iShares U.S. ETF Trust

Table of Contents

Market Overview

iShares U.S. ETF Trust

U.S. Bond Market Overview

The U.S. bond market declined slightly for the 12 months ended October 31, 2021 (“reporting period”). The Bloomberg U.S. Aggregate Bond Index, a broad measure of U.S. fixed-income performance, returned -0.48%.

The U.S. economy continued to recover from the effects of the coronavirus pandemic, growing at a brisk pace during the reporting period. Driven by strong consumer spending and significant fiscal and monetary stimulus, U.S. growth outpaced most other developed economies. An ongoing COVID-19 vaccination program helped accelerate the easing of pandemic-related restrictions, and consumers returned to activities that were previously curtailed, such as travel, restaurant dining, and in-person shopping. Spending on goods also remained elevated, leading imports to rise to an all-time high.

However, this robust consumer demand combined with continued pandemic-related disruptions to the global supply chain led to significantly higher inflation. Similarly, in the labor market, the reopening economy and pent-up demand meant that hiring accelerated, and the unemployment rate fell substantially. Nonetheless, total employment remained notably below pre-pandemic levels and job openings reached a record high despite rising wages. Elevated demand drove an increase in industrial production, although rising commodities prices and supply delays constrained growth, particularly late in the reporting period. The emergence of the highly contagious Delta variant, which was responsible for a significant rise in cases beginning late in summer 2021, also weighed on the economy.

The U.S. Federal Reserve Bank (“Fed”) continued to keep short-term interest rates at near-zero levels and maintained a significant bond-buying program for U.S. Treasuries and mortgage-backed securities, although it discontinued its corporate bond purchasing program. The Fed indicated that it would begin slowing its bond buying activities late in 2021 and signaled that an interest rate increase could be possible in 2022. However, the improving employment environment and a sharp rise in inflation led investors to anticipate a more accelerated tightening of monetary policy. Trading activity showed that investors view multiple interest rate increases as probable in 2022.

U.S. Treasuries declined, as inflation increased, and investors moved toward equities and lower-rated bonds. Rising domestic inflation expectations pressured U.S. Treasuries, which typically lose value in an inflationary environment. U.S. Treasury yields (which move inversely to prices) began the reporting period near historic lows, but generally rose as inflation increased and the economy continued to strengthen. Yields of U.S. Treasuries with intermediate- and long-term maturities, which are more sensitive to inflation, generally increased more than short-term U.S. Treasuries. However, long-term U.S. Treasury yields rose less than intermediate-term U.S. Treasury yields, with two-year, 10-year, and 30-year U.S. Treasury yields rising by 0.34%, 0.67%, and 0.28%, respectively.

Mortgage-backed securities (“MBS”) declined slightly, despite ongoing support from Fed bond purchasing. MBS performance was constrained by prepayments, as homeowners took advantage of low mortgage rates to refinance their mortgages at a lower interest rate.

On the upside, most corporate bonds advanced for the reporting period, particularly lower-rated corporate bonds. A narrowing yield spread (the difference between yields on corporate bonds and U.S. Treasuries) buoyed the performance of corporate bonds compared to U.S. Treasuries. Investors’ ongoing search for yield in a low interest rate environment drove the decline in the yield spread and supported corporate bond prices. High-yield bonds gained the most, as investors’ concerns about solvency abated alongside the growing economy, and the Fed’s support led to high investor confidence. Corporate bond issuance was elevated by historical standards as companies took advantage of low yields to refinance and lock in advantageous borrowing costs.

Investment Objective

The iShares Inflation Hedged Corporate Bond ETF (the “Fund”) seeks to mitigate the inflation risk of a portfolio composed of U.S. dollar-denominated, investment grade corporate bonds. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified 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.

Effective December 1, 2021, the Fund will change from operating as a transparent active ETF to tracking an underlying index, the BlackRock Inflation Hedged Corporate Bond Index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was 5/8/18. The first day of secondary market trading was 5/10/18.

The Markit iBoxx^® USD Liquid Investment Grade Inflation Hedged Index is an unmanaged index that is designed to reflect the inflation hedged performance of U.S. dollar-denominated investment-grade corporate debt.

Past performance is no guarantee 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” on page 11 for more information.

Expense Example

Portfolio Management Commentary

The Fund posted a positive return for the reporting period, largely driven by the strong performance of inflation-hedging securities in an environment of rising inflation. The Fund’s inflation hedge contributed the majority of the Fund’s return amid investors’ increasing inflation expectations. Inflation rose consistently during the reporting period due to the reopening of the global economy, persistent fiscal and monetary stimulus, and supply chain bottlenecks. Meanwhile, corporate yield spreads (the difference between yields of corporate bonds and U.S. Treasuries) declined, which supported corporate bond prices, while the relatively high yields of corporate bonds also helped the Fund’s performance.

On an unhedged basis, bonds issued by energy companies were the largest contributors to the Fund’s return. Oil prices more than doubled during the reporting period, as robust demand from the economic recovery met supply disruptions. Bonds issued by financial companies, especially banks, were also solid contributors to the Fund’s performance, as banks benefited from rising earnings, increased loan issuance, and somewhat higher bond yields relative to other types of corporate bonds. In the consumer non-cyclicals sector, bonds issued by food and beverage companies advanced, as an increase in consumption of alcohol and stockpiling of staples since the onset of the coronavirus pandemic continued throughout the reporting period. From a maturity perspective, the longest-term bonds contributed the most to the Fund’s return, as investors sought higher yields in the low interest rate environment.

In terms of the performance of the inflation hedge, the portfolio managers sought to mitigate the impact of inflation by using zero-coupon Consumer Price Index inflation swaps. These securities posted strong gains, as inflation expectations rose sharply during the reporting period to a seven-year high, reflecting higher realized inflation and concern that inflation could erode the value of fixed-income investments. The hedge, which is designed to offset the inflation risk of the entire Fund, was very effective during the reporting period, as it increased in value at a higher rate than inflation rose.

Portfolio Information

Investment Objective

The iShares Interest Rate Hedged Corporate Bond ETF (the “Fund”) seeks to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, investment-grade corporate bonds. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified 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.

Effective December 1, 2021, the Fund will change from operating as a transparent active ETF to tracking an underlying index, the BlackRock Interest Rate Hedged Corporate Bond Index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was 5/27/14. The first day of secondary market trading was 5/28/14.

The Markit iBoxx^® USD Liquid Investment Grade Interest Rate Hedged Swaps Index is an unmanaged index that is designed to reflect the duration hedged performance of U.S. dollar-denominated investment-grade corporate debt.

The Markit iBoxx^® USD Liquid Investment Grade Interest Rate Hedged Swaps Index reflects the performance of the Markit iBoxx^® USD Liquid Investment Grade Interest Rate Hedged Index through June 16, 2016 and beginning June 17, 2016 reflects the performance of the Markit iBoxx^® USD Liquid Investment Grade Interest Rate Hedged Swaps Index.

Past performance is no guarantee 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” on page 11 for more information.

Expense Example

Portfolio Management Commentary

The Fund posted a positive return for the reporting period despite rising long-term interest rates. The Fund’s interest rate hedge contributed the most to the Fund’s return, as the rising interest rate environment increased the value of the hedge. Similarly, corporate yield spreads (the difference between yields of corporate bonds and U.S. Treasuries) declined, which supported corporate bond prices, while the relatively high yields of corporate bonds also helped the Fund’s performance.

On an unhedged basis, bonds issued by energy companies were the largest contributors to the Fund’s return. Oil prices more than doubled during the reporting period, as robust demand from the economic recovery met supply disruptions. Bonds issued by financial companies, especially banks, were also solid contributors to the Fund’s performance, as banks benefited from rising earnings, increased loan issuance, and somewhat higher bond yields relative to other types of corporate bonds. In the consumer non-cyclicals sector, bonds issued by food and beverage companies advanced, as an increase in consumption of alcohol and stockpiling of staples since the onset of the coronavirus pandemic continued throughout the reporting period. From a maturity perspective, the longest-term bonds contributed the most to the Fund’s return, as investors sought higher yields in the low interest rate environment.

Interest rate hedging activity was beneficial to the Index’s performance. Typically, increasing interest rates reduce the price of existing bonds, meaning a rise in interest rates detracts from bond fund performance. Conversely, decreasing interest rates usually increase bond prices. An interest rate hedged fund attempts to avoid these fluctuations by offsetting interest rate risk, primarily using interest rate swaps and U.S. Treasury futures contracts.

The Fund’s interest rate hedge seeks near-zero interest rate sensitivity. Consequently, the Fund’s return was minimally affected by interest rate fluctuations during the reporting period. With interest rate sensitivity hedged, the Fund fluctuated based on direct exposure to the yield premium of investment-grade corporate bonds, independent of rising interest rates.

Portfolio Information

Investment Objective

The iShares Interest Rate Hedged HighYield Bond ETF (the “Fund”) seeks to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, high yield corporate bonds. The Fund is an actively managed exchange-traded fund that does not seek to replicate the performance of a specified 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.

Effective December 1, 2021, the Fund will change from operating as a transparent active ETF to tracking an underlying index, the BlackRock Interest Rate Hedged High Yield Bond Index.

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was 5/27/14. The first day of secondary market trading was 5/28/14.

The Markit iBoxx^® USD Liquid High Yield Interest Rate Hedged Swaps Index is an unmanaged index that reflects the duration hedged performance of U.S. dollar-denominated high yield corporate debt.

Past performance is no guarantee 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” on page 11 for more information.

Expense Example

Portfolio Management Commentary

The Fund posted a positive return for the reporting period. High-yield credit spreads, the difference in yield between high-yield bonds and U.S. Treasuries, declined to record lows during the reporting period due to healthy corporate balance sheets combined with strong investor demand. Previous downgrading of companies’ credit quality led to investor expectations of subsequent upgrades, contributing to the fall in yields. Rising interest rates also increased the value of the Fund’s hedge.

On an unhedged basis, bonds issued by energy companies were the largest contributors to the Fund’s return. Oil prices more than doubled during the reporting period, as robust demand from the economic recovery met supply disruptions. Consumer-oriented sectors were also strong contributors to the Fund’s performance, as rising wages and pent-up demand drove consumer spending on a wide variety of items, which led to strong performance in many industries, including automotive, gaming, healthcare, and food and beverage. Bonds issued by companies in the communications sector also posted gains, as remote work, learning, and entertainment led to a surge in demand for voice and data traffic. Most industries in the financial sector also benefited broadly from a rebound in global economic activity, especially real estate investment trusts, as business fundamentals improved.

Rising interest rates during the reporting period led to positive performance from hedging activity, which was the largest contributor to the Fund’s return. Typically, increasing interest rates reduce the price of existing bonds, meaning a rise in interest rates detracts from bond fund performance. Conversely, decreasing interest rates usually increase bond prices. An interest rate hedged fund attempts to avoid these fluctuations by offsetting interest rate risk, primarily using interest rate swaps and U.S. Treasury futures contracts.

The Fund’s interest rate hedge seeks near-zero interest rate sensitivity. Consequently, the Fund’s return was minimally affected by interest rate fluctuations during the reporting period. With interest rate sensitivity hedged, the Fund fluctuated based on direct exposure to the yield premium of high-yield corporate bonds, independent of rising interest rates.

Portfolio Information

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 by 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.

Shareholder Expenses

As a shareholder of your Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares and (2) ongoing costs, including management fees and other fund expenses. The expense example, which is based on an investment of $1,000 invested at the beginning of the period (or from the commencement of operations if less than 6 months) and held through the end of the period, is intended to help you understand your ongoing costs (in dollars and cents) of investing in your Fund and to compare these costs with the ongoing costs of investing in other funds.

Actual Expenses – The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period.”

Hypothetical Example for Comparison Purposes – The table also provides information about hypothetical account values and hypothetical expenses based on your Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions and other fees paid on purchases and sales of fund shares. Therefore, the hypothetical examples are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended October 31, 2021 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Futures Contracts (continued)

Centrally Cleared Inflation Swaps

Centrally Cleared Inflation Swaps (continued)

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

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:

Derivative Financial Instruments Categorized by Risk Exposure (continued)

For the period ended October 31, 2021, the effect of derivative financial instruments in the Statements of Operations was as follows:

Average Quarterly Balances of Outstanding Derivative Financial Instruments

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.

Fair Value Hierarchy as of Period End (continued)

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.

See notes to financial statements.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended October 31, 2021 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: