LOGO

  OCTOBER 31, 2023

 

 

  

 

   2023 Annual Report

 

iShares U.S. ETF Trust

· iShares Inflation Hedged Corporate Bond ETF | LQDI | Cboe BZX

· iShares Inflation Hedged High Yield Bond ETF | HYGI | NYSE Arca

· iShares Inflation Hedged U.S. Aggregate Bond ETF | AGIH | NYSE Arca

· iShares Interest Rate Hedged Corporate Bond ETF | LQDH | NYSE Arca

· iShares Interest Rate Hedged High Yield Bond ETF | HYGH | NYSE Arca

· iShares Interest Rate Hedged Long-Term Corporate Bond ETF | IGBH | NYSE Arca

· iShares Interest Rate Hedged U.S. Aggregate Bond ETF | AGRH | NYSE Arca


The Markets in Review

Dear Shareholder,

The combination of continued economic growth and cooling inflation provided a supportive backdrop for investors during the 12-month reporting period ended October 31, 2023. Significantly tighter monetary policy helped to rein in inflation, as the annual increase in the Consumer Price Index declined to its long-term average of approximately 3% in October 2023. Meanwhile, real economic growth proved more resilient than many investors anticipated. A moderating labor market also helped ease inflationary pressure, although wages continued to grow and unemployment rates touched the lowest levels in decades before rising slightly. This robust labor market powered further growth in consumer spending, backstopping the economy. On October 7, 2023, Hamas launched a horrific attack on Israel. The ensuing war will have a significant humanitarian impact and could lead to heightened economic and market volatility. We see geopolitics as a structural market risk going forward. See our geopolitical risk dashboard at blackrock.com for more details.

Equity returns were solid during the period, as the durability of consumer spending mitigated investors’ concerns about the economy’s trajectory. The U.S. economy continued to show strength, and growth further accelerated in the third quarter of 2023. However, equity returns were uneven, as the performance of a few notable technology companies supported gains among large-capitalization U.S. stocks, while small-capitalization U.S. stocks declined overall. Meanwhile, international developed market equities advanced, and emerging market equities posted solid gains.

The 10-year U.S. Treasury yield rose during the reporting period, driving its price down, as investors reacted to elevated inflation and attempted to anticipate future interest rate changes. The corporate bond market benefited from improving economic sentiment, although high-yield corporate bond prices fared significantly better than investment-grade bonds as demand from yield-seeking investors remained strong.

The U.S. Federal Reserve (the “Fed”), attempting to manage persistent inflation, raised interest rates six times during the 12-month period, but slowed and then paused its tightening later in the period. The Fed also wound down its bond-buying programs and incrementally reduced its balance sheet by not replacing securities that reach maturity.

Supply constraints appear to have become an embedded feature of the new macroeconomic environment, making it difficult for developed economies to increase production without sparking higher inflation. Geopolitical fragmentation and an aging population risk further exacerbating these constraints, keeping the labor market tight and wage growth high. Although the Fed has decelerated the pace of interest rate hikes and recently opted for several pauses, we believe that the new economic regime means that the Fed will need to maintain high rates for an extended period to keep inflation under control. Furthermore, ongoing structural changes may mean that the Fed will be hesitant to cut interest rates in the event of faltering economic activity lest inflation accelerate again.

While we favor an overweight position in developed market equities in the long term, we prefer an underweight stance in the near term. Expectations for corporate earnings remain elevated, which seems inconsistent with macroeconomic constraints. Nevertheless, we are overweight on Japanese stocks in the near term as shareholder-friendly policies generate increased investor interest. We also believe that stocks with an AI tilt should benefit from an investment cycle that is set to support revenues and margins. In credit, there are selective opportunities in the near term despite tightening credit and financial conditions. For fixed income investing with a six- to twelve-month horizon, we see the most attractive investments in short-term U.S. Treasuries, U.S. inflation-linked bonds, euro area government bonds and gilts, U.S. mortgage-backed securities, and hard-currency emerging market bonds.

Overall, our view is that investors need to think globally, position themselves to be prepared for a decarbonizing economy, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit iShares.com for further insight about investing in today’s markets.

 

LOGO

Rob Kapito

President, BlackRock, Inc.

LOGO

Rob Kapito

President, BlackRock, Inc.

 

Total Returns as of October 31, 2023
     
     6-Month     12-Month  
 

U.S. large cap equities

(S&P 500® Index)

  1.39%   10.14%  
 

U.S. small cap equities (Russell 2000® Index)

  (5.29)      (8.56)   
 

International equities

(MSCI Europe, Australasia, Far East Index)

  (7.88)      14.40     
 

Emerging market equities

(MSCI Emerging Markets Index)

  (4.78)      10.80     
 

3-month Treasury bills

(ICE BofA 3-Month

U.S. Treasury Bill Index)

  2.63       4.77   
 

U.S. Treasury securities

(ICE BofA 10-Year

U.S. Treasury Index)

  (9.70)      (3.25)   
 

U.S. investment grade bonds

(Bloomberg U.S. Aggregate Bond Index)

  (6.13)      0.36   
 

Tax-exempt municipal bonds

(Bloomberg Municipal Bond Index)

  (4.65)      2.64   
 

U.S. high yield bonds

(Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index)

  0.02      6.23   
Past performance is not an indication of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

 

 

  2    

T H I S   P A G E   I S   N O T   P A R T   O F   Y O U R   F U N D   R E P O R T


Table of Contents

 

      Page  

The Markets in Review

     2  

Annual Report:

  

Market Overview

     4  

Fund Summary

     5  

About Fund Performance

     19  

Disclosure of Expenses

     19  

Schedules of Investments

     20  

Financial Statements

  

Statements of Assets and Liabilities

     49  

Statements of Operations

     51  

Statements of Changes in Net Assets

     53  

Financial Highlights

     57  

Notes to Financial Statements

     64  

Report of Independent Registered Public Accounting Firm

     74  

Important Tax Information

     75  

Board Review and Approval of Investment Advisory Contract

     76  

Supplemental Information

     86  

Trustee and Officer Information

     87  

General Information

     90  

Glossary of Terms Used in this Report

     91  

Additional Financial Information

     92  

 

 

      


Market Overview

 

iShares U.S. ETF Trust

U.S. Bond Market Overview

The U.S. fixed-income market, as measured by the Bloomberg U.S. Aggregate Bond Index, posted a return of 0.36% for the 12 months ended October 31, 2023 (the “reporting period”). The benefit of income outweighed the effect of falling prices, leading to a narrow gain.

Several factors played a role in the weak showing for bonds. When the reporting period began, the market was seeing support from a decline in inflation from the peak reached in the months following the outbreak of war in Ukraine. The easing of price pressures fueled expectations that the U.S. Federal Reserve (Fed) could be nearing the end of its long series of interest rate hikes, leading to positive market performance in late 2022. As 2023 progressed, however, the combination of persistent inflation and communications from Fed officials made it clear that although rate hikes were indeed winding down, interest rates were likely to remain “higher for longer.” Continued strength in economic growth, together with elevated housing prices and robust employment, reinforced the notion that the Fed would need to maintain high rates to prevent a reacceleration of inflation. The Fed ultimately raised rates six times over the course of the 12-month period, bringing the benchmark fed funds rate from a range of 3.0-3.25% to 5.25%-5.50%. More important, however, was the fact that the markets continued to push out expectations for the central bank’s first rate cut. At the beginning of the period, the futures markets were indicating the initial rate reduction would occur in the second half of 2023. In contrast, the expected timing had shifted to late 2024 by the end of October.

In this environment, U.S. Treasury yields moved higher across the maturity spectrum (as prices fell). The two-year note climbed 4.48% to 5.09% over the course of the 12-month period, while the 10-year yield rose from 4.05% to 4.93%. Both issues finished October 2023 near their highest levels since 2007. The government bond market, in addition to being affected by rising interest rates, was further pressured by worries that the need for increased Treasury issuance would create an imbalance of supply and demand in the market.

The volatility in U.S. Treasuries, together with lower mortgage pre-payments and the Fed’s efforts to reduce the fixed-income holdings on its balance sheet, caused mortgage-backed securities to finish with a negative return. Conversely, the other major segments of the securitized category—asset-backed securities and commercial mortgage-backed securities—posted gains. Investment-grade corporate bonds also produced positive returns and outpaced Treasuries. The asset class benefited from a larger contribution from income and a decline in its yield spreads versus government issues.

Bonds with maturities of ten years and above, which are most sensitive to rate movements, trailed the broader market. On the other hand, issues in the three- to- seven-year maturity range outperformed. Higher-rated investment-grade bonds, whose performance is dictated more by interest-rate trends than credit developments, generally lagged lower-rated securities.

 

 

4  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Inflation Hedged Corporate Bond ETF

 

Investment Objective

The iShares Inflation Hedged Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the inflation risk of a portfolio composed of U.S. dollar-denominated, investment grade corporate bonds, as represented by the BlackRock Inflation Hedged Corporate Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares iBoxx $ Investment Grade Corporate Bond ETF. The Fund attempts to mitigate the inflation risk of the underlying fund by holding inflation swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year      5 Years      Since
Inception
           1 Year      5 Years      Since
Inception
 

Fund NAV

    2.18      3.00      2.48       2.18      15.94      14.38

Fund Market

    2.47        3.01        2.50         2.47        15.97        14.51  

Index

    2.28        4.01        3.69               2.28        21.72        21.93  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was May 8, 2018. The first day of secondary market trading was May 10, 2018.

Index performance through November 30, 2021 reflects the performance of the Markit iBoxx® USD Liquid Investment Grade Inflation Hedged Index. Index performance beginning on December 1, 2021 reflects the performance of the BlackRock Inflation Hedge Corporate Bond Index.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual           Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning
Account Value

(05/01/23)

 
 

 

      

Ending
Account Value
(10/31/23)
 
 
 
      

Expenses
Paid During
the Period
 
 
(a) 
           

Beginning
Account Value
(05/01/23)
 
 
 
      

Ending
Account Value
(10/31/23)
 
 
 
      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized
Expense
Ratio
 
 
 
          $       1,000.00          $        946.70          $        0.25               $        1,000.00          $      1,025.00          $        0.26          0.05

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    5  


Fund Summary as of October 31, 2023   (continued)    iShares® Inflation Hedged Corporate Bond ETF

 

Portfolio Management Commentary

Investment-grade corporate bonds posted a gain in the annual period, as gauged by the 2.18% return for the Markit iBoxx USD Liquid Investment Grade Index. Although the rising-rate environment was a headwind for performance, the combination of income and falling credit spreads versus government bonds helped corporates finish with a positive total return. The Fund’s benchmark—the Blackrock Inflation Hedged Corporate Bond Index—slightly outperformed the broader market with a return of 2.28%.

The Fund returned 2.18% in net asset value. The Fund’s inflation hedge typically helps Fund performance if inflation comes in above market expectations. The Fund uses zero-coupon swaps at multiple points across the yield curve. If inflation exceeds the fixed rate on the CPI swaps, the swaps will be “in the money.” The Fund actively adjusted its hedge positioning based on changes in composition of the investment-grade bond portfolio (achieved through a position in iShares iBoxx $ Investment Grade Corporate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements. The notional value of the hedges was typically about 4-6% of the portfolio.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    94.3

Short-term Investments

    46.2  

Swaps, net cumulative appreciation

    6.6  

Other assets less liabilities

    (47.1

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Aaa

    2.7

Aa

    4.6  

A

    45.1  

Baa

    44.7  

Ba

    2.2  

Not Rated

    0.7  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

6  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Inflation Hedged High Yield Bond ETF

 

Investment Objective

The iShares Inflation Hedged High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the inflation risk of a portfolio composed of U.S. dollar-denominated, high yield corporate bonds, as represented by the BlackRock Inflation Hedged High Yield Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares iBoxx $ HighYield Corporate Bond ETF. The Fund attempts to mitigate the inflation risk of the underlying fund by holding inflation swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year    

Since

Inception

             1 Year    

Since

Inception

 

Fund NAV

    4.88     4.79         4.88     6.58

Fund Market

    5.03       4.90           5.03       6.74  

Index

    4.40       4.31                 4.40       5.89  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was June 22, 2022. The first day of secondary market trading was June 24, 2022.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual     Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

           

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $      1,004.90          $        0.25               $      1,000.00          $      1,025.00          $        0.26          0.05

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    7  


Fund Summary as of October 31, 2023   (continued)    iShares® Inflation Hedged High Yield Bond ETF

 

Portfolio Management Commentary

High yield corporate bonds delivered a solid gain in the annual period, as gauged by the 6.23% return for the Bloomberg US Corporate High Yield Index. Expectations that central banks were nearing the end of their rate-hiking cycles helped fuel positive investor sentiment, as did mounting hopes that the U.S. economy would avoid a recession. These developments contributed to a decline in credit spreads over the course of the period. Together with the contribution from income, the compression in spreads outweighed the headwind from rising yields in the government bond market.

The Fund returned 4.88% in net asset value terms. The Fund’s inflation hedge typically helps Fund performance if inflation comes in above market expectations. The Fund uses zero-coupon swaps at multiple points across the yield curve. If inflation exceeds the fixed rate on the CPI swaps, the swaps will be “in the money.” The Fund actively adjusted its hedge positioning based on changes in composition of the investment-grade bond portfolio (achieved through a position in iShares iBoxx $ High Yield Corporate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements. The notional value of the hedges was typically about 1% of the portfolio.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    95.0

Short-term Investments

    48.1  

Swaps, net cumulative appreciation

    0.6  

Other assets less liabilities

    (43.7

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Baa

    1.8

Ba

    41.5  

B

    45.7  

Caa

    9.7  

Ca

    0.4  

Not Rated

    0.9  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

8  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Inflation Hedged U.S. Aggregate Bond ETF

 

Investment Objective

The iShares Inflation Hedged U.S. Aggregate Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the inflation risk of a portfolio composed of U.S. dollar-denominated, investment-grade bonds, as represented by the BlackRock Inflation Hedged U.S. Aggregate Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares Core U.S. Aggregate Bond ETF. The Fund attempts to mitigate the inflation risk of the underlying fund by holding inflation swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year    

Since

Inception

             1 Year    

Since

Inception

 

Fund NAV

    0.36     (2.85 )%          0.36     (3.87 )% 

Fund Market

    0.71       (2.73         0.71       (3.70

Index

    0.62       (2.79               0.62       (3.76

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was June 22, 2022. The first day of secondary market trading was June 24, 2022.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual           Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning
Account Value
(05/01/23)
 
 
 
      

Ending
Account Value
(10/31/23)
 
 
 
      

Expenses
Paid During

the Period

 
 

(a) 

           

Beginning
Account Value

(05/01/23)

 
 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $         957.10          $       0.49               $      1,000.00          $      1,024.70          $       0.51          0.10

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

Portfolio Management Commentary

Investment-grade bonds posted a narrow gain in the annual period, as gauged by the 0.36% return for Bloomberg U.S. Aggregate Index. Although the rising-rate environment was a headwind for performance, the combination of income and falling credit spreads versus government bonds helped the index finish with a slightly positive total return.

The Fund returned 0.36% in net asset value terms. The Fund’s inflation hedge typically helps Fund performance if inflation comes in above market expectations. The Fund uses zero-coupon swaps at multiple points across the yield curve. If inflation exceeds the fixed rate on the CPI swaps, the swaps will be “in the money.” The Fund actively adjusted its hedge positioning based on changes in composition of the investment-grade bond portfolio (achieved through a position in iShares Core U.S. Aggregate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements.

 

 

F U N D   S U M M A R Y

    9  


Fund Summary as of October 31, 2023   (continued)    iShares® Inflation Hedged U.S. Aggregate Bond ETF

 

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    93.7

Short-term Investments

    3.4  

Swaps, net cumulative appreciation

    1.4  

Other assets less liabilities

    1.5  

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Aaa

    62.6

Aa

    2.2  

A

    13.3  

Baa

    12.0  

Ba

    0.4  

Not Rated

    9.5  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

10  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Interest Rate Hedged Corporate Bond ETF

 

Investment Objective

The iShares Interest Rate Hedged Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, investment-grade corporate bonds, as represented by the BlackRock Interest Rate Hedged Corporate Bond Index, (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares iBoxx $ Investment Grade Corporate Bond ETF. The Fund attempts to mitigate the interest rate risk of the underlying fund by holding short positions in U.S. Treasury futures or interest rate swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year      5 Years     

Since

Inception

           1 Year      5 Years     

Since

Inception

 

Fund NAV

    9.65      2.92      2.35       9.65      15.48      24.49

Fund Market

    10.09        2.94        2.36         10.09        15.62        24.57  

Index

    9.38        2.60        2.64               9.38        13.72        27.82  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was May 27, 2014. The first day of secondary market trading was May 28, 2014.

Index performance through November 30, 2021 reflects the performance of the Markit iBoxx® USD Liquid Investment Grade Interest Rate Hedged Swaps Index. Index performance beginning on December 1, 2021 reflects the performance of the BlackRock Interest Rate Hedged Corporate Bond Index.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual           Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

           

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $      1,036.90          $          0.51               $      1,000.00          $      1,024.70          $         0.51          0.10

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    11  


Fund Summary as of October 31, 2023   (continued)    iShares® Interest Rate Hedged Corporate Bond ETF

 

Portfolio Management Commentary

Investment-grade corporate bonds posted a gain in the annual period, as gauged by the 2.18% return for the Markit iBoxx USD Liquid Investment Grade Index. Although the rising-rate environment was a headwind for performance, the combination of income and falling credit spreads versus government bonds helped corporates finish with a positive total return.

The Fund returned 9.65% in net asset value terms. The Fund’s interest-rate hedging was the largest contributor to performance versus the broader asset class at a time in which bond yields surged. The two-year U.S. Treasury note moved from 4.51% to 5.07% over the course of the 12-month period, and the 10-year yield rose from 4.10% to 4.88%. Both issues finished October 2023 near their highest levels since 2007. Rising interest rates typically reduce the price of existing bonds, while falling rates translate to rising bond prices. A fund that is hedged against interest-rate movements attempts to avoid these fluctuations by offsetting interest-rate risk through the use of interest-rate swaps and U.S. Treasury futures contracts.

The Fund actively adjusted its hedge positioning based on changes in the composition of the investment-grade bond portfolio (achieved through a position in iShares iBoxx $ Investment Grade Corporate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements.

Since the Fund’s hedging strategy seeks near-zero interest-rate sensitivity, rate movements had a minimal effect on the Fund’s return. Instead, the Fund’s net asset value fluctuated based on direct exposure to the credit spreads of investment-grade corporate bonds, independent of rising rates. The Fund’s positive return therefore reflects the decrease in credit spreads that occurred during the period.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    93.4

Short-term Investments

    47.9  

Swaps, net cumulative appreciation

    11.2  

Other assets less liabilities

    (52.5

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Aaa

    2.7

Aa

    4.6  

A

    45.1  

Baa

    44.7  

Ba

    2.2  

Not Rated

    0.7  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

12  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Interest Rate Hedged High Yield Bond ETF

 

Investment Objective

The iShares Interest Rate Hedged High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, high yield corporate bonds, as represented by the BlackRock Interest Rate Hedged High Yield Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares iBoxx $ High Yield Corporate Bond ETF. The Fund attempts to mitigate the interest rate risk of the underlying fund by holding short positions in U.S. Treasury futures or interest rate swaps.

Performance

 

         Average Annual Total Returns               Cumulative Total Returns  
     1 Year      5 Years     

Since

Inception

           1 Year      5 Years      Since
Inception
 

Fund NAV

    7.97      3.69      3.28       7.97      19.87      35.59

Fund Market

    8.06        3.70        3.29         8.06        19.94        35.77  

Index

    7.29        3.50        3.47               7.29        18.77        37.88  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was May 27, 2014. The first day of secondary market trading was May 28, 2014.

Index performance through November 30, 2021 reflects the performance of the Markit iBoxx® USD Liquid High Yield Interest Rate Hedged Swaps Index. Index performance beginning on December 1, 2021 reflects the performance of the BlackRock Interest Rate Hedged High Yield Bond Index.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual           Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

           

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $      1,043.50          $          0.26               $      1,000.00          $      1,025.00          $         0.26          0.05

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    13  


Fund Summary as of October 31, 2023   (continued)    iShares® Interest Rate Hedged High Yield Bond ETF

 

Portfolio Management Commentary

High yield corporate bonds delivered a solid gain in the annual period, as gauged by the 5.11% return for the Markit iBoxx USD Liquid High Yield Index. Expectations that central banks were nearing the end of their rate-hiking cycles helped fuel positive investor sentiment, as did mounting hopes that the U.S. economy would avoid a recession. These developments contributed to a decline in credit spreads over the course of the period. Together with the contribution from income, the compression in spreads outweighed the headwind from rising yields in the government bond market.

The Fund returned 7.97% in net asset value terms. The Fund’s interest-rate hedging was the largest contributor to performance versus the broader asset class at a time in which bond yields surged. The two-year U.S. Treasury note moved from 4.51% to 5.07% over the course of the 12-month period, and the 10-year yield rose from 4.10% to 4.88%. Both issues finished October 2023 near their highest levels since 2007. Rising interest rates typically reduce the price of existing bonds, while falling rates translate to rising bond prices. A fund that is hedged against interest-rate movements attempts to avoid these fluctuations by offsetting interest-rate risk through the use of interest-rate swaps and U.S. Treasury futures contracts.

The Fund actively adjusted its hedge positioning based on changes in the composition of the high-yield bond portfolio (achieved through a position in iShares iBoxx $ High Yield Corporate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements.

Since the Fund’s hedging strategy seeks near-zero interest-rate sensitivity, rate movements had a minimal effect on the Fund’s return. Instead, the Fund’s net asset value fluctuated based on direct exposure to the credit spreads of high yield corporate bonds, independent of rising rates. The Fund’s positive return therefore reflects the decrease in credit spreads that occurred during the period.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    94.8

Short-term Investments

    48.0  

Swaps, net cumulative appreciation

    4.3  

Other assets less liabilities

    (47.1

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Baa

    1.8

Ba

    41.5  

B

    45.7  

Caa

    9.7  

Ca

    0.4  

Not Rated

    0.9  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

14  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023      iShares® Interest Rate Hedged Long-Term Corporate Bond ETF

 

Investment Objective

The iShares Interest Rate Hedged Long-Term Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated investment-grade corporate bonds with remaining maturities greater than ten years, as represented by the BlackRock Interest Rate Hedged Long-Term Corporate Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares 10+ Year Investment Grade Corporate Bond ETF. The Fund attempts to mitigate the interest rate risk of the underlying fund by holding short positions in U.S. Treasury futures or interest rate swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year      5 Years     

Since

Inception

           1 Year      5 Years      Since
Inception
 

Fund NAV

    12.41      2.56      3.09       12.41      13.46      28.71

Fund Market

    12.98        2.57        3.10         12.98        13.55        28.76  

Index

    12.53        1.97        3.02               12.53        10.26        27.87  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was July 22, 2015. The first day of secondary market trading was July 23, 2015.

Index performance through November 30, 2021 reflects the performance of the ICE Q70A Custom Index. Index performance beginning on December 1, 2021 reflects the performance of the BlackRock Interest Rate Hedged Long-Term Corporate Bond Index.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual           Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a)  

           

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $      1,046.30          $          0.52               $      1,000.00          $      1,024.70          $         0.51          0.10

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    15  


Fund Summary as of October 31, 2023   (continued)    iShares® Interest Rate Hedged Long-Term Corporate Bond  ETF

 

Portfolio Management Commentary

The broad investment-grade corporate bond market posted a gain in the annual period, as gauged by the 2.18% return for the Markit iBoxx USD Liquid Investment Grade Index. Although the rising-rate environment was a headwind for performance, the combination of income and falling credit spreads versus government bonds helped corporates finish with a gain. Longer-term corporate bonds, which are morse sensitive to interest-rate trends, underperformed at a time of rising rates. As a result the ICE BofA 10+ Year US Corporate Index had a marginal return of 0.81%.

The Fund returned 12.41% in net asset value terms. The Fund’s interest-rate hedging was the largest contributor to performance versus the broader asset class at a time in which bond yields surged. The two-year U.S. Treasury note moved from 4.51% to 5.07% over the course of the 12-month period, and the 10-year yield rose from 4.10% to 4.88%. Both issues finished October 2023 near their highest levels since 2007. Rising interest rates typically reduce the price of existing bonds, while falling rates translate to rising bond prices. A fund that is hedged against interest-rate movements attempts to avoid these fluctuations by offsetting interest-rate risk through the use of interest-rate swaps and U.S. Treasury futures contracts.

The Fund actively adjusted its hedge positioning based on changes in the composition of the investment-grade bond portfolio (achieved through a position in iShares 10+ Year Investment Grade Corporate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements.

Since the Fund’s hedging strategy seeks near-zero interest-rate sensitivity, rate movements had a minimal effect on the Fund’s return. Instead, the Fund’s net asset value fluctuated based on direct exposure to the credit spreads of investment-grade corporate bonds, independent of rising rates. The Fund’s positive return therefore reflects the decrease in credit spreads that occurred during the period.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    89.5

Short-term Investments

    29.4  

Swaps, net cumulative appreciation

    12.4  

Other assets less liabilities

    (31.3

    CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)    

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Aaa

    3.3

Aa

    8.9  

A

    41.8  

Baa

    43.0  

Ba

    1.4  

Not Rated

    1.6  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

16  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Fund Summary as of October 31, 2023    iShares® Interest Rate Hedged U.S. Aggregate Bond ETF

 

Investment Objective

The iShares Interest Rate Hedged U.S. Aggregate Bond ETF (the “Fund”) seeks to track the investment results of an index designed to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, investment grade bonds, as represented by the BlackRock Interest Rate Hedged U.S. Aggregate Bond Index (the “Index”). The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares Core U.S.Aggregate Bond ETF. The Fund attempts to mitigate the interest rate risk of the underlying fund by holding positions in U.S. Treasury futures or interest rate swaps.

Performance

 

        Average Annual Total Returns               Cumulative Total Returns  
     1 Year     

Since

Inception

             1 Year    

Since

Inception

 

Fund NAV

    5.60      4.33         5.60     5.94

Fund Market

    5.85        4.42           5.85       6.07  

Index

    5.60        4.18                 5.60       5.70  

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

 

LOGO

The inception date of the Fund was June 22, 2022. The first day of secondary market trading was June 24, 2022.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

 

      Actual     Hypothetical 5% Return           
 

 

 

     

 

 

      
         

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

           

Beginning

Account Value

(05/01/23)

 

 

 

      

Ending

Account Value

(10/31/23)

 

 

 

      

Expenses

Paid During

the Period

 

 

(a) 

      

Annualized

Expense

Ratio

 

 

 

          $       1,000.00          $      1,021.90          $         0.51               $      1,000.00          $      1,024.70          $         0.51          0.10

 

  (a) 

Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period shown). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Disclosure of Expenses” for more information. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

 

 

 

F U N D   S U M M A R Y

    17  


Fund Summary as of October 31, 2023   (continued)    iShares® Interest Rate Hedged U.S. Aggregate Bond ETF

 

Portfolio Management Commentary

Investment-grade bonds posted a narrow gain in the annual period, as gauged by the 0.36% return for Bloomberg U.S. Aggregate Index. The combination of income and falling credit spreads versus government bonds helped the index finish with a slightly positive total return.

The Fund returned 5.60% in net asset value terms. The Fund’s interest-rate hedging was the largest contributor to performance versus the broader asset class at a time in which bond yields surged. The two-year U.S. Treasury note moved from 4.51% to 5.07% over the course of the 12-month period, and the 10-year yield rose from 4.10% to 4.88%. Both issues finished October 2023 near their highest levels since 2007. Rising interest rates typically reduce the price of existing bonds, while falling rates translate to rising bond prices. A fund that is hedged against interest-rate movements attempts to avoid these fluctuations by offsetting interest-rate risk through the use of interest-rate swaps and U.S. Treasury futures contracts.

The Fund actively adjusted its hedge positioning based on changes in the composition of the investment-grade bond portfolio (achieved through a position in iShares Core U.S. Aggregate Bond ETF), shifts in the market’s inflation expectations, and interest-rate movements.

Since the Fund’s hedging strategy seeks near-zero interest-rate sensitivity, rate movements had a minimal effect on the Fund’s return. Instead, the Fund’s net asset value fluctuated based on direct exposure to the credit spreads of investment-grade corporate bonds, independent of rising rates. The Fund’s positive return therefore reflects the decrease in credit spreads that occurred during the period.

Portfolio Information

 

PORTFOLIO COMPOSITION

 

   
Investment Type  

Percent of

Net Assets

 

Investment Companies

    92.6

Short-term Investments

    3.5  

Swaps, net cumulative appreciation

    7.1  

Other assets less liabilities

    (3.2

CREDIT QUALITY ALLOCATION (of the UNDERLYING FUND)

 

   
Credit Rating(a)  

Percent of

Total Investment(b)

 

Aaa

    62.6

Aa

    2.2  

A

    13.3  

Baa

    12.0  

Ba

    0.4  

Not Rated

    9.5  

 

  (a) 

Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 
  (b) 

Excludes money market funds.

 

 

 

18  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


About Fund Performance

 

Past performance is not an indication of future results. Financial markets have experienced extreme volatility and trading in many instruments has been disrupted. These circumstances may continue for an extended period of time and may continue to affect adversely the value and liquidity of each Fund’s investments. As a result, current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at iShares.com. Performance results assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. Beginning August 10, 2020, the price used to calculate market return (“Market Price”) is the closing price. Prior to August 10, 2020, Market Price was determined using the midpoint between the highest bid and the lowest ask on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Since shares of a fund may not trade in the secondary market until after the fund’s inception, for the period from inception to the first day of secondary market trading in shares of the fund, the NAV of the fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower.

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (1) transactional expenses, including brokerage commissions on purchases and sales of fund shares and (2) ongoing expenses, including management fees and other fund expenses. The expense examples shown (which are based on a hypothetical investment of $1,000 invested at the beginning of the period and held through the end of the period) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other funds.

The expense examples provide information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as brokerage commissions and other fees paid on purchases and sales of fund shares. Therefore, the hypothetical examples are useful in comparing ongoing expenses only and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

 

 

A B O U T   F U N D   P E R F O R M A N C E / D I S C L O S U R E   O F   E X P E N S E S

  19


Schedule of Investments

October 31, 2023

  

iShares® Inflation Hedged Corporate Bond ETF

(Percentages shown are based on Net Assets)

 

Security   Shares     Value  

 

 

Investment Companies

   
Exchange-Traded Funds — 94.3%            

iShares iBoxx $ Investment Grade Corporate Bond ETF(a)(b)

    436,431     $ 43,280,861  
   

 

 

 

Total Investment Companies
(Cost: $52,496,837)

      43,280,861  
   

 

 

 

Short-Term Securities

   
Money Market Funds — 46.2%            

BlackRock Cash Funds: Institutional, SL Agency Shares, 5.54%(a)(c)(d)

    20,542,071       20,550,288  

BlackRock Cash Funds: Treasury, SL Agency Shares, 5.33%(a)(c)

    630,000       630,000  
   

 

 

 

Total Short-Term Securities — 46.2%
(Cost: $21,180,163)

 

    21,180,288  
   

 

 

 

Total Investments in Securities — 140.5%
(Cost: $73,677,000)

 

    64,461,149  

Liabilities in Excess of Other Assets — (40.5)%

 

    (18,572,126
   

 

 

 

Net Assets — 100.0%

 

  $ 45,889,023  
   

 

 

 

 

(a) 

Affiliate of the Fund.

(b) 

All or a portion of this security is on loan.

(c) 

Annualized 7-day yield as of period end.

(d) 

All or a portion of this security was purchased with the cash collateral from loaned securities.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended October 31, 2023 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 

   
       Affiliated Issuer  

Value at

10/31/22

    

Purchases

at Cost

   

Proceeds

from Sale

   

Net Realized

Gain (Loss)

   

Change in

Unrealized

Appreciation

(Depreciation)

    

Value at

10/31/23

    

Shares

Held at

10/31/23

     Income    

Capital

Gain

Distributions

from

Underlying

Funds

   

  

 
 

 

   
 

BlackRock Cash Funds: Institutional, SL Agency Shares

  $      $ 20,551,413 (a)    $     $ (1,250   $ 125      $ 20,550,288        20,542,071      $ 42,783 (b)     $    
 

BlackRock Cash Funds: Treasury, SL Agency Shares

    170,000        460,000 (a)                          630,000        630,000        22,296          
 

iShares iBoxx $ Investment Grade Corporate Bond ETF

    53,261,756        19,756,210       (28,929,321     (7,188,593     6,380,809        43,280,861        436,431        2,136,355          
          

 

 

   

 

 

    

 

 

       

 

 

   

 

 

   
           $ (7,189,843   $ 6,380,934      $ 64,461,149         $ 2,201,434     $    
          

 

 

   

 

 

    

 

 

       

 

 

   

 

 

   

 

  (a) 

Represents net amount purchased (sold).

 
  (b) 

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Derivative Financial Instruments Outstanding as of Period End

Centrally Cleared Interest Rate Swaps

 

 

 

   
   

Paid by the Fund

     Received by the Fund       

 

      

 

        

 

     Notional         

 

      

Upfront

Premium

       Unrealized      

 

 
    Rate    Frequency      Rate    Frequency      Effective
Date
     Termination
Date
              Amount
(000)
       Value        Paid
(Received)
       Appreciation
(Depreciation)
        
 

 

   
 

3.32%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        12/06/29        USD        300        $  19,096        $ 4        $ 19,092    

  

 

3.27%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        03/15/30        USD        100          6,882          1          6,881    
 

3.14%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        05/05/30        USD        170          13,217          2          13,215    
 

3.25%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        12/06/32        USD        200          19,022          3          19,019    
 

3.08%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        01/23/33        USD        200          21,713          3          21,710    
 

3.23%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        12/06/37        USD        100          13,853          2          13,851    
 

3.71%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        08/04/43        USD        200          21,498          6          21,492    

 

 

20  

2 0 2 3  I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged Corporate Bond ETF

 

Centrally Cleared Interest Rate Swaps (continued)

 

 

 

   
                            

Effective
Date

  

Termination
Date

        

 

      

Notional

Amount
(000)

      

Value

    

Upfront

Premium

Paid
(Received)

    

Unrealized

Appreciation
(Depreciation)

     

 

    Paid by the Fund     

Received by the Fund

    Rate         Frequency      Rate      Frequency
 

 

   
  3.17%   Annual      1-Day SOFR, 5.35%      Annual      N/A      01/09/48          USD          200        $ 37,814      $ 6      $ 37,808    
  2.98%   Annual      1-Day SOFR, 5.35%      Annual      N/A      03/15/48          USD          100          21,594        3        21,591    
  3.07%   Annual      1-Day SOFR, 5.35%      Annual      N/A      05/05/48          USD          100          20,284        3        20,281    
  3.60%   Annual      1-Day SOFR, 5.35%      Annual      N/A      08/04/48          USD          200          25,126        7        25,119    
  4.32%   Annual      1-Day SOFR, 5.35%      Annual      N/A      10/06/48          USD          150          2,915        5        2,910    
  3.15%   Annual      1-Day SOFR, 5.35%      Annual      N/A      11/23/52          USD          100          19,609        4        19,605    
  2.93%   Annual      1-Day SOFR, 5.35%      Annual      N/A      12/06/52          USD          200          46,297        7        46,290    
  2.99%   Annual      1-Day SOFR, 5.35%      Annual      N/A      05/05/53          USD          100          22,189        4        22,185    
  4.21%   Annual      1-Day SOFR, 5.35%      Annual      N/A      10/06/53          USD          50          1,144        2        1,142    
                                    

 

 

    

 

 

    

 

 

   
                                     $ 312,253      $ 62      $ 312,191    
                                    

 

 

    

 

 

    

 

 

   

Centrally Cleared Inflation Swaps

 

 

 
                      

Termination
Date

     

 

   

Notional

Amount
(000)

   

Value

   

Upfront

Premium

Paid
(Received)

   

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

Reference    Frequency      Rate      Frequency

 

 

U.S. CPI Urban Consumers NSA

   At Termination     

2.63%

     At Termination     12/09/23       USD       2,700     $ (25,122   $ (5,947   $ (19,175

3.35%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/05/24       USD       3,000       129,011       19       128,992  

2.74%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     11/17/24       USD       230       1,239       2       1,237  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/30/24       USD       560       3,455       (4     3,459  

2.54%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/10/25       USD       60       379             379  

2.48%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/06/25       USD       66       332             332  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/13/25       USD       400       1,671       276       1,395  

2.42%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/25/25       USD       520       2,665       3       2,662  

2.27%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     05/05/25       USD       660       5,259       4       5,255  

2.43%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     07/27/25       USD       510       2,323       4       2,319  

2.63%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     09/21/25       USD       270       (267     1       (268

2.74%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     09/15/26       USD       1,600       91,798       21       91,777  

2.92%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     10/21/26       USD       3,000       139,174       40       139,134  

2.54%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/30/27       USD       430       2,946       (243     3,189  

2.46%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/05/28       USD       1,900       19,700       26       19,674  

2.45%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/08/28       USD       965       11,347       13       11,334  

2.59%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/22/28       USD       360       2,384       5       2,379  

2.71%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/24/28       USD       250       418       3       415  

2.58%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     03/31/28       USD       80       372       1       371  

2.56%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/05/28       USD       125       627       2       625  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/06/28       USD       700       5,575       9       5,566  

2.52%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/13/28       USD       1,200       8,269       1,935       6,334  

 

 

S C H E D U L E   O F   I N V E S T M E N T S

    21  


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged Corporate Bond ETF

 

Centrally Cleared Inflation Swaps (continued)

 

 

 
                      

Termination
Date

     

 

   

Notional

Amount
(000)

   

Value

   

Upfront

Premium

Paid
(Received)

   

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

Reference    Frequency      Rate      Frequency

 

 

2.55%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/19/28       USD       100     $ 527     $ 1     $ 526  

2.41%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     05/05/28       USD       1,600       18,079       21       18,058  

2.39%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     05/17/28       USD       1,150       14,750       15       14,735  

2.66%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     10/01/28       USD       1,000       58,908       18       58,890  

2.96%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     10/26/28       USD       1,500       57,688       28       57,660  

2.58%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     10/30/28       USD       1,000       352       13       339  

1.89%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     08/20/30       USD       360       58,428       7,109       51,319  

1.90%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     08/20/30       USD       420       67,900       10       67,890  

2.24%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/12/31       USD       2,000       246,058       47       246,011  

2.40%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/09/31       USD       1,440       155,629       34       155,595  

2.47%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/07/31       USD       2,000       200,881       46       200,835  

2.67%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     05/19/31       USD       580       45,990       13       45,977  

2.57%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     06/02/31       USD       3,000       263,141       2,870       260,271  

2.60%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     09/30/31       USD       1,000       63,628       23       63,605  

2.43%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/19/32       USD       110       2,748       3       2,745  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/05/33       USD       488       8,853       12       8,841  

2.47%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/07/33       USD       410       8,671       9       8,662  

2.54%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/13/33       USD       335       4,792       497       4,295  

2.58%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     07/14/33       USD       90       933       2       931  

2.66%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     09/21/33       USD       190       467       5       462  

2.61%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/07/37       USD       3,500       181,373       100       181,273  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/25/37       USD       560       34,897       17       34,880  

2.40%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     06/29/41       USD       500       51,210       19       51,191  

2.45%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     06/29/41       USD       1,000       96,185       39       96,146  

2.38%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     07/16/41       USD       300       30,727       4       30,723  

2.58%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/05/42       USD       1,530       83,018       58       82,960  

2.33%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/19/42       USD       200       10,518       8       10,510  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/06/46       USD       500       36,933       22       36,911  

2.47%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     12/09/46       USD       1,000       78,793       45       78,748  

1.83%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     10/18/49       USD       418       90,140       (11,790     101,930  

 

 

22  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged Corporate Bond ETF

 

Centrally Cleared Inflation Swaps (continued)

 

 

 
                      

Termination
Date

     

 

   

Notional

Amount
(000)

   

Value

   

Upfront

Premium

Paid
(Received)

   

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

Reference    Frequency      Rate      Frequency

 

 

1.94%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     08/20/50       USD       10     $ 2,086     $     $ 2,086  

1.95%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     08/20/50       USD       600       124,184       16,729       107,455  

2.23%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     01/06/51       USD       300       45,513       15       45,498  

2.41%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     07/30/51       USD       1,000       106,653       49       106,604  

2.42%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     08/02/51       USD       459       47,762       23       47,739  

2.37%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     02/08/53       USD       99       6,302       4       6,298  

2.35%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination     04/06/53       USD       50       3,283       3       3,280  
                    

 

 

   

 

 

   

 

 

 
                     $ 2,711,555     $ 12,291     $ 2,699,264  
                    

 

 

   

 

 

   

 

 

 

Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps

 

 

 
Description    Swap Premiums
Paid
       Swap Premiums
Received
      

Unrealized

Appreciation

      

Unrealized

Depreciation

 

 

 

Centrally Cleared Swaps(a)

   $ 30,337        $ (17,984      $ 3,030,898        $ (19,443

 

 

 

  (a) 

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
    

Commodity

Contracts

    

Credit

Contracts

    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

    

Interest

Rate

Contracts

    

Inflation

Linked

Contracts

     Total  

 

 

Assets — Derivative Financial Instruments

                    

Swaps — centrally cleared

                    

Unrealized appreciation on centrally cleared swaps(a)

   $      $      $      $      $ 312,191      $ 2,718,707      $ 3,030,898  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Swaps — centrally cleared

                    

Unrealized depreciation on centrally cleared swaps(a)

   $      $      $      $      $      $ 19,443      $ 19,443  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

 

 

S C H E D U L E   O F   I N V E S T M E N T S

    23  


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged Corporate Bond ETF

 

For the period ended October 31, 2023, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
    

Commodity

Contracts

    

Credit

Contracts

    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

    

Interest

Rate

Contracts

    

Inflation

Linked

Contracts

     Total  

 

 

Net Realized Gain (Loss) from

                    

Futures contracts

   $      $      $      $      $ (56,283    $      $ (56,283

Swaps

                                 54,389        1,088,743        1,143,132  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $      $      $      $ (1,894    $ 1,088,743      $   1,086,849  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on

                    

Futures contracts

   $      $      $      $      $   (113,634    $      $ (113,634

Swaps

                                 312,191        (1,083,088      (770,897
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $      $      $      $ 198,557      $     (1,083,088    $ (884,531
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Interest rate swaps:

  

Average notional value — pays fixed rate

   $ 2,310,000      

Inflation swaps:

  

Average notional value – pays fixed rate

   $ 54,819,250      

Average notional value – receives fixed rate

   $ 2,042,500      

 

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.

 

 

 
     Level 1        Level 2        Level 3        Total  

 

 

Assets

                 

Investments

                 

Long-Term Investments

                 

Investment Companies

   $ 43,280,861        $        $        $ 43,280,861  

Short-Term Securities

                 

Money Market Funds

     21,180,288                            21,180,288  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 64,461,149        $        $        $ 64,461,149  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(a)

                 

Assets

                 

Inflation Linked Contracts

   $        $ 2,718,707        $        $ 2,718,707  

Interest Rate Contracts

              312,191                   312,191  

Liabilities

                 

Inflation Linked Contracts

              (19,443                 (19,443
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $   3,011,455        $                 —          3,011,455  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

Derivative financial instruments are swaps. Swaps are valued at the unrealized appreciation (depreciation) on the instrument.

 

See notes to financial statements.

 

 

24  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Schedule of Investments

October 31, 2023

  

iShares® Inflation Hedged High Yield Bond ETF

(Percentages shown are based on Net Assets)

 

Security  

Shares

    Value  

 

 

Investment Companies

 

Exchange-Traded Funds — 95.0%            

iShares iBoxx $High Yield Corporate Bond ETF(a)(b)

    32,244     $ 2,339,947  
   

 

 

 

Total Investment Companies
(Cost: $2,385,834)

 

    2,339,947  
   

 

 

 

Short-Term Securities

 

Money Market Funds — 48.1%  

BlackRock Cash Funds: Institutional, SL Agency Shares, 5.54%(a)(c)(d)

    1,124,319       1,124,769  

BlackRock Cash Funds: Treasury, SL Agency Shares, 5.33%(a)(c)

    60,000       60,000  
   

 

 

 

Total Short-Term Securities — 48.1%
(Cost: $1,184,654)

 

    1,184,769  
   

 

 

 

Total Investments in Securities — 143.1%
(Cost: $3,570,488)

 

    3,524,716  

Liabilities in Excess of Other Assets — (43.1)%

 

    (1,062,131
   

 

 

 

Net Assets — 100.0%

 

  $ 2,462,585  
   

 

 

 

 

(a) 

Affiliate of the Fund.

(b) 

All or a portion of this security is on loan.

(c) 

Annualized 7-day yield as of period end.

(d) 

All or a portion of this security was purchased with the cash collateral from loaned securities.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended October 31, 2023 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

                   
Affiliated Issuer  

Value at

10/31/22

   

Purchases

at Cost

   

Proceeds

from Sale

   

Net Realized

Gain (Loss)

   

Change in

Unrealized

Appreciation

(Depreciation)

   

Value at

10/31/23

   

Shares

Held at

10/31/23

    Income    

Capital

Gain

Distributions

from

Underlying

Funds

 

BlackRock Cash Funds: Institutional, SL Agency Shares

  $ 723,613                $ 400,957 (a)    $     $ 83     $ 116     $ 1,124,769       1,124,319     $ 12,414 (b)    $  

BlackRock Cash Funds: Treasury, SL Agency Shares

    50,000         10,000 (a)                         60,000       60,000       2,661        

iShares iBoxx $ High Yield Corporate Bond ETF

    2,389,706         37,756       (59,435     186       (28,266     2,339,947       32,244       139,565        
         

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 
          $ 269     $ (28,150   $ 3,524,716       $ 154,640     $  
         

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

 

  (a) 

Represents net amount purchased (sold).

 
  (b) 

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Derivative Financial Instruments Outstanding as of Period End

Centrally Cleared Interest Rate Swaps

 

 

 
                       

Effective
Date

    

Termination
Date

        

 

      

Notional

Amount
(000)

      

Value

      

 

Upfront

Premium

Paid
(Received)

      

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

     Received by the Fund
Rate   

 

Frequency

     Rate    Frequency

 

 

3.18%

   Annual      1-Day SOFR, 5.35%        Annual      N/A        01/17/30          USD          15        $ 1,086        $        $ 1,086  

 

 

S C H E D U L E   O F   I N V E S T M E N T S

    25  


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged High Yield Bond ETF

 

OTC Inflation Swaps

 

 

 
                          Counterparty   Termination
Date
   

Notional

Amount

(000)

    Value    

Upfront

Premium

Paid
(Received)

   

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

Reference    Frequency      Rate      Frequency

 

 

4.05%

   At Termination     

U.S. CPI Urban Consumers NAS

     At Termination     

Goldman Sachs International

    06/24/24       USD       60     $ (174   $     $ (174

4.06%

   At Termination     

U.S. CPI Urban Consumers NAS

     At Termination     

Goldman Sachs International

    06/24/24       USD       50       (154           (154

3.05%

   At Termination     

U.S. CPI Urban Consumers NAS

     At Termination     

Goldman Sachs International

    06/24/27       USD       520       1,128             1,128  

2.82%

   At Termination     

U.S. CPI Urban Consumers NAS

     At Termination     

Goldman Sachs International

    06/24/32       USD       98       852             852  
                         

 

 

   

 

 

   

 

 

 
                          $ 1,652     $     $ 1,652  
                         

 

 

   

 

 

   

 

 

 

Centrally Cleared Inflation Swaps

 

 

 
                          Termination
Date
      

Notional

Amount

(000)

      

Value

      

Upfront

Premium

Paid
(Received)

      

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

Reference    Frequency      Rate      Frequency

 

 

2.34%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/24          USD          100        $ 426        $        $ 426  

2.58%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        11/22/24          USD          8          63                   63  

3.13%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/25          USD          349          1,862          4          1,858  

2.74%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        12/07/25          USD          42          78          1          77  

2.35%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        02/07/26          USD          14          150                   150  

2.50%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        04/13/26          USD          43          184                   184  

2.36%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        06/01/26          USD          115          1,010          1          1,009  

2.41%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/26          USD          21          127                   127  

2.90%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/27          USD          124          739          1          738  

2.62%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        02/28/28          USD          8          49                   49  

2.51%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/28          USD          30          195          1          194  

2.63%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        09/21/28          USD          55          1          1          0  

2.75%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        07/12/29          USD          488          6,399          8          6,391  

2.52%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        10/11/29          USD          13          178                   178  

2.80%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        10/27/29          USD          25          (64                 (64

2.71%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        12/07/29          USD          24          62          1          61  

2.51%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        12/22/29          USD          25          337                   337  

2.44%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        02/07/30          USD          20          350                   350  

2.48%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        06/01/30          USD          30          425          1          424  

2.61%

   At Termination     

U.S. CPI Urban Consumers NSA

     At Termination        08/23/30          USD          28          129          1          128  

 

 

26  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged High Yield Bond ETF

 

Centrally Cleared Inflation Swaps (continued)

 

 

 
                              Termination
Date
      

Notional

Amount

(000)

       Value       

Upfront

Premium

Paid
(Received)

      

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

      

Received by the Fund

 
Reference    Frequency        Rate      Frequency  

 

 

2.65%

     At Termination       

U.S. CPI Urban Consumers NSA

       At Termination          09/21/30          USD          10        $ 10        $        $ 10  

2.64%

     At Termination       

U.S. CPI Urban Consumers NSA

       At Termination          10/30/30          USD          29          4                   4  
                                

 

 

      

 

 

      

 

 

 
                                 $ 12,714        $ 20        $ 12,694  
                                

 

 

      

 

 

      

 

 

 

Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps and OTC Swaps

 

         
Description   

Swap

Premiums

Paid

    

Swap

Premiums

Received

    

Unrealized

Appreciation

    

Unrealized

Depreciation

 

Centrally Cleared Swaps(a)

   $ 20      $      $ 13,844      $ (64

OTC Swaps

                   1,980        (328

 

  (a) 

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
    

Commodity

Contracts

    

Credit

Contracts

    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

    

Interest

Rate

Contracts

    

Inflation

Linked

Contracts

     Total  

 

 

Assets — Derivative Financial Instruments

                    

Swaps — OTC

                    

Unrealized appreciation on OTC swaps; Swap premiums paid

   $      $      $      $      $      $ 1,980      $ 1,980  

Swaps — centrally cleared

                    

Unrealized appreciation on centrally cleared swaps(a)

   $      $      $      $      $ 1,086      $ 12,758      $ 13,844  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $      $      $      $ 1,086      $ 14,738      $ 15,824  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Swaps — OTC

                    

Unrealized depreciation on OTC swaps; Swap premiums received

   $      $      $      $      $      $ 328      $ 328  

Swaps — centrally cleared

                    

Unrealized depreciation on centrally cleared swaps(a)

   $      $      $      $      $      $ 64      $ 64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $      $      $      $      $      $ 392      $ 392  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

For the period ended October 31, 2023, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
    

Commodity

Contracts

    

Credit

Contracts

    

Equity

Contracts

    

Foreign

Currency

Exchange

Contracts

    

Interest

Rate

Contracts

    

Inflation

Linked

Contracts

     Total  

 

 

Net Realized Gain (Loss) from

                    

Swaps

   $      $      $      $      $ 1,430      $ (1,239    $ 191  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on

                    

Swaps

   $      $      $      $      $ 1,086      $ (6,827    $ (5,741
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

S C H E D U L E   O F   I N V E S T M E N T S

    27  


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged High Yield Bond ETF

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Interest rate swaps:

  

Average notional value — pays fixed rate

   $ 15,000      

Inflation swaps:

  

Average notional value – pays fixed rate

   $ 2,304,225      

 

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments - Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

 

 

 
     Assets        Liabilities  

 

 

Derivative Financial Instruments:

       

Swaps - centrally cleared

   $ 13,844        $ 64  

Swaps - OTC(a)

     1,980          328  
  

 

 

      

 

 

 

Total derivative assets and liabilities in the Statement of Assets and Liabilities

     15,824          392  

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

     (13,844        (64
  

 

 

      

 

 

 

Total derivative assets and liabilities subject to an MNA

     1,980          328  
  

 

 

      

 

 

 

 

  (a) 

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statements of Assets and Liabilities.

 

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

 

 

 
   

Derivative

Assets

Subject to

an MNA by

 

 

 

 

 

Derivatives

Available

 

 

 

Non-Cash

Collateral

 

 

 

Cash

Collateral

 

 

   

Net Amount

of Derivative

 

 

Counterparty     Counterparty         for Offset (a)    Received

 

  Received

 

      Assets (b) 

 

 

Goldman Sachs International

                         $  1,980            $ (328              $     —                $     —                $ 1,652  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
                   

 

 
   

Derivative
Liabilities

Subject to
an MNA by

    Derivatives
Available
    Non-Cash
Collateral
    Cash
Collateral
    Net Amount
of Derivative
 
Counterparty     Counterparty         for Offset (a)    Received

 

  Pledged

 

      Liabilities  

 

 

Goldman Sachs International

                     $  328       $ (328     $     —       $     —       $  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

  (a) 

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

 
  (b) 

Net amount represents the net amount receivable from the counterparty in the event of default.

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.

 

                                                                                                   

 

 
     Level 1        Level 2        Level 3        Total  

 

 

Assets

                 

Investments

                 

Long-Term Investments

                 

Investment Companies

   $ 2,339,947        $        $        $ 2,339,947  

Short-Term Securities

                 

Money Market Funds

     1,184,769                            1,184,769  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 3,524,716        $        $        $ 3,524,716  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(a)

                 

Assets

                 

Inflation Linked Contracts

   $        $ 14,738        $        $ 14,738  

Interest Rate Contracts

              1,086                   1,086  

 

 

28  

2 0 2 3   I S H A R E S   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S


Schedule of Investments   (continued)

October 31, 2023

  

iShares® Inflation Hedged High Yield Bond ETF

 

Fair Value Hierarchy as of Period End (continued)

 

                                                                                                               

 

 
     Level 1        Level 2        Level 3        Total  

 

 

Liabilities

                 

Inflation Linked Contracts

   $        $ (392      $        $ (392
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $ 15,432        $              15,432  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

Derivative financial instruments are swaps. Swaps are valued at the unrealized appreciation (depreciation) on the instrument.

 

See notes to financial statements.

 

 

S C H E D U L E   O F   I N V E S T M E N T S

    29  


Schedule of Investments

October 31, 2023

  

iShares® Inflation Hedged U.S. Aggregate Bond ETF

(Percentages shown are based on Net Assets)

 

Security   Shares     Value  

 

 

Investment Companies

 

Exchange-Traded Funds — 93.7%  

iShares Core U.S. Aggregate Bond ETF(a)

    23,688     $ 2,186,639  
   

 

 

 

Total Investment Companies
(Cost: $2,383,112)

 

    2,186,639  
   

 

 

 

Short-Term Securities

 

Money Market Funds — 3.4%            

BlackRock Cash Funds: Treasury, SL Agency Shares, 5.33%(a)(b)

    80,000       80,000  
   

 

 

 

Total Short-Term Securities — 3.4%
(Cost: $80,000)

 

    80,000  
   

 

 

 

Total Investments in Securities — 97.1%
(Cost: $2,463,112)

 

    2,266,639  

Other Assets Less Liabilities — 2.9%

 

    68,387  
   

 

 

 

Net Assets — 100.0%

    $   2,335,026  
   

 

 

 

 

(a) 

Affiliate of the Fund.

(b) 

Annualized 7-day yield as of period end.

    

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended October 31, 2023 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 
Affiliated Issuer  

Value at

10/31/22

   

Purchases

at Cost

    Proceeds
from Sale
   

Net Realized

Gain (Loss)

   

Change in

Unrealized

Appreciation
(Depreciation)

    Value at
10/31/23
    Shares
Held at
10/31/23
    Income    

Capital

Gain

Distributions

from

Underlying

Funds

 

 

 

BlackRock Cash Funds: Treasury, SL Agency Shares

  $ 30,000                  $ 50,000 (a)    $     $     $     $ 80,000       80,000     $ 2,039     $  

iShares Core U.S. Aggregate Bond ETF

    2,285,951         78,889       (118,339     (2,609     (57,253     2,186,639       23,688       69,814        
         

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 
          $ (2,609   $ (57,253   $ 2,266,639       $ 71,853     $  
         

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

 

  (a) 

Represents net amount purchased (sold).

 

Derivative Financial Instruments Outstanding as of Period End

Centrally Cleared Interest Rate Swaps

 

 

 
                        Effective
Date
     Termination
Date
               

Notional

Amount

(000)

      

Value

      

Upfront

Premium

Paid
(Received)

      

Unrealized

Appreciation
(Depreciation)

 

Paid by the Fund

    

Received by the Fund

      

 

 
Rate    Frequency          Rate    Frequency             

 

 

3.23%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        01/11/33          USD          5        $ 485        $        $ 485  

3.20%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        12/06/42          USD          5          858                   858  

4.06%

   Annual      1-Day SOFR, 5.35%    Annual      N/A        10/17/53          USD          10          477                   477  
                                   

 

 

      

 

 

      

 

 

 
                                    $ 1,820        $        $ 1,820  
                                   

 

 

      

 

 

      

 

 

 

OTC Inflation Swaps

 

 

 

   
                                Counterparty      Termination
Date
      

Notional

Amount
(000)

       Value       

Upfront

Premium

Paid
(Received)

      

Unrealized

Appreciation
(Depreciation)

     
   

Paid by the Fund

    

Received by the Fund

   

    

       Reference    Frequency      Rate      Frequency  
 

 

   
 

3.05%

   At Termination     

U.S. CPI Urban Consumers NAS

       At Termination       

Goldman Sachs International

       06/24/27          USD     315        $   683        $        $ 683    

 

 

30  

2 0 2 3  I S H A R E S   A N N U A L   R E P O R T   T O