0001193125-07-177560.txt : 20120820
0001193125-07-177560.hdr.sgml : 20120818
20070809163904
ACCESSION NUMBER: 0001193125-07-177560
CONFORMED SUBMISSION TYPE: 485APOS
PUBLIC DOCUMENT COUNT: 4
FILED AS OF DATE: 20070809
DATE AS OF CHANGE: 20080107
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: iSHARES TRUST
CENTRAL INDEX KEY: 0001100663
IRS NUMBER: 943351276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-92935
FILM NUMBER: 071041108
BUSINESS ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
BUSINESS PHONE: (415) 670-2000
MAIL ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
FORMER COMPANY:
FORMER CONFORMED NAME: ISHARES TRUST
DATE OF NAME CHANGE: 19991213
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: iSHARES TRUST
CENTRAL INDEX KEY: 0001100663
IRS NUMBER: 943351276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-09729
FILM NUMBER: 071041109
BUSINESS ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
BUSINESS PHONE: (415) 670-2000
MAIL ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
FORMER COMPANY:
FORMER CONFORMED NAME: ISHARES TRUST
DATE OF NAME CHANGE: 19991213
0001100663
S000019356
iShares S&P Global Infrastructure Index Fund
C000053784
iShares S&P Global Infrastructure Index Fund
S000019357
iShares S&P Global Listed Private Equity Index Fund
C000053785
iShares S&P Global Listed Private Equity Index Fund
485APOS
1
d485apos.txt
FORM 485APOS
As filed with the Securities and Exchange Commission on August 9, 2007
File Nos. 333-92935 and 811-09729
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 96 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 96 [X]
(Check appropriate box or boxes)
-----------------
iShares(R) Trust
(Exact Name of Registrant as Specified in Charter)
-----------------
c/o State Street Bank and Trust Company
200 Clarendon Street
Boston, MA 02116
(Address of Principal Executive Office)(Zip Code)
Registrant's Telephone Number, including Area Code: (415) 597-2000
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
(Name and Address of Agent for Service)
-----------------
With Copies to:
MARGERY K. NEALE, ESQ. BENJAMIN J. HASKIN, ESQ. ADAM MIZOCK, ESQ.
WILLKIE FARR & GALLAGHER WILLKIE FARR & GALLAGHER BARCLAYS GLOBAL INVESTORS,
LLP LLP N.A.
787 SEVENTH AVENUE 1875 K STREET, NW 45 FREMONT STREET
NEW YORK, NY 10019-6099 WASHINGTON, DC 20006-1238 SAN FRANCISCO, CA 94105
-----------------
It is proposed that this filing will become effective (check appropriate
box):
[ ] Immediately upon filing pursuant [ ] On (date) pursuant to paragraph (b)
to paragraph (b)
[ ] 60 days after filing pursuant to [ ] On (date) pursuant to paragraph
paragraph (a)(1) (a)(1)
[X] 75 days after filing pursuant to [ ] On (date) pursuant to paragraph
paragraph (a)(2) (a)(2)
If appropriate, check the following box:
[ ]The post-effective amendment designates a new effective date for a
previously filed post-effective amendment
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES DESCRIBED HEREIN MAY NOT BE
SOLD UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL.
iShares(Reg. TM)
iShares Trust
ISHARES TRUST (the "Trust") is a registered investment company that consists of
over ___ separate investment portfolios called "Funds." This Prospectus relates
to the following Funds:
iShares S&P Global Infrastructure Index Fund
iShares S&P Global Listed Private Equity Index Fund
Each Fund issues and redeems shares at their net asset value ("NAV") only in
blocks of [50,000] shares or multiples thereof ("Creation Units"). Only certain
large institutional investors known as Authorized Participants may purchase or
redeem Creation Units directly with a Fund at NAV. These transactions are
usually in exchange for a basket of securities similar to a Fund's portfolio
and an amount of cash. EXCEPT WHEN AGGREGATED IN CREATION UNITS, SHARES OF EACH
FUND ARE NOT REDEEMABLE SECURITIES. SHAREHOLDERS WHO ARE NOT AUTHORIZED
PARTICIPANTS MAY NOT REDEEM SHARES DIRECTLY FROM A FUND AT NAV.
iShares(Reg. TM) is a registered trademark of Barclays Global Investors, N.A.
("BGI").
The Securities and Exchange Commission ("SEC) has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
PROSPECTUS DATED [________________], 2007
Table of Contents
Introduction ........................ 1
Investment Objectives of the Funds .. 1
Principal Investment ................ 1
Strategies of the Funds
Principal Risks of the Funds ........ 3
Portfolio Holdings Information ...... 6
Descriptions of the Funds ........... 8
iShares S&P Global .................. 8
Infrastructure Index Fund
iShares S&P Global Listed ........... 10
Private Equity Index Fund
Performance Information ............. 12
Fees and Expenses ................... 12
Management .......................... 12
Shareholder Information ............. 13
Distribution ........................ 19
Financial Highlights ................ 20
Index Provider ...................... 21
Disclaimers ......................... 22
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"S&P", "S&P Global Infrastructure Index" and "S&P Listed Private Equity Index"
are trademarks of Standard & Poor's (a division of The McGraw-Hill Companies,
Inc.) ("S&P(R)" or "Standard and Poor's") and are marks that have been licensed
for use for certain purposes by BGI.
i
Introduction
This Prospectus contains important information about investing in the Funds.
Please read this Prospectus carefully before you make any investment decisions.
Additional information regarding the Funds is available at www.iShares.com.
Barclays Global Fund Advisors ("BGFA") is the investment adviser to the Funds.
BGFA is a subsidiary of BGI. The shares of each Fund are listed and trade at
market prices on a national securities exchange such as the American Stock
Exchange, the Chicago Board Options Exchange, the New York Stock Exchange
("NYSE") or the NYSE Arca, Inc. The market price for a share of a Fund may be
different from the Fund's most recent NAV per share. Each Fund has its own CUSIP
number and exchange trading symbol.
Each Fund is an exchange traded fund (commonly referred to as an "ETF"). ETFs
are funds that trade like other publicly-traded securities and are designed to
track an index. Similar to shares of an index mutual fund, each share of a Fund
represents a partial ownership in an underlying portfolio of securities
intended to track a market index. Unlike shares of a mutual fund, which can be
bought and redeemed from the issuing fund by all shareholders at a price based
on NAV, only Authorized Participants may purchase or redeem shares directly
from the Funds at NAV. Also, unlike shares of a mutual fund, the shares of each
Fund are listed on a national securities exchange and trade in the secondary
market at market prices that change throughout the day.
Each Fund invests in a particular segment of the securities markets and seeks
to track the performance of a securities index that generally is not
representative of the market as a whole. The Funds are designed to be used as
part of broader asset allocation strategies. Accordingly, an investment in a
Fund should not constitute a complete investment program.
An investment in a Fund is not a bank deposit and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, BGFA or any of its affiliates.
Investment Objectives of the Funds
Each Fund is an "index fund" that seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of a
particular index (its "Underlying Index").Each Fund's investment objective and
its Underlying Index may be changed without shareholder approval.
Each of the Underlying Indexes is sponsored by an organization (the "Index
Provider") that is independent of the Funds and BGFA. The Index Provider
determines the relative weightings of the securities in the Underlying Index
and publishes information regarding the market value of the Underlying Index.
Each Fund's Index Provider is set forth below:
FUND INDEX PROVIDER
----------------------------- ---------------
iShares S&P Global S&P
Infrastructure Index Fund
iShares S&P Global Listed S&P
Private Equity Index Fund
Additional information regarding the Index Provider is provided in the INDEX
PROVIDER section of this Prospectus.
Principal Investment Strategies of the Funds
The principal investment strategies common to each of the Funds are described
below. Additional information regarding each Fund's principal investment
strategies is provided in the DESCRIPTIONS OF THE FUNDS section of this
Prospectus.
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1
BGFA uses a "passive" or indexing approach to try to achieve each Fund's
investment objective. Unlike many investment companies, the Funds do not try to
"beat" the indexes they track and do not seek temporary defensive positions
when markets decline or appear overvalued.
Indexing eliminates the chance that a Fund may substantially outperform its
Underlying Index, but also may reduce some of the risks of active management,
such as poor security selection. Indexing seeks to achieve lower costs and
better after-tax performance by keeping portfolio turnover low in comparison to
actively managed investment companies.
Each Fund generally will invest at least 90% of its assets in the securities of
its Underlying Index or in American Depositary Receipts ("ADRs"), or other
depositary receipts representing securities in the Underlying Index. A Fund may
invest the remainder of its assets in securities not included in its Underlying
Index, but which BGFA believes will help the Fund track its Underlying Index.
For example, a Fund may invest in securities not included in its Underlying
Index in order to reflect various corporate actions (such as mergers) and other
changes in its Underlying Index (such as reconstitutions, additions and
deletions). A Fund also may invest its other assets in futures contracts,
options on futures contracts, options and swaps related to its Underlying
Index, as well as cash and cash equivalents, including shares of money market
funds affiliated with BGFA.
BGFA uses a representative sampling indexing strategy to manage the Funds as
described below.
Representative Sampling
"Representative sampling" is an indexing strategy that involves investing in a
representative sample of the securities included in the relevant Underlying
Index that collectively has an investment profile similar to the Underlying
Index. The securities selected are expected to have, in the aggregate,
investment characteristics (based on factors such as market capitalization and
industry weightings), fundamental characteristics (such as return variability
and yield) and liquidity measures similar to those of the relevant Underlying
Index. A Fund may or may not hold all of the securities that are included in
the relevant Underlying Index.
Correlation
An index is a theoretical financial calculation, while a Fund is an actual
investment portfolio. The performance of a Fund and its Underlying Index may
vary somewhat due to transaction costs, asset valuations, corporate actions
(such as mergers and spin-offs), timing variances and differences between a
Fund's portfolio and the Underlying Index resulting from legal restrictions
(such as diversification requirements that apply to the Funds but not to the
Underlying Indexes) or representative sampling.
BGFA expects that, over time, the correlation between a Fund's performance and
that of its Underlying Index, before fees and expenses, will be 95% or better.
A correlation percentage of 100% would indicate perfect correlation. The
difference between 100% correlation and a Fund's actual correlation with its
Underlying Index is called "tracking error." The Funds' use of a representative
sampling indexing strategy can be expected to result in greater tracking error
than if the Funds used a replication indexing strategy. "Replication" is an
indexing strategy in which a fund invests in substantially all of the
securities in its underlying index in approximately the same proportions as in
the underlying index.
Industry Concentration Policy
A Fund will concentrate its investments (I.E., hold 25% or more of its total
assets) in a particular industry or group of industries only to approximately
the same extent that its Underlying Index is so concentrated. For purposes of
this limitation, securities of the U.S. government (including its agencies and
instrumentalities), repurchase agreements collateralized by U.S. government
securities, and securities of state or municipal governments and their
political subdivisions are not considered to be issued by members of any
industry.
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2
[GRAPHIC APPEARS HERE]
Principal Risks of the Funds
Each Fund may be subject to the principal risks noted below, as well as those
specifically identified in the DESCRIPTIONS OF THE FUNDS section of this
Prospectus. Some or all of these risks may adversely affect a Fund's NAV,
trading price, yield, total return and its ability to meet its investment
objective. Below is a table that identifies the risks described in this section
that are applicable to a particular Fund:
ISHARES S&P GLOBAL INFRASTRUCTURE INDEX FUND
Asset Class Risk o
Concentration Risk o
Emerging Markets Risk o
Foreign Investment Risks o
Geographic Risk o
Legal Enforcement of Shareholder o
Rights Risk
Management Risk o
Market Risk o
Market Trading Risks o
Non-Diversification Risk o
Passive Investments Risk o
Secondary Market Trading Risk o
Security Risk o
Tracking Error Risk o
Valuation Risk o
Additional Principal Risks* o
ISHARES S&P GLOBAL LISTED PRIVATE EQUITY INDEX FUND
Asset Class Risk o
Concentration Risk o
Emerging Markets Risk o
Foreign Investment Risks o
Geographic Risk o
Legal Enforcement of Shareholder o
Rights Risk
Management Risk o
Market Risk o
Market Trading Risks o
Non-Diversification Risk o
Passive Investments Risk o
Secondary Market Trading Risk o
Security Risk o
Tracking Error Risk o
Valuation Risk o
Additional Principal Risks* o
* The Funds are subject to additional principal risks that are described
in the DESCRIPTION OF THE FUNDS section applicable to that Fund.
Asset Class Risk
The securities in the Underlying Index or a Fund's portfolio may underperform
the returns of other securities or indexes that track other industries, groups
of industries, markets, asset classes or sectors. Different types of securities
or indexes tend to go through cycles of outperformance and underperformance in
comparison to the general securities markets.
Concentration Risk
If the Underlying Index or a Fund's portfolio is concentrated in the securities
of companies in a particular market, industry, group of industries, sector or
asset class, the Fund may be adversely affected by the performance of those
securities and may be subject to increased price volatility and may be more
susceptible to adverse economic, market, political or regulatory occurrences
affecting that market, industry, group of industries, sector or asset class. An
investment in a Fund should not constitute a complete investment program.
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3
Emerging Markets Risk
Investments in emerging markets are subject to a greater risk of loss than
investments in a developed market. This is due to, among other things, greater
market volatility, lower trading volume, political and economic instability,
greater risk of market shut down and more governmental limitations on foreign
investment policy than those typically found in a developed market.
Foreign Investment Risks
Investments in the securities of non-U.S. issuers are subject to the risks of
investing in the markets of such issuers' countries, including market
fluctuations caused by factors such as economic and political developments,
changes in interest rates and perceived trends in stock prices. As a result of
investing in foreign securities, a Fund may be subject to the risks listed and
described below. These risks may decrease the value of your investment.
[ ] Less liquid and less efficient securities markets;
[ ] Greater price volatility;
[ ] Exchange rate fluctuations and exchange controls;
[ ] Less publicly available information about issuers;
[ ] Imposition of withholding or other taxes;
[ ] Imposition of restrictions on the expatriation of funds or other assets of
the Fund;
[ ] Higher transaction and custody costs and delays in attendant settlement
procedures;
[ ] Difficulties in enforcing contractual obligations;
[ ] Lesser levels of regulation of the securities markets;
[ ] Different accounting, disclosure and reporting requirements;
[ ] More substantial government involvement in the economy;
[ ] Higher rates of inflation; and
[ ] Greater social, economic and political uncertainty and the risk of
nationalization or expropriation of assets and risk of war.
Each Fund's NAV is determined on the basis of U.S. dollars. You may lose money
on your investment in the Funds that hold foreign investments if the local
currency value of a foreign market depreciates against the U.S. dollar, even if
the local currency value of the Funds' holdings goes up.
Since foreign exchanges are open on days when the Funds do not price their
shares, the value of the securities in the portfolios may change on days when
shareholders will not be able to purchase or sell the shares.
Geographic Risk
Some countries in which a Fund invests are located in parts of the world prone
to natural disasters, such as earthquakes, volcanoes or tsunamis, or are
economically sensitive to environmental events. Any such event could cause a
significant impact on their respective economies and investments in these
countries.
Legal Enforcement of Shareholder Rights Risk
In countries other than the U.S., legal principles relating to corporate
affairs and the validity of corporate procedures, directors' fiduciary duties
and liabilities and stockholders' rights may differ from those that may apply
in the U.S. Stockholders' rights under the laws of other nations may not be as
extensive as those
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4
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that exist under the laws of the U.S. A Fund may therefore have more difficulty
asserting its rights as a stockholder of a non-U.S. company in which it invests
than it would as a stockholder of a comparable U.S. company.
Management Risk
Each Fund may be subject to management risk because each Fund does not fully
replicate its Underlying Index and may hold securities that are not included in
its Underlying Index. Management risk is the risk that BGFA's investment
strategy, the implementation of which is subject to a number of constraints,
may not produce the intended results. Each Fund is managed in a manner that
seeks to track the Fund's Underlying Index, and is therefore subject to passive
investments risk, which is described below.
Market Risk
Each Fund's NAV will react to securities market movements. You could lose money
over short periods due to fluctuation in the Fund's NAV in response to market
movements, and over longer periods during market downturns. Securities may
decline in value due to factors affecting securities markets generally or
particular industries represented in the markets. The value of a security may
decline due to general market conditions or economic trends or events which are
not specifically related to a company or to factors which affect a particular
industry or industries. During a general economic downturn in the securities
markets, multiple assets classes may be negatively affected.
Market Trading Risks
ABSENCE OF ACTIVE MARKET
Although shares of the Funds are listed for trading on a national
securities exchange, there can be no assurance that an active trading
market for such shares will develop or be maintained.
LACK OF MARKET LIQUIDITY
Secondary market trading in Fund shares may be halted by a national
securities exchange because of market conditions or for other reasons. In
addition, trading in Fund shares is subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules.
There can be no assurance that the requirements necessary to maintain the
listing of the shares of any Fund will continue to be met or will remain
unchanged.
SHARES OF EACH FUND WILL TRADE AT PRICES OTHER THAN NAV
Shares of each Fund trade on exchanges at prices at, above or below their
most recent prior NAV. The per share NAV of each Fund is calculated at
the end of each business day and fluctuates with changes in the market
value of such Fund's holdings since the most recent prior calculation.
The trading prices of a Fund's shares fluctuate continuously throughout
trading hours based on market supply and demand rather than NAV. The
trading prices of a Fund's shares may deviate significantly from NAV
during periods of market volatility. ANY OF THESE FACTORS MAY LEAD TO A
FUND'S SHARES TRADING AT A PREMIUM OR DISCOUNT TO NAV. However, given
that shares can be created and redeemed in Creation Units at NAV (unlike
shares of many closed-end funds, which frequently trade at appreciable
discounts from, and sometimes at premiums to, their NAVs), BGFA believes
that large discounts or premiums to the NAV of a Fund are not likely to
be sustained over the long-term. While the creation/redemption feature is
designed to make it likely that a Fund's shares normally will trade on
exchanges at prices close to the Fund's next calculated NAV, exchange
prices are not expected to correlate exactly with a Fund's NAV due to
timing reasons as well as market supply and demand factors. In addition,
disruptions to creations and redemptions or the existence of extreme
market volatility may result in trading prices that differ significantly
from NAV. If a shareholder purchases at a time when the market price is
at a premium to the NAV or sells at a time when the market price is at a
discount to the NAV, then the shareholder may sustain losses.
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5
COSTS OF BUYING OR SELLING FUND SHARES
Buying or selling Fund shares involves two types of costs that apply to
all securities transactions. When buying or selling shares of a Fund
through a broker, you will incur a brokerage commission or other charges
imposed by brokers as determined by that broker. In addition, you will
also incur the cost of the "spread" - that is, the difference between
what professional investors are willing to pay for Fund shares (the "bid"
price) and the price at which they are willing to sell Fund shares (the
"ask" price). Because of the costs inherent in buying or selling Fund
shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for
investors who anticipate regularly making small investments.
Non-Diversification Risk
The Funds are classified as "non-diversified." A non-diversified fund generally
may invest a larger percentage of its assets in the securities of a smaller
number of issuers. As a result, the Fund may be more susceptible to the risks
associated with these particular companies, or to a single economic, political
or regulatory occurrence affecting these companies.
Passive Investments Risk
The Funds are not actively managed. Each Fund may be affected by a general
decline in the stock market segments or foreign market segments relating to its
Underlying Index. Each Fund invests in the securities included in, or
representative of, its Underlying Index regardless of their investment merit.
BGFA does not attempt to take defensive positions in declining markets.
Secondary Market Trading Risk
Shares of a Fund may trade in the secondary market on days when the Funds do
not accept orders to purchase or redeem shares. On such days, shares may trade
in the secondary market with more significant premiums or discounts than might
be experienced on days when the Funds accept purchase and redemption orders.
Security Risk
Some national economies have experienced acts of terrorism or have strained
international relations due to territorial disputes, historical animosities or
other defense concerns. These situations may cause uncertainty in the markets
of developed nations and may affect the performance of their economies.
Tracking Error Risk
Imperfect correlation between a Fund's securities and those in its Underlying
Index, rounding of prices, changes to the Underlying Index and regulatory
requirements may cause a Fund's performance to diverge from the performance of
its Underlying Index. This is called "tracking error." Tracking error also may
result because a Fund incurs fees and expenses while its Underlying Index does
not incur such expenses.
Valuation Risk
Because foreign exchanges may be open on days when a Fund does not price its
shares, the value of the securities in a Fund's portfolio may change on days
when shareholders will not be able to purchase or sell a Fund's shares.
Portfolio Holdings Information
A description of the Trust's policies and procedures with respect to the
disclosure of the Funds' portfolio securities is available in the Funds'
combined Statement of Additional Information ("SAI"). The top holdings
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6
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of each Fund can be found at www.iShares.com. Fund fact sheets provide
information regarding each Fund's top holdings and may be requested by calling
1-800-iShares (1-800-474-2737).
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7
Descriptions of the Funds
iShares S&P Global Infrastructure Index Fund
CUSIP:
TRADING SYMBOL:
UNDERLYING INDEX: S&P Global Infrastructure Index
-------------------------------------------------
Investment Objective
The iShares S&P Global Infrastructure Index Fund seeks investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the S&P Global Infrastructure Index (the "Underlying Index").
Principal Investment Strategy
The Underlying Index is designed to track the performance of the stocks of
large infrastructure companies around the world. The Underlying Index includes
companies involved in utilities, energy and transportation infrastructure, such
as the management or ownership of oil and gas storage and transportation;
airport services; highways and rail tracks; marine ports and services; and
electric, gas and water utilities. As of August 1, 2007, each of the Underlying
Index's constituents had a minimum market capitalization of $100 million.
Because all of the securities included in the Underlying Index are issued by
infrastructure companies, the Fund will be concentrated in the infrastructure
industry.
Principal Risks
The Fund is subject to the risks identified as applicable to the Fund in the
PRINCIPAL RISKS OF THE FUNDS section of this Prospectus. In addition, the Fund
is subject to the risks listed below:
INFRASTRUCTURE INDUSTRY RISK. Companies in the infrastructure industry may be
subject to a variety of factors that could adversely affect their business or
operations, including high interest costs in connection with capital
construction programs, high degrees of leverage, costs associated with
governmental, environmental and other regulations, the effects of economic
slowdowns, increased competition from other providers of services,
uncertainties concerning costs, and other factors. Infrastructure companies may
be adversely affected by commodity price volatility, changes in exchange rates,
import controls, depletion of resources, technological developments, and labor
relations.
Infrastructure companies in the oil and gas sector may be adversely affected by
government regulation or world events in the regions that the companies operate
(E.G., expropriation, nationalization, confiscation of assets and property or
the imposition of restrictions on foreign investments and repatriation of
capital, military coups, social unrest, violence or labor unrest).
Infrastructure companies may have significant capital investments in, or engage
in transactions involving, emerging market countries, which may heighten these
risks.
OPERATIONS RISK. The failure of an infrastructure company to carry adequate
insurance or to operate its assets appropriately could lead to significant
losses. Infrastructure may be adversely affected by environmental clean-up
costs and catastrophic events such as earthquakes, hurricanes and terrorist
acts.
CUSTOMER RISK. Infrastructure companies can be dependent upon a narrow
customer base. Additionally, if these customers fail to pay their
obligations, significant revenues could be lost and may not be replaceable.
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8
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REGULATORY RISK. Infrastructure companies may be subject to significant
regulation by various governmental authorities and also may be affected by
regulation of rates charged to customers, service interruption due to
environmental, operational or other events, the imposition of special
tariffs and changes in tax laws, regulatory policies and accounting
standards.
STRATEGIC ASSET RISK. Infrastructure companies may control significant
strategic assets (E.G., major pipelines or highways), which are assets that
have a national or regional profile, and may have monopolistic
characteristics. Given their national or regional profile or irreplaceable
nature, strategic assets could generate additional risk not common in other
industry sectors and they may be targeted for terrorist acts or adverse
political actions.
INTEREST RATE RISK. Rising interest rates could result in higher costs of
capital for infrastructure companies, which could negatively impact their
ability to meet payment obligations.
LEVERAGE RISK. Infrastructure companies can be highly leveraged which
increases investments risk and other risks normally associated with debt
financing, and could adversely affect an infrastructure company's operations
and market value in periods of rising interest rates.
INFLATION RISK. Many infrastructure companies may have fixed income streams.
Consequently, their market values may decline in times of higher inflation.
Additionally, the prices that an infrastructure company is able to charge
users of its assets may be linked to inflation, whether by government
regulation, contractual arrangement or other factors. In this case, changes
in the rate of inflation may affect the company's profitability.
TRANSPORTATION RISK. The stock prices of companies in the transportation
sector are affected by both supply and demand for their specific product.
Government regulation, world events and economic conditions may affect the
performance of companies in the transportation sector.
OIL AND GAS RISK. The profitability of oil and gas companies is related to
worldwide energy prices, exploration, and production spending.
UTILITIES RISK. Utilities companies face intense competition, both
domestically and internationally, which may have an adverse affect on their
profit margins. The rates charged by regulated utility companies are subject
to review and limitation by governmental regulatory commissions.
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9
iShares S&P Global Listed Private Equity Index Fund
CUSIP:
TRADING SYMBOL:
UNDERLYING INDEX: S&P Listed Private Equity Index
-------------------------------------------------
Investment Objective
The iShares S&P Global Listed Private Equity Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the S&P Listed Private Equity Index (the "Underlying
Index").
Principal Investment Strategy
The Underlying Index is designed to track large private equity companies listed
on exchanges in developed markets countries. The Underlying Index includes
public companies that S&P characterizes as engaging in the private equity
business, such as venture capital and leveraged buyout firms and business
development companies that typically make direct equity investments as well as
provide loans to privately held companies. Some private equity companies take
substantial ownership position in their portfolio companies and may provide
significant managerial assistance to them. As of August 1, 2007, each of the
Underlying Index's constituents had a minimum market capitalization of $250
million. Real estate income and property trusts are excluded from the
Underlying Index.
Because all of the securities included in the Underlying Index are issued by
private equity companies, the Fund will be concentrated in the private equity
industry.
Principal Risks
The Fund is subject to the risks identified as applicable to the Fund in the
PRINCIPAL RISKS OF THE FUNDS section of this Prospectus. In addition, the Fund
is subject to the risks listed below:
PRIVATE EQUITY INVESTMENT RISK. The Fund invests in private equity companies,
which exposes investors to some if the significant risks of owning private
equity directly, as well as to risks that relate specifically to the way in
which private equity companies are organized and operated.
MARKET RISK. The market for private equity investments is subject to
fluctuations and may significantly diminish as a result of changes in
interest rates, the availability of financing and general market conditions.
A disruption in the market for private equity investments could cause a
private equity company to lose all or part of its investment.
PERSONNEL RISK. Private equity companies, and the portfolio companies in
which they invest, may depend on a small number of key personnel and thus
are more vulnerable to loss of personnel.
OPERATING RISK. Private equity companies, and the portfolio companies in
which they invest, generally have less predictable operating results, may
from time to time be parties to litigation, may be engaged in rapidly
changing businesses with products subject to a substantial risk of
obsolescence and may require substantial additional capital to support their
operations, finance expansion or maintain their competitive position.
Private equity companies, and the portfolio companies in which they invest,
typically have shorter operating histories, narrower product lines and
smaller market shares than larger businesses, which tend to render them more
vulnerable to competitors' actions and market conditions.
INFORMATION RISK. Generally, limited public information exists about
companies in which private equity investments are made, and private equity
companies must rely on their own ability to obtain adequate information for
the purposes of evaluating potential private equity investments.
DISTRIBUTION RISK. If a private equity company receives distributions in
kind from any of its private equity investments it will incur additional
costs and risks in disposing of such assets.
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[GRAPHIC APPEARS HERE]
REGULATORY RISK. Potential regulatory action poses a significant risk to
private equity companies. Private equity companies are subject to extensive
regulation in the U.S. and in the other countries in which their investment
activities occur. Many investing activities, such as lending, are subject to
regulation by various U.S., state, and foreign regulators. Trading
activities can implicate a broad number of U.S. and foreign securities law
regimes, including laws governing trading on inside information, market
manipulation and a broad number of technical trading requirements that
implicate fundamental market regulation policies. Violation of such laws
could result in severe restrictions on the activities and reputation of a
private equity company. Changes to U.S. federal tax laws could, if enacted,
change the tax treatment of income received or distributed by certain
private equity companies, and could adversely affect the tax liabilities of
such companies.
INVESTING IN BDCS. The Fund may invest in business development companies
("BDCs"), which entail certain special risks. The Investment Company Act of
1940, as amended (the "1940 Act"), imposes certain restrictions upon BDC's
operations. For example, BDCs are required to invest at least 70% of their
assets primarily in securities of private companies or thinly-traded U.S.
public companies. Additionally, a BDC may only incur indebtedness in amounts
such that the BDC's asset coverage equals at least 200% after incurring the
debt. These limitations on asset mix and leverage may restrict the way that
the BDC raises capital. BDCs generally invest in less mature private
companies which involve greater risk than well-established publicly-traded
companies.
COMPETITION RISK. Over the past several years, the size and number of
private equity companies have continued to increase, potentially making it
difficult for such companies to raise capital. In addition, the allocation
of increasing amounts of capital to alternative investment strategies may
lead to a reduction in profitable investment opportunities.
Rising interest rates could result in higher costs of capital for private
equity companies, which could negatively impact their investment income and
their ability to meet their payment obligations.
LEVERAGE RISK. Private equity companies invest in businesses with capital
structures that typically have significant amounts of leverage. The large
amount of borrowing in the leveraged capital structure of such businesses
increases the risk of losses due to factors such as rising interest rates,
downturns in the economy or deteriorations in the condition of the
investment or its industry. In the event of defaults under borrowings, the
assets being financed would be at risk of foreclosure, and the private
equity company could lose its entire investment. The leveraged companies may
be limited in their ability to adjust to market conditions, engage in
strategic acquisitions, and obtain additional capital. A private equity
company may be limited in its access to established credit markets and may
be forced to pay higher rates for its borrowings.
LIQUIDITY RISK. Private equity companies generally invest in securities that
are not publicly traded, and generally illiquid. Private equity investments
often require a long-term commitment of capital. In many cases, private
equity companies may be prohibited by contract or by applicable securities
laws from selling portfolio securities for a period of time. Accordingly,
such companies may be forced to sell securities at a loss.
VALUATION RISK. There are no readily-ascertainable market prices for a very
large number of illiquid investments by private equity companies. The values
of the investments held in private equity companies are often determined
periodically based on the fair value of such portfolio investments, which
may be determined by using a number of methodologies based on many factors,
such as the nature of the investment, the expected cash flows from the
investment, bid or ask prices provided by third parties for the investment,
the length of time the investment has been held, the trading price of
securities, restrictions on transfer and other recognized valuation
methodologies. The methodologies generally used in valuing individual
investments are based on a variety of estimates and assumptions specific to
the particular investments, and actual results related to the investment
therefore often vary materially as a result of the inaccuracy of such
assumptions or estimates. In addition, because many of the illiquid
investments held by private equity companies are in industries or sectors
which are unstable, in distress, or undergoing some uncertainty, such
investments are subject to rapid changes in value caused by sudden
company-specific or industry-wide developments. Because there is significant
uncertainty in the valuation of, or in the stability of the value of
illiquid investments, the fair values of such investments as reflected in
each private equity company do not necessarily reflect the prices that would
actually be obtained on behalf of a private equity company when such
investments are sold.
Additional Tracking Error Risk. A significant portion of the Underlying Index
is comprised of BDCs or other U.S. investment companies. The Fund is limited
to acquiring no greater than 3% of the total outstanding stock of each such
company. This limitation could inhibit the Fund's ability to purchase certain
of the securities in the Underlying Index in the proportions represented in
the Underlying Index. In these circumstances, the Fund would be required to
use representative sampling strategies which can be expected to result in
greater tracking error.
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Performance Information
As of the date of this Prospectus, the Funds have been in operation for less
than one full calendar year and therefore do not report their performance
information.
Fees and Expenses
The following table describes the fees and expenses that you will incur if you
own shares of a Fund. You will also incur usual and customary brokerage
commissions when buying or selling shares of a Fund:
ANNUAL FUND OPERATING EXPENSES/2/
----------------------------------------------------------------
DISTRIBUTION AND TOTAL ANNUAL FUND
SHAREHOLDER MANAGEMENT SERVICE (12B-1) OTHER OPERATING
FUND FEES/1/ FEES FEES EXPENSES/3/ EXPENSES
--------------------------------- ------------- ------------ ------------------ ------------- ------------------
iShares S&P Global None [___]% None None [___]%
Infrastructure Index
Fund
iShares S&P Global Listed Private None [___]% None None [___]%
Equity Index Fund
--------
/1/Fees paid directly from your investment.
/2/Expenses that are deducted from a Fund's assets, expressed as a
percentage of average net assets.
/3/The Trust's Investment Advisory Agreement provides that BGFA will pay all
operating expenses of the Funds, except interest expense and taxes (both
expected to be DE MINIMIS), any brokerage expenses, future distribution
fees or expenses, and extraordinary expenses.
Example
This Example is intended to help you compare the cost of owning shares of a
Fund with the cost of investing in other funds. The Example assumes that you
invest $10,000 in a Fund for the time periods indicated and then sell all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
FUND 1 YEAR 3 YEARS
----------------------------- -------- --------
iShares S&P Global $[__] $[__]
Infrastructure Index Fund
iShares S&P Global Listed $[__] $[__]
Private Equity Index
Fund
Management
Investment Adviser
As investment adviser, BGFA has overall responsibility for the general
management and administration of the Trust. BGFA provides an investment program
for each Fund and manages the investment of each Fund's assets. In seeking to
achieve a Fund's investment objective, BGFA uses teams of portfolio managers,
investment strategists and other investment specialists. This team approach
brings together many disciplines and leverages BGFA's extensive resources. BGFA
also arranges for transfer agency, custody, fund administration and all other
non-distribution related services necessary for the Funds to operate.
Under the Investment Advisory Agreement, BGFA is responsible for substantially
all expenses of the Trust, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, except interest expense and
taxes, brokerage expenses, distribution fees or expenses and extraordinary
expenses.
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BGFA is entitled to receive management fees from each Fund based on a
percentage of the Fund's average daily net assets, as shown in the following
table:
FUND MANAGEMENT FEE
----------------------------- ---------------
iShares S&P Global [___]%
Infrastructure Index Fund
iShares S&P Global Listed [___]%
Private Equity Index Fund
--------
1 Because the Fund has been in operation for less than one full fiscal year,
this percentage reflects the rate at which BGFA will be
paid.
BGFA is located at 45 Fremont Street, San Francisco, CA 94105. It is a
wholly-owned subsidiary of BGI, which in turn is a majority-owned subsidiary of
Barclays Bank PLC. As of [________], 2007, BGI and its affiliates, including
BGFA, provided investment advisory services for assets in excess of $__
trillion. BGI, BGFA, Barclays Global Investors Services, Barclays Bank PLC and
their affiliates deal, trade and invest for their own accounts in the types of
securities in which the Funds may also invest.
A discussion regarding the basis for the Board of Trustees' approval of the
Investment Advisory Agreement with BGFA is available in each Fund's semi-annual
report for the six-month period ended September 30.
Portfolio Managers
Patrick O'Connor and S. Jane Leung (the "Portfolio Managers") are primarily
responsible for the day-to-day management of the Funds. Each Portfolio Manager
is responsible for various functions related to portfolio management,
including, but not limited to, investing cash inflows, coordinating with
members of his or her team to focus on certain asset classes, implementing
investment strategy, researching and reviewing investment strategy, and
overseeing members of his or her portfolio management team with more limited
responsibilities.
Patrick O'Connor is an employee of BGFA and BGI and, together with the other
Portfoliol Manager, will be primarily responsible for the day-to-day management
of the Funds from inception. Mr. O'Connor has been a senior portfolio manager
with BGFA and BGI since 1999.
S. Jane Leung is an employee of BGFA and BGI, together with the other Portfolio
Manager, will be primarily responsible for the day-to-day management of the
Funds from inception. Ms. Leung has been a senior portfolio manager with BGFA
and BGI since 2004 and was a portfolio manager with BGFA and BGI from 2001 to
2004.
The Funds' SAI provides additional information about the Portfolio Managers'
compensation, other accounts managed by the Portfolio Managers, and the
Portfolio Managers' ownership (if any) of shares in the Funds.
Administrator, Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street") is the administrator,
custodian and transfer agent for each Fund.
Shareholder Information
ADDITIONAL SHAREHOLDER INFORMATION, INCLUDING HOW TO BUY AND SELL SHARES OF THE
FUNDS, IS AVAILABLE FREE OF CHARGE BY CALLING TOLL-FREE: 1-800-ISHARES
(1-800-474-2737) OR VISITING OUR WEBSITE WWW.ISHARES.COM.
Buying and Selling Shares
Shares of each Fund trade on a national securities exchange during the trading
day. Shares can be bought and sold throughout the trading day like shares of
other publicly-traded companies. The Trust does not
--------------------------------------------------------------------------------
13
impose any minimum investment for shares of a Fund purchased on an exchange.
Buying or selling Fund shares involves two types of costs that apply to all
stock transactions. When buying or selling shares of the Funds through a
broker, you will incur a brokerage commission determined by your broker. In
addition, you will also incur the cost of the "spread" - that is, the
difference between the bid price and the ask price. The commission is
frequently a fixed amount, and may be a significant proportional cost for
investors seeking to buy or sell small amounts of shares. The spread varies
over time for the shares of each Fund based on its trading volume and market
liquidity, and is generally lower if a Fund has a lot of trading volume and
market liquidity and higher if a Fund has little trading volume and market
liquidity. The Funds' shares trade under the trading symbols listed for each
Fund in the DESCRIPTIONS OF THE FUNDS section of this Prospectus.
Shares of the Funds may be acquired or redeemed directly from a Fund only in
Creation Units or multiples thereof, as discussed in the CREATIONS AND
REDEMPTIONS section of this Prospectus. Once created, shares of the Funds
generally trade in the secondary market in amounts less than a Creation Unit.
The Trust's Board of Trustees has adopted a policy of not monitoring for
frequent purchases and redemptions of Fund shares ("frequent trading") that
appear to attempt to take advantage of a potential arbitrage opportunity
presented by a lag between a change in the value of a Fund's portfolio
securities after the close of the primary markets for a Fund's portfolio
securities and the reflection of that change in the Fund's NAV ("market
timing"), because each Fund sells and redeems its shares directly through
transactions that are in-kind and/or for cash, with a deadline for placing
cash-related transactions no later than the close of the primary markets for
the Fund's portfolio securities. The Board of Trustees has not adopted a policy
of monitoring for other frequent trading activity because shares of the Funds
are listed and traded on national securities exchanges.
The national securities exchange on which each Fund's shares are listed is open
for trading Monday through Friday and is closed on weekends and the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Each Fund's primary listing exchange is shown below:
FUND PRIMARY LISTING EXCHANGE
----------------------------- -------------------------
iShares S&P Global [____]
Infrastructure Index Fund
iShares S&P Global Listed [____]
Private Equity Index Fund
Section 12(d)(1) of the 1940 Act, restricts investments by registered
investment companies in the securities of other investment companies, including
shares of each Fund. Registered investment companies are permitted to invest in
each Fund beyond the limits set forth in Section 12(d)(1), subject to certain
terms and conditions set forth in an SEC exemptive order issued to the Trust,
including that such investment companies enter into an agreement with the
Trust.
Book Entry
Shares of the Funds are held in book-entry form, which means that no stock
certificates are issued. The Depository Trust Company ("DTC"), or its nominee,
is the record owner of all outstanding shares of each Fund and is recognized as
the owner of all shares for all purposes.
Investors owning shares of the Funds are beneficial owners as shown on the
records of DTC or its participants. DTC serves as the securities depository for
all shares of the Funds. Participants include DTC, securities brokers and
dealers, banks, trust companies, clearing corporations and other institutions
that directly or indirectly maintain a custodial relationship with DTC. As a
beneficial owner of shares, you are not entitled to receive physical delivery
of stock certificates or to have shares registered in your name, and you are
not considered a registered owner of shares. Therefore, to exercise any right
as an owner of shares, you must rely upon the procedures of DTC and its
participants. These procedures are the same as those that apply to any other
securities that you hold in book-entry or "street name" form.
--------------------------------------------------------------------------------
14
[GRAPHIC APPEARS HERE]
Share Prices
The trading prices of a Fund's shares in the secondary market generally will
differ from the Fund's daily NAV per share and are affected by market forces
such as supply and demand, economic conditions and other factors. Information
regarding the intraday value of shares of each Fund, also known as the
"indicative optimized portfolio value" ("IOPV"), is disseminated every 15
seconds throughout the trading day by the national securities exchange on which
the Fund is listed or by market data vendors or other information providers.
The IOPV is based on the current market value of the securities and cash
required to be deposited in exchange for a Creation Unit. The IOPV does not
necessarily reflect the precise composition of the current portfolio of
securities held by a Fund at a particular point in time nor the best possible
valuation of the current portfolio. Therefore, the IOPV should not be viewed as
a "real-time" update of the NAV, which is computed only once a day. The IOPV is
generally determined by using both current market quotations and/or price
quotations obtained from broker-dealers that may trade in the portfolio
securities held by the Funds. The quotations of certain Fund holdings may not
be updated during U.S. trading hours if such holdings do not trade in the U.S.
The Funds are not involved in, or responsible for, the calculation or
dissemination of the IOPV and make no representation or warranty as to its
accuracy.
Determination of Net Asset Value
The NAV for each Fund will generally be determined once daily Monday through
Friday generally as of the regularly scheduled close of business of the NYSE
(normally 4:00 p.m., Eastern time) on each day that the NYSE is open for
trading, based on prices at the time of closing, provided that (a) any assets
or liabilities denominated in currencies other than the U.S. dollar shall be
translated into U.S. dollars at the prevailing market rates on the date of
valuation as quoted by one or more major banks or dealers that makes a two-way
market in such currencies (or a data service provider based on quotations
received from such banks or dealers); and (b) U.S. fixed-income assets may be
valued as of the announced closing time for trading in fixed-income instruments
on any day that the Securities Industry and Financial Markets Association
announces an early closing time. The NAV of each Fund is calculated by dividing
the value of the net assets of a Fund (I.E., the value of its total assets less
total liabilities) by the total number of outstanding shares of the Fund,
generally rounded to the nearest cent.
In calculating a Fund's NAV, a Fund's investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange, a pricing service, or a major market maker (or dealer), (ii)
based on a price quotation or other equivalent indication of value supplied by
an exchange, a pricing service, or a major market maker (or dealer), or (iii)
based on amortized cost. In the case of shares of funds that are not traded on
an exchange, a market valuation means such fund's published net asset value per
share. BGFA may use various pricing services or discontinue the use of any
pricing service. A price obtained from a pricing service based on such pricing
service's valuation matrix may be considered a market valuation.
In the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and
procedures approved by the Board of Trustees. The frequency with which a Fund's
investments are valued using fair value pricing is primarily a function of the
types of securities and other assets in which each Fund invests pursuant to its
investment objective, strategies and limitations.
Investments that may be valued using fair value pricing include, but are not
limited to: (i) an unlisted security related to corporate actions; (ii) a
restricted security (I.E., one that may not be publicly sold without
registration under the Securities Act of 1933, as amended (the "Securities
Act")); (iii) a security whose trading has been suspended or which has been
de-listed from its primary trading exchange; (iv) a security that is thinly
traded; (v) a security in default or bankruptcy proceedings for which there is
no current market quotation; (vi) a security affected by currency controls or
restrictions; and (vii) a security affected by a significant event (I.E., an
event that occurs after the close of the markets on which the security is
traded but before the time as of which the Fund's NAV is computed and that may
materially
--------------------------------------------------------------------------------
15
affect the value of the Fund's investments). Examples of events that may be
"significant events" are government actions, natural disasters, armed conflict,
acts of terrorism and significant market fluctuations.
Valuing a Fund's investments using fair value pricing will result in using
prices for those investments that may differ from current market valuations.
Use of fair value prices and certain current market valuations could result in
a difference between the prices used to calculate a Fund's NAV and the prices
used by the Fund's Underlying Index, which, in turn, could result in a
difference between the Fund's performance and the performance of the Fund's
Underlying Index.
Because foreign markets may be open on different days than the days during
which a shareholder may purchase a Fund's shares, the value of the Fund's
investments may change on days when shareholders are not able to purchase the
Fund's shares.
The value of assets denominated in foreign currencies is converted into U.S.
dollars using exchange rates deemed appropriate by BGFA as investment adviser.
Dividends and Distributions
GENERAL POLICIES. Dividends from net investment income, if any, are declared
and paid at least annually by each Fund. Each Fund generally distributes its
net capital gains, if any, to shareholders annually. Each Fund also reserves
the right to declare special distributions if, in its reasonable discretion,
such action is necessary or advisable to preserve its status as a regulated
investment company or to avoid imposition of income or excise taxes on
undistributed income.
Dividends and other distributions on shares are distributed on a PRO RATA basis
to beneficial owners of such shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from a
Fund.
DIVIDEND REINVESTMENT SERVICE. No dividend reinvestment service is provided by
the Trust. Broker-dealers may make available the DTC book-entry Dividend
Reinvestment Service for use by beneficial owners of a Fund for reinvestment of
their dividend distributions. Beneficial owners should contact their broker to
determine the availability and costs of the service and the details of
participation therein. Brokers may require beneficial owners to adhere to
specific procedures and timetables. If this service is available and used,
dividend distributions of both income and realized gains will be automatically
reinvested in additional whole shares of a Fund purchased in the secondary
market.
Taxes
As with any investment, you should consider how your investment in shares of
the Funds will be taxed. The tax information in this Prospectus is provided as
general information. You should consult your own tax professional about the tax
consequences of an investment in shares of the Funds.
Unless your investment in shares is made through a tax-exempt entity or
tax-deferred retirement account, such as an IRA, you need to be aware of the
possible tax consequences when a Fund makes distributions or you sell Fund
shares.
Taxes on Distributions
Distributions from a Fund's net investment income (other than qualified
dividend income), including distributions out of the Fund's net short-term
capital gains, if any, and distributions of income from securities lending, are
taxable to you as ordinary income. Distributions by a Fund of net long-term
capital gains in excess of net short-term capital losses (capital gain
dividends) are taxable to you as long-term capital gains, regardless of how
long you have held a Fund's shares. Distributions by a Fund that qualify as
qualified dividend income are taxable to you at long-term capital gain rates.
Under current law, the taxation of qualified dividend income at long-term
capital gain rates will no longer apply for taxable years beginning after
December 31, 2010.
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[GRAPHIC APPEARS HERE]
In order for a distribution by a Fund to be treated as qualified dividend
income, the Fund must meet holding period and other requirements with respect
to its dividend paying securities, and you must meet holding period
requirements and other requirements with respect to the Fund's shares. A
dividend will not be treated as qualified dividend income if the dividend is
received with respect to any share of stock held for fewer than 61 days during
the 121-day period beginning at the date which is 60 days before the date on
which such share becomes ex-dividend with respect to such dividend or in the
case of certain preferred stock 91 days during the 181-day period beginning 90
days before such date. In general, your distributions are subject to federal
income tax for the year when they are paid. Certain distributions paid in
January, however, may be treated as paid on December 31 of the prior year.
If a Fund's distributions exceed current and accumulated earnings and profits,
all or a portion of the distributions made in the taxable year may be
recharacterized as a return of capital to shareholders. A return of capital
distribution generally will not be taxable but will reduce the shareholder's
cost basis and result in a higher capital gain or lower capital loss when those
shares on which the distribution was received are sold.
If you are neither a resident nor a citizen of the United States or if you are
a foreign entity, a Fund's ordinary income dividends (which include
distributions of net short-term capital gains) will generally be subject to a
30% U.S. withholding tax, unless a lower treaty rate applies, provided,
however, that withholding tax will generally not apply to any gain or income
realized by a non-U.S. shareholder in respect of any distributions of long-term
capital gains or upon the sale of other disposition of shares of a Fund. In
addition, for taxable years of a Fund beginning on or before December 31, 2007,
U.S.-source interest-related dividends and short-term capital gain dividends
may not be subject to such U.S. withholding tax. In order for a distribution to
qualify as an interest-related dividend or a short-term capital gain dividend,
a Fund must designate it as such in writing to shareholders; depending on its
circumstances, a Fund may designate all, some or none of its potentially
eligible dividends as such qualified net interest income or as qualified
short-term capital gains, and/or treat such dividends, in whole or in part, as
ineligible for this exemption from withholding. In order to qualify for this
exemption from withholding, a non-U.S. shareholder will need to comply with
applicable certification requirements relating to its non-U.S. status
(including, in general, furnishing an IRS Form W-8BEN or substitute Form). In
the case of shares held through an intermediary, the intermediary may withhold
even if a Fund designates the payment as qualified net interest income or
qualified short-term capital gain. Non-U.S. shareholders should contact their
intermediaries with respect to the application of these rules to their
accounts.
Dividends and interest received by a Fund with respect to foreign securities
may give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Since more than 50% of each Fund's total assets, will
almost certainly consist of foreign stocks or securities, the Funds will "pass
through" to you certain foreign income taxes (including withholding taxes) paid
by the Funds. This means that you will be considered to have received as an
additional dividend your share of such foreign taxes, but you may be entitled
to either a corresponding tax deduction in calculating your taxable income, or,
subject to certain limitations, a credit in calculating your federal income
tax.
If you are a resident or a citizen of the United States, by law, back-up
withholding will apply to your distributions and proceeds if you have not
provided a taxpayer identification number or social security number and made
other required certifications.
Taxes When Shares are Sold
Currently, any capital gain or loss realized upon a sale of shares is generally
treated as a long-term gain or loss if shares have been held for more than one
year. Any capital gain or loss realized upon a sale of shares held for one year
or less is generally treated as short-term gain or loss, except that any
capital loss on the sale of shares held for six months or less is treated as
long-term capital loss to the extent that capital gain dividends were paid with
respect to such shares.
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17
THE FOREGOING DISCUSSION SUMMARIZES SOME OF THE CONSEQUENCES UNDER CURRENT
FEDERAL TAX LAW OF AN INVESTMENT IN A FUND. IT IS NOT A SUBSTITUTE FOR PERSONAL
TAX ADVICE. YOU MAY ALSO BE SUBJECT TO STATE AND LOCAL TAXATION ON FUND
DISTRIBUTIONS AND SALES OF SHARES. CONSULT YOUR PERSONAL TAX ADVISER ABOUT THE
POTENTIAL TAX CONSEQUENCES OF AN INVESTMENT IN SHARES OF A FUND UNDER ALL
APPLICABLE TAX LAWS.
Creations and Redemptions
The shares that trade in the secondary market are "created" at NAV by market
makers, large investors and institutions only in block-size Creation Units of
[50,000] shares or multiples thereof. Each "creator" or "Authorized
Participant" enters into an authorized participant agreement with the Funds'
distributor, SEI Investments Distribution Co. (the "Distributor"). A creation
transaction which is subject to acceptance by the transfer agent takes place
when an Authorized Participant deposits into the applicable Fund a portfolio of
securities closely approximating the holdings of the Fund and a specified
amount of cash in exchange for a specified number of Creation Units.
Similarly, shares can only be redeemed in a specified number of Creation Units,
principally in-kind for a portfolio of securities held by the Fund and a
specified amount of cash. EXCEPT WHEN AGGREGATED IN CREATION UNITS, SHARES ARE
NOT REDEEMABLE. The prices at which creations and redemptions occur are based
on the next calculation of NAV after an order is received in a form described
in the authorized participant agreement.
Each Fund intends to comply with the federal securities laws in accepting
securities for deposits and satisfying redemptions with redemption securities,
including that the securities accepted for deposits and the securities used to
satisfy redemption requests will be sold in transactions that would be exempt
from registration under the Securities Act. Further, an Authorized Participant
that is not a "qualified institutional buyer," as such term is defined under
Rule 144A of the Securities Act, will not be able to receive Fund securities
that are restricted securities eligible for resale under Rule 144A.
Creations and redemptions must be made through a firm that is either a member
of the Continuous Net Settlement System of the National Securities Clearing
Corporation or a DTC participant, and in either case, has executed an agreement
with the Distributor with respect to creations and redemptions of Creation Unit
aggregations. Information about the procedures regarding creation and
redemption of Creation Units (including the cut-off times for receipt of
creation and redemption orders) is included in the SAI.
Because new shares may be created and issued on an ongoing basis, at any point
during the life of a Fund a "distribution," as such term is used in the
Securities Act, may be occurring. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner that could render them statutory underwriters and subject to the
prospectus delivery and liability provisions of the Securities Act.
Nonetheless, any determination of whether one is an underwriter must take into
account all the relevant facts and circumstances of each particular case.
Broker-dealers should also note that dealers who are not "underwriters," but
are participating in a distribution (as contrasted to ordinary secondary
transactions), and thus dealing with shares that are part of an "unsold
allotment" within the meaning of Section 4(3)(C) of the Securities Act, would
be unable to take advantage of the prospectus delivery exemption provided by
Section 4(3) of the Securities Act. For delivery of prospectuses to exchange
members, the prospectus delivery mechanism of Rule 153 under the Securities Act
is only available with respect to transactions on a national securities
exchange.
Transaction Fees
Each Fund will impose a creation transaction fee and a redemption transaction
fee to offset transfer and other transaction costs associated with the issuance
and redemption of Creation Units. Purchasers and redeemers of Creation Units
for cash are required to pay an additional variable charge to compensate for
brokerage and market impact expenses. The creation and redemption transaction
fees for creations and redemptions in-kind for each Fund are discussed below.
The standard creation transaction fee is charged
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18
[GRAPHIC APPEARS HERE]
to each purchaser on the day such purchaser creates a Creation Unit. The fee is
a single charge and will be the amount indicated below regardless of the number
of Creation Units purchased by an investor on the same day. BGFA may, from time
to time, at its own expense, compensate purchasers of Creation Units who have
purchased substantial amounts of Creation Units and other financial
institutions for administrative or marketing services. Similarly, the standard
redemption transaction fee will be the amount indicated regardless of the
number of Creation Units redeemed that day. The standard creation and
redemption transaction fees for creations and redemptions through DTC for cash
(when cash creations and redemptions are available or specified) will also be
subject to an additional variable charge up to the maximum amount shown below
under "Maximum Creation/Redemption Transaction Fee." In addition, purchasers of
shares in Creation Units are responsible for payment of the costs of
transferring securities to the Fund. Redeemers of shares in Creation Units are
responsible for the costs of transferring securities from the Fund. Investors
who use the services of a broker or other such intermediary may pay fees for
such services. The following table also shows, as of [___________], 2007, the
approximate value of one Creation Unit per Fund, including the standard
creation and redemption transaction fee:
STANDARD MAXIMUM
APPROXIMATE CREATION/ CREATION/
VALUE OF A CREATION REDEMPTION REDEMPTION
FUND CREATION UNIT UNIT SIZE TRANSACTION FEE TRANSACTION FEE
-------------------------- --------------- ----------- ----------------- ----------------
iShares S&P Global $ [__] $[__] $[__]
Infrastructure Index
Fund
iShares S&P Global Listed $ [__] $[__] $[__]
Private Equity
Index Fund
Householding
Householding is an option available to certain Fund investors. Householding is
a method of delivery, based on the preference of the individual investor, in
which a single copy of certain shareholder documents can be delivered to
investors who share the same address, even if their accounts are registered
under different names. Please contact your broker-dealer if you are interested
in enrolling in householding and receiving a single copy of prospectuses and
other shareholder documents, or if you are currently enrolled in householding
and wish to change your householding status.
Distribution
The Distributor distributes Creation Units for each Fund on an agency basis.
The Distributor does not maintain a secondary market in shares of the Funds.
The Distributor has no role in determining the policies of any Fund or the
securities that are purchased or sold by any Fund. The Distributor's principal
address is One Freedom Valley Drive, Oaks, PA 19456.
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19
Financial Highlights
As of the date of this Prospectus, the Funds have been in operation for less
than one full calendar year and therefore do not report their financial
highlights.
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20
[GRAPHIC APPEARS HERE]
Index Provider
Standard & Poor's (a division of The McGraw-Hill Companies, Inc.) is the Index
Provider for the Underlying Indexes. The Index Provider is not affiliated with
the Trust, BGI, BGFA, the Distributor or any of their respective affiliates.
Standard & Poor's provides financial, economic and investment information and
analytical services to the financial community. Standard & Poor's calculates
and maintains the Standard & Poor's Global 1200 Index, which includes the
Standard & Poor's 500 for the U.S., the Standard & Poor's Europe 350 for
Continental Europe and the U.K., the Standard & Poor's/TOPIX 150 for Japan, the
Standard & Poor's Asia Pacific 50, and the Standard & Poor's Latin America 40.
Sector indexes in the S&P Global 100 Index include the Standard & Poor's Global
Energy Sector Index, the Standard & Poor's Global Financials Sector Index, the
Standard & Poor's Global Healthcare Sector Index, the Standard & Poor's Global
Information Technology Sector Index, and the Standard & Poor's Global
Telecommunications Sector Index. Standard & Poor's also publishes the Standard
& Poor's MidCap 400, Standard & Poor's SmallCap 600, Standard & Poor's
Composite 1500 and Standard & Poor's REIT Composite for the U.S. Standard &
Poor's calculates and maintains the S&P/Citigroup Global Equity Index Series, a
set of comprehensive rules-based benchmarks covering developed and emerging
countries around the world. Company additions to and deletions from a Standard
& Poor's equity index do not in any way reflect an opinion on the investment
merits of the company.
BGI has entered into a license agreement with the Index Provider to use the
Underlying Indexes. BGI is sub-licensing rights in the Underlying Indexes to
the Trust at no charge.
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21
Disclaimers
THE FUNDS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S.
STANDARD & POOR'S MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO
THE OWNERS OF SHARES OF THE FUNDS OR TO ANY MEMBER OF THE PUBLIC REGARDING THE
ADVISABILITY OWNING OR TRADING IN SHARES OF THE FUNDS. STANDARD & POOR'S ONLY
RELATIONSHIP TO THE TRUST, BGI OR BGFA IS THE LICENSING OF CERTAIN TRADEMARKS,
TRADE NAMES AND SERVICE MARKS OF STANDARD & POOR'S AND OF THE STANDARD & POOR'S
INDEXES WHICH ARE DETERMINED, COMPOSED, AND CALCULATED BY STANDARD & POOR'S
WITHOUT REGARD TO THE TRUST, BGI OR BGFA. STANDARD & POOR'S HAS NO OBLIGATION
TO TAKE THE NEEDS OF BGI, BGFA OR THE OWNERS OF SHARES INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE STANDARD & POOR'S INDEXES. STANDARD &
POOR'S IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION OR
TIMING OF, THE PRICES, OR QUANTITIES OF SHARES TO BE LISTED OR SALE OR IN THE
DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH SHARES ARE TO BE
CONVERTED INTO CASH. STANDARD & POOR'S HAS NO OBLIGATION OR LIABILITY IN
CONNECTION WITH THE ADMINISTRATION OF THE TRUST, OR THE MARKETING OR TRADING OF
SHARES. STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE STANDARD & POOR'S INDEXES OR ANY DATA INCLUDED THEREIN AND
STANDARD & POOR'S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. STANDARD & POOR'S MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY BGI, BGFA, OWNERS OF SHARES OF THE TRUST, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE STANDARD & POOR'S INDEXES OR ANY
DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE STANDARD & POOR'S
INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY LOST PROFIT OR
INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS BETWEEN STANDARD & POOR'S AND BGI AND BGFA.
SHARES OF THE FUND ARE NOT SPONSORED, ENDORSED OR PROMOTED BY THE [LISTING
EXCHANGE]. THE [LISTING EXCHANGE] MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE SHARES OF ANY FUND OR ANY MEMBER OF THE PUBLIC
REGARDING THE ABILITY OF A FUND TO TRACK THE TOTAL RETURN PERFORMANCE OF ANY
UNDERLYING INDEX OR THE ABILITY OF ANY UNDERLYING INDEX IDENTIFIED HEREIN TO
TRACK STOCK MARKET PERFORMANCE. THE [LISTING EXCHANGE] IS NOT RESPONSIBLE FOR,
NOR HAS IT PARTICIPATED IN, THE DETERMINATION OF THE COMPILATION OR THE
CALCULATION OF ANY UNDERLYING INDEX, NOR IN THE DETERMINATION OF THE TIMING OF,
PRICES OF, OR QUANTITIES OF THE SHARES OF ANY FUND TO BE ISSUED, NOR IN THE
DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE SHARES ARE
REDEEMABLE. THE [LISTING EXCHANGE] HAS NO OBLIGATION OR LIABILITY TO OWNERS OF
THE SHARES OF ANY FUND IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR
TRADING OF THE SHARES OF THE FUND.
THE [LISTING EXCHANGE] DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF ANY UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. THE [LISTING EXCHANGE]
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
TRUST ON BEHALF OF ITS FUNDS AS LICENSEE, LICENSEE'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE SHARES OF THE TRUST, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE SUBJECT INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED AS DESCRIBED HEREIN OR FOR ANY OTHER USE.
THE [LISTING EXCHANGE] MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY UNDERLYING INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE [LISTING
EXCHANGE] HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
BGFA DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE UNDERLYING
INDEXES OR ANY DATA INCLUDED THEREIN AND BGFA SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
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22
[GRAPHIC APPEARS HERE]
BGFA MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
FUNDS, TO THE OWNERS OF THE SHARES OF A FUND, OR TO ANY OTHER PERSON OR ENTITY,
FROM THE USE OF THE UNDERLYING INDEXES OR ANY DATA INCLUDED THEREIN. BGFA MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
UNDERLYING INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL BGFA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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23
Copies of the Prospectus, SAI, and recent shareholder reports can be found on
our website at www.iShares.com. For more detailed information about the Trust
and shares of the Funds, you may request a copy of the SAI. The SAI provides
detailed information about the Funds, and is incorporated by reference into
this Prospectus. This means that the SAI, for legal purposes, is a part of this
Prospectus.
Additional information about a Fund's investments is available in the Fund's
Annual or Semi-Annual reports to shareholders. In a Fund's Annual Report, you
will find a discussion of the market conditions and investments strategies that
significantly affected the Fund's performance during the last fiscal year.
If you have any questions about the Trust or shares of the Funds or you wish to
obtain the SAI, Semi-Annual or Annual report free of charge, please:
Call: 1-800-iShares
(toll free) 1-800-474-2737
Monday through Friday
8:30 a.m. to 6:30 p.m. (Eastern Time)
E-mail: iSharesfunds@seic.com
Write: iShares Trust
c/o SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
Information about the Funds (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-202-551-8090. Reports and other information about the Funds are available on
the EDGAR Database on the SEC's website at www.sec.gov, and copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following e-mail address: publicinfo@sec.gov, or by writing the
Public Reference Section of the SEC Washington, D.C. 20549-0102.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
ABOUT ANY FUND AND ITS SHARES NOT CONTAINED IN THIS PROSPECTUS AND YOU SHOULD
NOT RELY ON ANY OTHER INFORMATION. READ AND KEEP THE PROSPECTUS FOR FUTURE
REFERENCE.
Investment Company Act File No.: 811-09729
For more information visit
Our website or call
1-800-iShares (1-800-474-2737)
WWW.ISHARES.COM
[GRAPHIC APPEARS HERE]
[GRAPHIC APPEARS HERE]
The information in this Statement of Additional Information is not complete and
may be changed. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. The securities described
herein may not be sold until the registration statement becomes effective. This
Statement of Additional Information is not an offer to sell or the solicitation
of an offer to buy securities and is not soliciting an offer to buy these
securities in any State in which the offer, solicitation or sale would be
unlawful.
iShares(R) Trust
Statement of Additional Information
Dated ______, 2007
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the current prospectus ("Prospectus") for the
following Funds of iShares Trust (the "Trust") as such Prospectus may be
revised or supplemented from time to time:
iShares S&P Global Infrastructure Index Fund
iShares S&P Global Listed Private Equity Index Fund
The Prospectus for the Funds listed above is dated ______, 2007. Capitalized
terms used herein that are not defined have the same meaning as in the
Prospectus, unless otherwise noted. A copy of the Prospectus may be obtained
without charge by writing to the Trust's distributor, SEI Investments
Distribution Co. (the "Distributor"), at One Freedom Valley Drive, Oaks, PA
19456, calling 1-800-iShares (1-800-474-2737) or visiting www.iShares.com.
iShares(R) is a registered trademark of Barclays Global Investors, N.A. ("BGI").
Page
----
General Description of the Trust and its Funds 1
Exchange Listing and Trading 1
Investment Strategies and Risks 2
Lack of Diversification of the Funds 2
Lending Portfolio Securities 2
Repurchase Agreements 3
Reverse Repurchase Agreements 3
Currency Transactions 3
Short-Term Instruments and Temporary Investments 4
Securities of Investment Companies and REITs 4
Foreign Securities 4
Illiquid Securities 5
Futures and Options 5
Options on Futures Contracts 5
Swap Agreements 6
Tracking Stocks 6
Future Developments 6
General Considerations and Risks 6
Risks of Equity Securities 6
Risk of Derivatives 6
Risks of Futures and Options Transactions 7
Risks of Swap Agreements 7
Proxy Voting Policy 8
Portfolio Holdings Information 9
Construction and Maintenance Standards for the Underlying Indexes 10
The S&P Indexes Generally 10
S&P Global Infrastructure Index 10
S&P Listed Private Equity Index 11
Investment Limitations 11
Page
----
Continuous Offering 12
Management 13
Trustees and Officers 13
Committees of the Board of Trustees 18
Remuneration of Trustees 18
Control Persons and Principal Holders of Securities 19
Investment Advisory, Administrative and Distribution Services 19
Investment Adviser 19
Portfolio Managers 20
Codes of Ethics 22
Administrator, Custodian and Transfer Agent 22
Distributor 23
Index Provider 23
Brokerage Transactions 23
Additional Information Concerning the Trust 24
Shares 24
Termination of the Trust or a Fund 24
DTC as Securities Depository for Shares of the Trust 24
Creation and Redemption of Creation Unit Aggregations 25
Creation 25
Fund Deposit 25
Procedures for Creation of Creation Unit Aggregations 26
Placement of Creation Orders for Domestic Funds Using the Clearing
Process 27
Placement of Creation Orders for Domestic Funds Outside the Clearing
Process 27
Placement of Creation Orders for Foreign Funds 28
Acceptance of Orders for Creation Unit Aggregations 29
Creation Transaction Fee 29
Redemption of Shares in Creation Unit Aggregations 29
Redemption Transaction Fee 30
Page
----
Placement of Redemption Orders for Domestic Funds Using the Clearing
Process 31
Placement of Redemption Orders for Domestic Funds Outside the Clearing
Process 31
Placement of Redemption Orders for Foreign Funds 31
Taxes 33
Regulated Investment Company Qualification 33
Taxation of RICs 33
Excise Tax 33
Net Capital Loss Carryforwards 33
Federal Tax Treatment of Complex Securities 33
Taxation of U.S. Shareholders 35
Back-Up Withholding 36
Sections 351 and 362 36
Qualified Dividend Income 36
Corporate Dividends Received Deduction 36
Sales of Shares 36
Other Taxes 37
Taxation of Non-U.S. Shareholders 37
Reporting 38
Financial Statements 38
Miscellaneous Information 38
Counsel 38
Independent Registered Public Accounting Firm 38
Shareholder Communication to the Board 38
General Description of the Trust and its Funds
The Trust currently consists of over [______] investment portfolios. The Trust
was organized as a Delaware statutory trust on December 16, 1999 and is
authorized to have multiple series or portfolios. The Trust is an open-end
management investment company, registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended
(the "1940 Act"). The offering of the Trust's shares is registered under the
Securities Act of 1933, as amended (the "Securities Act"). This SAI relates to
the following funds (each, a "Fund" and collectively, the "Funds"):
. iShares S&P Global Infrastructure Index Fund
. iShares S&P Global Listed Private Equity Index Fund
The investment objective of each Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of a specified benchmark index (the "Underlying Index") representing
publicly traded equity securities of companies in a particular broad market,
market segment, market sector or group of industries. Each Fund is managed by
Barclays Global Fund Advisors ("BGFA" or the "Investment Adviser"), a
subsidiary of BGI.
Each Fund offers and issues shares at their net asset value per share ("NAV")
only in aggregations of a specified number of shares (each, a "Creation Unit"
or a "Creation Unit Aggregation"), generally in exchange for a basket of equity
securities included in its Underlying Index (the "Deposit Securities"),
together with the deposit of a specified cash payment (the "Cash Component").
The shares of each Fund are listed and traded on the [______], a national
securities exchange. Shares trade in the secondary market and elsewhere at
market prices that may be at, above or below NAV. Shares are redeemable only in
Creation Unit Aggregations, and, generally, in exchange for portfolio
securities and a Cash Component. Creation Units typically are a specified
number of shares, generally [______] or multiples thereof.
The Trust reserves the right to offer a "cash" option for creations and
redemptions of shares although it has no current intention of doing so. Shares
may be issued in advance of receipt of Deposit Securities subject to various
conditions, including a requirement to maintain on deposit with the Trust cash
at least equal to 105%, which BGFA may change from time to time, of the market
value of the missing Deposit Securities. See the Creation and Redemption of
Creation Unit Aggregations section of this SAI. In each instance of such cash
creations or redemptions, transaction fees may be imposed that will be higher
than the transaction fees associated with in-kind creations or redemptions. In
all cases, such conditions and fees will be limited in accordance with the
requirements of the SEC applicable to management investment companies offering
redeemable securities.
Exchange Listing and Trading
A discussion of exchange listing and trading matters associated with an
investment in each Fund is contained in the Shareholder Information section of
the Prospectus. The discussion below supplements, and should be read in
conjunction with, that section of the Prospectus.
Shares of each Fund are listed on the [______] (the "Listing Exchange") and
traded throughout the day on the Listing Exchange and other secondary markets.
Shares of each Fund may also be listed on certain non-U.S. exchanges. There can
be no assurance that the requirements of the Listing Exchange necessary to
maintain the listing of shares of any Fund will continue to be met. Although
listing requirements vary among exchanges, the Listing Exchange may, but is not
required to, remove the shares of a Fund from listing if (i) following the
initial 12-month period beginning upon the commencement of trading of a Fund,
there are fewer than 50 beneficial owners of the shares of a Fund for 30 or
more consecutive trading days; (ii) the value of the Underlying Index on which
such Fund is based is no longer calculated or available; (iii) the "indicative
optimized portfolio value" ("IOPV") of a Fund is no longer calculated or
available; or (iv) any other event shall occur or condition shall exist that,
in the opinion of the Listing Exchange, makes further dealings on the Listing
Exchange inadvisable. The Listing Exchange will remove the shares of the Fund
from listing and trading upon termination of such Fund.
As in the case of other publicly-traded securities, when you buy or sell shares
through a broker, you will incur a brokerage commission determined by that
broker.
In order to provide additional information regarding the indicative value of
shares of a Fund, the Listing Exchange disseminates every 15 seconds through
the facilities of the Consolidated Tape Association an updated IOPV for the
Fund as calculated by an information provider or market data vendors. The Trust
is not involved in or responsible for any aspect of the calculation or
dissemination of the IOPVs, and makes no representation or warranty as to the
accuracy of the IOPVs.
An IOPV has an equity securities component and a cash component. The equity
securities values included in an IOPV are the values of the Deposit Securities
for a Fund. While the IOPV reflects the current market value of the Deposit
Securities required to be deposited in connection with the purchase of a
Creation Unit Aggregation, it does not necessarily reflect the precise
composition of the current portfolio of securities held by the Fund at a
particular point in time, because the current portfolio of the Fund may include
securities that are a part of the current Deposit Securities. Therefore, a
Fund's IOPV disseminated during the Listing Exchange trading hours should not
be viewed as a real time update of the Fund's NAV, which is calculated only
once a day.
In addition to the equity component described in the preceding paragraph, the
IOPV for a Fund includes a Cash Component consisting of estimated accrued
dividend and other income, less expenses.
The Trust reserves the right to adjust the share prices of the Funds in the
future to maintain convenient trading ranges for investors. Any adjustments
would be accomplished through stock splits or reverse stock splits, which would
have no effect on the net assets of the applicable Fund.
Investment Strategies and Risks
Each Fund seeks to achieve its objective by investing primarily in securities
issued by companies that comprise the relevant Underlying Index and through
transactions that provide substantially similar exposure to securities in the
Underlying Index. Each Fund operates as an index fund and will not be actively
managed. The adverse performance of a security in a Fund's portfolio will
ordinarily not result in the elimination of the security from a Fund's
portfolio.
Each Fund will engage in "representative sampling." Representative sampling is
an indexing strategy that involves investing in a representative sample of
securities in the Underlying Index that collectively has an investment profile
similar to the Underlying Index. Securities selected are expected to have, in
the aggregate, investment characteristics (based on market capitalization and
industry weightings), fundamental characteristics (such as return variability,
earnings valuation and yield) and liquidity measures similar to those of the
relevant Underlying Index. Funds that use representative sampling may or may
not hold all of the securities that are included in the relevant Underlying
Index.
Lack of Diversification of the Funds. The Funds are non-diversified funds. A
"non-diversified" classification means that a Fund is not limited by the 1940
Act with regard to the percentage of its assets that may be invested in the
securities of a single issuer. The securities of a particular issuer (or the
securities of issuers in particular industries) may dominate the Underlying
Index of such a Fund and, consequently, the Fund's investment portfolio. This
may adversely affect the Fund's performance or subject the Fund's shares to
greater price volatility than that experienced by more diversified investment
companies.
Each Fund, however, intends to maintain the required level of diversification
and otherwise conduct its operations so as to qualify as a "regulated
investment company" ("RIC") for purposes of the U.S. Internal Revenue Code of
1986, as amended (the "IRC"), and to relieve the Fund of any liability for
federal income tax to the extent that its earnings are distributed to
shareholders. Compliance with the diversification requirements of the IRC may
limit the investment flexibility of certain Funds and may make it less likely
that such Funds will meet their investment objectives.
Lending Portfolio Securities. Each Fund may lend portfolio securities to
certain creditworthy borrowers, including borrowers affiliated with BGFA. The
borrowers provide collateral that is maintained in an amount at least equal to
the current market value of the securities loaned. A Fund may terminate a loan
at any time and obtain the return of the securities loaned. Each Fund receives
the value of any interest or cash or non-cash distributions paid on the loaned
securities.
With respect to loans that are collateralized by cash, the borrower will be
entitled to receive a fee based on the amount of cash collateral. The Funds are
compensated by the difference between the amount earned on the
reinvestment of cash collateral and the fee paid to the borrower. In the case
of collateral other than cash, a Fund is compensated by a fee paid by the
borrower equal to a percentage of the market value of the loaned securities.
Any cash collateral may be reinvested in certain short-term instruments either
directly on behalf of each lending Fund or through one or more joint accounts
or money market funds, including those managed by BGFA.
Securities lending involves exposure to certain risks, including operational
risk (i.e., the risk of losses resulting from problems in the settlement and
accounting process), "gap" risk (i.e., the risk of a mismatch between the
return on cash collateral reinvestments and the fees each Fund has agreed to
pay a borrower), and credit, legal, counterparty and market risk. In the event
a borrower does not return a Fund's securities as agreed, a Fund may experience
losses if the proceeds received from liquidating the collateral does not at
least equal the value of the loaned security at the time the collateral is
liquidated plus the transaction costs incurred in purchasing replacement
securities.
A Fund may pay a portion of the interest or fees earned from securities lending
to a borrower as described above and to a securities lending agent who
administers the lending program in accordance with guidelines approved by the
Trust's Board of Trustees (the "Board" or the "Trustees"). BGI acts as
securities lending agent for the Funds subject to the overall supervision of
BGFA. BGI receives a portion of the revenues generated by securities lending
activities as compensation for its services in this regard.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
certain counterparties. Repurchase agreements involve an agreement to purchase
financial instruments and to resell those instruments back to the same
counterparty at an agreed-upon date and price, which price reflects a rate of
interest unrelated to a coupon rate or maturity of the purchased instruments.
The value of the instruments purchased may be more or less than the price at
which the counterparty has agreed to repurchase them. As protection against the
risk that the counterparty will not fulfill its obligation, the instruments are
marked to market daily and are maintained at a value at least equal to the sale
price plus the accrued incremental amount. Delays or losses could result if the
counterparty to the repurchase agreement defaults or becomes insolvent. The
Funds will only engage in repurchase agreements with counterparties whose
creditworthiness has been reviewed and found satisfactory by BGFA.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to
repurchase the securities at an agreed-upon price, date and interest payment
and have the characteristics of borrowing. Generally the effect of such
transactions is that a Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases a Fund is able to keep some of the interest
income associated with those securities. Such transactions are only
advantageous if a Fund has an opportunity to earn a greater rate of interest on
the cash derived from these transactions than the interest cost of obtaining
the same amount of cash. Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to be paid may not
always be available and the Funds intend to use the reverse repurchase
technique only when BGFA believes it will be advantageous to a Fund. The use of
reverse repurchase agreements may exaggerate any interim increase or decrease
in the value of each Fund's assets. The Funds' exposure to reverse repurchase
agreements will be covered by securities having a value equal to or greater
than such commitments. The Funds segregate liquid assets in connection with
reverse repurchase agreements. Under the 1940 Act, reverse repurchase
agreements are considered borrowings.
Currency Transactions. No Fund expects to engage in currency transactions for
the purpose of hedging against declines in the value of the Fund's assets that
are denominated in a foreign currency. A Fund may enter into foreign currency
forward and foreign currency futures contracts to facilitate local securities
settlements or to protect against currency exposure in connection with its
distributions to shareholders, but may not enter into such contracts for
speculative purposes.
A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency futures contract is a contract involving an obligation to
deliver or acquire the specified amount of a specific currency, at a specified
price and at a specified future time. Futures contracts may be settled on a net
cash payment basis rather than by the sale and delivery of the underlying
currency.
Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly
volatile, highly specialized and highly technical. Significant changes,
including
changes in liquidity prices, can occur in such markets within very short
periods of time, often within minutes. Foreign exchange trading risks include,
but are not limited to, exchange rate risk, counterparty risk, maturity gap,
interest rate risk, and potential interference by foreign governments through
regulation of local exchange markets, foreign investment or particular
transactions in foreign currency. If BGFA utilizes foreign exchange
transactions at an inappropriate time or judges market conditions, trends or
correlations incorrectly, foreign exchange transactions may not serve their
intended purpose of improving the correlation of a Fund's return with the
performance of the Underlying Index and may lower the Fund's return. The Fund
could experience losses if the value of its currency forwards, options and
futures positions were poorly correlated with its other investments or if it
could not close out its positions because of an illiquid market. In addition,
each Fund could incur transaction costs, including trading commissions, in
connection with certain foreign currency transactions.
Short-Term Instruments and Temporary Investments. Each Fund may invest in
short-term instruments, including money market instruments, on an ongoing basis
to provide liquidity or for other reasons. Money market instruments are
generally short-term investments that may include but are not limited to:
(i) shares of money market funds (including those advised by BGFA);
(ii) obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities (including government-sponsored enterprises);
(iii) negotiable certificates of deposit ("CDs"), bankers' acceptances, fixed
time deposits and other obligations of U.S. and foreign banks (including
foreign branches) and similar institutions; (iv) commercial paper rated at the
date of purchase "Prime-1" by Moody's(R) Investor's Service, Inc. ("Moody's")
or "A-1" by Standard & Poor's Rating Service, a division of The McGraw Hill
Companies, Inc. ("S&P(R)"), or if unrated, of comparable quality as determined
by BGFA; (v) non-convertible corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date of purchase of not more than
397 days and that satisfy the rating requirements set forth in Rule 2a-7 under
the 1940 Act; (vi) repurchase agreements; and (vii) short-term U.S.
dollar-denominated obligations of foreign banks (including U.S. branches) that,
in the opinion of BGFA, are of comparable quality to obligations of U.S. banks
which may be purchased by a Fund. Any of these instruments may be purchased on
a current or a forward-settled basis. Time deposits are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates. Bankers' acceptances are time drafts drawn on commercial banks
by borrowers, usually in connection with international transactions.
Securities of Investment Companies and REITs. Each Fund may invest in the
securities of other investment companies (including money market funds) and
real estate investment trusts ("REITS") to the extent allowed by law. Under the
1940 Act, a Fund's investment in investment companies is limited to, subject to
certain exceptions: (i) 3% of the total outstanding voting stock of any one
investment company; (ii) 5% of the Fund's total assets with respect to any one
investment company; and (iii) 10% of the Fund's total assets with respect to
investment companies in the aggregate. To the extent allowed by law or
regulation, each Fund may invest its assets in the securities of investment
companies that are money market funds, including those advised by BGFA or
otherwise affiliated with BGFA, in excess of the limits discussed above. Other
investment companies in which a Fund invests can be expected to incur fees and
expenses for operations, such as investment advisory and administration fees,
that would be in addition to those incurred by the Fund.
Foreign Securities. Each Fund may purchase publicly traded common stocks of
foreign corporations. Each Fund's investment in common stock of foreign
corporations represented in the Underlying Indices may also be in the form of
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and
European Depositary Receipts ("EDRs") (collectively, "Depositary Receipts").
Depositary Receipts are receipts, typically issued by a bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation. For ADRs, the depository is typically a U.S. financial institution
and the underlying securities are issued by a foreign issuer. For other
Depositary Receipts, the depository may be a foreign or a U.S. entity and the
underlying securities may be issued by a foreign or a U.S. issuer. Depositary
Receipts are not necessarily be denominated in the same currency as their
underlying securities. Generally, ADRs, issued in registered form, are designed
for use in the U.S. securities markets and EDRs, issued in bearer form, are
designed for use in European securities markets. GDRs are tradable both in the
United States and in Europe and are designed for use throughout the world.
To the extent a Fund invests in ADRs, such ADRs will be listed on a national
securities exchange, and to the extent a Fund invests in GDRs or EDRs, such
GDRs and EDRs will be listed on a foreign exchange. A Fund will not invest in
any unlisted Depositary Receipt or any Depositary Receipt that BGFA deems to be
illiquid or for which pricing information is not readily available. In
addition, all Depositary Receipts generally must be sponsored, however a Fund
may invest in unsponsored Depositary Receipts under certain limited
circumstances.
The issuers of unsponsored Depositary Receipts are not obligated to disclose
material information in the United States, and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the Depositary Receipts.
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, and potential restrictions on the
flow of international capital. Foreign companies may be subject to less
governmental regulation than U.S. companies. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.
Illiquid Securities. Each Fund may invest up to an aggregate amount of 15% of
its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.
Futures and Options. Each Fund may enter into U.S. futures contracts, options
and options on futures contracts. These futures contracts and options will be
used to simulate full investment in the respective Underlying Index, to
facilitate trading or to reduce transaction costs. Each Fund will only enter
into futures contracts and options on futures contracts that are traded on a
U.S. exchange. No Fund will use futures or options for speculative purposes.
Each Fund intends to use futures and options in accordance with Rule 4.5 of the
Commodity Exchange Act ("CEA"). The Trust, on behalf of the Fund, has filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" in accordance with Rule 4.5 so that the Fund is not subject to
registration or regulation as a commodity pool operator under the CEA.
A call option gives a holder the right to purchase a specific security at a
specified price ("exercise price") within a specified period of time. A put
option gives a holder the right to sell a specific security at a specified
price within a specified period of time. The initial purchaser of a call option
pays the "writer" a premium, which is paid at the time of purchase and is
retained by the writer whether or not such option is exercised. Each Fund may
purchase put options to hedge its portfolio against the risk of a decline in
the market value of securities held and may purchase call options to hedge
against an increase in the price of securities it is committed to purchase.
Each Fund may write put and call options along with a long position in options
to increase its ability to hedge against a change in the market value of the
securities it holds or is committed to purchase. Investments in futures
contracts, and other investments that contain leverage, may require a Fund to
segregate liquid assets in the amount of a Fund's obligation under the contract.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific instrument or index at a
specified future time and at a specified price. Stock index contracts are based
on investments that reflect the market value of common stock of the firms
included in the investments. Each Fund may enter into futures contracts to
purchase security investments when BGFA anticipates purchasing the underlying
securities and believes prices will rise before the purchase will be made.
Assets committed to futures contracts will be segregated to the extent required
by law.
Options on Futures Contracts. An option on a futures contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right,
in return for the premium paid, to assume a position in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account that
represents the amount by which the market price of the futures contract exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. The potential for loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option plus transaction costs. Because the value of the option is fixed
at the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value of
the option changes daily and that change would be reflected in the NAV of each
Fund. The potential for loss related to writing call options is unlimited.
Each Fund may purchase and write put and call options on futures contracts that
are traded on a U.S. exchange as a hedge against changes in value of its
portfolio securities, or in anticipation of the purchase of securities, and may
enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected.
Upon entering into a futures contract, a Fund will be required to deposit with
the broker an amount of cash or cash equivalents known as "initial margin,"
which is in the nature of a performance bond or good faith deposit on the
contract and is returned to each Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin," to and from the broker will be made daily as the
price of the index underlying the futures contract fluctuates, making the long
and short positions in the futures contract more or less valuable, a process
known as "marking-to-market." At any time prior to the expiration of a futures
contract, each Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
Swap Agreements. Swap agreements are contracts between parties in which one
party agrees to make periodic payments to the other party based on the change
in market value or level of a specified rate, index or asset. In return, the
other party agrees to make periodic payments to the first party based on the
return of a different specified rate, index or asset. Swap agreements will
usually be done on a net basis, with each Fund receiving or paying only the net
amount of the two payments. The net amount of the excess, if any, of each
Fund's obligations over its entitlements with respect to each swap is accrued
on a daily basis and an amount of liquid assets having an aggregate value at
least equal to the accrued excess will be maintained by each Fund.
The use of interest-rate and index swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.
Tracking Stocks. A tracking stock is a separate class of common stock whose
value is linked to a specific business unit or operating division within a
larger company and which is designed to "track" the performance of such
business unit or division. The tracking stock may pay dividends to shareholders
independent of the parent company. The parent company, rather than the business
unit or division, generally is the issuer of tracking stock. However, holders
of the tracking stock may not have the same rights as holders of the company's
common stock.
Future Developments. The Board may, in the future, authorize each Fund to
invest in securities contracts and investments other than those listed in this
SAI and in the Prospectus, provided they are consistent with the Fund's
investment objective and do not violate any investment restrictions or policies.
General Considerations and Risks.
A discussion of some of the risks associated with an investment in a Fund is
contained in the Prospectus.
An investment in a Fund should be made with an understanding that the value of
a Fund's portfolio securities may fluctuate in accordance with changes in the
financial condition of the issuers of the portfolio securities, the value of
common stocks in general, and other factors that affect the market.
Risks of Derivatives. A derivative is a financial contract, the value of which
depends on, or is derived from, the value of an underlying asset such as a
security or an index. A Fund may invest in stock index futures contracts and
other derivatives. Compared to conventional securities, derivatives can be more
sensitive to changes in interest rates or to sudden fluctuations in market
prices and thus the Fund's losses may be greater if it invests in derivatives
than if it invests only in conventional securities.
Risks of Equity Securities. An investment in a Fund should be made with an
understanding that the value of the Fund's portfolio securities may fluctuate
in accordance with changes in the financial condition of the issuers of the
portfolio securities, the value of preferred or common stocks in general, and
other factors that affect the market. An investment in a Fund should also be
made with an understanding of the risks inherent in an investment in equity
securities, including the risk that the financial condition of issuers may
become impaired or that the general condition of the stock market may
deteriorate (either of which may cause a decrease in the value of the portfolio
securities and thus in the value of shares of a Fund). Common stocks are
susceptible to general stock market fluctuations and to volatile increases and
decreases in value as market confidence and perceptions of their issuers
change. These investor perceptions are based on various and unpredictable
factors, including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking crises.
Holders of common stocks incur more
risk than holders of preferred stocks and debt obligations because common
stockholders, as owners of the issuer generally have inferior rights to receive
payments from the issuer in comparison with the rights of creditors or holders
of debt obligations or preferred stocks. Further, unlike debt securities, which
typically have a stated principal amount payable at maturity (whose value,
however, is subject to market fluctuations prior to maturity), or preferred
stocks, which typically have a liquidation preference and which may have stated
optional or mandatory redemption provisions, common stocks have neither a fixed
principal amount nor a maturity. Common stock values are subject to market
fluctuations as long as the common stock remains outstanding.
Although most of the securities in the Underlying Indexes are listed on a
national securities exchange, the principal trading market for some may be
over-the-counter. The existence of a liquid trading market for certain
securities may depend on whether dealers will make a market in such securities.
There can be no assurance that a market will be made or maintained or that any
such market will be or remain liquid. The price at which securities may be sold
and the value of a Fund's shares will be adversely affected if trading markets
for a Fund's portfolio securities are limited or absent, or if bid/ask spreads
are wide.
Risks of Futures and Options Transactions. There are several risks accompanying
the utilization of futures contracts and options on futures contracts. First, a
position in futures contracts and options on futures contracts may be closed
only on the exchange on which the contract was made (or a linked exchange).
While each Fund plans to utilize futures contracts only if an active market
exists for such contracts, there is no guarantee that a liquid market will
exist for the contract at a specified time. Furthermore, because, by
definition, futures contracts project price levels in the future and not
current levels of valuation, market circumstances may result in a discrepancy
between the price of the stock index future and the movement in the Underlying
Index. In the event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain its required margin. In such
situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to deliver the
instruments underlying the future contracts it has sold.
The risk of loss in trading futures contracts or uncovered call options in some
strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Funds do not plan to use futures and options
contracts in this way. The risk of a futures position may still be large as
traditionally measured due to the low margin deposits required. In many cases,
a relatively small price movement in a futures contract may result in immediate
and substantial loss or gain to the investor relative to the size of a required
margin deposit. The Funds, however, intends to utilize futures and options
contracts in a manner designed to limit their risk exposure to levels
comparable to a direct investment in the types of stocks in which they invest.
Utilization of futures and options on futures by a Fund involves the risk of
imperfect or even negative correlation to the Underlying Index if the index
underlying the futures contract differs from the Underlying Index. There is
also the risk of loss by a Fund of margin deposits in the event of bankruptcy
of a broker with whom a Fund has an open position in the futures contract or
option. The purchase of put or call options will be based upon predictions by
BGFA as to anticipated trends, which predictions could prove to be incorrect.
Because the futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in the
futures market could result in price fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount by
which the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting each Fund to substantial losses. In the event of
adverse price movements, each Fund would be required to make daily cash
payments of variation margin.
Although each Fund intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time.
Risks of Swap Agreements. The risk of loss with respect to swaps generally is
limited to the net amount of payments that a Fund is contractually obligated to
make. Swap agreements are subject to the risk that the swap counterparty will
default on its obligations. If such a default occurs, a Fund will have
contractual remedies pursuant to the agreements related to the transaction.
However, such remedies may be subject to bankruptcy and
insolvency laws which could affect such Fund's rights as a creditor (e.g., a
Fund may not receive the net amount of payments that it contractually is
entitled to receive).
Risks of Investing in Non-U.S. Equity Securities. An investment in each Fund
involves risks similar to those of investing in broad-based portfolios of
equity securities traded on foreign exchanges. These risks include market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. Investing in
securities issued by companies domiciled in countries other than the domicile
of the investor and denominated in currencies other than an investor's local
currency entails certain considerations and risks not typically encountered by
the investor in making investments in its home country and in that country's
currency. These considerations include favorable or unfavorable changes in
interest rates, currency exchange rates, exchange control regulations and the
costs that may be incurred in connection with conversions between various
currencies. Investing in the Fund also involves certain risks and
considerations not typically associated with investing in a fund whose
portfolio contains securities of U.S. issuers. These risks include generally
less liquid and less efficient securities markets; generally greater price
volatility; less publicly available information about issuers; the imposition
of withholding or other taxes; the imposition of restrictions on the
expatriation of funds or other assets of the Fund; higher transaction and
custody costs; delays and risks attendant in settlement procedures;
difficulties in enforcing contractual obligations; lesser liquidity and
significantly smaller market capitalization of most non-U.S. securities
markets; different accounting and disclosure standards; lesser levels of
regulation of the securities markets; more substantial government interference
with the economy; higher rates of inflation; greater social, economic, and
political uncertainty; and the risk of nationalization or expropriation of
assets and risk of war.
Proxy Voting Policy
The Trust has adopted as its proxy voting policies for each Fund, the proxy
voting guidelines of BGFA, the investment adviser to each Fund. The Trust has
delegated to BGFA the responsibility for voting proxies on the portfolio
securities held by each Fund. The remainder of this section discusses each
Fund's proxy voting guidelines and BGFA's role in implementing such guidelines.
BGFA votes (or refrains from voting) proxies for each Fund in a manner that
BGFA, in the exercise of its independent business judgment, concludes is in the
best economic interests of such Fund. In some cases, BGFA may determine that it
is in the best economic interests of a Fund to refrain from exercising the
Fund's proxy voting rights (such as, for example, proxies or certain non-U.S.
securities that might impose costly or time-consuming in-person voting
requirements). With regard to the relationship between securities lending and
proxy voting, BGFA's approach is also driven by our clients' economic
interests. The evaluation of the economic desirability of recalling loans
involves balancing the revenue producing value of loans against the likely
economic value of casting votes. Based on our evaluation of this relationship,
we believe that the likely economic value of casting a vote generally is less
than the securities lending income, either because the votes will not have
significant economic consequences or because the outcome of the vote would not
be affected by BGFA recalling loaned securities in order to ensure they are
voted. Periodically, BGFA analyzes the process and benefits of voting proxies
for securities on loan, and will consider whether any modification of its proxy
voting policies or procedures are necessary in light of any regulatory changes.
BGFA will normally vote on specific proxy issues in accordance with its proxy
voting guidelines. BGFA's proxy voting guidelines provide detailed guidance as
to how to vote proxies on certain important or commonly raised issues. BGFA
may, in the exercise of its business judgment, conclude that the proxy voting
guidelines do not cover the specific matter upon which a proxy vote is
requested, or that an exception to the proxy voting guidelines would be in the
best economic interests of the Fund. BGFA votes (or refrains from voting)
proxies without regard to the relationship of the issuer of the proxy (or any
shareholder of such issuer) to a Fund, a Fund's affiliates (if any), BGFA or
BGFA's affiliates, or the Distributor or the Distributor's affiliates. When
voting proxies, BGFA attempts to encourage companies to follow practices that
enhance shareholder value and increase transparency and allow the market to
place a proper value on their assets. With respect to certain specific issues:
. Each Fund generally supports the board's nominees in the election of
directors and generally supports proposals that strengthen the
independence of boards of directors;
. Each Fund generally does not support proposals on social issues that
lack a demonstrable economic benefit to the issuer and the Fund
investing in such issuer; and
. Each Fund generally votes against anti-takeover proposals and proposals
that would create additional barriers or costs to corporate transactions
that are likely to deliver a premium to shareholders.
BGFA maintains institutional policies and procedures that are designed to
prevent any relationship between the issuer of the proxy (or any shareholder of
the issuer) and a Fund, a Fund's affiliates, BGFA or BGFA's affiliates (if
any), or the Distributor or the Distributor's affiliates, from having undue
influence on BGFA's proxy voting activity. In certain instances, BGFA may
determine to engage an independent fiduciary to vote proxies as a further
safeguard against potential conflicts of interest or as otherwise required by
applicable law. The independent fiduciary may either vote such proxies or
provide BGFA with instructions as to how to vote such proxies. In the latter
case, BGFA votes the proxy in accordance with the independent fiduciary's
determination.
Information with respect to how BGFA voted Fund proxies relating to portfolio
securities during the most recent 12-month period ended June 30 will be
available: (i) without charge, upon request, by calling 1-800-iShares or
through the Fund's website at www.iShares.com and (ii) on the SEC's website at
www.sec.gov.
Portfolio Holdings Information
The Board has adopted a policy regarding the disclosure of the Funds' portfolio
holdings information that requires that such information be disclosed in a
manner that: (a) is consistent with applicable legal requirements and in the
best interests of the Funds' respective shareholders; (b) does not put the
interests of BGFA, the Distributor, or any affiliated person of the Funds, BGFA
or the Distributor, above those of Fund shareholders; (c) does not advantage
any current or prospective Fund shareholders over any other current or
prospective Fund shareholders, except to the extent that certain Entities (as
described below) may receive portfolio holdings information not available to
other current or prospective Fund shareholders in connection with the
dissemination of information necessary for transactions in Creation Units, as
contemplated by the iShares Exemptive Orders and as discussed below; and
(d) does not provide selective access to portfolio holdings information except
pursuant to the procedures outlined below and to the extent appropriate
confidentiality arrangements limiting the use of such information are in
effect. The "Entities" referred to in sub-section (c) above are generally
limited to National Securities Clearing Corporation ("NSCC") members and
subscribers to various fee-based subscription services, including those large
institutional investors (known as "Authorized Participants") that have been
authorized by the Distributor to purchase and redeem large blocks of shares
(known as Creation Units) pursuant to legal requirements, including exemptive
orders granted by the SEC pursuant to which the Funds offer and redeems their
shares ("iShares Exemptive Orders"), and other institutional market
participants and entities that provide information services.
Each business day, each Fund's portfolio holdings information will be provided
to the Distributor or other agent for dissemination through the facilities of
the NSCC and/or other fee-based subscription services to NSCC members and/or
subscribers to those other fee-based subscription services, including
Authorized Participants, and to entities that publish and/or analyze such
information in connection with the process of purchasing or redeeming Creation
Units or trading shares of Funds in the secondary market. This information
typically reflects each Fund's anticipated holdings on the following business
day.
Daily access to information concerning the Funds' portfolio holdings is
permitted (i) to certain personnel of those service providers that are involved
in portfolio management and providing administrative, operational, risk
management, or other support to portfolio management, including affiliated
broker-dealers and/or Authorized Participants and (ii) to other personnel of
the Investment Adviser and the Funds' administrator, custodian and fund
accountant who deal directly with, or assist in, functions related to
investment management, administration, custody and fund accounting, as may be
necessary to conduct business in the ordinary course in a manner consistent
with the iShares Exemptive Orders, agreements with the Funds, and the terms of
the Funds' current registration statement. In addition, the Funds will disclose
its portfolio holdings and the percentages they represent of the Funds' net
assets at least monthly, but as often as each day the Funds are open for
business, online at www.iShares.com. More information about this disclosure is
available at www.iShares.com.
From time to time, information concerning portfolio holdings, other than
portfolio holdings information made available in connection with the
creation/redemption process, as discussed above, may also be provided to other
entities that provide additional services to the Funds, including, among
others, rating or ranking organizations, in the ordinary course of business, no
earlier than one business day following the date of the information. Portfolio
holdings information made available in connection with the creation/redemption
process may be provided to other
entities that provide additional services to the Funds in the ordinary course
of business after it has been disseminated to the NSCC.
Each Fund will disclose its complete portfolio holdings schedule in public
filings with the SEC on a quarterly basis, based on the Fund's fiscal year,
within 70 days of the end of the quarter, and will provide that information to
shareholders, as required by federal securities laws and regulations
thereunder. A Fund, however, may voluntarily disclose all or part of its
portfolio holdings other than in connection with the creation/redemption
process, as discussed above, in advance of required filings with the SEC,
provided that such information is made generally available to all shareholders
and other interested parties in a manner that is consistent with the above
policy for disclosure of portfolio holdings information. Such information may
be made available through a publicly-available website or other means that make
the information available to all likely interested parties in a contemporaneous
manner.
The Trust's Chief Compliance Officer may authorize disclosure of portfolio
holdings information pursuant to the above policy and procedures.
The Board reviews the policy and procedures for disclosure of portfolio
holdings information at least annually.
Construction and Maintenance Standards for the
Underlying Indexes
A brief description of the Underlying Indexes on which the Funds are based is
provided below.
The S&P Indexes Generally
About Standard & Poor's Indexes. S&P calculates various U.S. and global
indexes. These indexes are comprised of securities selected according to
published criteria or guidelines designed to reflect the performance of a
market or certain sections of a market.
Index Availability. The S&P Indexes are calculated continuously and are
available from major data vendors.
Issue Changes. General oversight responsibility for the S&P Indexes, including
overall policy guidelines and methodology, is handled by an S&P Index
Committee. Maintenance of component investments, including additions and
deletions to these investments, is the responsibility of separate regional
index committees composed of S&P staff specialized in the various regional
equity markets and, in some cases with the assistance of local stock exchanges.
Public announcements of index changes as the result of committee decisions will
generally be made one to five business days in advance of the anticipated
effective date whenever possible, although for exceptional corporate events
announcements may be made earlier.
Index Maintenance. Maintaining the S&P Indexes includes monitoring and
completing the adjustments for company additions and deletions, share changes,
stock splits, stock dividends, and stock price adjustments due to restructuring
and spin-offs.
S&P Global Infrastructure Index
Number of Components: approximately 75
Index Description. The S&P Global Infrastructure Index is designed to track the
performance of the stocks of large infrastructure companies around the world.
The Underlying Index includes companies involved in utilities, energy and
transportation infrastructure, such as the management or ownership of oil and
gas storage and transportation; airport services; highways and rail tracks;
marine ports and services; and electric, gas and water utilities.
Component Selection Criteria. The S&P/Citigroup Global Broad Market Index
("BMI") serves as the universe of stocks from which the S&P Global
Infrastructure Index's components are drawn. Stocks are eligible for the Index
if they meet criteria for size, liquidity, sector and market representation. As
of August 1, 2007, each of the Index's components had a minimum market
capitalization of $100 million. Index components at rebalancing are distributed
across the following infrastructure clusters, as determined by S&P: energy (15
components), transportation (30
components), and utilities (30 components). The Index is modified market
capitalization weighted. After S&P calculates the float-adjusted market
capitalizations, weights are modified so that components and clusters do not
exceed limits predetermined by S&P (currently, 5% for any single component, 40%
for the utilities and transportation clusters, and 20% for the energy cluster).
S&P Listed Private Equity Index
Number of Components: approximately 30
Index Description. The S&P Listed Private Equity Index is designed to track
large private equity companies listed on exchanges in developed markets
countries. The Underlying Index includes public companies that S&P
characterizes as engaging in the private equity business, such as venture
capital and leveraged buyout firms and business development companies that
typically make direct equity investments as well as provide loans to privately
held companies.
Component Selection Criteria.
A proprietary S&P database serves as the universe of stocks from which Index's
constituents are drawn. Components are eligible for the Index if they meet
criteria for size, liquidity, sector, deal activity, and market representation.
The Index is modified market capitalization and liquidity weighted. No single
component can have a weight of more than 7.5% in the Index at reconstitution,
and the sum of the weights of all components with weights of more than 4.0% is
less than 36.0%. As of August 1, 2007, each of the Index's components had a
minimum market capitalization of $250 million. Publicly listed investment
companies, business development companies, investment trusts, special purpose
acquisition vehicles and fund of funds that engage in the private equity
business are all eligible for inclusion in the Index. Real estate income trusts
and property trusts are excluded from the universe, as are "blank check"
companies (i.e., a development stage company that has no specific business plan
or purpose) and companies whose primary business is in energy exploration and
transportation, or mining.
Investment Limitations
The Board has adopted the investment objective of each Fund as a
non-fundamental policy. Therefore, each Fund may change its investment
objective and its Underlying Index without a shareholder vote. The Board has
adopted as fundamental policies the Funds' investment restrictions numbered one
through six below. The restrictions for a Fund cannot be changed without the
approval of the holders of a majority of such Fund's outstanding voting
securities. A vote of a majority of the outstanding voting securities is
defined in the 1940 Act as the lesser of (a) 67% or more of the voting
securities present at a fund meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (b) more
than 50% of outstanding voting securities of the fund.
Each Fund will not:
1. Concentrate its investments (i.e., invest 25% or more of its total assets in
the securities of a particular industry or group of industries), except that
a Fund will concentrate to approximately the same extent that its Underlying
Index concentrates in the securities of such particular industry or group of
industries. For purposes of this limitation, securities of the U.S.
government (including its agencies and instrumentalities), repurchase
agreements collateralized by U.S. government securities, and securities of
state or municipal governments and their political subdivisions are not
considered to be issued by members of any industry.
2. Borrow money, except that (i) each Fund may borrow from banks for temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests which might otherwise require the untimely disposition of
securities, and (ii) each Fund may, to the extent consistent with its
investment policies, enter into repurchase agreements, reverse repurchase
agreements, forward roll transactions and similar investment strategies and
techniques. To the extent that it engages in transactions described in
(i) and (ii), each Fund will be limited so that no more than 33 1/3% of the
value of its total assets (including the amount borrowed) is derived from
such transactions. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law.
3. Issue any senior security, except as permitted under the 1940 Act, as
amended, and as interpreted, modified or otherwise permitted by regulatory
authority having jurisdiction, from time to time.
4. Make loans, except as permitted under the 1940 Act, as interpreted, modified
or otherwise permitted by regulatory authority having jurisdiction, from
time to time.
5. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this restriction shall not prevent each
Fund from investing in securities of companies engaged in the real estate
business or securities or other instruments backed by real estate or
mortgages), or commodities or commodity contracts (but this restriction
shall not prevent each Fund from trading in futures contracts and options on
futures contracts, including options on currencies to the extent consistent
with each Fund's investment objective and policies).
6. Engage in the business of underwriting securities issued by other persons,
except to the extent that each Fund may technically be deemed to be an
underwriter under the Securities Act, in disposing of portfolio securities.
In addition to the investment restrictions adopted as fundamental policies set
forth above, each Fund as a non-fundamental policy, will not invest in the
securities of a company for the purpose of exercising management or control or
purchase or otherwise acquire any illiquid security, except as permitted under
the 1940 Act, which currently permits up to 15% of each Fund's net assets to be
invested in illiquid securities.
BGFA monitors the liquidity of restricted securities in each Fund's portfolio.
In reaching liquidity decisions, BGFA considers the following factors:
. The frequency of trades and quotes for the security;
. The number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;
. Dealer undertakings to make a market in the security; and
. The nature of the security and the nature of the marketplace in which it
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
If any percentage restriction described above is complied with at the time of
an investment, a later increase or decrease in percentage resulting from a
change in values of assets will not constitute a violation of such restriction.
Each Fund has adopted a non-fundamental investment policy in accordance with
Rule 35d-1 under the 1940 Act to invest, under normal circumstances, at least
80% of the value of its net assets, plus the amount of any borrowings for
investment purposes, in securities in the Fund's Underlying Index and in ADRs
based on securities in the Underlying Index. Each Fund also has adopted a
policy to provide its shareholders with at least 60 days' prior written notice
of any change in such policy. If, subsequent to an investment, the 80%
requirement is no longer met, a Fund's future investments will be made in a
manner that will bring the Fund into compliance with this policy.
Continuous Offering
The method by which Creation Unit Aggregations of shares are created and traded
may raise certain issues under applicable securities laws. Because new Creation
Unit Aggregations of shares are issued and sold by the Funds on an ongoing
basis, at any point a "distribution," as such term is used in the Securities
Act, may occur. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus delivery requirement
and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent shares, and sells such
shares directly to customers, or if it chooses to couple the creation of a
supply of new shares with an active selling effort involving solicitation of
secondary market demand for shares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or
its client in the particular case, and the examples mentioned above should not
be considered a complete description of all the activities that could lead to a
categorization as an underwriter.
Broker-dealer firms should also note that dealers who are not "underwriters"
but are effecting transactions in shares, whether or not participating in the
distribution of shares, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3) of the Securities Act
is not available in respect of such transactions as a result of Section 24(d)
of the 1940 Act. Firms that incur a prospectus delivery obligation with respect
to shares of the Funds are reminded that, pursuant to Rule 153 under the
Securities Act, a prospectus delivery obligation under Section 5(b)(2) of the
Securities Act owed to an exchange member in connection with a sale on the
Listing Exchange is satisfied by the fact that the prospectus is available at
the Listing Exchange upon request. The prospectus delivery mechanism provided
in Rule 153 is only available with respect to transactions on an exchange.
Management
Trustees and Officers. The Board has responsibility for the overall management
and operations of the Funds, including general supervision of the duties
performed by BGFA and other service providers. Each Trustee serves until his or
her successor is duly elected or appointed and qualified.
The Trust, iShares, Inc., Master Investment Portfolio ("MIP"), Barclays Global
Investors Funds ("BGIF") and Barclays Foundry Investment Trust ("BFIT"), each
an open-end management investment company registered under the 1940 Act, are
considered to be members of the same fund complex, as defined in Form N-1A
under the 1940 Act. Each Trustee also serves as a Director for iShares, Inc.
and, as a result, oversees a total of [______] Funds within the fund complex.
In addition, Lee T. Kranefuss serves as a Trustee for BGIF, MIP and BFIT and,
as a result, oversees an additional 24 portfolios within the fund complex. The
address of each Trustee and Officer, is c/o Barclays Global Investors, N.A., 45
Fremont Street, San Francisco, CA 94105. The Board has designated George G.C.
Parker as its Lead Independent Trustee.
Trustees and Officers
Principal Occupation(s) During the Other Directorships Held by
Name (Year of Birth) Position Past 5 Years Trustee/Officer
----------------------------- ------------------------ ---------------------------------- ---------------------------
Interested Trustees
Lee T. Kranefuss/1/ Trustee and Chairman Director (since 2003) of
(1961) (since 2003) Chief Executive Officer of iShares, Inc.; Trustee
the Intermediary Investor (since 2001) of BGIF and
and Exchange Traded MIP; Trustee (since
Products Business of BGI 2007) of BFIT; Director
(since 2003); Director of (since 2003) of BGI
BGFA (since 2005); Cayman Prime Money
Director, President and Market Fund, Ltd.
Chief Executive Officer of
Barclays Global Investors
International, Inc. (since
2005); Director, Chairman
and Chief Executive Officer
of Barclays Global
Investors Services (since
2005); Chief Executive
Officer of the Individual
Investor Business of BGI
(1999-2003).
John E. Martinez/1/ Trustee (since 2003) Co-Chief Executive Officer Director (since 2003) of
(1962) of Global Index and Markets iShares, Inc.; Director
Group of BGI (2001-2003); (since 2005) of Real
Chairman of Barclays Estate Equity Exchange.
Global Investors Services
(2000-2003).
--------
/1/ Lee T. Kranefuss and John E. Martinez are deemed to be "interested
persons" (as defined in the 1940 Act) of the Trust due to their
affiliations with BGFA, BGI, and Barclays Global Investors Services, an
affiliate of BGFA and BGI.
Principal Occupation(s) During the Other Directorships Held by
Name (Year of Birth) Position Past 5 Years Trustee/Officer
----------------------------- ------------------------ ---------------------------------- ---------------------------
Independent Trustees
George G.C. Parker (1939) Trustee (since 2000) Dean Witter Distinguished Director (since 2002) of
Lead Independent Professor of Finance, iShares, Inc.; Director
Trustee (since 2006) Emeritus (since 1994); (since 1996) of
Formerly Senior Associate Continental Airlines,
Dean for Academic Affairs, Inc.; Director (since
Director of MBA Program, 1995) of Community First
Stanford University: Financial Group;
Graduate School of Business Director (since 1999) of
(1993-2001). Tejon Ranch Company;
Director (since 2003) of
First Republic Bank;
Director (since 2004) of
Threshold
Pharmaceuticals;
Director (since 2007) of
NETGEAR, Inc.
Cecilia H. Herbert (1949) Trustee (since 2005) Member of Finance Council, Director (since 2005) of
Archdiocese of San iShares, Inc.
Francisco (1999-2006);
Chair of Investment
Committee, Archdiocese of
San Francisco (1994-2005);
Director (since 1998) and
President (since 2007) of
the Board of Directors,
Catholic Charities CYO;
Trustee (since 2004) of
Pacific Select Funds;
Trustee (1992-2003) of the
Montgomery Funds; Trustee
(since 2005) of the Thacher
School
Charles A. Hurty (1943) Trustee (since 2005) Partner, KPMG, LLP Director (since 2005) of
(1968-2001). iShares, Inc.; Director
(since 2002) of GMAM
Absolute Return Strategy
Fund (1 portfolio);
Director (since 2002) of
Citigroup Alternative
Investments
Multi-Adviser Hedge Fund
Portfolios LLC (1
portfolio); Director
(since 2005) of CSFB
Alternative Investments
Fund (6 portfolios).
John E. Kerrigan (1955) Trustee (since 2005) Chief Investment Officer, Director (since 2005) of
Santa Clara University iShares, Inc.; Member
(since 2002); Managing (since 2004) of Advisory
Director, Merrill Lynch Council for Common fund
(1994-2002). Distressed Debt Partners
II.
Principal Occupation(s) During the Other Directorships Held by
Name (Year of Birth) Position Past 5 Years Trustee/Officer
----------------------------- ------------------------ ---------------------------------- ---------------------------
Robert H. Silver (1955) Trustee (since March President and Co-Founder Director (since March
2007) of The Bravitas Group, Inc. 2007) of iShares, Inc.;
(since 2006); Member, Director and Member of
Non-Investor Advisory the Audit and
Board of Russia Partners Compensation Committee
II, LP (since 2006); of EPAM Systems, Inc.
President and Chief (since 2006).
Operating Officer
(2003-2005) and Director
(1999-2005) of UBS
Financial Services, Inc.;
President and Chief
Executive Officer of UBS
Services USA, LLC
(1999-2005); Managing
Director, UBS America, Inc.
(2000-2005); Director and
Vice Chairman of the YMCA
of Greater NYC (since
2001); Broadway Producer
(since 2006).
Name (Year of Birth) Principal Occupation(s) During the
Officers Position Past 5 Years
-------------------- ------------------------ ----------------------------------
Officers
Michael A. Latham (1965) President (since 2007) Head of Americas iShares
(since 2007); Chief
Operating Officer of the
Intermediary Investors
and Exchange Traded
Products Business of BGI
(since 2003-2007);
Director of Mutual Fund
Delivery in the U.S.
Individual Investor
Business of BGI
(2000-2003); Head of
Operations, BGI Europe
(1997-2000).
Geoffrey D. Flynn (1956) Treasurer and Chief Director, Mutual Fund
Financial Officer Operations, BGI (since
(since 2007) 2007); President, Van
Kampen Investors
Services (2003-2007);
Managing Director,
Morgan Stanley
(2002-2007); President,
Morgan Stanley Trust,
FSB (2002-2007).
Name (Year of Birth) Principal Occupation(s) During the
Officers Position Past 5 Years
-------------------- ------------------------ ----------------------------------
Eilleen M. Clavere (1952) Secretary Head of Legal
(since 2007) Administration-- IIB,
and BGI (since 2006);
Legal Counsel and Vice
President of Atlas
Funds, Atlas Advisers,
Inc. and Atlas
Securities, Inc.
(2005-2006); Counsel,
Kirkpatrick & Lockhart
LLP (2001-2005).
Ira P. Shapiro (1963) Vice President and Chief Associate General
Legal Officer Counsel, BGI (since
(since 2007) 2004); First Vice
President, Merrill Lynch
Investment Managers
(1993-2004).
Amy Schioldager (1962) Executive Vice President Head of U.S. Indexing,
(since 2007) BGI (since 2006); Head
of Domestic Equity
Portfolio Management,
BGI (2001-2006).
H. Michael Williams (1960) Executive Vice President Head, Global Index and
(since 2007) Markets Group, BGI
(since January 2006);
Global Head of
Securities Lending, BGI
(2002-2006).
Patrick O'Connor (1967) Vice President Head of iShares
(since 2007) Portfolio Management,
BGI (since 2006); Senior
Portfolio Manager, BGI
(since 1999).
Lee Sterne (1965) Vice President Senior Portfolio
(since 2007) Manager, BGI (since
2004); Portfolio
Manager, BGI (2001-2004).
Matt Tucker (1972) Vice President Head of U.S. Fixed
(since 2007) Income Investment
Solutions, BGI (since
2005); Fixed Income
Investment Strategist,
BGI (2003-2005);
Fixed Income Portfolio
Manager, BGI (1997-2003).
The following table sets forth, as of December 31, 2006, the dollar range of
equity securities beneficially owned by each Trustee in the Funds and in other
registered investment companies overseen by the Trustee within the same family
of investment companies as the Trust. If a Fund is not listed below, the
Trustee did not own any securities in that Fund as of the date indicated above:
Aggregate Dollar Range of Equity
Securities in all Registered
Dollar Range of Investment Companies Overseen by
Equity Securities Trustee in Family of Investment
Name of Trustee* Name of Index Fund in the Fund Companies
---------------- ---------------------------------------- ------------------------ ----------------------------------
Lee T. Kranefuss iShares Lehman 1-3 Year Treasury Bond $50,001-$100,000 Over $100,000
iShares Russell 3000 Over $100,000
iShares iBoxx $Investment Grade
Corporate Bond $10,001-$50,000
iShares Dow Jones Select Dividend $10,000-$50,000
John E. Martinez iShares MSCI EAFE Over $100,000 Over $100,000
iShares Russell 1000 Over $100,000
iShares Russell 1000 Value Over $100,000
iShares Russell 2000 Over $100,000
iShares S&P 500 Over $100,000
George G.C. Parker iShares Dow Jones Select Dividend Over $100,000 Over $100,000
iShares FTSE/Xinhua China 25 Over $100,000
iShares iBoxx $ Investment Grade
Corporate Bond Over $100,000
iShares Lehman 1-3 Year Treasury Bond $1-$10,000
iShares MSCI EAFE Over $100,000
iShares MSCI Emerging Markets Over $100,000
iShares MSCI Mexico Over $100,000
iShares Russell 1000 Value Over $100,000
iShares Russell 2000 $50,000-$100,000
iShares Russell 2000 Value Over $100,000
iShares S&P 100 Over $100,000
iShares S&P 500 Over $100,000
iShares S&P 500 Growth $10,001-$50,000
iShares S&P 500 Value Over $100,000
iShares S&P Midcap 400 Value Over $100,000
iShares S&P Global 100 $10,001-$50,000
Cecilia H. Herbert iShares MSCI Hong Kong $10,001-$50,000 Over $100,000
iShares MSCI Japan $10,001-$50,000
iShares Dow Jones Consumer Goods Sector $10,001-$50,000
Charles A. Hurty iShares S&P 500 $10,001-$50,000 Over $100,000
iShares FTSE/Xinhua China 25 $10,001-$50,000
iShares Dow Jones Financial Sector $10,001-$50,000
iShares Dow Jones U.S. Energy Sector $10,001-$50,000
iShares Dow Jones U.S. Technology Sector $10,001-$50,000
iShares MSCI EAFE $10,001-$50,000
iShares MSCI Japan $10,001-$50,000
John E. Kerrigan iShares Russell 1000 Over $100,000 Over $100,000
iShares MSCI Japan Over $100,000
iShares MSCI Pacific ex-Japan Over $100,000
iShares MSCI EAFE Over $100,000
--------
/1/ The dollar range of equity securities beneficially owned by Robert H.
Silver is not reflected in the table because he was appointed to serve as
an Independent Trustee of the Trust effective March 9, 2007.
As of December 31, 2006, none of the Trustees who are not interested persons
(as defined in the 1940 Act) of the Trust ("Independent Trustees") or their
immediate family members owned beneficially or of record any securities of BGFA
(the Funds' investment adviser), the Distributor (the Funds' distributor) or
any person controlling, controlled by or under control with BGFA or the
Distributor.
Committees of the Board of Trustees. Each Independent Trustee serves on the
Audit Committee and the Nominating and Governance Committee of the Board. The
purposes of the Audit Committee are to assist the Board (i) in its oversight of
the Trust's accounting and financial reporting principles and policies and
related controls and procedures maintained by or on behalf of the Trust;
(ii) in its oversight of the Trust's financial statements and the independent
audit thereof; (iii) in selecting, evaluating and, where deemed appropriate,
replacing the independent accountants (or nominating the independent
accountants to be proposed for shareholder approval in any proxy statement);
(iv) in evaluating the independence of the independent accountants; (v) in
complying with legal and regulatory requirements that relate to the Trust's
accounting and financial reporting, internal controls and independent audits;
and (vi) to assume such other responsibilities as may be delegated by the
Board. The Audit Committee met four times during the calendar year ended
December 31, 2006.
The Nominating and Governance Committee nominates individuals for Independent
Trustee membership on the Board. The Nominating and Governance Committee
functions include, but are not limited to, the following (i) reviewing the
qualifications of any person properly identified or nominated to serve as an
Independent Trustee; (ii) recommending to the Board and current Independent
Trustees the nominee(s) for appointment as an Independent Trustee by the Board
and current Independent Trustees and/or for election as Independent Trustees by
shareholders to fill any vacancy for a position of Independent Trustee(s) on
the Board; (iii) recommending to the Board and current Independent Trustees the
size and composition of the Board and Board committees and whether they comply
with applicable laws and regulations; (iv) recommending a current Independent
Trustee to the Board and current Independent Trustees to serve as Lead
Independent Trustee; (v) periodic review of the Board's retirement policy; and
(vi) recommending an appropriate level of compensation for the Independent
Trustees for their services as Trustees, members or chairpersons of committees
of the Board, Lead Independent Trustee, Chairperson of the Board and any other
positions as the Nominating and Governance Committee considers appropriate. The
Nominating and Governance Committee does not consider Board nomination(s)
recommended by shareholders (acting solely in their capacity as a shareholder
and not in any other capacity). The Nominating and Governance Committee is
comprised of all members of the Board that are Independent Trustees. The
Nominating and Governance Committee met three times during the calendar year
ended December 31, 2006.
Remuneration of Trustees. The Trust pays each Independent Trustee and John
Martinez, an Interested Trustee, an annual fee of $75,000 for meetings of the
Board attended by the Trustee; also the Trust pays Charles Hurty an annual fee
of $20,000 for service as the chairperson of the Board's Audit Committee and
George G. C. Parker an annual fee of $25,000 for service as the Board's Lead
Independent Trustee. During the period January 1, 2006 through December 31,
2006, the Trust paid each Independent Trustee and John Martinez, an Interested
Trustee, an annual fee of $60,000 for meetings of the Board attended by the
Trustee; also the Trust paid Charles Hurty an annual fee of $12,500 for service
as the chairperson of the Board's Audit Committee and George G. C. Parker an
annual fee of $25,000 for service as the Board's Lead Independent Trustee. The
Trust also reimburses each Trustee for travel and other out-of-pocket expenses
incurred by him/her in connection with attending such meetings.
The table below sets forth the compensation paid to each Interested Trustee for
the calendar year ended December 31, 2006:
Pension or
Aggregate Retirement Total
Compensation Benefits Accrued As Estimated Annual Compensation
from the Part of Trust Benefits Upon From the Fund
Name of Interested Trustee Trust Expenses* Retirement* and Fund Complex**
-------------------------- ------------ ------------------- ---------------- ------------------
Lee T. Kranefuss*** $ 0 Not Applicable Not Applicable $ 0
John E. Martinez $60,000 Not Applicable Not Applicable $120,000
--------
* No Trustee or Officer is entitled to any pension or retirement benefits
from the Trust.
** Includes compensation for service on the Board of Directors of iShares, Inc.
*** Lee T. Kranefuss was not compensated by the Trust due to his employment
with BGI during the time period reflected in the table.
The table below sets forth the compensation paid to each Independent Trustee
for the calendar year ended December 31, 2006:
Pension or
Aggregate Retirement Total
Compensation Benefits Accrued As Estimated Annual Compensation
from the Part of Trust Benefits Upon From the Fund
Name of Independent Trustee/3/ Trust Expenses* Retirement* and Fund Complex**
------------------------------ ------------ ------------------- ---------------- ------------------
Richard K. Lyons/1/ $ 50,869 Not Applicable Not Applicable $ 154,413***
George G. C. Parker $ 85,000 Not Applicable Not Applicable $ 170,000
W. Allen Reed/2/ $ 36,250 Not Applicable Not Applicable $ 72,500
Charles A. Hurty $ 60,000 Not Applicable Not Applicable $ 120,000
John E. Kerrigan $ 66,250 Not Applicable Not Applicable $ 132,500
Cecilia H. Herbert $ 60,000 Not Applicable Not Applicable $ 120,000
--------
* No Trustee or Officer is entitled to any pension or retirement benefits
from the Trust.
** Includes compensation for service on the Board of Directors of iShares,
Inc.
*** Includes compensation as Trustee for BGIF and MIP, investment companies
with 24 Funds also advised by BGFA and/or for which BGFA provides
administration services.
/1/ Served as Trustee through November 6, 2006.
/2/ Served as Trustee through June 30, 2006.
/3/ Compensation is not shown for Robert H. Silver because he was elected to
serve as an Independent Trustee of the Trust effective March 9, 2007.
The Trustees and officers of the Trust do not own any outstanding shares of the
Fund subject to this SAI as of the date hereof.
Control Persons and Principal Holders of Securities. Ownership information is
not provided for the Funds as they had not commenced operations as of the date
of this SAI.
Investment Advisory, Administrative and Distribution
Services
Investment Adviser. BGFA serves as investment adviser to each Fund pursuant to
an Investment Advisory Agreement between the Trust and BGFA. BGFA is a
California corporation indirectly owned by Barclays Bank PLC and is registered
as an investment adviser under the Investment Advisers Act of 1940, as amended.
Under the Investment Advisory Agreement, BGFA, subject to the supervision of
the Board and in conformity with the stated investment policies of each Fund,
manages and administers the Trust and the investment of each Fund's assets.
BGFA is responsible for placing purchase and sale orders and providing
continuous supervision of the investment portfolio of each Fund.
Under the Investment Advisory Agreement, BGFA is responsible for all expenses
of the Funds, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, except interest expense, and
taxes, brokerage expenses and other expenses connected with the execution of
portfolio securities transactions, distribution fees and extraordinary
expenses. For its investment management services to each Fund, BGFA is paid a
management fee at the annual rates (as a percentage of such Fund's average net
assets) of:
Fund Management Fee
---- --------------
iShares S&P Global Infrastructure Index Fund %
iShares S&P Global Listed Private Equity Index Fund %
The Investment Advisory Agreement with respect to each Fund continues in effect
for two years from its effective date, and thereafter is subject to annual
approval by (i) the Board or (ii) the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, provided that in
either event such continuance also is approved by a majority of the Board who
are not interested persons (as defined in the 1940 Act) of the Fund, by a vote
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreement with respect to each Fund is terminable
without penalty, on 60-days' notice, by the Board or by a vote of the holders
of a majority of the applicable Fund's outstanding voting securities (as
defined in the 1940 Act). The Investment Advisory Agreement is also terminable
upon 60 days notice by BGFA and will terminate automatically in the event of
its assignment (as defined in the 1940 Act).
Current interpretations of federal banking laws and regulations (i) may
prohibit Barclays Bank PLC, BGI and BGFA from controlling or underwriting the
shares of the Trust, but (ii) would not prohibit Barclays Bank PLC or BGFA
generally from acting as an investment adviser, administrator, transfer agent
or custodian to a Fund or from purchasing shares as agent for and upon the
order of a customer.
BGFA believes that it may perform advisory and related services for the Trust
without violating applicable banking laws or regulations. However, the legal
requirements and interpretations about the permissible activities of banks and
their affiliates may change in the future. These changes could prevent BGFA
from continuing to perform services for the Trust. If this happens, the Board
would consider selecting other qualified firms. Any new investment advisory
agreement would be subject to shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed,
BGFA, or its affiliates, would consider performing additional services for the
Trust. BGFA cannot predict whether these changes will be enacted, or the terms
under which BGFA, or its affiliates, might offer to provide additional services.
Portfolio Managers. Patrick O'Connor and S. Jane Leung (the "Portfolio
Managers") are primarily responsible for the day-to-day management of the
Funds. As of ______, 2007, the Portfolio Managers were also primarily
responsible for the day-to-day management of other iShares Funds and certain
other portfolios and/or accounts as indicated in the table below:
Patrick O'Connor
Types of Accounts Number Total Assets
----------------- ------ ------------
Registered Investment Companies $
Other Pooled Investment Vehicles $
Other Accounts $
Accounts with Incentive-Based Fee Arrangements $
S. Jane Leung
Types of Accounts Number Total Assets
----------------- ------ ------------
Registered Investment Companies $
Other Pooled Investment Vehicles $
Other Accounts $
Accounts with Incentive-Based Fee Arrangements $
Each of the portfolios or accounts for which the Portfolio Managers are
primarily responsible for the day-to-day management seeks to track the rate of
return, risk profile and other characteristics of independent third-party
indexes by either replicating the same combination of securities that
constitute those indexes or through a representative sampling of the securities
that constitute those indexes based on objective criteria and data. The
Portfolio Managers are required to manage each portfolio or account to meet
those objectives. Pursuant to BGI
and BGFA policy, investment opportunities are allocated equitably among the
Funds and other portfolios and accounts. For example, under certain
circumstances, an investment opportunity may be restricted due to limited
supply on the market, legal constraints or other factors, in which event the
investment opportunity will be allocated equitably among those portfolios and
accounts, including the iShares Funds, seeking such investment opportunity. As
a consequence, from time to time the Funds may receive a smaller allocation of
an investment opportunity than they would have if the Portfolio Managers and
BGFA and its affiliates did not manage other portfolios or accounts.
Like the Funds, the other portfolios or accounts for which the Portfolio
Managers are primarily responsible for the day-to-day portfolio management
generally pay an asset-based fee to BGFA or BGI, as applicable, for its
advisory services. One or more of those other portfolios or accounts, however,
may pay BGI an incentive-based fee in lieu of, or in addition to, an
asset-based fee for its advisory services. A portfolio or account with an
incentive-based fee would pay BGI a portion of that portfolio's or account's
gains, or would pay BGI more for its services than would otherwise be the case
if BGI meets or exceeds specified performance targets. By their very nature,
incentive-based fee arrangements could present an incentive for BGI to devote
greater resources, and allocate more investment opportunities, to the
portfolios or accounts that have those fee arrangements, relative to other
portfolios or accounts, in order to earn larger fees. Although BGI has an
obligation to allocate resources and opportunities equitably among portfolios
and accounts and intends to do so, shareholders of the Funds should be aware
that, as with any group of portfolios and accounts managed by an investment
adviser and/or its affiliates pursuant to varying fee arrangements, including
incentive-based fee arrangements, there is the potential for a
conflict-of-interest that may result in the Portfolio Manager's favoring those
portfolios or accounts with incentive-based fee arrangements.
The below table reflects, for each Portfolio Manager, the number of portfolios
or accounts of the types enumerated in the above table and the aggregate of
total assets in those portfolios or accounts with respect to which the
investment management fees for those portfolios or accounts are based on the
performance of those portfolios or accounts, as of [ ]:
Number of Other Accounts with
Patrick O'Connor Performance Fees Managed Aggregate of Total Assets
---------------- ----------------------------- -------------------------
Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts
Number of Other Accounts with
S. Jane Leung Performance Fees Managed Aggregate of Total Assets
------------- ----------------------------- -------------------------
Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts
As of ______, 2007, with respect to all iShares Funds and other portfolios
and/or accounts managed by the Portfolio Managers, on behalf of BGFA, the
Portfolio Managers receive a salary and are eligible to receive an annual
bonus. Each Portfolio Manager's salary is a fixed amount generally determined
annually based on a number of factors, including, but not limited to, the
Portfolio Manager's title, scope of responsibilities, experience and knowledge.
Each Portfolio Manager's bonus is a discretionary amount determined annually
based on the overall profitability of the various BGI companies worldwide, the
performance of the Portfolio Manager's business unit, and an assessment of the
Portfolio Manager's individual performance. Each Portfolio Manager's salary and
annual bonus are paid in cash. In addition, a Portfolio Manager may be paid a
signing bonus or other amounts in connection with initiation of employment with
BGFA. If a Portfolio Manager satisfied the requirements for being part of a
"select group of management or highly compensated employees (within the meaning
of ERISA section 401(a))" as so specified under the terms of BGI's Compensation
Deferral Plan, the Portfolio Manager may elect to defer a portion of his or her
bonus under that Plan.
Portfolio Managers may be selected, on a fully discretionary basis, for awards
under BGI's Compensation Enhancement Plan ("CEP"). Under the CEP, these awards
are determined annually, and vest after two years. At the option of the CEP
administrators, the award may be "notionally invested" in funds managed by BGI,
which means that the final award amount may be increased or decreased according
to the performance of the BGI-
managed funds over the two-year period. If the award is not notionally
invested, the original award amount is paid once vested.
A Portfolio Manager may be granted options to purchase shares in Barclays
Global Investors UK Holdings Limited ("BGI UK Holdings"), a company organized
under the laws of England and Wales that directly or indirectly owns all of the
Barclays Global Investors companies worldwide, which options vest in three
equal installments over three years and are generally exercisable during
prescribed exercise windows. Shares purchased must generally be held 355 days
prior to sale. For such purposes, the value of BGI UK Holdings is based on its
fair value as determined by an independent public accounting firm.
As of ______, 2007, the Portfolio Managers beneficially owned shares of the
Funds in the amounts reflected in the following table:
Patrick O'Connor
Dollar Range
------------------------------------------------------------------------
$10,001 to $50,001 to $100,001 to $500,001 to over
Fund None $1 to $10k $50k $100k $500k $1 million $1 million
---- ---- ---------- ---------- ---------- ----------- ----------- ----------
iShares S&P Global Infrastructure Index
Fund X
iShares S&P Global Listed Private
Equity Index Fund X
S. Jane Leung
Dollar Range
------------------------------------------------------------------------
$10,001 to $50,001 to $100,001 to $500,001 to over
Fund None $1 to $10k $50k $100k $500k $1 million $1 million
---- ---- ---------- ---------- ---------- ----------- ----------- ----------
iShares S&P Global Infrastructure Index
Fund X
iShares S&P Global Listed Private
Equity Index Fund X
Codes of Ethics. The Trust, BGFA and the Distributor have adopted Codes of
Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permit
personnel subject to the Codes of Ethics to invest in securities, subject to
certain limitations, including securities that may be purchased or held by the
Funds. The Codes of Ethics are on public file with, and are available from, the
SEC.
Administrator, Custodian and Transfer Agent. State Street Bank and Trust
("State Street") serves as administrator, custodian and transfer agent for the
Funds. State Street's principal address is 200 Clarendon Street, Boston, MA
02116. Under the Administration Agreement with the Trust, State Street provides
necessary administrative, legal, tax, accounting services, and financial
reporting for the maintenance and operations of the Trust and each Fund. In
addition, State Street makes available the office space, equipment, personnel
and facilities required to provide such services. Under the Custodian Agreement
with the Trust, State Street maintains in separate accounts cash, securities
and other assets of the Trust and each Fund, keeps all necessary accounts and
records, and provides other services. State Street is required, upon the order
of the Trust, to deliver securities held by State Street and to make payments
for securities purchased by the Trust for each Fund. Also, under a Delegation
Agreement, State Street is authorized to appoint certain foreign custodians or
foreign custody managers for Fund investments outside the United States.
Pursuant to a Transfer Agency and Service Agreement with the Trust, State
Street acts as a transfer agent for the Funds' authorized and issued shares of
beneficial interest, and as dividend disbursing agent of the Trust. As
compensation for the foregoing services, State Street receives certain
out-of-pocket costs, transaction fees and asset-based fees which are accrued
daily and paid monthly by BGFA from its management fee.
Distributor. The Distributor's principal address is One Freedom Valley Drive,
Oaks, PA 19456. The Distributor has entered into a Distribution Agreement with
the Trust pursuant to which it distributes shares of each Fund. The
Distribution Agreement will continue for two years from its effective date and
is renewable annually. Shares are continuously offered for sale by the Funds
through the Distributor only in Creation Unit Aggregations, as described in the
Prospectus and below in the Creation and Redemption of Creation Units
Aggregations section. Shares in less than Creation Unit Aggregations are not
distributed by the Distributor. The Distributor will deliver the Prospectus
and, upon request, the Statement of Additional Information to persons
purchasing Creation Unit Aggregations and will maintain records of both orders
placed with it and confirmations of acceptance furnished by it. The Distributor
is a broker-dealer registered under Securities Exchange Act of 1934, as amended
(the "1934 Act") and a member of the NASD Inc. ("NASD").
The Distribution Agreement for each Fund provides that it may be terminated at
any time, without the payment of any penalty, on at least 60-days prior written
notice to the other party (i) by vote of a majority of the Independent Trustees
or (ii) by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the relevant Fund. The Distribution Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of shares. Such Soliciting Dealers may also be Authorized Participants (as
defined below), Depository Trust Company ("DTC") Participants (as defined
below) and/or Investor Services Organizations.
BGFA or BGI may, from time to time and from its own resources, pay, defray or
absorb costs relating to distribution, including payments out of its own
resources to the Distributor, or to otherwise promote the sale of shares.
Index Provider. Each Fund is based upon a particular index compiled by S&P. S&P
is not affiliated with the Funds or with BGI or BGI's affiliates. Each Fund is
entitled to use its Underlying Index pursuant to a sub-licensing agreement with
BGI, which in turn has a licensing agreement with S&P. BGI has provided the
applicable sub-licenses to the Trust without charge.
Brokerage Transactions
BGFA assumes general supervision over placing orders on behalf of each Fund for
the purchase and sale of portfolio securities. In selecting brokers or dealers
for any transaction in portfolio securities, BGFA's policy is to make such
selection based on factors deemed relevant, including but not limited to, the
breadth of the market in the security, the price of the security, the
reasonableness of the commission or mark-up or mark-down, if any, execution
capability, settlement capability, back office efficiency and the financial
condition of the broker or dealer, both for the specific transaction and on a
continuing basis. The overall reasonableness of brokerage commissions paid is
evaluated by BGFA based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. Brokers may also be selected because of their ability to
handle special or difficult executions, such as may be involved in large block
trades, less liquid securities, broad distributions, or other circumstances.
BGFA does not consider the provision or value of research, products or services
a broker or dealer may provide, if any, as a factor in the selection of a
broker or dealer or the determination of the reasonableness of commissions paid
in connection with portfolio transactions. The Trust has adopted policies and
procedures that prohibit the consideration of sales of a Fund's shares as a
factor in the selection of a broker or a dealer to execute its portfolio
transactions.
The Funds' purchase and sale orders for securities may be combined with those
of other investment companies, clients or accounts that BGFA manages or
advises, and for which it has brokerage placement authority. If purchases or
sales of portfolio securities of the Funds and one or more other accounts
managed or advised by BGFA are considered at or about the same time,
transactions in such securities are allocated among the Fund and the other
accounts in a manner deemed equitable to all by BGFA. In some cases, this
procedure could have a detrimental effect on the price or volume of the
security as far as the Funds are concerned. However, in other cases, it is
possible that the ability to participate in volume transactions and to
negotiate lower transaction costs will be beneficial to the Fund. BGFA may
deal, trade and invest for its own account in the types of securities in which
the Funds may invest. BGFA may, from time to time, effect trades on behalf of
and for the account of the Funds with brokers or dealers that are affiliated
with BGFA, in conformity with the 1940 Act and SEC rules and
regulations. Under these provisions, any commissions paid to affiliated brokers
or dealers must be reasonable and fair compared to the commissions charged by
other brokers or dealers in comparable transactions. The Funds will not deal
with affiliates in principal transactions unless permitted by applicable SEC
rule or regulation or by SEC exemptive order.
Additional Information Concerning the Trust
Shares. The Trust currently is comprised of over [______] Funds. The Trust
issues shares of beneficial interests in the Fund, with no par value. The Board
may designate additional iShares Funds.
Each share issued by a Fund has a pro rata interest in the assets of that Fund.
Shares have no preemptive, exchange, subscription or conversion rights and are
freely transferable. Each share is entitled to participate equally in dividends
and distributions declared by the Board with respect to the relevant Fund, and
in the net distributable assets of such Fund on liquidation.
Each share has one vote with respect to matters upon which a shareholder vote
is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder. Shares of all Funds vote together as a single class
except that, if the matter being voted on affects only a particular Fund, and,
if a matter affects a particular Fund differently from other Funds, that Fund
will vote separately on such matter.
Under Delaware law, the Trust is not required to hold an annual meeting of
shareholders unless required to do so under the 1940 Act. The policy of the
Trust is not to hold an annual meeting of shareholders unless required to do so
under the 1940 Act. All shares (regardless of the Fund) have noncumulative
voting rights for the Board. Under Delaware law, Trustees of the Trust may be
removed by vote of the shareholders.
Following the creation of the initial Creation Unit Aggregation(s) of shares of
a Fund and immediately prior to the commencement of trading in such Fund's
shares, a holder of shares may be a "control person" of the Fund, as defined in
the 1940 Act. A Fund cannot predict the length of time for which one or more
shareholders may remain a control person of the Fund.
Absent an applicable exemption or other relief from the SEC or its staff,
beneficial owners of more than 5% of the shares of a fund may be subject to the
reporting provisions of Section 13 of the 1934 Act and the SEC's rules
promulgated thereunder. In addition, absent an applicable exemption or other
relief from the SEC staff, officers and Trustees of a fund and beneficial
owners of 10% of the shares of a fund ("Insiders") may be subject to the
insider reporting, short-swing profit and short sale provisions of Section 16
of the 1934 Act and the SEC's rules promulgated thereunder. Beneficial owners
and insiders should consult with their own legal counsel concerning their
obligations under Sections 13 and 16 of the 1934 Act.
Termination of the Trust or a Fund. The Trust or a Fund may be terminated by a
majority vote of the Board or the affirmative vote of a super majority of the
holders of the Trust or the Fund entitled to vote on termination. Although the
shares are not automatically redeemable upon the occurrence of any specific
event, the Trust's organizational documents provide that the Board will have
the unrestricted power to alter the number of shares in a Creation Unit
Aggregation. In the event of a termination of the Trust or a Fund, the Board,
in its sole discretion, could determine to permit the shares to be redeemable
in aggregations smaller than Creation Unit Aggregations or to be individually
redeemable. In such circumstance, the Trust may make redemptions in-kind, for
cash, or for a combination of cash or securities.
DTC as Securities Depository for Shares of the Trust. Shares of each Fund are
represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.
DTC, a limited-purpose trust company, was created to hold securities of its
participants ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities'
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the NYSE, the AMEX and the NASD. Access
to the DTC system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a DTC Participant, either directly or indirectly ("Indirect Participants").
Beneficial ownership of shares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and
Indirect Participants. Ownership of beneficial interests in shares (owners of
such beneficial interests is shown on, and the transfer of ownership is
effected only through, records maintained by DTC (with respect to DTC
Participants) and on the records of DTC Participants (with respect to Indirect
Participants and Beneficial Owners that are not DTC Participants). Beneficial
Owners will receive from or through the DTC Participant a written confirmation
relating to their purchase of shares.
Conveyance of all notices, statements and other communications to Beneficial
Owners is effected as follows. Pursuant to the Depositary Agreement between the
Trust and DTC, DTC is required to make available to the Trust upon request and
for a fee to be charged to the Trust a listing of the shares of each Fund held
by each DTC Participant. The Trust shall inquire of each such DTC Participant
as to the number of Beneficial Owners holding shares, directly or indirectly,
through such DTC Participant. The Trust shall provide each such DTC Participant
with copies of such notice, statement or other communication, in such form,
number and at such place as such DTC Participant may reasonably request, in
order that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In
addition, the Trust shall pay to each such DTC Participant a fair and
reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all shares of the Trust. DTC or its nominee, upon receipt
of any such distributions, shall credit immediately DTC Participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in shares of such Fund as shown on the records of DTC or its nominee. Payments
by DTC Participants to Indirect Participants and Beneficial Owners of shares
held through such DTC Participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers in bearer form or registered in a "street name", and will
be the responsibility of such DTC Participants.
The Trust has no responsibility or liability for any aspect of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests, or
for any other aspect of the relationship between DTC and the DTC Participants
or the relationship between such DTC Participants and the Indirect Participants
and Beneficial Owners owning through such DTC Participants. DTC may decide to
discontinue providing its service with respect to shares of the Trust at any
time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action to find a replacement for DTC to
perform its functions at a comparable cost.
Creation and Redemption of Creation Unit Aggregations
Creation. The Trust issues and sells shares of each Fund only in Creation Unit
Aggregations on a continuous basis through the Distributor, without a sales
load, at the NAV next determined after receipt, on any Business Day (as defined
below), of an order in proper form.
A "Business Day" with respect to each Fund is any day on which the Listing
Exchange on which a Fund is listed for trading is open for business. As of the
date of this SAI, the Listing Exchange observes the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Fund Deposit. The consideration for purchase of Creation Unit Aggregations of a
Fund generally consists of the in-kind deposit of a designated portfolio of
equity securities, (i.e., the Deposit Securities), which constitutes a
substantial replication, or a portfolio sampling representation, of the stocks
involved in the relevant Fund's Underlying Index the Cash Component computed as
described below. Together, the Deposit Securities and the Cash Component
constitute the "Fund Deposit," which represents the minimum initial and
subsequent investment amount for a Creation Unit Aggregation of any Fund.
The Cash Component is sometimes also referred to as the "Balancing Amount." The
Cash Component serves the function of compensating for any differences between
the NAV per Creation Unit Aggregation and the Deposit Amount (as defined
below). The Cash Component is an amount equal to the difference between the NAV
of the shares (per Creation Unit Aggregation) and the "Deposit Amount," which
is an amount equal to the market value of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit
Aggregation exceeds the Deposit Amount), the creator will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the creator will
receive the Cash Component. Computation of the Cash Component excludes any
stamp duty or other similar fees and expenses payable upon transfer of
beneficial ownership of the Deposit Securities, which shall be the sole
responsibility of the Authorized Participant.
BGFA, through the NSCC, makes available on each Business Day, prior to the
opening of business on the applicable Listing Exchange (currently 9:30 a.m.,
Eastern time), the list of the names and the required number of shares of each
Deposit Security to be included in the current Fund Deposit (based on
information at the end of the previous Business Day) for each Fund.
Such Deposit Securities are applicable, subject to any adjustments as described
below, in order to effect creations of Creation Unit Aggregations of a given
Fund until such time as the next-announced composition of the Deposit
Securities is made available.
The identity and number of shares of the Deposit Securities required for a Fund
Deposit for each Fund changes as rebalancing adjustments and corporate action
events are reflected from time to time by BGFA with a view to the investment
objective of the relevant Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
component securities of the Underlying Index.
The Trust reserves the right to permit or require the substitution of an amount
of cash (i.e., a "cash in lieu" amount) to be added to the Cash Component to
replace any Deposit Security that may not be available in sufficient quantity
for delivery or that may not be eligible for transfer through the systems of
DTC or the Clearing Process (discussed below). The Trust also reserves the
right to permit or require a "cash in lieu" amount where the delivery of the
Deposit Security by the Authorized Participant (as described below) would be
restricted under the securities laws or where the delivery of the Deposit
Security to the Authorized Participant would result in the disposition of the
Deposit Security by the Authorized Participant becoming restricted under the
securities laws, or in certain other situations. The adjustments described
above will reflect changes known to BGFA on the date of announcement to be in
effect by the time of delivery of the Fund Deposit, in the composition of the
Underlying Index or resulting from certain corporate actions.
Procedures for Creation of Creation Unit Aggregations. To be eligible to place
orders with the Distributor and to create a Creation Unit Aggregation of the
Fund, an entity must be: (i) a "Participating Party," i.e., a broker-dealer or
other participant in the clearing process through the Continuous Net Settlement
System of the NSCC (the "Clearing Process"), a clearing agency that is
registered with the SEC; or (ii) a DTC Participant (see the Book Entry Only
System section), and, in each case, must have executed an agreement with the
Distributor with respect to creations and redemptions of Creation Unit
Aggregations ("Participant Agreement") (discussed below). A Participating Party
and DTC Participant who has executed a Participant Agreement are collectively
referred to as an "Authorized Participant." Investors should contact the
Distributor for the names of Authorized Participants that have signed a
Participant Agreement. All shares of a Fund, however created, will be entered
on the records of DTC in the name of Cede & Co. for the account of a DTC
Participant.
All orders to create shares must be placed for one or more Creation Unit
Aggregations. Orders to create Creation Unit Aggregations of the Funds cannot
be placed through the Clearing Process. All orders to create Creation Unit
Aggregations, whether through the Clearing Process (through a Participating
Party) or outside the Clearing Process (through a DTC Participant), must be
received by the Distributor no later than the closing time of the regular
trading session on the Listing Exchange ("Closing Time") (ordinarily 4:00 p.m.,
Eastern time) in each case on the date such order is placed in order for
creation of Creation Unit Aggregations to be effected based on the NAV of
shares of a Fund as next determined on such date after receipt of the order in
proper form. The date on which an order to create Creation Unit Aggregations
(or an order to redeem Creation Unit Aggregations, as discussed below) is
placed is referred to as the "Transmittal Date." Orders must be transmitted by
an Authorized Participant by telephone or other transmission method acceptable
to the Distributor pursuant to procedures set forth in the Participant
Agreement, as described below. Economic or market disruptions or changes, or
telephone or other communication failure, may impede the ability to reach the
Distributor or an Authorized Participant.
All orders to create Creation Unit Aggregations shall be placed with an
Authorized Participant, as applicable, in the form required by such Authorized
Participant. In addition, the Authorized Participant may request the investor
to make certain representations or enter into agreements with respect to the
order, (e.g., to provide for payments of cash), when required. Investors should
be aware that their particular broker may not have executed a Participant
Agreement and, therefore, orders to create Creation Unit Aggregations of a Fund
have to be placed by the investor's broker through an Authorized Participant
that has executed a Participant Agreement. In such cases, there may be
additional charges to such investor. At any given time, there may be only a
limited number of broker-dealers that have executed a Participant Agreement
and, to the extent needed, only a small number of such Authorized Participants
may have international capabilities.
Those placing orders for Creation Unit Aggregations of the Funds should
ascertain the applicable deadline for cash transfers by contacting the
operations department of the broker or depositary institution making the
transfer of the Cash Component. This deadline is likely to be significantly
earlier than the closing time of the regular trading session on the Listing
Exchange. Investors should be aware that the Authorized Participant may require
orders for Creation Units placed with it to be in the form required by the
individual Authorized Participant, which form may not be the same as the form
of purchase order specified by the Trust that the Authorized Participant must
deliver to the Distributor.
Placement of Creation Orders for Domestic Funds Using the Clearing Process. The
Clearing Process is the process of creating or redeeming Creation Unit
Aggregations. Fund Deposits made through the Clearing Process must be delivered
through a Participating Party that has executed a Participant Agreement. The
Participant Agreement authorizes the Distributor to transmit through State
Street to NSCC, on behalf of the Participating Party, such trade instructions
as are necessary to effect the Participating Party's creation order. Pursuant
to such trade instructions to NSCC, the Participating Party agrees to deliver
the requisite Deposit Securities and the Cash Component to the Trust, together
with such additional information as may be required by the Distributor. An
order to create Creation Unit Aggregations through the Clearing Process is
deemed received by the Distributor on the Transmittal Date if: (i) such order
is received by the Distributor no later than the Closing Time on such
Transmittal Date; and (ii) all other procedures set forth in the Participant
Agreement are properly followed.
Placement of Creation Orders for Domestic Funds Outside the Clearing Process.
Fund Deposits made outside the Clearing Process must be delivered through a DTC
Participant that has executed a Participant Agreement. A DTC participant who
wishes to place an order creating Creation Unit Aggregations to be effected
outside the Clearing Process does not need to be a Participating Party, but
such orders must state that the DTC Participant is not using the Clearing
Process and that the creation of Creation Unit Aggregations will instead be
effected through a transfer of securities and cash directly through DTC. The
Fund Deposit transfer must be ordered by the DTC Participant on the Transmittal
Date in a timely fashion so as to ensure the delivery of the requisite number
of Deposit Securities through DTC to the account of the Fund by no later than
2:00 p.m., Eastern Time, on the "Settlement Date." The Settlement Date is
typically the third Business Day following the Transmittal Date. However, the
Settlement Date for certain funds based on international indexes is typically
the second Business Day following the Transmittal Date and each Fund reserves
the right to settle transactions on a basis other than T+3. In certain cases
Authorized Participants will create and redeem Creation Unit Aggregations of
the same Fund on the same trade date. In these instances, the Trust reserves
the right to settle these transactions on a net basis.
All questions as to the number of Deposit Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by the Trust, whose determination
shall be final and binding. The amount of cash equal to the Cash Component must
be transferred directly to State Street through the Federal Reserve Bank wire
transfer system in a timely manner so as to be received by State Street no
later than 2:00 p.m., Eastern Time, on the Settlement Date. An order to create
Creation Unit Aggregations outside the Clearing Process is deemed received by
the Distributor on the Transmittal Date if: (i) such order is received by the
Distributor not later than the Closing Time on such Transmittal Date; and
(ii) all other procedures set forth in the Participant Agreement are properly
followed. However, if State Street does not receive both the required Deposit
Securities and the Cash Component by 2:00 p.m., Eastern time on the Settlement
Date, such order may be canceled. Upon written notice to the Distributor, such
canceled order may be resubmitted the following Business Day using a Fund
Deposit as newly constituted to reflect the then current NAV of the Fund. The
delivery of Creation Unit Aggregations so created generally will occur no later
than the Settlement Date.
An additional charge of up to three (3) times the normal transaction fee (for a
total charge of up to four (4) times the normal transaction fee) may be imposed
with respect to transactions effected outside the Clearing Process (through a
DTC participant) and in the limited circumstances in which any cash can be used
in lieu of Deposit Securities to create Creation Units. This charge is subject
to a limit not to exceed 0.1% (10 basis points) of the value of one Creation
Unit at the time of creation.
Creation Unit Aggregations of funds based on domestic indexes may be created in
advance of receipt by the Trust of all or a portion of the applicable Deposit
Securities as described below. In these circumstances, the initial deposit will
have a value greater than the NAV of the shares on the date the order is placed
in proper form since, in addition to available Deposit Securities, cash must be
deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) at
least 105%, which BGFA may change from time to time, of the market value of the
undelivered Deposit Securities (the "Additional Cash Deposit") with the Fund
pending delivery of any missing Deposit Securities.
If an Authorized Participant determines to post an additional cash deposit as
collateral for any undelivered Deposit Securities, such Authorized Participant
must deposit with State Street the appropriate amount of federal funds by 2:00
p.m., Eastern time, on the date of requested settlement. If the Authorized
Participant does not place its purchase order by the closing time or State
Street does not receive federal funds in the appropriate amount by such time,
then the order may be deemed to be rejected and the Authorized Participant
shall be liable to the Fund for losses, if any, resulting therefrom. An
additional amount of cash shall be required to be deposited with State Street,
pending delivery of the missing Deposit Securities to the extent necessary to
maintain the Additional Cash Deposit with the Trust in an amount at least equal
to 105%, which BGFA may change from time to time, of the daily marked to market
value of the missing Deposit Securities. To the extent that missing Deposit
Securities are not received by 2:00 p.m., Eastern time, on the Settlement Date
or in the event a marked-to-market payment is not made within one Business Day
following notification by the Distributor that such a payment is required, the
Trust may use the cash on deposit to purchase the missing Deposit Securities.
Authorized Participants will be liable to the Trust for the costs incurred by
the Trust in connection with any such purchases. These costs will be deemed to
include the amount by which the actual purchase price of the Deposit Securities
exceeds the market value of such Deposit Securities on the transmittal date
plus the brokerage and related transaction costs associated with such
purchases. The Trust will return any unused portion of the Additional Cash
Deposit once all of the missing Deposit Securities have been properly received
by State Street or purchased by the Trust and deposited into the Trust. In
addition, a transaction fee, as listed below, will be charged in all cases. The
delivery of Creation Unit Aggregations so created generally will occur no later
than the Settlement Date.
Placement of Creation Orders for Foreign Funds. Fund Deposits in connection
with the Funds will not be made either through the Clearing Process or through
DTC. For the Funds, State Street shall cause the sub-custodian of the Funds to
maintain an account into which the Authorized Participant shall deliver, on
behalf of itself or the party on whose behalf it is acting, the securities
included in the designated Fund Deposit (or the cash value of all or part of
such securities, in the case of a permitted or required cash purchase or "cash
in lieu" amount), with any appropriate adjustments as advised by the Trust.
Deposit Securities must be delivered to an account maintained at the applicable
local sub-custodian(s). Orders to purchase Creation Unit Aggregations must be
received by the Distributor from an Authorized Participant on its own or
another investor's behalf by the closing time of the regular trading session on
the applicable Listing Exchange on the relevant Business Day. However, when a
relevant local market is closed due to local market holidays, the local market
settlement process will not commence until the end of the local holiday period.
Settlement must occur by 2:00 p.m., Eastern Time, on the contractual settlement
date.
The Authorized Participant must also make available no later than 2:00 p.m.,
Eastern Time, on the contractual settlement date, by means satisfactory to the
Trust, immediately-available or same-day funds estimated by the Trust to be
sufficient to pay the Cash Component next determined after acceptance of the
purchase order, together with the applicable purchase transaction fee. Any
excess funds will be returned following settlement of the issue of the Creation
Unit Aggregation.
To the extent contemplated by the applicable Participant Agreement, Creation
Unit Aggregations of the Funds will be issued to such Authorized Participant
notwithstanding the fact that the corresponding Fund Deposits have not been
received in part or in whole, in reliance on the undertaking of the Authorized
Participant to deliver the missing Deposit Securities as soon as possible,
which undertaking shall be secured by such Authorized Participant's delivery
and maintenance of collateral consisting of cash in the form of U.S. dollars in
immediately available funds having a value (marked to market daily) at least
equal to 110%, which BGFA may change from time to time of the value of the
missing Deposit Securities. Such cash collateral must be delivered no later
than 2:00 p.m., Eastern Time, on the contractual settlement date. The
Participant Agreement will permit the Funds to buy the missing Deposit
Securities at any time and will subject the Authorized Participant to liability
for any shortfall between the cost to the Trust of purchasing such securities
and the value of the collateral.
Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the
absolute right to reject a creation order transmitted to it by the Distributor
in respect of each Fund if: (i) the order is not in proper form; (ii) the
investor(s), upon obtaining the shares ordered, would own 80% or more of the
currently outstanding shares of a Fund; (iii) the Deposit Securities delivered
are not as disseminated through the facilities of the NSCC for that date by
BGFA, as described above; (iv) acceptance of the Deposit Securities would have
certain adverse tax consequences to a Fund; (v) acceptance of the Fund Deposit
would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund
Deposit would otherwise, in the discretion of the Trust or BGFA, have an
adverse effect on the Trust or the rights of beneficial owners; or (vii) in the
event that circumstances outside the control of the Trust, State Street, the
Distributor or BGFA makes it, for all practical purposes, impossible to process
creation orders. Examples of such circumstances include acts of God; public
service or utility problems such as fires, floods, extreme weather conditions
and power outages resulting in telephone, telecopy and computer failures;
market conditions or activities causing trading halts; systems failures
involving computer or other information systems affecting the Trust, BGFA, the
Distributor, DTC, NSCC, State Street or sub-custodian or any other participant
in the creation process; and similar extraordinary events. The Distributor
shall notify a prospective creator of a Creation Unit and/or the Authorized
Participant acting on behalf of the creator of a Creation Unit Aggregation of
its rejection of the order of such person. The Trust, State Street, a
sub-custodian and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall any of them incur any liability for the failure to give any such
notification.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of
any securities to be delivered shall be determined by the Trust, and the
Trust's determination shall be final and binding.
Creation Transaction Fee. A purchase transaction fee is imposed for the
transfer and other transaction costs of a Fund associated with the issuance of
Creation Units of shares. The fee is a single charge and will be the same
regardless of the number of Creation Units purchased by a purchaser on the same
day. Purchasers of Creation Units of shares for cash are required to pay an
additional variable charge to compensate for brokerage and market impact
expenses. Where the Trust permits an in-kind purchaser to substitute cash in
lieu of depositing a portion of the Deposit Securities, the purchaser will be
assessed the additional variable charge for cash purchases on the "cash in
lieu" portion of its investment. Investors will also bear the costs of
transferring the Deposit Securities to the Trust. Investors who use the
services of a broker or other such intermediary may be charged a fee for such
services.
The following table sets forth the standard and maximum creation transaction
fees for each of the Funds:
Standard Creation Maximum Creation
Fund Transaction Fee* Transaction Fee*
---- ----------------- ----------------
iShares S&P Global Infrastructure Index Fund $ $
iShares S&P Global Listed Private Equity
Index Fund $ $
--------
* If a Creation Unit is purchased outside the usual process through the NSCC
or for cash, a variable fee will be charged up to four times the standard
creation or redemption transaction fee.
Redemption of Shares in Creation Units Aggregations. Shares may be redeemed
only in Creation Unit Aggregations at their NAV next determined after receipt
of a redemption request in proper form by the Fund through State Street and
only on a Business Day. A Fund will not redeem shares in amounts less than
Creation Unit Aggregations. Beneficial Owners must accumulate enough shares in
the secondary market to constitute a Creation Unit Aggregation in order to have
such shares redeemed by the Trust. There can be no assurance, however, that
there will be sufficient liquidity in the public trading market at any time to
permit assembly of a Creation Unit Aggregation. Investors should expect to
incur brokerage and other costs in connection with assembling a sufficient
number of shares to constitute a redeemable Creation Unit Aggregation.
With respect to each Fund, BGFA, through the NSCC and the Distributor, makes
available immediately prior to the opening of business on the applicable
Listing Exchange (currently 9:30 a.m., Eastern time) on each Business Day, the
identity of the Fund securities that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
described below) on that day ("Fund Securities"). Fund Securities
received on redemption may not be identical to Deposit Securities that are
applicable to creations of Creation Unit Aggregations.
Unless cash redemptions are available or specified for a Fund, the redemption
proceeds for a Creation Unit Aggregation generally consist of Fund Securities
-- as announced on the Business Day of the request for redemption received in
proper form -- plus cash in an amount equal to the difference between the NAV
of the shares being redeemed, as next determined after a receipt of a request
in proper form, and the value of the Fund Securities (the "Cash Redemption
Amount"), less a redemption transaction fee as listed below. In the event that
the Fund Securities have a value greater then the NAV of the shares, a
compensating cash payment equal to the difference is required to be made by or
through an Authorized Participant by the redeeming shareholder.
Redemptions of shares for Fund Securities will be subject to compliance with
applicable U.S. federal and state securities laws and each Fund (whether or not
it otherwise permits cash redemptions) reserves the right to redeem Creation
Unit Aggregations for cash to the extent that the Trust could not lawfully
deliver specific Fund Securities upon redemptions or could not do so without
first registering the Fund Securities under such laws. An Authorized
Participant or an investor for which it is acting subject to a legal
restriction with respect to a particular stock included in the Fund Securities
applicable to the redemption of a Creation Unit Aggregation may be paid an
equivalent amount of cash. This would specifically prohibit delivery of Fund
Securities that are not registered in reliance upon Rule 144A under the
Securities Act to a redeeming Beneficial Owner that is not a "qualified
institutional buyer," as such term is defined under Rule 144A of the Securities
Act. The Authorized Participant may request the redeeming Beneficial Owner of
the shares to complete an order form or to enter into agreements with respect
to such matters as compensating cash payment.
The right of redemption may be suspended or the date of payment postponed with
respect to any Fund: (i) for any period during which the NYSE is closed (other
than customary weekend and holiday closings); (ii) for any period during which
trading on the NYSE is suspended or restricted; (iii) for any period during
which an emergency exists as a result of which disposal of the shares of a Fund
or determination of such Fund's NAV is not reasonably practicable; or (iv) in
such other circumstances as is permitted by the SEC.
Redemption Transaction Fee. A redemption transaction fee is imposed to offset
transfer and other transaction costs that may be incurred by the relevant Fund.
The fee is a single charge and will be the same regardless of the number of
Creation Units redeemed by an investor on the same day. The redemption
transaction fees for redemptions in kind and for cash and the additional
variable charge for cash redemptions (when cash redemptions are available or
specified) are listed below. Investors will also bear the costs of transferring
the Fund Securities from the Trust to their account or on their order.
Investors who use the services of a broker or other such intermediary may be
charged a fee for such services.
The following table sets forth the standard and maximum redemption transaction
fees for each of the Funds:
Standard Redemption Maximum Redemption
Fund Transaction Fee* Transaction Fee*
---- ------------------- ------------------
iShares S&P Global Infrastructure Index
Fund $ $
iShares S&P Global Listed Private
Equity Index Fund $ $
--------
* If a Creation Unit is redeemed outside the usual process through the NSCC or
for cash, a variable fee will be charged up to four times the standard
creation or redemption transaction fee.
Placement of Redemption Orders for Domestic Funds Using the Clearing Process.
Orders to redeem Creation Unit Aggregations of funds based on domestic indexes
through the Clearing Process must be delivered through a Participating Party
that has executed the Participant Agreement. An order to redeem Creation Unit
Aggregations using the Clearing Process is deemed received by the Trust on the
Transmittal Date if (i) such order is received by State Street not later than
the Closing Time on such Transmittal Date; and (ii) all other procedures set
forth in the Participant Agreement are properly followed. Such order will be
effected based on the NAV of the Fund as next determined. An order to redeem
Creation Unit Aggregations using the Clearing Process made in proper form but
received by the Trust after the Closing Time, will be deemed received on the
next Business Day immediately following the Transmittal Date and will be
effected at the NAV next determined on such Business Day. The requisite Fund
Securities and the Cash Redemption Amount will be transferred by the third NSCC
Business Day following the date on which such request for redemption is deemed
received.
Placement of Redemption Orders for Domestic Funds Outside the Clearing Process.
Orders to redeem Creation Unit Aggregations of funds based on domestic indexes
outside the Clearing Process must be delivered through a DTC Participant that
has executed the Participant Agreement. A DTC Participant who wishes to place
an order for redemption of Creation Unit Aggregations to be effected outside
the Clearing Process does not need to be a Participating Party, but such orders
must state that the DTC Participant is not using the Clearing Process and that
redemption of Creation Unit Aggregations will instead be effected through
transfer of shares directly through DTC. An order to redeem Creation Unit
Aggregations outside the Clearing Process is deemed received by the Trust on
the Transmittal Date if: (i) such order is received by State Street not later
than the Closing Time on such Transmittal Date; (ii) such order is accompanied
or followed by the requisite number of shares of the Fund specified in such
order, which delivery must be made through DTC to State Street no later than
11:00 a.m., Eastern time, on the contracted settlement date; and (iii) all
other procedures set forth in the Participant Agreement are properly followed.
After the Trust has deemed an order for redemption outside the Clearing Process
received, the Trust will initiate procedures to transfer the requisite Fund
Securities which are expected to be delivered within three Business Days and
the Cash Redemption Amount to the Authorized Participant on behalf of the
redeeming Beneficial Owner by the Settlement Date. In certain cases Authorized
Participants will redeem and create Creation Unit Aggregations of the same Fund
on the same trade date. In these instances, the Trust reserves the right to
settle these transactions on a net basis.
Placement of Redemption Orders for Foreign Funds. Orders to redeem Creation
Unit Aggregations of the Fund must be delivered through an Authorized
Participant that has executed a Participant Agreement. Investors other than
Authorized Participants are responsible for making arrangements for a
redemption request to be made through an Authorized Participant. An order to
redeem Creation Unit Aggregations of the Funds is deemed received by the Trust
on the Transmittal Date if: (i) such order is received by State Street not
later than the Closing Time on the Transmittal Date; (ii) such order is
accompanied or followed by the requisite number of shares of the Fund specified
in such order, which delivery must be made through DTC to State Street no later
than 10:00 a.m., Eastern Time, on the next Business Day following the
Transmittal Date; and (iii) all other procedures set forth in the Participant
Agreement are properly followed. Deliveries of Fund Securities to redeeming
investors generally will be made within three Business Days. Due to the
schedule of holidays in certain countries, however, the delivery of in-kind
redemption proceeds for the Funds may take longer than three Business Days
after the day on which the redemption request is received in proper form. In
such cases, the local market settlement procedures will not commence until the
end of the local holiday periods.
In connection with taking delivery of shares of Fund Securities upon redemption
of shares of the Funds, a redeeming Beneficial Owner, or Authorized Participant
action on behalf of such Beneficial Owner must maintain appropriate security
arrangements with a qualified broker-dealer, bank or other custody provider in
each
jurisdiction in which any of the Fund Securities are customarily traded, to
which account such Fund Securities will be delivered.
To the extent contemplated by an Authorized Participant's agreement, in the
event the Authorized Participant has submitted a redemption request in proper
form but is unable to transfer all or part of the Creation Unit Aggregation to
be redeemed to the Funds' Transfer Agent, the Distributor will nonetheless
accept the redemption request in reliance on the undertaking by the Authorized
Participant to deliver the missing shares as soon as possible. Such undertaking
shall be secured by the Authorized Participant's delivery and maintenance of
collateral consisting of cash having a value (marked to market daily) at least
equal to 110%, which BGFA may change from time to time, of the value of the
missing shares.
The current procedures for collateralization of missing shares require, among
other things, that any cash collateral shall be in the form of U.S. dollars in
immediately-available funds and shall be held by State Street and marked to
market daily, and that the fees of State Street and any sub-custodians in
respect of the delivery, maintenance and redelivery of the cash collateral
shall be payable by the Authorized Participant. The Authorized Participant's
agreement will permit the Trust, on behalf of the affected Fund, to purchase
the missing shares or acquire the Deposit Securities and the Cash Component
underlying such shares at any time and will subject the Authorized Participant
to liability for any shortfall between the cost to the Trust of purchasing such
shares, Deposit Securities or Cash Component and the value of the collateral.
The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered upon redemption will be made by State Street according
to the procedures set forth under Determination of NAV computed on the Business
Day on which a redemption order is deemed received by the Trust. Therefore, if
a redemption order in proper form is submitted to State Street by a DTC
Participant not later than Closing Time on the Transmittal Date, and the
requisite number of shares of the relevant Fund are delivered to State Street
prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the
Cash Redemption Amount to be delivered will be determined by State Street on
such Transmittal Date. If, however, a redemption order is submitted to State
Street by a DTC Participant not later than the Closing Time on the Transmittal
Date but either (i) the requisite number of shares of the relevant Fund are not
delivered by the DTC Cut-Off-Time, as described above, on such Transmittal
Date, or (ii) the redemption order is not submitted in proper form, then the
redemption order will not be deemed received as of the Transmittal Date. In
such case, the value of the Fund Securities and the Cash Redemption Amount to
be delivered will be computed on the Business Day that such order is deemed
received by the Trust, (i.e., the Business Day on which the shares of the
relevant Fund are delivered through DTC to State Street by the DTC
Cut-Off-Time) on such Business Day pursuant to a properly submitted redemption
order.
If it is not possible to effect deliveries of the Fund Securities, the Trust
may in its discretion exercise its option to redeem such shares in cash, and
the redeeming Beneficial Owner will be required to receive its redemption
proceeds in cash. In addition, an investor may request a redemption in cash
that the Funds may, in its sole discretion, permit. In either case, the
investor will receive a cash payment equal to the NAV of its shares based on
the NAV of shares of the relevant Fund next determined after the redemption
request is received in proper form (minus a redemption transaction fee and
additional charge for requested cash redemptions specified above, to offset the
Trust's brokerage and other transaction costs associated with the disposition
of Fund Securities). Each Fund may also, in its sole discretion, upon request
of a shareholder, provide such redeemer a portfolio of securities that differs
from the exact composition of the Fund Securities but does not differ in NAV.
Redemptions of shares for Fund Securities will be subject to compliance with
applicable federal and state securities laws and the Fund (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Unit
Aggregations for cash to the extent that the Trust could not lawfully deliver
specific Fund Securities upon redemptions or could not do so without first
registering the Fund Securities under such laws. An Authorized Participant or
an investor for which it is acting subject to a legal restriction with respect
to a particular stock included in the Fund Securities applicable to the
redemption of a Creation Unit Aggregation may be paid an equivalent amount of
cash. The Authorized Participant may request the redeeming Beneficial Owner of
the shares to complete an order form or to enter into agreements with respect
to such matters as compensating cash payment.
Because the Portfolio Securities of the Fund may trade on the relevant
exchange(s) on days that the Listing Exchange for the Foreign Fund is closed or
are otherwise not Business Days for such Fund, stockholders may not be able to
redeem their shares of the Funds, or to purchase and sell shares of the Funds
on the Listing Exchange
for the Funds, on days when the NAV of the Funds could be significantly
affected by events in the relevant foreign markets.
Taxes
Regulated Investment Company Qualifications. Each Fund intends to qualify for
and to elect treatment as a separate RIC under Subchapter M of the IRC. To
qualify for treatment as a RIC, each Fund must annually distribute at least 90%
of its net investment company taxable income (which includes dividends,
interest and net short-term capital gains) and meet several other requirements.
Among such other requirements are the following: (i) at least 90% of each
Fund's annual gross income must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including gains
from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies, and net income
derived from an interest in a qualified publicly traded partnership; and
(ii) at the close of each quarter of the company's taxable year, (a) at least
50% of the market value of each Fund's total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs and other
securities, with such other securities limited for purposes of this calculation
in respect of any one issuer to an amount not greater than 5% of the value of
each Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of each
Fund's total assets may be invested in the securities of any one issuer, or of
two or more issuers of which 20% or more of the voting securities are held by
the Fund, and that are engaged in the same or similar trades or businesses or
related trades or businesses (other than U.S. Government securities or the
securities of other RICs) or the securities of one or more qualified publicly
traded partnerships. A Fund's investments in partnerships, including in
qualified publicly traded partnerships, may result in a Fund being subject to
state, local or foreign income, franchise or withholding tax liabilities.
Taxation of RICs. As a regulated investment company, a Fund will not be subject
to U.S. federal income tax on the portion of its taxable investment income and
capital gains that it distributes to its shareholders, provided that it
satisfies a minimum distribution requirement. To satisfy the minimum
distribution requirement, a Fund must distribute to its shareholders at least
the sum of (i) 90% of its "investment company taxable income" (i.e., income
other than its net realized long-term capital gain over its net realized
short-term capital loss), plus or minus certain adjustments, and (ii) 90% of
its net tax-exempt income for the taxable year. A Fund will be subject to
income tax at regular corporation rates on any taxable income or gains that it
does not distribute to its shareholders. Although each Fund intends to
distribute substantially all of its net investment income and its capital gains
for each taxable year, each Fund will be subject to federal income taxation to
the extent any such income or gains are not distributed. If a Fund fails to
qualify for any taxable year as a RIC, all of its taxable income will be
subject to tax at regular corporate income tax rates without any deduction for
distributions to shareholders, and such distributions generally will be taxable
to shareholders as ordinary dividends to the extent of each Fund's current and
accumulated earnings and profits. In such event, distributions to individuals
should be eligible to be treated as qualified dividend income and distributions
to corporate shareholders generally should be eligible for the
dividends-received deduction. Moreover, if a Fund fails to qualify as a RIC in
any year, it must pay out its earnings and profits accumulated in that year in
order to qualify again as a RIC. If a Fund fails to qualify as a RIC for a
period greater than two taxable years, the Fund may be required to recognize
any net built-in gains with respect to certain of its assets (i.e., the excess
of the aggregate gains, including items of income, over aggregate losses that
would have been realized with respect to such assets if the Fund had been
liquidated) if it qualifies as a RIC in a subsequent year.
Excise Tax. Each Fund will be subject to a 4% excise tax on certain
undistributed income if it does not distribute to its shareholders in each
calendar year at least 98% of its ordinary income for the calendar year plus
98% of its capital gain net income for the 12 months ended October 31 of such
year. Each Fund intends to declare and distribute dividends and distributions
in the amounts and at the times necessary to avoid the application of this 4%
excise tax.
Net Capital Loss Carryforwards. Net capital loss carryforwards may be applied
against any net realized capital gains in each succeeding year, or until their
respective expiration dates, whichever occurs first.
Federal Tax Treatment of Complex Securities. The Funds may invest in complex
securities. These investments may be subject to numerous special and complex
tax rules. These rules could affect whether gains and losses
recognized by a Fund are treated as ordinary income or capital gain, accelerate
the recognition of income to a Fund and/or defer a Fund's ability to recognize
losses. In turn, these rules may affect the amount, timing or character of the
income distributed to you by a Fund.
Each Fund is required, for federal income tax purposes, to mark-to-market and
recognize as income for each taxable year its net unrealized gains and losses
on certain futures and options contracts as of the end of the year as well as
those actually realized during the year. Gain or loss from futures and options
contracts on broad-based investments required to be marked-to-market will be
60% long-term and 40% short-term capital gain or loss. Application of this rule
may alter the timing and character of distributions to shareholders. A Fund may
be required to defer the recognition of losses on futures contracts, option
contracts and swaps to the extent of any unrecognized gains on offsetting
positions held by the Fund.
As a result of entering into swap contracts, a Fund may make or receive
periodic net payments. A Fund may also make or receive a payment when a swap is
terminated prior to maturity through an assignment of the swap or other closing
transaction. Periodic net payments will generally constitute ordinary income or
deductions, while termination of a swap will generally result in capital gain
or loss (which will be a long-term capital gain or loss if the Fund has been a
party to the swap for more than one year). The tax treatment of many types of
credit default swaps is uncertain.
It is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered qualifying income for purposes of the 90%
requirement for a Fund to qualify as a RIC.
Each Fund intends to distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on futures or options transactions.
Such distributions are combined with distributions of capital gains realized on
a Fund's other investments and shareholders are advised on the nature of the
distributions.
Foreign Investments. Dividends or other income (including, in some cases,
capital gains) received by the Funds from investments in foreign securities may
be subject to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes in some cases. Since more than 50% of each Fund's total
assets at the close of its taxable year will almost certainly consist of stock
or securities of foreign corporations, the Funds will elect for U.S. income tax
purposes to treat foreign income taxes paid by it as paid by their
shareholders. Shareholders of the Funds would be required to take into account
an amount equal to their pro rata portions of such foreign taxes in computing
their taxable income and then treat an amount equal to those foreign taxes as a
U.S. federal income tax deduction or as a foreign tax credit against their U.S.
federal income taxes. Shortly after any year for which it makes such an
election, each Fund will report to its shareholders the amount per share of
such foreign income tax that must be included in each shareholder's gross
income and the amount which will be available for the deduction or credit. No
deduction for foreign taxes may be claimed by a shareholder who does not
itemize deductions. Certain limitations will be imposed on the extent to which
the credit (but not the deduction) for foreign taxes may be claimed.
Under Section 988 of the IRC, gains or losses attributable to fluctuations in
exchange rates between the time each Fund accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time
the Fund actually collects such income or pays such liabilities are generally
treated as ordinary income or ordinary loss. Similarly, gains or losses on
foreign currency, foreign currency forward contracts, certain foreign currency
options or futures contracts and the disposition of debt securities denominated
in foreign currency, to the extent attributable to fluctuations in exchange
rates between the acquisition and disposition dates, are also treated as
ordinary income or loss unless the Fund were to elect otherwise.
If a Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies" ("PFICs"), it may be subject to U.S.
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on the Fund in respect of deferred taxes arising from
such distributions or gains.
If a Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing requirements, the Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to the Fund, and such amounts
would be subject to the 90% and excise tax distribution requirements described
above. In order to make this election, the Fund would be required to obtain
certain annual information from the PFICs in which it invests, which may be
difficult or impossible to obtain.
Alternatively, the Fund may make a mark-to-market election that will result in
the Fund being treated as if it had sold and repurchased its PFIC stock at the
end of each year. In such case, the Fund would report any such gains as
ordinary income and would deduct any such losses as ordinary losses to the
extent of previously recognized gains. The election must be made separately for
each PFIC owned by the Fund and, once made, would be effective for all
subsequent taxable years, unless revoked with the consent of the Internal
Revenue Service (the "IRS"). By making the election, the Fund could potentially
ameliorate the adverse tax consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required to recognize income in
excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC stock. The Fund may have to distribute this "phantom"
income and gain to satisfy the 90% distribution requirement and to avoid
imposition of the 4% excise tax.
Each Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.
Taxation of U.S. Shareholders. Dividends and other distributions by a Fund are
generally treated under the IRC as received by the shareholders at the time the
dividend or distribution is made. However, any dividend or distribution
declared by a Fund in October, November or December of any calendar year and
payable to shareholders of record on a specified date in such a month shall be
deemed to have been received by each shareholder on December 31 of such
calendar year and to have been paid by the Fund not later than such
December 31, provided such dividend is actually paid by the Fund during January
of the following calendar year.
Each Fund intends to distribute annually to its shareholders substantially all
of its investment company taxable income, and any net realized long-term
capital gains in excess of net realized short-term capital losses (including
any capital loss carryovers). However, if a Fund retains for investment an
amount equal to all or a portion of its net long-term capital gains in excess
of its net short-term capital losses (including any capital loss carryovers),
it will be subject to a corporate tax (currently at a maximum rate of 35%) on
the amount retained. In that event, the Fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who
(a) will be required to include in income for U.S. federal income tax purposes,
as long-term capital gains, their proportionate shares of the undistributed
amount, (b) will be entitled to credit their proportionate shares of the 35%
tax paid by the Fund on the undistributed amount against their U.S. federal
income tax liabilities, if any, and to claim refunds to the extent their
credits exceed their liabilities, if any, and (c) will be entitled to increase
their tax basis, for U.S. federal income tax purposes, in their shares by an
amount equal to 65% of the amount of undistributed capital gains included in
the shareholder's income. Organizations or persons not subject to U.S. federal
income tax on such capital gains will be entitled to a refund of their pro rata
share of such taxes paid by the Fund upon filing appropriate returns or claims
for refund with the IRS.
Distributions of net realized long-term capital gains, if any, that a Fund
designates as capital gains dividends are taxable as long-term capital gains,
whether paid in cash or in shares and regardless of how long a shareholder has
held shares of the Fund. All other dividends of a Fund (including dividends
from short-term capital gains) from its current and accumulated earnings and
profits ("regular dividends") are generally subject to tax as ordinary income,
subject to the discussion of qualified dividend income below .
If an individual receives a regular dividend qualifying for the long-term
capital gains rates and such dividend constitutes an "extraordinary dividend,"
and the individual subsequently recognizes a loss on the sale or exchange of
stock in respect of which the extraordinary dividend was paid, then the loss
will be long-term capital loss to the extent of such extraordinary dividend. An
"extraordinary dividend" on common stock for this purpose is generally a
dividend (i) in an amount greater than or equal to 10% of the taxpayer's tax
basis (or trading value) in a share of stock, aggregating dividends with
ex-dividend dates within an 85-day period; or (ii) in an amount greater than
20% of the taxpayer's tax basis (or trading value) in a share of stock,
aggregating dividends with ex-dividend dates within a 365-day period.
Distributions in excess of a Fund's current and accumulated earnings and
profits will, as to each shareholder, be treated as a tax-free return of
capital to the extent of a shareholder's basis in his shares of the Fund, and
as a
capital gain thereafter (if the shareholder holds his shares of the Fund as
capital assets). Shareholders receiving dividends or distributions in the form
of additional shares should be treated for U.S. federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or capital gain
distribution should be aware that, although the price of shares just purchased
at that time may reflect the amount of the forthcoming distribution, such
dividend or distribution may nevertheless be taxable to them. If a Fund is the
holder of record of any stock on the record date for any dividends payable with
respect to such stock, such dividends will be included in the Fund's gross
income not as of the date received but as of the later of (a) the date such
stock became ex-dividend with respect to such dividends (i.e., the date on
which a buyer of the stock would not be entitled to receive the declared, but
unpaid, dividends); or (b) the date a Fund acquired such stock. Accordingly, in
order to satisfy its income distribution requirements, a Fund may be required
to pay dividends based on anticipated earnings, and shareholders may receive
dividends in an earlier year than would otherwise be the case.
Back-Up Withholding. In certain cases, a Fund will be required to withhold at
the applicable withholding rate (currently 28%), and remit to the U.S. Treasury
such amounts withheld from any distributions paid to a shareholder who: (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
back-up withholding by the IRS; (3) has failed to certify to a Fund that such
shareholder is not subject to back-up withholding; or (4) has not certified
that such shareholder is a U.S. person (including a U.S. resident alien).
Sections 351 and 362. The Trust, on behalf of each Fund, has the right to
reject an order for a purchase of shares of the Fund if the purchaser (or group
of purchasers) would, upon obtaining the shares so ordered, own 80% or more of
the outstanding shares of a given Fund and if, pursuant to Sections 351 and 362
of the IRC, that Fund would have a basis in the securities different from the
market value of such securities on the date of deposit. If a Fund's basis in
such securities on the date of deposit was less than market value on such date,
the Fund, upon disposition of the securities, would recognize more taxable gain
or less taxable loss than if its basis in the securities had been equal to
market value. It is not anticipated that the Trust will exercise the right of
rejection except in a case where the Trust determines that accepting the order
could result in material adverse tax consequences to a Fund or its
shareholders. The Trust also has the right to require information necessary to
determine beneficial share ownership for purposes of the 80% determination.
Qualified Dividend Income. Distributions by each Fund of investment company
taxable income (including any short-term capital gains) whether received in
cash or shares will be taxable either as ordinary income or as qualified
dividend income, eligible for the reduced maximum rate to individuals of 15%
(5% for individuals in lower tax brackets) to the extent each Fund receives
qualified dividend income on the securities it holds and the Fund designates
the distribution as qualified dividend income. Qualified dividend income is, in
general, dividend income from taxable domestic corporations and certain foreign
corporations (e.g., foreign corporations incorporated in a possession of the
United States or in certain countries with a comprehensive tax treaty with the
United States, or the stock of which is readily tradable on an established
securities market in the United States). A dividend will not be treated as
qualified dividend income to the extent that (i) the shareholder has not held
the shares on which the dividend was paid for more than 60 days during the
121-day period that begins on the date that is 60 days before the date on which
the shares become ex dividend with respect to such dividend (and the Fund also
satisfies those holding period requirements with respect to the securities it
holds that paid the dividends distributed to the shareholder), (ii) the
shareholder (or the Fund) is under an obligation (whether pursuant to a short
sale or otherwise) to make related payments with respect to substantially
similar or related property, or (iii) the shareholder elects to treat such
dividend as investment income under Section 163(d)(4)(B) of the IRC. Dividends
received by a Fund from a REIT or RIC may be treated as qualified dividend
income only to the extent the dividends are attributable to qualified dividend
income received by the REIT. Such amounts are not expected to be material.
After further legislation, the maximum 15% rate on qualified dividend income
will not apply to dividends received in taxable years beginning after
December 31, 2010.
Corporate Dividends Received Deduction. A Fund's dividends that are paid to its
corporate shareholders and are attributable to qualifying dividends it received
from U.S. domestic corporations may be eligible, in the hands of such
shareholders, for the corporate dividends received deduction, subject to
certain holding period requirements and debt financing limitations.
Sales of Shares. Upon the sale or exchange of his shares, a shareholder will
realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. A redemption of shares by a Fund will be
treated as a sale for this purpose. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains
distributions in a Fund, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of the shares. In such a case, the basis
of the shares acquired will be increased to reflect the disallowed loss. Any
loss realized by a shareholder on the sale of a Fund share held by the
shareholder for six months or less will be treated for U.S. federal income tax
purposes as a long-term capital loss to the extent of any distributions or
deemed distributions of long-term capital gains received by the shareholder
with respect to such share. If a shareholder incurs a sales charge in acquiring
shares of a Fund, disposes of those shares within 90 days and then acquires
shares in a mutual fund for which the otherwise applicable sales charge is
reduced by reason of a reinvestment right (e.g., an exchange privilege), the
original sales charge will not be taken into account in computing gain/loss on
the original shares to the extent the subsequent sales charge is reduced.
Instead, the disregarded portion of the original sales charge will be added to
the tax basis of the newly acquired shares. Furthermore, the same rule also
applies to a disposition of the newly acquired shares made within 90 days of
the second acquisition. This provision prevents a shareholder from immediately
deducting the sales charge by shifting his or her investment within a family of
mutual funds.
Other Taxes. Dividends, distributions and redemption proceeds may also be
subject to additional state, local and foreign taxes depending on each
shareholder's particular situation.
Taxation of Non-U.S. Shareholders. Dividends paid by a Fund to non-U.S.
shareholders are generally subject to withholding tax at a 30% rate or a
reduced rate specified by an applicable income tax treaty to the extent derived
from investment income and short-term capital gains. In order to obtain a
reduced rate of withholding, a non-U.S. shareholder will be required to provide
an IRS Form W-8BEN certifying its entitlement to benefits under a treaty. The
withholding tax does not apply to regular dividends paid to a non-U.S.
shareholder who provides a Form W-8ECI, certifying that the dividends are
effectively connected with the non-U.S. shareholder's conduct of a trade or
business within the United States. Instead, the effectively connected dividends
will be subject to regular U.S. income tax as if the non-U.S. shareholder were
a U.S. shareholder. A non-U.S. corporation receiving effectively connected
dividends may also be subject to additional "branch profits tax" imposed at a
rate of 30% (or lower treaty rate). A non-U.S. shareholder who fails to provide
an IRS Form W-8BEN or other applicable form may be subject to backup
withholding at the appropriate rate.
In general, United States federal withholding tax will not apply to any gain or
income realized by a non-U.S. shareholder in respect of any distributions of
net long-term capital gains over net short-term capital losses, exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.
For taxable years beginning before January 1, 2008, properly-designated
dividends are generally exempt from United States federal withholding tax where
they (i) are paid in respect of a Fund's "qualified net interest income"
(generally, a Fund's U.S. source interest income, other than certain contingent
interest and interest from obligations of a corporation or partnership in which
the Fund is at least a 10% shareholder, reduced by expenses that are allocable
to such income) or (ii) are paid in respect of a Fund's "qualified short-term
capital gains" (generally, the excess of a Fund's net short-term capital gain
over the Fund's long-term capital loss for such taxable year). However,
depending on its circumstances, a Fund may designate all, some or none of its
potentially eligible dividends as such qualified net interest income or as
qualified short-term capital gains, and/or treat such dividends, in whole or in
part, as ineligible for this exemption from withholding. In order to qualify
for this exemption from withholding, a non-U.S. shareholder will need to comply
with applicable certification requirements relating to its non-U.S. status
(including, in general, furnishing an IRS Form W-8BEN or substitute Form). In
the case of shares held through an intermediary, the intermediary may withhold
even if a Fund designates the payment as qualified net interest income or
qualified short-term capital gain. Non-U.S. shareholders should contact their
intermediaries with respect to the application of these rules to their accounts.
A distribution from a Fund to foreign shareholders who have held more than 5%
of the Fund at any time during the one-year period ending on the date of
distribution is treated as real property gain subject to 35% withholding tax
and treated as income effectively connected to a U.S. trade or business with
certain tax filing requirements applicable, if such distribution is
attributable to a distribution of real property gain received by the Fund from
a REIT and if 50% or more of the value of the Fund's assets are invested in
REITs and other U.S. real property holding corporations. A distribution paid
prior to 2008 attributable to a Fund's sale of a REIT or other U.S. real
property holding company will also be treated as real property gain if 50% or
more of the value of the Fund's
assets are invested in REITs and other U.S. real property holding corporations
and if the foreign shareholder has held more than 5% of a class of stock at any
time during the one-year period ending on the date of the distribution.
Reporting. If a shareholder recognizes a loss with respect to a Fund's shares
of $2 million or more for an individual shareholder or $10 million or more for
a corporate shareholder, the shareholder must file with the IRS a disclosure
statement on Form 8886. Direct shareholders of portfolio securities are in many
cases exempted from this reporting requirement, but under current guidance,
shareholders of a regulated investment company are not exempted. The fact that
a loss is reportable under these regulations does not affect the legal
determination of whether the taxpayer's treatment of the loss is proper.
Shareholders should consult their tax advisors to determine the applicability
of these regulations in light of their individual circumstances.
The foregoing discussion is a summary only and is not intended as a substitute
for careful tax planning. Purchasers of shares should consult their own tax
advisers as to the tax consequences of investing in such shares, including
under state, local and foreign tax laws. Finally, the foregoing discussion is
based on applicable provisions of the IRC, regulations, judicial authority and
administrative interpretations in effect on the date of this SAI. Changes in
applicable authority could materially affect, possibly retroactively, the
conclusions discussed above, and such changes often occur.
Financial Statements
Financial statements for the Funds are not available because, as of the date of
this SAI, each Fund has no financial information to report.
Miscellaneous Information
Counsel. Willkie Farr & Gallagher LLP, located at 787 Seventh Avenue, New York,
NY 10019, is counsel to the Trust.
Independent Registered Public Accounting Firm. __________, located at
__________, serves as the Trust's independent registered public accounting
firm, audits the Funds' financial statements, and may perform other services.
Shareholder Communication to the Board. Shareholders may make inquiries by
writing to the Trust, c/o the Distributor, SEI Investments Distribution Co., at
One Freedom Valley Drive, Oaks, PA 19456. The Board has established a process
for shareholders to communicate with the Boards. Shareholders may contact the
Board by mail. Correspondence should be addressed to: iShares Board of
Trustees, c/o Barclays Global Investors, N.A. - Mutual Fund Administration, 45
Fremont Street, San Francisco, CA 94105. Shareholder communications to the
Board should include the following information: (a) the name and address of the
shareholder; (b) the number of shares owned by the shareholder; (c) the Fund(s)
of which the shareholder owns shares; and (d) if these shares are owned
indirectly through a broker, financial intermediary or other record owner, the
name of the broker, financial intermediary or other record owner. All
correspondence received as set forth above shall be reviewed by the Secretary
of the Trust and reported to the Board.
iShares Trust
File Nos. 333-92935 and 811-09729
Part C
Other Information
Item 23. Exhibits: PEA # 96
Exhibit
Number Description
------- -----------
(a) Agreement and Declaration of Trust, dated September 13, 2006, is
incorporated herein by reference to Post-Effective Amendment No. 53,
filed September 19, 2006 ("PEA No. 53").
(a.1) Restated Certificate of Trust, dated September 13, 2006 is
incorporated herein by reference to PEA No. 53.
(b) Amended and Restated By-Laws, dated December 8, 2006 are incorporated
herein by reference to Post-Effective Amendment No. 74, filed March
23, 2007 ("PEA No. 74").
(c) Not applicable.
(d.1) Investment Advisory Agreement between the Trust and Barclays Global
Fund Advisors ("BGFA") is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000 ("PEA No. 2").
(d.2) Schedule A to the Investment Advisory Agreement between the Trust and
BGFA to be filed by amendment.
(e.1) Distribution Agreement between the Trust and SEI Investments
Distribution Company ("SEI") is incorporated herein by reference to
PEA No. 2.
(e.2) Exhibit A to the Distribution Agreement between the Trust and SEI to
be filed by amendment.
(f) Not applicable.
(g.1) Custodian Agreement between the Trust and Investors Bank & Trust
Company ("IBT")/1/ is incorporated herein by reference to PEA No. 2.
(g.2) Amendment, dated December 31, 2002, to the Custodian Agreement is
incorporated herein by reference to Post-Effective Amendment No. 45,
filed June 28, 2006 ("PEA No. 45").
(g.3) Amendment, dated May 21, 2002, to the Custodian Agreement is
incorporated herein by reference to PEA No. 45.
(g.4) Amendment, dated January 1, 2006, to the Custodian Agreement is
incorporated herein by reference to PEA No. 45.
(g.5) Appendix A to the Custodian Agreement between the Trust and IBT/1/ is
incorporated herein by reference to Post-Effective Amendment No. 82,
filed June 11, 2007 ("PEA No. 82").
(h.1) Securities Lending Agency Agreement, dated April 2, 2007, between the
Trust and iShares, Inc. and Barclays Global Investors (" BGI") is
incorporated herein by reference to Post-Effective Amendment No. 78,
filed April 23, 2007 ("PEA No. 78").
(h.2) Appendix A to Securities Lending Agency Agreement between BGI and the
Trust to be filed by amendment.
(h.3) Delegation Agreement between the Trust and IBT/1/ is incorporated
herein by reference to Exhibit (g.3) to PEA No. 2.
(h.4) Administration Agreement between the Trust and IBT/1/ is incorporated
herein by reference to Exhibit (h.1) to PEA No. 2.
(h.5) Appendix A to the Administration Agreement between the Trust and
IBT/1/ is incorporated herein by reference to PEA No. 82.
Exhibit
Number Description
------- -----------
(h.6) Amendment, dated May 21, 2002, to the Administration Agreement is
incorporated herein by reference to PEA No. 45.
(h.7) Amendment, dated January 1, 2006, to the Administration Agreement is
incorporated herein by reference to PEA No. 45.
(h.8) Amendment, dated January 1, 2007, to the Administration Agreement is
incorporated herein by reference to Post-Effective Amendment No. 75,
filed March 26, 2007.
(h.9) Transfer Agency and Service Agreement between the Trust and IBT/1/ is
incorporated herein by reference to Exhibit (h.2) to PEA No. 2.
(h.10) Appendix A to the Transfer Agency and Service Agreement between the
Trust and IBT/1/ to be filed by amendment.
(h.11) Amendment, dated May 21, 2002, to the Transfer Agency Agreement is
incorporated herein by reference to PEA No. 45.
(h.12) Amendment, dated August 18, 2004, to the Transfer Agency Agreement is
incorporated herein by reference to PEA No. 45.
(h.13) Amendment, dated January 1, 2006, to the Transfer Agency Agreement is
incorporated herein by reference to PEA No. 45.
(h.14) Sublicense Agreement, dated April 25, 2000, between BGI and the Trust
for iShares S&P Funds is incorporated herein by reference to Exhibit
(h.3.i) to PEA No. 2.
(h.15) Amendment dated July 30, 2007, to Sublicense Agreement between BGI
and the Trust for the iShares S&P Funds filed herein.
(h.16) Sublicense Agreement, dated April 25, 2000, between BGI and the Trust
for iShares Dow Jones Funds is incorporated herein by reference to
Exhibit (h.7) to PEA No. 37.
(h.17) Exhibit A to the Sublicense Agreement, dated April 1, 2006, between
BGI and the Trust for iShares Dow Jones Funds is incorporated herein
by reference to Exhibit (h.8) to Post-Effective Amendment No. 43,
filed April 17, 2006 ("PEA No. 43").
(h.18) Sublicense Agreement between BGI and the Trust for iShares Dow Jones
Funds to be filed by amendment.
(h.19) Sublicense Agreement, dated April 25, 2000, between BGI and the Trust
for iShares Russell Funds is incorporated herein by reference to
Exhibit (h.8) to PEA No. 37.
(h.20) Exhibit A to the Sublicense Agreement between BGI and the Trust for
iShares Russell Funds to be filed by amendment.
(h.21) Sublicense Agreement between BGI and the Trust for iShares MSCI EAFE
Index Fund is incorporated herein by reference to Exhibit (h.9) to
Post-Effective Amendment No. 10, filed June 1, 2001.
(h.22) Sublicense Agreement between BGI and the Trust for iShares Nasdaq
Biotechnology Index Fund is incorporated herein by reference to
Exhibit (h.10) to Post-Effective Amendment No. 13, filed July 31,
2001.
(h.23) Sublicense Agreement between BGI and the Trust for iShares S&P
GSSI/GSTI Funds to be filed by amendment.
Exhibit
Number Description
------- -----------
(h.24) Sublicense Agreement between BGI and the Trust for iShares Lehman
Brothers 1-3 year Treasury Index Fund, iShares Lehman Brothers 7-10
year Treasury Index Fund, iShares Lehman Brothers 20+ year Treasury
Index Fund, iShares Lehman Brothers Treasury Index Fund, iShares
Lehman Brothers Government/Credit Index Fund and iShares U.S. Credit
Index Fund is incorporated herein by reference to Exhibit (h.12) to
PEA No. 16.
(h.25) Sublicense Agreement between BGI and the Trust for iShares iBoxx $
High Yield Corporate Bond Index Fund and iShares iBoxx $ Investment
Grade Corporate Bond Fund to be filed by amendment.
(h.26) Sublicense Agreement between BGI and the Trust for iShares Cohen &
Steers Realty Majors Index Fund is incorporated herein by reference
to Exhibit (h.15) to PEA No. 37.
(h.27) Sublicense Agreement between BGI and the Trust for iShares Dow Jones
Transportation Average Index Fund and iShares Dow Jones Select
Dividend Index Fund is incorporated herein by reference to Exhibit
(h.17) to PEA No. 37.
(h.28) Sublicense Agreement between BGI and the Trust for iShares NYSE 100
Index Fund and iShares NYSE Composite Index Fund is incorporated
herein by reference to Exhibit (h.19) to PEA No. 37.
(h.29) Sublicense Agreement between BGI and the Trust for iShares
FTSE/Xinhua China 25 Index Fund is incorporated herein by reference
to Exhibit (h.20) to PEA No. 37.
(h.30) Sublicense Agreement between BGI and the Trust for iShares
Morningstar Funds is incorporated herein by reference to Exhibit
(h.21) to PEA No. 37.
(h.31) Sublicense Agreement between BGI and the Trust for iShares KLD Select
Social Index Fund is incorporated herein by reference to Exhibit
(h.22) to PEA No. 37.
(h.32) Exhibit A to the Sublicense Agreement between BGI and the Trust for
iShares KLD 400 Social Index Fund to be filed by amendment.
(h.33) Exhibit A to the Sublicense Agreement between BGI and the Trust for
iShares Lehman Brothers Funds is incorporated herein by reference to
Exhibit (h.32) to Post-Effective Amendment No. 67, filed January 5,
2007.
(h.34) Exhibit A to the Sublicense Agreement between BGI and the Trust for
iShares MSCI EAFE Funds is incorporated herein by reference to
Exhibit (h.22) to Post-Effective Amendment No. 40, filed August 24,
2005.
(h.35) Amendment to the Sublicense Agreement between BGI and the Trust for
iShares Dow Jones EPAC Select Dividend Index Fund is incorporated
herein by reference to Exhibit (h.38) to Post-Effective Amendment No.
93, filed July 30, 2007.
(h.36) Sublicense Agreement between BGI and the Trust for FTSE/NAREIT Funds
to be filed by amendment.
(h.37) Sublicense Agreement between BGI and the Trust for iShares S&P
National Municipal Bond Fund, iShares S&P California Municipal Bond
Fund and iShares New York S&P Municipal Bond Fund to be filed
by amendment.
(h.38) Sublicense Agreement between BGI and the Trust for iShares MSCI EAFE
Small Cap Index Fund to be filed by amendment.
(h.39) Exhibit A to the Sublicense Agreement between BGI and the Trust for
iShares S&P Global Infrastructure Index Fund and iShares S&P Global
Listed Private Equity Index Fund to be filed by amendment.
(i) Legal Opinion and Consent of Richards, Layton & Finger P.A. is filed
herein.
(j) Consent of PricewaterhouseCoopers, LLP to be filed by amendment.
(k) Not applicable.
(l.1) Subscription Agreement between the Trust and SEI is incorporated
herein by reference to PEA No. 2.
(l.2) Letter of Representations between the Trust and Depository Trust
Company is incorporated herein by reference to PEA No. 2.
Exhibit
Number Description
------ -----------
(l.3) Amendment of Letter of Representations between the Trust and
Depository Trust Company for iShares S&P Global 100 Index Fund and
iShares Cohen & Steers Realty Majors Index Fund is incorporated
herein by reference to Post-Effective Amendment No. 11, filed July 2,
2001.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p.1) iShares Trust Code of Ethics is incorporated herein by reference to
Post-Effective Amendment No. 41, filed November 23, 2005.
(p.2) BGI Code of Ethics is incorporated herein by reference to PEA No. 39.
(p.3) Code of Ethics for SEI is incorporated herein by reference to PEA No.
45.
(q.1) Power of Attorney, dated April 19, 2007, for Robert H. Silver is
incorporated herein by reference to Post-Effective Amendment No. 79,
filed April 27, 2007.
(q.2) Powers of Attorney, dated February 22, 2006, for Cecilia H. Herbert,
John E. Kerrigan, John E. Martinez and George G.C. Parker are
incorporated herein by reference to PEA No. 43.
(q.3) Power of Attorney, dated February 25, 2006, for Charles A. Hurty is
incorporated herein by reference to PEA No. 43.
(q.4) Power of Attorney, dated August 25, 2006, for Lee T. Kranefuss is
incorporated herein by reference to PEA No. 53.
Item 24. Persons Controlled By or Under Common Control with Registrant:
Percentage of
Ownership
-------------
iShares Dow Jones EPAC Select Dividend Index Fund
Goldman Sachs Execution & Clearing, L.P.......................... 61.67%
iShares Dow Jones U.S. Aerospace & Defense Index Fund
Merrill Lynch Safekeeping........................................ 27.37%
iShares FTSE NAREIT Industrial/Office Index Fund
Fortis Clearing Americas LLC..................................... 92.41%
iShares FTSE NAREIT Mortgage REITs Index Fund
Goldman Sachs Execution & Clearing, L.P.......................... 66.71%
iShares FTSE NAREIT Real Estate 50 Index Fund
Credit Suisse Securities (USA) LLC............................... 35.94%
Goldman, Sachs & Co.............................................. 44.36%
iShares FTSE NAREIT Residential Index Fund
Timber Hill LLC.................................................. 98.55%
iShares FTSE NAREIT Retail Index Fund
Fortis Clearing Americas LLC..................................... 91.01%
iShares iBoxx $ High Yield Corporate Bond Fund
First Clearing, LLC.............................................. 33.65%
iShares Lehman 1-3 Year Treasury Bond Fund
Deutsche Bank Securities Inc./Cedear............................. 29.60%
iShares Lehman 3-7 Year Treasury Bond Fund
Northern Trust Company, The...................................... 30.01%
iShares Lehman Credit Bond Fund
Merrill Lynch Safekeeping........................................ 50.72%
iShares Lehman Government/Credit Bond Index Fund
Citigroup Global Markets Inc..................................... 81.85%
iShares Lehman Intermediate Credit Bond Fund
Citigroup Global Markets Inc..................................... 25.42%
iShares Lehman MBS Fixed-Rate Bond Fund
Merrill Lynch, Pierce, Fenner & Smith Incorporated............... 26.98%
iShares Morningstar Mid Growth Index Fund
First Clearing, LLC.............................................. 44.31%
iShares NYSE 100 Index Fund
First Clearing, LLC.............................................. 80.27%
iShares Russell 1000 Index Fund
Charles Schwab & Co., Inc........................................ 27.18%
iShares Russell 2000 Index Fund
Barclays Global Investors, N.A................................... 58.18%
iShares S&P Global Consumer Discretionary Sector Index Fund
Goldman Sachs Execution & Clearing, L.P.......................... 62.94%
iShares S&P Preferred Stock Index Fund
Charles Schwab & Co., Inc........................................ 28.73%
Item 25. Indemnification:
The Trust (also referred to in this section as the "Fund") is organized as a
Delaware statutory trust and is operated pursuant to an Agreement and
Declaration of Trust, (the "Declaration of Trust"), that permits the Trust to
indemnify its trustees and officers under certain circumstances. Such
indemnification, however, is subject to the limitations imposed by the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940 (the "1940 Act"). The Declaration of Trust provides that officers
and trustees of the Trust shall be indemnified by the Trust against liabilities
and expenses incurred or paid in connection with any claim, action, suit, or
proceedings against them by reason of the fact that they each serve as an
officer or trustee of the Trust or as an officer or trustee of another entity
at the request of the entity. This indemnification is subject to the following
conditions:
(a) no trustee or officer of the Trust is indemnified against any liability to
the Trust or its security holders that was the result of any willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office; and
(b) officers and trustees of the Trust are indemnified only for actions taken
in good faith that the officers and trustees believed were in or not opposed to
the best interests of the Trust.
The Declaration of Trust provides that if indemnification is not ordered by a
court, indemnification may be authorized upon determination by shareholders, or
by a majority vote of a quorum of the trustees who were not parties to the
proceedings or, if this quorum is not obtainable, if directed by a quorum of
disinterested trustees, or by independent legal counsel in a written opinion,
that the persons to be indemnified have met the applicable standard.
The Administration Agreement provides that IBT/1/ shall indemnify and hold the
Fund, its Board of Trustees, officers and employees and its agents harmless
from and against any and all Claims to the extent any such Claim arises out of
the negligent acts or omissions, bad faith, willful misconduct or material
breach of the Administration Agreement by IBT/1/, its officers, directors or
employees or any of its agents or subcustodians in connection with the
activities undertaken pursuant to the Administration Agreement, provided that
IBT's/1/ indemnification obligation with respect to the acts or omissions of
its subcustodians shall not exceed the indemnification provided by the
applicable subcustodian to IBT/1/.
The Custodian Agreement provides that IBT/1/ shall indemnify and hold the Fund,
its Board of Trustees, officers and employees and its agents harmless from and
against any and all Claims to the extent any such Claim arises out of the
negligent acts or omissions, bad faith, willful misconduct or material breach
of the Custodian Agreement by IBT/1/, its officers, directors or employees or
any of its agents or subcustodians in connection with the activities undertaken
pursuant to the Custodian Agreement, provided that IBT's/1/ indemnification
obligation with respect to the acts or omissions of its subcustodians shall not
exceed the indemnification provided by the applicable subcustodian to IBT/1/.
The Distribution Agreement provides that SEI agrees to indemnify, defend and
hold the Fund, its several officers and Board members, and any person who
controls the Fund within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Fund, its officers or Board members, or any such controlling person, may incur
under the 1933 Act, the 1940 Act, or under common law or otherwise, but only to
the extent that such liability or expense incurred by the Fund, its officers or
Board members, or such controlling person resulting from such claims or
demands, (a) shall arise out of or be based upon any information, statements or
representations made or provided SEI in any sales literature or advertisements,
or any Disqualifying Conduct by SEI in connection with the offering and sale of
any Shares, (b) shall arise out of or be based upon any untrue, or alleged
untrue, statement of a material fact contained in information furnished in
writing by SEI to the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the registration
statement or in the corresponding statements made in the prospectus or
statement of additional information, or shall arise out of or be based upon any
omission, or alleged omission, to state a material fact in connection with such
information furnished in writing by SEI to the Fund and required to be stated
in such answers or necessary to make such information not misleading,
(c) arising out of SEI's breach of any obligation, representation or warranty
pursuant to this Agreement, or (d) SEI's failure to comply in any material
respect with applicable securities laws.
The Authorized Participant Agreement provides that the Participant agrees to
indemnify and hold harmless the Fund and its respective subsidiaries,
affiliates, directors, officers, employees and agents, and each person, if any,
who controls such persons within the meaning of Section 15 of the 1933 Act
(each an "Indemnified Party") from and against any loss, liability, cost and
expense (including attorneys' fees) incurred by such Indemnified Party as a
result of (i) any breach by the Participant of any provision of the Authorized
Participant Agreement that relates to the Participant; (ii) any failure on the
part
of the Participant to perform any of its obligations set forth in the
Authorized Participant Agreement; (iii) any failure by the Participant to
comply with applicable laws, including rules and regulations of self-regulatory
organizations; or (iv) actions of such Indemnified Party in reliance upon any
instructions issued in accordance with Annex II, III or IV (as each may be
amended from time to time) of the Authorized Participant Agreement reasonably
believed by the distributor and/or the transfer agent to be genuine and to have
been given by the Participant.
The Securities Lending Agency Agreement provides that BGI shall indemnify and
hold harmless each client, Lender, its Board of Trustees and its agents and
BGFA from any and all loss, liability, costs, damages, actions, and claims
("Loss") to the extent that any such Loss arises out of the material breach of
this Agreement by or negligent acts or omissions or willful misconduct of BGI,
its officers, directors or employees or any of its agents or subcustodians in
connection with the securities lending activities undertaken pursuant to this
Agreement, provided that BGI's indemnification obligation with respect to the
acts or omissions of its subcustodians shall not exceed the indemnification
provided by the applicable subcustodian to BGI.
Insofar as indemnification for liabilities arising under the 1940 Act may be
permitted to directors, officers and controlling persons of the Trust pursuant
to foregoing provisions, or otherwise, the Trust has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1940 Act and is, therefore,
unenforceable. In the event that a claim for Fund expenses incurred or paid by
a director, officer or controlling person of the Fund in the successful defense
of any action, suit or proceeding is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Trust will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of
such issue.
Item 26. (a) Business and Other Connections of the Investment Adviser:
The Trust is advised by BGFA, a wholly-owned subsidiary of BGI, 45 Fremont
Street, San Francisco, CA 94105. BGFA's business is that of a registered
investment adviser to certain open-end, management investment companies and
various other institutional investors.
The directors and officers of BGFA consist primarily of persons who during the
past two years have been active in the investment management business. Each of
the directors and executive officers of BGFA will also have substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
Name and Position Principal Business(es) During the Last Two Fiscal Years
----------------- -------------------------------------------------------
Blake Grossman Director and Chairman of the Board of Directors of
Chairman BGFA and Chief Executive Officer and Director of BGI,
45 Fremont Street, San Francisco, CA 94105
Frank Ryan Chief Financial Officer of BGFA and Chief Financial
Officer Officer and Cashier of BGI, 45 Fremont Street, San
Francisco, CA 94105
Rohit Bhagat Director and Chief Operating Officer of BGFA and BGI,
Director 45 Fremont Street, San Francisco, CA 94105
Item 27. Principal Underwriters:
(i) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.
Registrant's distributor, SEI Investments Distribution Co. ("SEI") acts as
distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Advisors' Inner Circle Fund II January 28, 1993
Bishop Street Funds January 27, 1995
SEI Asset Allocation Trust April 1, 1996
SEI Institutional Investments Trust June 14, 1996
HighMark Funds February 15, 1997
Oak Associates Funds February 27, 1998
CNI Charter Funds April 1, 1999
iShares Inc. January 28, 2000
JohnsonFamily Funds, Inc. November 1, 2000
Causeway Capital Management Trust September 20, 2001
The Japan Fund, Inc. October 7, 2002
Barclays Global Investors Funds March 31, 2003
The Arbitrage Funds May 17, 2005
The Turner Funds January 1, 2006
ProShares Trust November 14, 2005
Community Reinvestment Act Qualified Investment Fund January 8, 2007
SEI provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include portfolio
evaluation, performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of securities
transactions ("MarketLink").
(b) Furnish the information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 20 of Part B. Unless otherwise noted, the business address of
each director or officer is One Freedom Valley Drive, Oaks, PA 19456.
Positions and Offices
Name Position and Office with Underwriter with Registrant
---- ------------------------------------ ---------------------
William M. Doran Director --
Edward D. Loughlin Director --
Wayne M. Withrow Director --
Kevin Barr President & Chief Executive Officer --
Maxine Chou Chief Financial Officer & Treasurer --
Thomas Rodman Chief Operations Officer --
John Munch General Counsel & Secretary --
Karen LaTourette Chief Compliance Officer, Anti-Money
Laundering Officer & Assistant Secretary --
Mark J. Held Senior Vice President --
Lori L. White Vice President & Assistant Secretary --
Robert Silvestri Vice President --
John Coary Vice President & Assistant Secretary --
Michael Farrell Vice President --
Mark McManus Vice President --
(c) Not applicable.
Item 28. Location of Accounts and Records:
(a) The Trust maintains accounts, books and other documents required by
Section 31(a) of the 1940 Act and the rules thereunder (collectively, the
"Records") at the offices of State Street Bank and Trust Company ("State
Street"), 200 Clarendon Street, Boston, MA 02116.
(b) BGFA maintains all Records relating to its services as investment adviser
at 45 Fremont Street, San Francisco, CA, 94105.
(c) SEI Investments Distribution Company maintains all Records relating to its
services as distributor at One Freedom Valley Drive, Oaks, PA 19456.
(d) State Street maintains all Records relating to its services as transfer
agent, fund accountant and custodian at 200 Clarendon Street, Boston, MA 02116.
Item 29. Management Services:
Not applicable.
Item 30. Undertakings:
Not applicable.
--------
/1/ On July 2, 2007, State Street Corporation acquired Investors Financial
Services Corporation, the parent company of IBT which provides
administrative, custodial and transfer agency services for the Funds.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 96 to the Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of San Francisco
and the State of California on the 9th day of August, 2007.
By: /s/ Michael A. Latham
----------------------------------
Michael A. Latham
President
Date: August 9, 2007
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 96 to the Registration Statement has been signed
below by the following persons in the capacity and on the dates indicated.
By:
----------------------------------
Lee T. Kranefuss*
Trustee
Date: August 9, 2007
----------------------------------
John E. Martinez*
Trustee
Date: August 9, 2007
----------------------------------
George G. C. Parker*
Trustee
Date: August 9, 2007
----------------------------------
Cecilia H. Herbert*
Trustee
Date: August 9, 2007
----------------------------------
Charles A. Hurty*
Trustee
Date: August 9, 2007
----------------------------------
John E. Kerrigan*
Trustee
Date: August 9, 2007
----------------------------------
Robert H. Silver*
Trustee
Date: August 9, 2007
/s/ Michael A. Latham
----------------------------------
Michael A. Latham
President
Date: August 9, 2007
/s/ Geoffrey D. Flynn
----------------------------------
Geoffrey D. Flynn
Treasurer
Date: August 9, 2007
*By: /s/ Michael A. Latham
----------------------------------
Michael A. Latham
Attorney-in-fact
Date: August 9, 2007
--------
* Power of Attorney, dated April 19, 2007, for Robert H. Silver is
incorporated herein by reference to Post-Effective Amendment No. 79, filed
April 27, 2007. Power of Attorney, dated August 25, 2006, for Lee T.
Kranefuss is incorporated herein by reference to Post-Effective Amendment
No. 53 filed September 18, 2006. Powers of Attorney, dated February 22,
2006, for Cecilia H. Herbert, John E. Kerrigan, John E. Martinez and George
G.C. Parker are incorporated herein by reference to Post-Effective
Amendment No. 43, filed April 17, 2006 ("PEA No. 43"). Power of Attorney,
dated February 25, 2006, for Charles A. Hurty is incorporated herein by
reference to PEA No. 43.
Exhibit Index
(h.15) Amendment to Sublicense Agreement between BGI and the Trust for the
iShares S&P Funds
(i) Legal Opinion and Consent of Richards, Layton & Finger P.A
EX-99.(H)(15)
2
dex99h15.txt
AMENDMENT TO SUBLICENSE AGMT BETWEEN BGI AND THE TRUST FOR THE ISHARES S&P FUNDS
Exhibit (h.15)
AMENDMENT TO SUBLICENSE AGREEMENT
This Amendment to the Sublicense Agreement dated April 25, 2000 (the
"Agreement") between Barclays Global Investors, N.A. ("BGI"), a national
banking association, and iShares Trust ("iShares"), a Delaware statutory trust,
is effective as of July 30, 2007.
WHEREAS, pursuant to Section 7 of the Agreement the parties may amend the
Agreement from time to time; and
NOW THEREFORE, Exhibit A is hereby deleted in its entirety and amended to
read as attached.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Agreement to be executed as of the date first set forth above.
BARCLAYS GLOBAL INVESTORS, N.A.
By: /s/ Michael Latham
-----------------------------
Name: Michael Latham
Title: Managing Director
By: /s/ Eilleen Clavere
-----------------------------
Name: Eilleen Clavere
Title: Principal
iSHARES TRUST
By: /s/ Michael Latham
-----------------------------
Name: Michael Latham
Title: President
Exhibit A
S&P 100 Index
S&P 500 Index
S&P 500/Citigroup Growth Index
S&P 500/Citigroup Value Index
S&P MidCap 400 Index
S&P MidCap 400/Citigroup Growth Index
S&P MidCap 400/Citigroup Value Index
S&P SmallCap 600 Index
S&P SmallCap 600/Citigroup Index
S&P SmallCap 600/Citigroup Value Index
S&P Europe 350 Index
S&P/TSE 60 Index
S&P Global 100 Index
S&P Global Energy Sector Index
S&P Global Financials Sector Index
S&P Global Healthcare Sector Index
S&P Global Information Technology Sector Index
S&P Global Telecommunications Sector Index
S&P Latin America 40 Index
S&P/Tokyo Stock Price Index ("TOPIX") 150 Index
S&P Composite 1500 Index
S&P Global Consumer Discretionary Sector Index
S&P Global Consumer Staples Sector Index
S&P Global Industrials Sector Index
S&P Global Utilities Sector Index
S&P Global Materials Sector Index
S&P/Citigroup BMI World ex-U.S. Property Index
EX-99.(I)
3
dex99i.txt
LEGAL OPINION AND CONSENT OF RICHARDS, LAYTON & FINGER P.A
Exhibit (i)
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
August 8, 2007
iShares Trust
c/o Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
Re: iShares S&P Global Infrastructure Index Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel for iShares Trust, a Delaware
statutory trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, as filed with the office of the
Secretary of State of the State of Delaware (the "Secretary of State")
on December 16, 1999, as amended and restated by the Restated
Certificate of Trust of the Trust (the "Certificate of Trust"), as
filed with the office of the Secretary of State on September 15, 2006;
(b) The Agreement and Declaration of Trust, dated December 16, 1999, made
by the trustee named therein, as amended and restated by the Agreement
and Declaration of Trust (the "Trust Instrument"), dated September 13,
2006, made by the trustees named therein;
(c) Post-Effective Amendment No. 96, to be filed with the Securities and
Exchange Commission (the "Amendment"), to the Trust's Registration
Statement on Form N-1A (File Nos. 333-92935 and 811-09729), filed with
the Securities and Exchange Commission on December 16, 1999 (as
amended by the Amendment, the "Registration Statement");
(d) The Amended and Restated By-Laws of the Trust in effect on the date
hereof as approved by the Board of Trustees of the Trust (the "Board")
on December 8, 2006;
iShares Trust
August 8, 2007
Page 2
(e) Copies of certain resolutions (the "Resolutions") adopted by the Board
at meetings held on June 13-14, 2007, with respect to the creation of
that certain series of the Trust to be known as iShares S&P Global
Infrastructure Index Fund (the "Fund") and the issuance of certain
shares of beneficial interest in such Fund (each, a "Share," and
collectively, the "Shares");
(f) A certificate of an Assistant Secretary of the Trust with respect to
certain matters, dated August 8, 2007; and
(g) A Certificate of Good Standing for the Trust, dated August 8, 2007,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Trust Instrument.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (g) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (g) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust Instrument
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Trust Instrument, the By-laws and the
Certificate of Trust are in full force and effect and will not be amended,
(ii) except to the extent provided in paragraph 1 below, the due organization
or due formation, as the case may be, and valid existence in good standing of
each party to the documents examined by us under the laws of the jurisdiction
governing its organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties (other than the Trust) to the documents examined by us has the power
and authority to execute and deliver, and to perform its obligations under,
such documents, (v) the due authorization, execution and delivery by all
parties thereto of all documents examined by us, (vi) the payment by each
Person to whom a Share is to be issued by the Trust (collectively, the
"Shareholders") for such Share, in accordance with the Trust Instrument and the
Resolutions and as contemplated by the Registration Statement, and (vii) that
the Shares are issued and sold to the Shareholders in accordance with the Trust
Instrument and
iShares Trust
August 8, 2007
Page 3
the Resolutions and as contemplated by the Registration Statement. We have not
participated in the preparation of the Registration Statement and assume no
responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a statutory trust under the Delaware Statutory Trust Act,
12 Del. C. (S) 3801, et. seq.
2. The Shares of the Trust have been duly authorized and, when issued,
will be validly issued, fully paid and nonassessable beneficial
interests in the Trust.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. In giving the foregoing
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Richards, Layton & Finger, P.A.
RJF/MCG
iShares Trust
August 8, 2007
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
August 8, 2007
iShares Trust c/o
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
Re: iShares S&P Global Listed Private Equity Index Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel for iShares Trust, a Delaware
statutory trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, as filed with the office of the
Secretary of State of the State of Delaware (the "Secretary of State")
on December 16, 1999, as amended and restated by the Restated
Certificate of Trust of the Trust (the "Certificate of Trust"), as
filed with the office of the Secretary of State on September 15, 2006;
(b) The Agreement and Declaration of Trust, dated December 16, 1999, made
by the trustee named therein, as amended and restated by the Agreement
and Declaration of Trust (the "Trust Instrument"), dated September 13,
2006, made by the trustees named therein;
(c) Post-Effective Amendment No. 96, to be filed with the Securities and
Exchange Commission (the "Amendment"), to the Trust's Registration
Statement on Form N-1A (File Nos. 333-92935 and 811-09729), filed with
the Securities and Exchange Commission on December 16, 1999 (as
amended by the Amendment, the "Registration Statement");
(d) The Amended and Restated By-Laws of the Trust in effect on the date
hereof as approved by the Board of Trustees of the Trust (the "Board")
on December 8, 2006;
(e) Copies of certain resolutions (the "Resolutions") adopted by the Board
at a meeting held on June 13-14, 2007, with respect to the creation of
that certain series of the Trust to be known as iShares S&P Global
Listed
iShares Trust
August 8, 2007
Page 2
Private Equity Index Fund (the "Fund") and the issuance of certain
shares of beneficial interest in such Fund (each, a "Share," and
collectively, the "Shares");
(f) A certificate of an Assistant Secretary of the Trust with respect to
certain matters, dated August 8, 2007; and
(g) A Certificate of Good Standing for the Trust, dated August 8, 2007,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Trust Instrument.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (g) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (g) above) that is referred to in orincorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust Instrument
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Trust Instrument, the By-laws and the
Certificate of Trust are in full force and effect and will not be amended,
(ii) except to the extent provided in paragraph 1 below, the due organization
or due formation, as the case may be, and valid existence in good standing of
each party to the documents examined by us under the laws of the jurisdiction
governing its organization or formation, (iii) the legal capacity of natural
persons who are parties to the documents examined by us, (iv) that each of the
parties (other than the Trust) to the documents examined by us has the power
and authority to execute and deliver, and to perform its obligations under,
such documents, (v) the due authorization, execution and delivery by all
parties thereto of all documents examined by us, (vi) the payment by each
Person to whom a Share is to be issued by the Trust (collectively, the
"Shareholders") for such Share, in accordance with the Trust Instrument and the
Resolutions and as contemplated by the Registration Statement, and (vii) that
the Shares are issued and sold to the Shareholders in accordance with the Trust
Instrument and the Resolutions and as contemplated by the Registration
Statement. We have not participated in the preparation of the Registration
Statement and assume no responsibility for its contents.
iShares Trust
August 8, 2007
Page 3
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a statutory trust under the Delaware Statutory Trust Act,
12 Del. C. Section 3801, et. seq.
2. The Shares of the Trust have been duly authorized and, when issued,
will be validly issued, fully paid and nonassessable beneficial
interests in the Trust.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. In giving the foregoing
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Richards, Layton & Finger, P.A.
RJF/MCG
CORRESP
4
filename4.txt
[LOGO OF WILLKIE FARR & GALLAGHER LLP.]
1875 K Street, NW
Washington, DC 20006-1238
Tel: 202 303 1000
Fax: 202 303 2000
VIA EDGAR
August 9, 2007
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: iShares Trust
(Securities Act File No. 333-92935;
Investment Company Act File No. 811-09729)
Post-Effective Amendment No. 96
Ladies and Gentlemen:
On behalf of the iShares Trust (the "Trust"), we hereby transmit for filing
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940 (the "1940 Act"), Post-Effective Amendment No. 96 (the "Amendment")
to the Trust's Registration Statement on Form N-1A (the "Registration
Statement"). The Amendment is being filed pursuant to Rule 485(a)(2) under the
1933 Act and for the sole purpose of adding two new funds to the Trust: iShares
S&P Global Infrastructure Index Fund and iShares S&P Global Listed Private
Equity Index Fund (each a "Fund," collectively, the "Funds"). The filing will
become automatically effective 75 days after the filing.
The following information is provided to assist the Staff of the Commission
(the "Staff") in its review of the Registration Statement.
(1)Investment Objectives and Policies
The iShares S&P Global Infrastructure Index Fund seeks investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the S&P Global Infrastructure Index (the "Underlying Index"). The
Underlying Index is designed to track the performance of the stocks of large
infrastructure companies around the world. The Underlying Index includes
companies involved in utilities, energy and transportation infrastructure, such
as the management or ownership of oil and gas storage and transportation;
airport services; highways and rail tracks; marine ports and services; and
electric, gas and water utilities.
The iShares S&P Global Listed Private Equity Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the S&P Listed Private Equity Index (the "Underlying
Index"). The Underlying Index is designed to track large private equity
companies listed on exchanges in developed markets countries. The Underlying
Index includes public companies that S&P characterizes as engaging in the
private equity business, such as venture capital and leveraged buyout firms and
business development companies that typically make direct equity investments as
well as provide loans to privately held companies. Some private equity
companies take substantial ownership position in their portfolio companies and
may provide significant managerial assistance to them.
(2)Material Changes from Recent Filings
Each Fund's description of its investment strategy (i.e., the Fund tracks a
specific benchmark) and risk factors are specific to each Fund.
(3)Portions of Prior Filings Similar to, or Precedent for, the Current Filing
Each Fund's descriptions of its shares, investment manager and other attributes
under the headings "Management" "Shareholder Information" and "Distribution,"
included in the Prospectus and under the headings "Proxy Voting," "Continuous
Offering," "Management," "Brokerage Transactions," "Portfolio Holdings
Information," "Taxes," "Determination of NAV," "Dividends and Distribution,"
"Financial Statements" and "Miscellaneous Information," included in the
Statement of Additional Information are substantially similar to the
corresponding descriptions contained in the Prospectus and Statement of
Additional Information of iShares S&P World ex-U.S. Property Index Fund
included in the Post-Effective Amendment No. 93 filed pursuant to Rule 485(b)
on behalf of iShares Trust, which was filed on July 30, 2007.
* * * * *
The operations of the Funds, the description of the shares offered and the
other information that is typically common in a fund complex do not appear to
raise novel issues or problem areas that warrant particular attention of the
Staff in reviewing the Registration Statement. Consequently, on behalf of the
Trust, we request that the Registration Statement be given selective review by
the Staff./1/
Should members of the Staff have any questions or comments concerning the
Registration Statement, please do not hesitate to contact me at (202) 303-1124.
Sincerely,
/s/ Benjamin J. Haskin
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Benjamin J. Haskin
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/1/ See Inv. Co. Act. Rel. No. 13768 (Feb. 15, 1984)