takes office at the end of July, but a clear majority of Parliament is opposed to a no-deal Brexit.

BlackRock will evaluate the regulatory and political developments as we continue our preparations to ensure we remain well placed to serve our clients regardless of the outcome of Brexit.

Fund details

There were 40 Funds in operation at 28 February 2019. The investment objective of the Funds is to provide investors with a total return, taking into account the capital and income returns, which reflect the total returns of the respective benchmark listed in the table below:

Fund iShares $ Corp Bond Interest Rate Hedged UCITS ETF

iShares $ Corp Bond UCITS ETF iShares $ Treasury Bond 0-1yr UCITS ETF iShares $ Treasury Bond 1-3yr UCITS ETF iShares Corp Bond Large Cap UCITS ETF iShares Govt Bond 1-3yr UCITS ETF

iShares High Yield Corp Bond UCITS ETF iShares Inflation Linked Govt Bond UCITS ETF

iShares ? Corp Bond 0-5yr UCITS ETF iShares AEX UCITS ETF iShares Asia Pacific Dividend UCITS ETF

Benchmark Index

Markit iBoxx USD Liquid Investment Grade Interest Rate Hedged Index Markit iBoxx USD Liquid Investment Grade Index ICE U.S. Treasury Short Bond Index ICE U.S. Treasury 1-3 Year Bond Index Markit iBoxx EUR Liquid Corporates Large Cap Index Bloomberg Barclays Euro Government Bond 1-3 Year Term Index Markit iBoxx Euro Liquid High Yield Index Bloomberg Barclays Euro Government Inflation Linked Bond Index Markit iBoxx GBP Corporates 0-5 Index AEX-Index? Dow Jones Asia/Pacific Select Dividend 30 Index

Investment Management Approach* Non-Replicating

Non-Replicating Non-Replicating Non-Replicating Non-Replicating Non-Replicating

Non-Replicating Non-Replicating

Non-Replicating Replicating Replicating

iSHARES PLC ANNUAL REPORT [7]

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