Document ID: SEC-2013-0437-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-03-06T05:00Z

[Federal Register Volume 78, Number 44 (Wednesday, March 6, 2013)]
[Notices]
[Pages 14600-14617]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05124]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69008; File No. SR-NYSEArca-2013-18]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Fourteen Series of the 
iShares Trust Under NYSE Arca Equities Rule 8.600

February 28, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ notice is hereby given that, on February 14, 2013, NYSE 
Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the 
Securities and Exchange Commission (the ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade fourteen series of the 
iShares Trust under NYSE Arca Equities Rule 8.600. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of 
iShares Australian Dollar Cash Rate Fund; iShares British Pound Cash 
Rate Fund; iShares Canadian Dollar Cash Rate Fund; iShares Chinese 
Offshore Renminbi Cash Rate Fund; iShares Euro Cash Rate Fund; iShares 
Japanese Yen Cash Rate Fund; iShares Mexican Peso Cash Rate Fund; 
iShares New Zealand Dollar Cash Rate Fund; iShares Norwegian Krone Cash 
Rate Fund; iShares Singapore Dollar Cash Rate Fund; iShares Swedish 
Krona Cash Rate Fund; iShares Swiss Franc Cash Rate Fund; iShares Thai 
Offshore Baht Cash Rate Fund; and iShares Turkish Lira Cash Rate Fund 
(each, a ``Fund'' and, collectively, the ``Funds'') under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund

[[Page 14601]]

Shares \4\ on the Exchange.\5\ The Shares will be offered by iShares 
Trust (the ``Trust''), a statutory trust organized under the laws of 
Delaware and registered with the Securities and Exchange Commission 
(the ``Commission'') as an open-end management investment company.\6\
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Commission has previously approved the listing and 
trading on the Exchange of other actively managed funds under Rule 
8.600. See, e.g., Securities Exchange Act Release Nos. 60981 
(November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-
2009-79) (order approving Exchange listing and trading of five fixed 
income funds of the PIMCO ETF Trust); 62623 (August 2, 2010), 75 FR 
47652 (August 6, 2010) (SR-NYSEArca-2010-51) (order approving 
Exchange listing and trading of WisdomTree Dreyfus Commodity 
Currency Fund); 64935 (July 20, 2011), 76 FR 44966 (July 27, 2011) 
(SR-NYSEArca-2011-31) (order approving Exchange listing and trading 
of WisdomTree Dreyfus Euro Debt Fund); and 67320 (June 29, 2012), 77 
FR 39763 (July 5, 2012) (SR-NYSEArca-2012-44) (order approving 
Exchange listing and trading of iShares Strategic Beta U.S. Large 
Cap Fund and iShares Strategic Beta U.S. Small Cap Fund).
    \6\ The Trust is registered under the 1940 Act. On August 9, 
2012, the Trust filed with the Commission a post-effective amendment 
to Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``1933 Act'') and the 1940 Act relating to the Fund (File Nos. 333-
92935 and 811-09729) (the ``Registration Statement''). The 
description of the operation of the Trust and the Funds herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
29571 (January 24, 2011) (File No. 812-13601) (``Exemptive Order'').
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    The investment adviser to the Funds will be BlackRock Fund Advisors 
(``Investment Adviser'' or ``BFA''), an indirect wholly-owned 
subsidiary of BlackRock, Inc. BlackRock Investments, LLC, an affiliate 
of the Investment Adviser, will serve as the distributor for the Funds 
(``Distributor''). State Street Bank and Trust Company will serve as 
the administrator, custodian and transfer agent for each Fund.
    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\7\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Investment 
Adviser is affiliated with multiple broker-dealers and has implemented 
a ``fire wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Funds' 
portfolio. In the event (a) the Investment Adviser or any sub-adviser 
becomes newly affiliated with a broker-dealer, or (b) any new manager, 
adviser or sub-adviser becomes affiliated with a broker-dealer, it will 
implement a fire wall with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Investment Adviser and its related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    The Funds will not be index funds. The Funds will be actively 
managed and will not seek to replicate the performance of a specified 
index. Each Fund is classified as ``non-diversified.'' \8\
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    \8\ According to the Registration Statement, each Fund will be 
``non-diversified'' under the 1940 Act and may invest more of its 
assets in fewer issuers than ``diversified'' funds. The 
diversification standard is set forth in Section 5(b)(1) of the 1940 
Act (15 U.S.C. 80a-5(b)(1)).
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iShares Australian Dollar Cash Rate Fund
    According to the Registration Statement, the iShares Australian 
Dollar Cash Rate Fund will seek to provide its shareholders a daily 
return that reflects: (i) The increase or decrease in the exchange rate 
of the Australian dollar against the United States dollar and (ii) the 
yield of the Australian dollar, minus the Fund's fees and expenses. 
``Yield'' refers to the yield an investor would expect to receive if 
they invested in an overnight or similar cash or cash equivalent 
investment denominated in Australian dollars. The Fund also will seek 
to preserve liquidity, and maintain stability of principal and preserve 
capital, each as measured in Australian dollars.
    According to the Registration Statement, the Fund will be an 
actively managed exchange-traded fund (``ETF'') that will seek to 
achieve its investment objective by investing, under normal 
circumstances,\9\ substantially all of its assets in short-term 
securities denominated in United States dollars and a matching notional 
amount of spot foreign exchange contracts (generally required to be 
settled within two business days) to purchase the Australian dollar 
(against delivery of the United States dollar). Under normal 
circumstances, there will be a 1:1 ratio between the fixed income 
securities and spot contracts. The strategy of combining investments in 
short-term fixed income securities and spot foreign exchange contracts 
is designed to provide financial exposure substantially similar to a 
purchase of the Australian dollar reflecting: (i) The increase or 
decrease in the exchange rate of the Australian dollar against the 
United States dollar and (ii) the yield of the Australian dollar, minus 
the Fund's fees and expenses.
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    \9\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of adverse market, economic, political or 
other conditions, including extreme volatility or trading halts in 
the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
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    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Australian dollar. The short-term 
debt securities held by the Fund generally will consist of high quality 
debt obligations and may

[[Page 14602]]

include, but are not limited to, obligations issued by the U.S. 
government and its agencies and instrumentalities, U.S. municipal 
variable rate demand notes,\10\ U.S. corporate and commercial debt 
instruments,\11\ and bank notes and similar demand deposits. The Fund's 
assets also may be invested in short-term debt instruments and bank 
notes and similar demand deposits denominated in the Australian dollar 
from time to time when the Investment Adviser believes these debt 
securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one nationally recognized statistical 
rating organization (``NRSRO'') or, if unrated, deemed by the 
Investment Adviser to be of equivalent quality.\12\ The Fund may also 
invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality.
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    \10\ According to the Registration Statement, variable rate 
demand obligations (also referred to as variable rate demand notes) 
are tax-exempt obligations that contain a floating or variable 
interest rate adjustment formula and a right of demand on the part 
of the holder thereof to receive payment of the unpaid principal 
balance plus accrued interest upon a short notice period not to 
exceed seven days.
    \11\ The Fund will invest only in corporate bonds that the 
Investment Adviser deems to be sufficiently liquid at time of 
investment. Generally a non-U.S. corporate bond must have $200 
million (or an equivalent value if denominated in a currency other 
than United States dollars) or more par amount outstanding and 
significant par value traded to be considered as an eligible 
investment, and a U.S. corporate bond must have $100 million (or an 
equivalent value if denominated in a currency other than United 
States dollars) or more par amount outstanding and significant par 
value traded to be considered as an eligible investment.
    \12\ According to the Investment Adviser, the Investment Adviser 
may determine that unrated securities are of ``equivalent quality'' 
based on such credit quality factors that it deems appropriate, 
which may include, among other things, performing an analysis 
similar, to the extent possible, to that performed by an NRSRO when 
rating similar securities and issuers. In making such a 
determination, the Investment Adviser may consider internal analyses 
and risk ratings, third party research and analysis, and other 
sources of information, as deemed appropriate by the Investment 
Adviser.
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    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Australian dollars. The Fund will 
enter into spot foreign exchange contracts only in Australian dollars 
and mainly for the purpose of taking long positions in the Australian 
dollar. Because the spot foreign exchange contracts entered into by the 
Fund will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Australian dollar, the Fund 
will continuously enter into new spot foreign exchange contracts by 
entering into two simultaneous trades.\13\ The Fund will not enter into 
forward foreign exchange contracts.\14\
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    \13\ According to the Registration Statement, a Fund will 
maintain exposure to the foreign currency identified in its name 
(the ``FX Base Currency'') by entering into two simultaneous trades 
that result in the same open net long position of the FX Base 
Currency with the settlement date extended by one business day. The 
first trade will be an offsetting transaction to the original 
position (which is the long foreign exchange contract that the Fund 
has entered into on the previous day) for the same notional amount 
and same settlement date. This offsetting transaction may cause a 
Fund to realize a gain or loss on the transaction. The second trade 
will be for the same notional amount as the original position with 
the settlement date extended by one business day. Where there is an 
interest rate differential in the overnight ``risk free'' rate 
between the FX Base Currency and the United States dollar, there 
will be a difference in price between the two trades of the 
simultaneous transaction. This difference represents the difference 
in benchmark overnight interest rates between the two currencies in 
the position (i.e., one day of ``carry'' or ``cost of carry'').
    \14\ The Investment Adviser believes that the foreign exchange 
contracts entered into by the Funds are properly characterized as 
``spot'' foreign exchange transactions as of the date of this 
filing. However, legal requirements and interpretations surrounding 
such transactions may change, which may lead market participants 
such as the Funds' foreign exchange counterparties to characterize 
such transactions as forward contracts.
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    According to the Investment Adviser, the Australian dollar 
(``AUD'') is a free floating currency. The Reserve Bank of Australia is 
independent, conducts monetary policy, works to maintain a strong 
financial system and issues the nation's currency. The Australian 
dollar spot market is fully convertible and tradable 24 hours a day 
without restriction. Trading volume has expanded over the past few 
years with increased demand for commodities. The average AUD/USD bid/
ask spread is 2-4 pips (.0002-.0004 USD). The average daily trading 
volume for Australian dollar spot transactions is $111 billion.\15\ The 
average daily volatility over the last five years was 2.887%. Trading 
volume is relatively deep and steady during the London session. The 
Australian dollar/United States dollar pair is the most heavily traded 
currency pair in the Australian foreign exchange markets; interest in 
the Australian dollar/Japanese yen exchange rate appears during the 
Asian session.
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    \15\ Bank of International Settlements. ``Triennial Central Bank 
Survey: Foreign exchange and derivatives market activity in April 
2010,'' September 2010, available at http://www.bis.org/publ/rpfx10.pdf.
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iShares British Pound Cash Rate Fund
    According to the Registration Statement, the iShares British Pound 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
British pound sterling against the United States dollar and (ii) the 
yield of the British pound sterling, minus the Fund's fees and 
expenses. ``Yield'' refers to the yield an investor would expect to 
receive if they invested in an overnight or similar cash or cash 
equivalent investment denominated in British pound sterling. The Fund 
also will seek to preserve liquidity, and maintain stability of 
principal and preserve capital, each as measured in British pounds 
sterling.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\16\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the British pound sterling (against delivery of the United States 
dollar). Under normal circumstances, there will be a 1:1 ratio between 
the fixed income securities and spot contracts. The strategy of 
combining investments in short-term fixed income securities and spot 
foreign exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the British pound sterling, 
reflecting: (i) The increase or decrease in the exchange rate of the 
British pound sterling against the United States dollar and (ii) the 
yield of

[[Page 14603]]

the British pound sterling, minus the Fund's fees and expenses.
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    \16\ See note 9, supra.
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    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the British pound sterling. The short-
term debt securities held by the Fund generally will consist of high 
quality debt obligations and may include, but are not limited to, 
obligations issued by the U.S. government and its agencies and 
instrumentalities, U.S. municipal variable rate demand notes,\17\ U.S. 
corporate and commercial debt instruments \18\ and bank notes and 
similar demand deposits. The Fund's assets also may be invested in 
short-term debt instruments, and bank notes and similar demand deposits 
denominated in the British pound sterling from time to time when the 
Investment Adviser believes these debt securities may help the Fund 
achieve its investment objective. All short-term debt securities 
acquired by the Fund will be rated investment grade by at least one 
NRSRO or, if unrated, deemed by the Investment Adviser to be of 
equivalent quality.\19\ The Fund may also invest its assets in money 
market funds (including funds that are managed by the Investment 
Adviser or one of its affiliates), cash and cash equivalents. All money 
market securities acquired by the Fund will be rated investment grade. 
The Fund does not intend to invest in any unrated money market 
securities. However, the Fund may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Investment Adviser to be of 
comparable quality.
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    \17\ See note 10, supra.
    \18\ See note 11, supra.
    \19\ See note 12, supra.
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    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of British pounds sterling. The Fund 
will enter into spot foreign exchange contracts only in British pounds 
sterling and mainly for the purpose of taking long positions in the 
British pound sterling. Because the spot foreign exchange contracts 
entered into by the Fund will be spot transactions and typically settle 
within two business days, in order to maintain exposure to the British 
pound sterling, the Fund will continuously enter into new spot foreign 
exchange contracts by entering into two simultaneous trades.\20\ The 
Fund will not enter into forward foreign exchange contracts.\21\
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    \20\ See note 13, supra.
    \21\ See note 14, supra.
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    According to the Investment Adviser, the British pound (``GBP'') is 
a free floating currency. The Bank of England is an independent body 
that controls monetary policy. Its primary objective is to deliver 
price stability through low inflation of 2%. The British pound spot 
market is fully convertible and tradable 24 hours a day without 
restriction. The GBP/USD exchange market has deep liquidity. The 
average GBP/USD bid/ask spread is 2-4 pips (.0002-.0004 USD). The 
average daily trading volume for British pound spot transactions is 
$213 billion.\22\ The average daily volatility over the last five years 
was 2.0669%. Trading volume is very deep from London open through New 
York early afternoon, with lighter volume during the late New York 
afternoon through Asia morning sessions, and with high currency flow 
around the 4:00 p.m. Greenwich Mean Time fixing.
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    \22\ See note 15, supra.
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iShares Canadian Dollar Fund
    According to the Registration Statement, the iShares Canadian 
Dollar Fund will seek to provide its shareholders a daily return that 
reflects: (i) The increase or decrease in the exchange rate of the 
Canadian dollar against the United States dollar and (ii) the yield of 
the Canadian dollar, minus the Fund's fees and expenses. ``Yield'' 
refers to the yield an investor would expect to receive if they 
invested in an overnight or similar cash or cash equivalent investment 
denominated in Canadian dollars. The Fund also will seek to preserve 
liquidity, and maintain stability of principal and preserve capital, 
each as measured in Canadian dollars.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\23\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Canadian dollar (against delivery of the United States dollar). 
Under normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Canadian dollar, reflecting: 
(i) The increase or decrease in the exchange rate of the Canadian 
dollar against the United States dollar and (ii) the yield of the 
Canadian dollar, minus the Fund's fees and expenses.
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    \23\ See note 9, supra.
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    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Canadian dollar. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\24\ U.S. corporate and commercial 
debt instruments,\25\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments and 
bank notes and similar demand deposits denominated in the Canadian 
dollar from time to time when the Investment Adviser believes these 
debt securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one NRSRO or, if unrated, deemed by the 
Investment Adviser to be of equivalent quality.\26\ The Fund may also 
invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security

[[Page 14604]]

is determined by the Investment Adviser to be of comparable quality.
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    \24\ See note 10, supra.
    \25\ See note 11, supra.
    \26\ See note 12, supra.
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    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Canadian dollars. The Fund will 
enter into spot foreign exchange contracts only in Canadian dollars and 
mainly for the purpose of taking long positions in the Canadian dollar. 
Because the spot foreign exchange contracts entered into by the Fund 
will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Canadian dollar, the Fund 
will continuously enter into new spot foreign exchange contracts by 
entering into two simultaneous trades.\27\ The Fund will not enter into 
forward foreign exchange contracts.\28\
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    \27\ See note 13, supra.
    \28\ See note 14, supra.
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    According to the Investment Adviser, the Canadian dollar (``CAD'') 
is a free floating currency. The Bank of Canada is responsible for 
Canada's monetary policy, bank notes, financial system, and funds 
management. Monetary policy targets inflation of near 2%. The Bank of 
Canada carries out monetary policy by influencing short-term interest 
rates. The Canadian dollar spot market is fully convertible and 
tradable 24 hours a day without restriction. The USD/CAD exchange 
market has deep liquidity. The average USD/CAD bid/ask spread is 2-4 
pips (.0002-.0004 CAD). The average daily trading volume for Canadian 
dollar spot transactions is $78 billion.\29\ The average daily 
volatility over the last five years was 2.1563%. Trading volume is 
relatively deep from the New York open through the New York close. 
There is high currency flow during the New York open and into the 
London close. Spikes in volume are noted at the London fixing.
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    \29\ See note 15, supra.
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iShares Chinese Offshore Renminbi Cash Rate Fund
    According to the Registration Statement, the iShares Chinese 
Offshore Renminbi Cash Rate Fund will seek to provide its shareholders 
a daily return that reflects: (i) The increase or decrease in the 
exchange rate of the Chinese offshore renminbi against the United 
States dollar and (ii) the yield of the Chinese offshore renminbi, 
minus the Fund's fees and expenses. ``Yield'' refers to the yield an 
investor would expect to receive if they invested in an overnight or 
similar cash or cash equivalent investment denominated in Chinese 
offshore renminbi. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Chinese offshore renminbi.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\30\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Chinese offshore renminbi (against delivery of the United States 
dollar). Under normal circumstances, there will be a 1:1 ratio between 
the fixed income securities and spot contracts. The Chinese offshore 
renminbi trades in Hong Kong and other markets outside mainland China. 
The offshore renminbi is also known as the ``offshore yuan.'' The 
strategy of combining investments in short-term fixed income securities 
and spot foreign exchange contracts is designed to provide financial 
exposure substantially similar to a purchase of the Chinese offshore 
renminbi, reflecting: (i) The increase or decrease in the exchange rate 
of the Chinese offshore renminbi against the United States dollar and 
(ii) the yield of the Chinese offshore renminbi, minus the Fund's fees 
and expenses.
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    \30\ See note 9, supra.
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    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Chinese offshore renminbi. The short-
term debt securities held by the Fund generally will consist of high 
quality debt obligations and may include, but are not limited to, 
obligations issued by the U.S. government and its agencies and 
instrumentalities, U.S. municipal variable rate demand notes,\31\ U.S. 
corporate and commercial debt instruments,\32\ and bank notes and 
similar demand deposits. The Fund's assets also may be invested in 
short-term debt instruments and bank notes and similar demand deposits 
denominated in the Chinese offshore renminbi from time to time when the 
Investment Adviser believes these securities may help the Fund to 
achieve its investment objective. All short-term debt securities 
acquired by the Fund will be rated investment grade by at least one 
NRSRO or, if unrated, deemed by the Investment Adviser to be of 
equivalent quality.\33\ The Fund may also invest its assets in money 
market funds (including funds that are managed by the Investment 
Adviser or one of its affiliates), cash and cash equivalents. All money 
market securities acquired by the Fund will be rated investment grade. 
The Fund does not intend to invest in any unrated money market 
securities. However, the Fund may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Investment Adviser to be of 
comparable quality.
---------------------------------------------------------------------------

    \31\ See note 10, supra.
    \32\ See note 11, supra.
    \33\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Chinese offshore renminbi. The 
Fund will enter into spot foreign exchange contracts only in Chinese 
offshore renminbi and mainly for the purpose of taking long positions 
in the Chinese offshore renminbi. Because the spot foreign exchange 
contracts entered into by the Fund will be spot transactions and 
typically settle within two business days, in order to maintain 
exposure to the Chinese offshore renminbi, the Fund will continuously 
enter into new spot foreign exchange contracts by entering into two 
simultaneous trades.\34\ The Fund will not enter into forward foreign 
exchange contracts.\35\
---------------------------------------------------------------------------

    \34\ See note 13, supra.
    \35\ See note 14, supra.

---------------------------------------------------------------------------

[[Page 14605]]

    According to the Investment Adviser, the People's Bank of China 
operates a managed floating exchange rate system, which is partially 
pegged to a basket of trade-weighted international currencies. The 
Chinese onshore renminbi is non-deliverable and partially convertible. 
Hong Kong is the only jurisdiction where Chinese offshore renminbi 
trading is sanctioned and regulated. Bank of China (Hong Kong) serves 
as the clearing bank for Chinese offshore renminbi. No fixing rate is 
set by authorities. The average bid/ask spread is 10-20 pips (0.001-
0.002 Chinese offshore renminbi).\36\ The average daily trading volume 
for Chinese offshore renminbi spot transactions is $300 million.\37\ 
The average daily volatility over the last five years was 0.2715%. 
Trading volume is relatively deep from 9:00 a.m. to 5:00 p.m. Hong Kong 
Time.
---------------------------------------------------------------------------

    \36\ HSBC Global Research, ``The offshore renminbi: A practical 
primer on the CNH market,'' December 1, 2010, available at http://www.research.hsbc.com/midas/Res/RDV?p=pdf&key=UHa14N6Tu3&n=282753.PDF.
    \37\ Id.
---------------------------------------------------------------------------

iShares Euro Cash Rate Fund
    According to the Registration Statement, the iShares Euro Cash Rate 
Fund will seek to provide its shareholders a daily return that 
reflects: (i) The increase or decrease in the exchange rate of the euro 
against the United States dollar and (ii) the yield of the euro, minus 
the Fund's fees and expenses. ``Yield'' refers to the yield an investor 
would expect to receive if they invested in an overnight or similar 
cash or cash equivalent investment denominated in euros. The Fund also 
will seek to preserve liquidity, and maintain stability of principal 
and preserve capital, each as measured in euros.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\38\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the euro (against delivery of the United States dollar). Under normal 
circumstances, there will be a 1:1 ratio between the fixed income 
securities and spot contracts. The strategy of combining investments in 
short-term fixed income securities and spot foreign exchange contracts 
is designed to provide financial exposure substantially similar to a 
purchase of the euro, reflecting: (i) The increase or decrease in the 
exchange rate of the euro against the United States dollar and (ii) the 
yield of the euro, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \38\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the euro. The short-term debt securities 
held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\39\ U.S. corporate and commercial 
debt instruments \40\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments, and 
bank notes and similar demand deposits denominated in the euro from 
time to time when the Investment Adviser believes these debt securities 
may help the Fund achieve its investment objective. All short-term debt 
securities acquired by the Fund will be rated investment grade by at 
least one NRSRO or, if unrated, deemed by the Investment Adviser to be 
of equivalent quality.\41\ The Fund may also invest its assets in money 
market funds (including funds that are managed by the Investment 
Adviser or one of its affiliates), cash and cash equivalents. All money 
market securities acquired by the Fund will be rated investment grade. 
The Fund does not intend to invest in any unrated money market 
securities. However, the Fund may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Investment Adviser to be of 
comparable quality.
---------------------------------------------------------------------------

    \39\ See note 10, supra.
    \40\ See note 11, supra.
    \41\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of euros. The Fund will enter into 
spot foreign exchange contracts only in euros and mainly for the 
purpose of taking long positions in the euro. Because the spot foreign 
exchange contracts entered into by the Fund will be spot transactions, 
in order to maintain exposure to the euro, the Fund will continuously 
enter into new spot foreign exchange contracts by entering into two 
simultaneous trades.\42\ The Fund will not enter into forward foreign 
exchange contracts.\43\
---------------------------------------------------------------------------

    \42\ See note 13, supra.
    \43\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the euro (``EUR'') is a freely 
floating currency. The primary objective of the European Central Bank 
(``ECB'') is to maintain price stability in the euro area. The ECB aims 
for inflation rates of below, but close to, 2% over the medium term. 
The euro spot market is fully convertible and tradable 24 hours a day 
without restriction. The euro and United States dollar have the deepest 
liquidity of all foreign exchange pairs. The average EUR/USD bid/ask 
spread is 1-2 pips (.0001-.0002 USD). The average daily trading volume 
for euro spot transactions is $691 billion.\44\ The average daily 
volatility over the last five years was 2.1994%. Trading volume is 
extremely deep from European open through New York close, and there is 
high currency flow around 2:15 p.m. Central European Time, the local 
fixing time.
---------------------------------------------------------------------------

    \44\ See note 15, supra.
---------------------------------------------------------------------------

iShares Japanese Yen Cash Rate Fund
    According to the Registration Statement, the iShares Japanese Yen 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
Japanese yen against the United States dollar and (ii) the yield of the 
Japanese yen, minus the Fund's fees and expenses. ``Yield'' refers to 
the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Japanese yen. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Japanese yen.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\45\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional

[[Page 14606]]

amount of spot foreign exchange contracts (generally required to be 
settled within two business days) to purchase the Japanese yen (against 
delivery of the United States dollar). Under normal circumstances, 
there will be a 1:1 ratio between the fixed income securities and spot 
contracts. The strategy of combining investments in short-term fixed 
income securities and spot foreign exchange contracts is designed to 
provide financial exposure substantially similar to a purchase of 
Japanese yen, reflecting: (i) The increase or decrease in the exchange 
rate of the Japanese yen against the United States dollar and (ii) the 
yield of the Japanese yen, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \45\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Japanese yen. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\46\ U.S. corporate and commercial 
debt instruments \47\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments, and 
bank notes and similar demand deposits denominated in the Japanese yen 
from time to time when the Investment Adviser believes these debt 
securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one nationally recognized statistical 
rating organization (NRSRO) or, if unrated, deemed by the Investment 
Adviser to be of equivalent quality.\48\ The Fund may also invest its 
assets in money market funds (including funds that are managed by the 
Investment Adviser or one of its affiliates), cash and cash 
equivalents. All money market securities acquired by the Fund will be 
rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality. According to the Registration 
Statement, the Fund generally will maintain a weighted average 
portfolio maturity of between 1 and 30 days and generally will be 
limited to investments with remaining maturities of 60 days or less. 
The Fund will not purchase any security with a remaining maturity of 
more than 397 calendar days.
---------------------------------------------------------------------------

    \46\ See note 10, supra.
    \47\ See note 11, supra.
    \48\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Japanese yen. The Fund will enter 
into spot foreign exchange contracts only in Japanese yen and mainly 
for the purpose of taking long positions in the Japanese yen. Because 
the spot foreign exchange contracts entered into by the Fund will be 
spot transactions and typically settle within two business days, in 
order to maintain exposure to the Japanese yen, the Fund will 
continuously enter into new spot foreign exchange contracts by entering 
into two simultaneous trades.\49\ The Fund will not enter into forward 
foreign exchange contracts.\50\
---------------------------------------------------------------------------

    \49\ See note 13, supra.
    \50\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Japanese yen (``JPY'') is 
a free floating currency. The Bank of Japan is an independent body that 
carries out currency and monetary policy. The Japanese yen spot market 
is fully convertible and tradable 24 hours a day without restriction. 
The USD/JPY exchange market has deep liquidity. The average USD/JPY 
bid/ask spread is 1-3 pips (.01-.03 JPY). The average daily trading 
volume for Japanese yen spot transactions is $300 billion.\51\ The 
average daily volatility over the last five years was 1.9879%. Trading 
volume in USD/JPY is deep from the London open to the New York close.
---------------------------------------------------------------------------

    \51\ See note 15, supra.
---------------------------------------------------------------------------

iShares Mexican Peso Cash Rate Fund
    According to the Registration Statement, the iShares Mexican Peso 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
Mexican peso against the United States dollar and (ii) the yield of the 
Mexican peso, minus the Fund's fees and expenses. ``Yield'' refers to 
the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Mexican peso. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Mexican pesos.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\52\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Mexican peso (against delivery of the United States dollar). Under 
normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Mexican peso, reflecting: 
(i) The increase or decrease in the exchange rate of the Mexican peso 
against the United States dollar and (ii) the yield of the Mexican 
peso, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \52\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Mexican peso. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\53\ U.S. corporate and commercial 
debt instruments \54\ and bank notes, and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments and 
bank notes and similar demand deposits denominated in the Mexican peso 
from time to time when the Investment Adviser believes these debt 
securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one NRSRO or, if unrated, deemed by the 
Investment Adviser to be of equivalent quality.\55\ The Fund may also 
invest its assets in money market funds

[[Page 14607]]

(including funds that are managed by the Investment Adviser or one of 
its affiliates), cash and cash equivalents. All money market securities 
acquired by the Fund will be rated investment grade. The Fund does not 
intend to invest in any unrated money market securities. However, the 
Fund may do so, to a limited extent, such as where a rated money market 
security becomes unrated, if such money market security is determined 
by the Investment Adviser to be of comparable quality.
---------------------------------------------------------------------------

    \53\ See note 10, supra.
    \54\ See note 11, supra.
    \55\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Mexican pesos. The Fund will 
enter into spot foreign exchange contracts only in Mexican pesos and 
mainly for the purpose of taking long positions in the Mexican peso. 
Because the spot foreign exchange contracts entered into by the Fund 
will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Mexican peso, the Fund will 
continuously enter into new spot foreign exchange contracts by entering 
into two simultaneous trades.\56\ The Fund will not enter into forward 
foreign exchange contracts.\57\
---------------------------------------------------------------------------

    \56\ See note 13, supra.
    \57\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Mexican peso (``MXN'') is 
a free floating currency. Banco de M[eacute]xico (``Banxico'') is 
responsible for regulating foreign exchange operations. It is formally 
independent and follows an inflation targeting policy. The Mexican peso 
is fully deliverable for all types of investors. There is some 
overnight trading, but the vast majority of trading in the Mexican peso 
occurs during local hours. Mexico has the most liquid spot market in 
Latin America. The average spot transaction is $5 million. The average 
bid/ask spread is 30-50 pips (0.003-0.005 MXN). The average daily 
trading volume for Mexican peso spot transactions is $18 billion.\58\ 
The average daily volatility over the last five years was 2.3338%. 
Trading volume is relatively deep from the London afternoon through the 
New York close. Banxico sets the fixing rate daily from 12 p.m. Central 
Standard Time onwards by surveying at least four local banks.
---------------------------------------------------------------------------

    \58\ See note 15, supra.
---------------------------------------------------------------------------

iShares New Zealand Dollar Cash Rate Fund
    According to the Registration Statement, the iShares New Zealand 
Dollar Cash Rate Fund will seek to provide its shareholders a daily 
return that reflects: (i) The increase or decrease in the exchange rate 
of the New Zealand dollar against the United States dollar and (ii) the 
yield of the New Zealand dollar, minus the Fund's fees and expenses. 
``Yield'' refers to the yield an investor would expect to receive if 
they invested in an overnight or similar cash or cash equivalent 
investment denominated in New Zealand dollars. The Fund also will seek 
to preserve liquidity, and maintain stability of principal and preserve 
capital, each as measured in New Zealand dollars.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\59\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the New Zealand dollar (against delivery of the United States dollar). 
Under normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the New Zealand dollar, 
reflecting: (i) The increase or decrease in the exchange rate of the 
New Zealand dollar against the United States dollar and (ii) the yield 
of the New Zealand dollar, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \59\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the New Zealand dollar. The short-term 
debt securities held by the Fund generally will consist of high quality 
debt obligations and may include, but are not limited to, obligations 
issued by the U.S. government and its agencies and instrumentalities, 
U.S. municipal variable rate demand notes,\60\ U.S. corporate and 
commercial debt instruments,\61\ and bank notes and similar demand 
deposits. The Fund's assets also may be invested in short-term debt 
instruments and bank notes and similar demand deposits denominated in 
the New Zealand dollar from time to time when the Investment Adviser 
believes these debt securities may help the Fund achieve its investment 
objective. All short-term debt securities acquired by the Fund will be 
rated investment grade by at least one nationally recognized 
statistical rating organization (NRSRO) or, if unrated, deemed by the 
Investment Adviser to be of equivalent quality.\62\ The Fund may also 
invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality. According to the Registration 
Statement, the Fund generally will maintain a weighted average 
portfolio maturity of between 1 and 30 days and generally will be 
limited to investments with remaining maturities of 60 days or less. 
The Fund will not purchase any security with a remaining maturity of 
more than 397 calendar days.
---------------------------------------------------------------------------

    \60\ See note 10, supra.
    \61\ See note 11, supra.
    \62\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of New Zealand dollars. The Fund 
will enter into spot foreign exchange contracts only in New Zealand 
dollars and mainly for the purpose of taking long positions in the New 
Zealand dollar. Because the spot foreign exchange contracts entered 
into by the Fund will be spot transactions and typically settle within 
two business days, in order to maintain exposure to the New Zealand 
dollar, the Fund will continuously enter into new spot foreign exchange 
contracts by entering

[[Page 14608]]

into two simultaneous trades.\63\ The Fund will not enter into forward 
foreign exchange contracts.\64\
---------------------------------------------------------------------------

    \63\ See note 13, supra.
    \64\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the New Zealand Dollar 
(``NZD'') is a freely floating currency. The Reserve Bank of New 
Zealand manages monetary policy to maintain price stability. The NZD 
trading day changes at 7:00 a.m. New Zealand time Tuesday through 
Friday (i.e., Monday through Thursday, Eastern Time (``E.T.'')); 
Friday's trading day for the NZD lasts through 5:00 p.m., E.T. This is 
unique to this currency; the market convention for other currencies is 
to change the trading day at 5:00 p.m. E.T. The New Zealand dollar is 
fully convertible and tradable 24 hours a day without restriction. The 
average NZD/USD bid/ask spread is 3-5 pips (.0003-.0005 USD). The 
average daily trading volume for New Zealand dollar spot transactions 
is $22 billion.\65\ The average daily volatility over the last five 
years was 3.018%. Trading volume in NZD/USD is relatively steady from 
the Asian open through London close. Volume spikes are noted in NZD/JPY 
at the Tokyo open. AUD/NZD volumes are consistent during a 24 hour 
period in all trading centers.
---------------------------------------------------------------------------

    \65\ See note 15, supra.
---------------------------------------------------------------------------

iShares Norwegian Krone Cash Rate Fund
    According to the Registration Statement, the iShares Norwegian 
Krone Cash Rate Fund will seek to provide its shareholders a daily 
return that reflects: (i) The increase or decrease in the exchange rate 
of the Norwegian krone against the United States dollar and (ii) the 
yield of the Norwegian krone, minus the Fund's fees and expenses. 
``Yield'' refers to the yield an investor would expect to receive if 
they invested in an overnight or similar cash or cash equivalent 
investment denominated in Norwegian krone. The Fund also will seek to 
preserve liquidity, and maintain stability of principal and preserve 
capital, each as measured in Norwegian kroner.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\66\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Norwegian krone (against delivery of the United States dollar). 
Under normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Norwegian krone, reflecting: 
(i) The increase or decrease in the exchange rate of the Norwegian 
krone against the United States dollar and (ii) the yield of the 
Norwegian krone, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \66\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Norwegian krone. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\67\ U.S. corporate and commercial 
debt instruments,\68\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments and 
bank notes and similar demand deposits denominated in the Norwegian 
krone from time to time when the Investment Adviser believes these debt 
securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one nationally recognized statistical 
rating organization (NRSRO) or, if unrated, deemed by the Investment 
Adviser to be of equivalent quality.\69\ The Fund may also invest its 
assets in money market funds (including funds that are managed by the 
Investment Adviser or one of its affiliates), cash and cash 
equivalents. All money market securities acquired by the Fund will be 
rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality. According to the Registration 
Statement, the Fund generally will maintain a weighted average 
portfolio maturity of between 1 and 30 days and generally will be 
limited to investments with remaining maturities of 60 days or less. 
The Fund will not purchase any security with a remaining maturity of 
more than 397 calendar days.
---------------------------------------------------------------------------

    \67\ See note 10, supra.
    \68\ See note 11, supra.
    \69\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Norwegian kroner. The Fund will 
enter into spot foreign exchange contracts only in Norwegian kroner and 
mainly for the purpose of taking long positions in the Norwegian krone. 
Because the spot foreign exchange contracts entered into by the Fund 
will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Norwegian krone, the Fund 
will continuously enter into new spot foreign exchange contracts by 
entering into two simultaneous trades.\70\ The Fund will not enter into 
forward foreign exchange contracts.\71\
---------------------------------------------------------------------------

    \70\ See note 13, supra.
    \71\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Norwegian krone (``NOK'') 
is a floating currency. Norges Bank (the Norwegian Central Bank) has 
executive and advisory responsibilities for monetary policy and is 
responsible for promoting robust and efficient payment systems and 
financial markets. The Norwegian krone spot market is fully convertible 
and tradable 24 hours a day. EUR/NOK and NOK/Swedish krona have the 
deepest liquidity of currency pairs in the Norwegian foreign exchange 
markets. The average USD/NOK bid/ask spread is 25-45 pips (.0025-.0045 
NOK). The average daily trading volume for Norwegian krone spot 
transactions is $12 billion.\72\ The average daily volatility over the 
last five years was 2.648%. Trading volume in EUR/NOK is relatively 
deep from European session open to the London close. Volumes are 
lighter, but well supported throughout the New York session. High 
trading volume is noted in NOK/USD around the Norges Bank fixing time 
(2:15 p.m. Central European Time).
---------------------------------------------------------------------------

    \72\ See note 15, supra.
---------------------------------------------------------------------------

iShares Singapore Dollar Cash Rate Fund
    According to the Registration Statement, the iShares Singapore 
Dollar Cash Rate Fund will seek to provide its shareholders a daily 
return that reflects:

[[Page 14609]]

(i) The increase or decrease in the exchange rate of the Singapore 
dollar against the United States dollar and (ii) the yield of the 
Singapore dollar, minus the Fund's fees and expenses. ``Yield'' refers 
to the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Singapore dollars. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Singapore dollars.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\73\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Singapore dollar (against delivery of the United States dollar). 
Under normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Singapore dollar, 
reflecting: (i) The increase or decrease in the exchange rate of the 
Singapore dollar against the United States dollar and (ii) the yield of 
the Singapore dollar, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \73\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Singapore dollar. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\74\ U.S. corporate and commercial 
debt instruments,\75\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments and 
bank notes and similar demand deposits denominated in the Singapore 
dollar from time to time when the Investment Adviser believes these 
debt securities may help the Fund achieve its investment objective. All 
short-term debt securities acquired by the Fund will be rated 
investment grade by at least one NRSRO or, if unrated, deemed by the 
Investment Adviser to be of equivalent quality.\76\ The Fund may also 
invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality.
---------------------------------------------------------------------------

    \74\ See note 10, supra.
    \75\ See note 11, supra.
    \76\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Singapore dollars. The Fund will 
enter into spot foreign exchange contracts only in Singapore dollars 
and mainly for the purpose of taking long positions in the Singapore 
dollar. Because the spot foreign exchange contracts entered into by the 
Fund will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Singapore dollar, the Fund 
will continuously enter into new spot foreign exchange contracts by 
entering into two simultaneous trades.\77\ The Fund will not enter into 
forward foreign exchange contracts.\78\
---------------------------------------------------------------------------

    \77\ See note 13, supra.
    \78\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Singapore dollar floats 
within an undisclosed crawling target band set against a trade-weighted 
basket of currencies. It is fully convertible and deliverable. The 
Monetary Authority of Singapore has considerable operational 
independence in acting as the central bank, although it is not 
independent. The Singapore dollar spot market is fully convertible and 
tradable 24 hours a day without restriction. The average spot 
transaction is $10 million. The average bid/ask spread is 2-5 pips 
(0.0002-0.0005 SGD). The average daily trading volume for Singapore 
dollar spot transactions is $16 billion.\79\ The average daily 
volatility over the last five years was 1.182%. Trading volume is 
relatively deep from Asia open through London close.
---------------------------------------------------------------------------

    \79\ See note 15, supra.
---------------------------------------------------------------------------

iShares Swedish Krona Cash Rate Fund
    According to the Registration Statement, the iShares Swedish Krona 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
Swedish krona against the United States dollar and (ii) the yield of 
the Swedish krona, minus the Fund's fees and expenses. ``Yield'' refers 
to the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Swedish krona. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Swedish kronor.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\80\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Swedish krona (against delivery of the United States dollar). Under 
normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Swedish krona, reflecting: 
(i) The increase or decrease in the exchange rate of the Swedish krona 
against the United States dollar and (ii) the yield of the Swedish 
krona, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \80\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Swedish krona. The short-term debt 
securities held by the Fund generally will consist of high

[[Page 14610]]

quality debt obligations and may include, but are not limited to, 
obligations issued by the U.S. government and its agencies and 
instrumentalities, U.S. municipal variable rate demand notes,\81\ U.S. 
corporate and commercial debt instruments,\82\ and bank notes and 
similar demand deposits. The Fund's assets also may be invested in 
short-term debt instruments and bank notes and similar demand deposits 
denominated in the Swedish krona from time to time when the Investment 
Adviser believes these debt securities may help the Fund achieve its 
investment objective. All short-term debt securities acquired by the 
Fund will be rated investment grade by at least one NRSRO or, if 
unrated, deemed by the Investment Adviser to be of equivalent 
quality.\83\ The Fund may also invest its assets in money market funds 
(including funds that are managed by the Investment Adviser or one of 
its affiliates), cash and cash equivalents. All money market securities 
acquired by the Fund will be rated investment grade. The Fund does not 
intend to invest in any unrated money market securities. However, the 
Fund may do so, to a limited extent, such as where a rated money market 
security becomes unrated, if such money market security is determined 
by the Investment Adviser to be of comparable quality.
---------------------------------------------------------------------------

    \81\ See note 10, supra.
    \82\ See note 11, supra.
    \83\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Swedish kronor. The Fund will 
enter into spot foreign exchange contracts only in Swedish kronor and 
mainly for the purpose of taking long positions in the Swedish krona. 
Because the spot foreign exchange contracts entered into by the Fund 
will be spot transactions and typically settle within two business 
days, in order to maintain exposure to the Swedish krona, the Fund will 
continuously enter into new spot foreign exchange contracts by entering 
into two simultaneous trades.\84\ The Fund will not enter into forward 
foreign exchange contracts.\85\
---------------------------------------------------------------------------

    \84\ See note 13, supra.
    \85\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Swedish krona (``SEK'') is 
a floating currency. The independent Riksbank (the Swedish Central 
Bank) is responsible for monetary policy with the objective of 
maintaining price stability. The Swedish krona spot market is fully 
convertible and tradable 24 hours a day. EUR/SEK and NOK/SEK have deep 
liquidity. The average USD/SEK bid/ask spread is 25-40 pips 
(.0025-.0040 SEK). The average daily trading volume for Swedish krona 
spot transactions is $19 billion.\86\ The average daily volatility over 
the last five years was 2.736%. Trading volume is heaviest during the 
European session. Volumes are lighter, but well supported throughout 
the New York session.
---------------------------------------------------------------------------

    \86\ See note 15, supra.
---------------------------------------------------------------------------

iShares Swiss Franc Cash Rate Fund
    According to the Registration Statement, the iShares Swiss Franc 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
Swiss franc against the United States dollar and (ii) the yield of the 
Swiss franc, minus the Fund's fees and expenses. ``Yield'' refers to 
the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Swiss francs. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Swiss francs.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\87\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Swiss franc (against delivery of the United States dollar). Under 
normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Swiss franc, reflecting: (i) 
The increase or decrease in the exchange rate of the Swiss franc 
against the United States dollar and (ii) the yield of the Swiss franc, 
minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \87\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Swiss franc. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\88\ U.S. corporate and commercial 
debt instruments,\89\ and bank notes and similar demand deposits. The 
Fund's assets also may be invested in short-term debt instruments and 
bank notes and similar demand deposits denominated in the Swiss franc 
from time to time when the Investment Adviser believes these securities 
may help the Fund to achieve its investment objective. All short-term 
debt securities acquired by the Fund will be rated investment grade by 
at least one NRSRO or, if unrated, deemed by the Investment Adviser to 
be of equivalent quality.\90\ The Fund may also invest its assets in 
money market funds (including funds that are managed by the Investment 
Adviser or one of its affiliates), cash and cash equivalents. All money 
market securities acquired by the Fund will be rated investment grade. 
The Fund does not intend to invest in any unrated money market 
securities. However, the Fund may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Investment Adviser to be of 
comparable quality.
---------------------------------------------------------------------------

    \88\ See note 10, supra.
    \89\ See note 11, supra.
    \90\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a

[[Page 14611]]

specified purchase price expressed in United States dollars, a 
specified amount of Swiss francs. The Fund will enter into spot foreign 
exchange contracts only in Swiss francs and mainly for the purpose of 
taking long positions in the Swiss franc. Because the spot foreign 
exchange contracts entered into by the Fund will be spot transactions 
and typically settle within two business days, in order to maintain 
exposure to the Swiss franc, the Fund will continuously enter into new 
spot foreign exchange contracts by entering into two simultaneous 
trades.\91\ The Fund will not enter into forward foreign exchange 
contracts.\92\
---------------------------------------------------------------------------

    \91\ See note 13, supra.
    \92\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Swiss franc (``CHF'') is a 
floating currency. The Swiss National Bank conducts the country's 
monetary policy as an independent central bank. Its primary goal is to 
ensure price stability, while taking due account of economic 
developments. The Swiss franc spot market is fully convertible and 
tradable 24 hours a day without restriction. The Swiss franc is 
traditionally considered a safe haven currency. The average USD/CHF 
bid/ask spread is 2-5 pips (.0002-.0005 CHF). The average daily trading 
volume for Swiss franc spot transactions is $92 billion.\93\ The 
average daily volatility over the last five years was 2.3123%. Trading 
volume in USD/CHF is deep during the London session, and there is high 
currency flow around the London fixing and London close.
---------------------------------------------------------------------------

    \93\ See note 15, supra.
---------------------------------------------------------------------------

iShares Thai Offshore Baht Cash Rate Fund
    According to the Registration Statement, the iShares Thai Offshore 
Baht Cash Rate Fund will seek to provide its shareholders a daily 
return that reflects: (i) The increase or decrease in the exchange rate 
of the Thai offshore baht against the United States dollar and (ii) the 
yield of the Thai offshore baht, minus the Fund's fees and expenses. 
``Yield'' refers to the yield an investor would expect to receive if 
they invested in an overnight or similar cash or cash equivalent 
investment denominated in Thai offshore baht. The Fund also will seek 
to preserve liquidity, and maintain stability of principal and preserve 
capital, each as measured in Thai offshore bahts.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\94\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Thai offshore baht (against delivery of the United States dollar). 
Under normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The Thai onshore baht is the 
everyday currency used to purchase goods and services in Thailand. The 
Thai offshore baht is the foreign exchange currency for Thailand; 
offshore banks cannot exchange Thai onshore baht for foreign currency. 
The strategy of combining investments in short-term fixed income 
securities and spot foreign exchange contracts is designed to provide 
financial exposure substantially similar to a purchase of the Thai 
offshore baht, reflecting: (i) The increase or decrease in the exchange 
rate of the Thai offshore baht against the United States dollar and 
(ii) the yield of the Thai offshore baht, minus the Fund's fees and 
expenses.
---------------------------------------------------------------------------

    \94\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Thai offshore baht. The short-term 
debt securities held by the Fund generally will consist of high quality 
debt obligations and may include, but are not limited to, obligations 
issued by the U.S. government and its agencies and instrumentalities, 
U.S. municipal variable rate demand notes,\95\ U.S. corporate and 
commercial debt instruments \96\ and bank notes and similar demand 
deposits. The Fund's assets also may be invested in short-term debt 
instruments, and bank notes and similar demand deposits denominated in 
the Thai offshore baht from time to time when the Investment Adviser 
believes these debt securities may help the Fund achieve its investment 
objective. All short-term debt securities acquired by the Fund will be 
rated investment grade by at least one NRSRO or, if unrated, deemed by 
the Investment Adviser to be of equivalent quality.\97\ The Fund may 
also invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality.
---------------------------------------------------------------------------

    \95\ See note 10, supra.
    \96\ See note 11, supra.
    \97\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Thai offshore baht. The Fund will 
enter into spot foreign exchange contracts only in Thai offshore baht 
and mainly for the purpose of taking long positions in the Thai 
offshore baht. Because the spot foreign exchange contracts entered into 
by the Fund will be spot transactions and typically settle within two 
business days, in order to maintain exposure to the Thai offshore baht, 
the Fund will continuously enter into new spot foreign exchange 
contracts by entering into two simultaneous trades.\98\ The Fund will 
not enter into forward foreign exchange contracts.\99\
---------------------------------------------------------------------------

    \98\ See note 13, supra.
    \99\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Thai baht (``THB'') is a 
managed floating currency. It is deliverable and convertible. The Bank 
of Thailand (``BoT'') sets and implements monetary policy. The foreign 
exchange market is the most competitive financial instrument market in 
Thailand. The BoT has important influence over the size and liquidity 
of the market due to onshore-offshore currency regulations. The average 
offshore spot transaction is $3 million. The average bid/ask spread is 
1 pip (0.01 THB). The average daily trading volume for Thai baht spot 
transactions is $3 billion.\100\ The average daily volatility over the 
last five years was 0.976%. Trading volume is relatively deep from 9:00 
a.m. to 4:00 p.m. Bangkok local time (Greenwich Mean Time plus seven 
hours).
---------------------------------------------------------------------------

    \100\ See note 15, supra.

---------------------------------------------------------------------------

[[Page 14612]]

iShares Turkish Lira Cash Rate Fund
    According to the Registration Statement, the iShares Turkish Lira 
Cash Rate Fund will seek to provide its shareholders a daily return 
that reflects: (i) The increase or decrease in the exchange rate of the 
Turkish lira against the United States dollar and (ii) the yield of the 
Turkish lira, minus the Fund's fees and expenses. ``Yield'' refers to 
the yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
Turkish lira. The Fund also will seek to preserve liquidity, and 
maintain stability of principal and preserve capital, each as measured 
in Turkish lira.
    According to the Registration Statement, the Fund will be an 
actively managed ETF that will seek to achieve its investment objective 
by investing, under normal circumstances,\101\ substantially all of its 
assets in short-term securities denominated in United States dollars 
and a matching notional amount of spot foreign exchange contracts 
(generally required to be settled within two business days) to purchase 
the Turkish lira (against delivery of the United States dollar). Under 
normal circumstances, there will be a 1:1 ratio between the fixed 
income securities and spot contracts. The strategy of combining 
investments in short-term fixed income securities and spot foreign 
exchange contracts is designed to provide financial exposure 
substantially similar to a purchase of the Turkish lira, reflecting: 
(i) The increase or decrease in the exchange rate of the Turkish lira 
against the United States dollar and (ii) the yield of the Turkish 
lira, minus the Fund's fees and expenses.
---------------------------------------------------------------------------

    \101\ See note 9, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the Turkish lira. The short-term debt 
securities held by the Fund generally will consist of high quality debt 
obligations and may include, but are not limited to, obligations issued 
by the U.S. government and its agencies and instrumentalities, U.S. 
municipal variable rate demand notes,\102\ U.S. corporate and 
commercial debt instruments \103\ and bank notes, and similar demand 
deposits. The Fund's assets also may be invested in short-term debt 
instruments and bank notes and similar demand deposits denominated in 
the Turkish lira from time to time when the Investment Adviser believes 
these debt securities may help the Fund achieve its investment 
objective. All short-term debt securities acquired by the Fund will be 
rated investment grade by at least one NRSRO or, if unrated, deemed by 
the Investment Adviser to be of equivalent quality.\104\ The Fund may 
also invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash and 
cash equivalents. All money market securities acquired by the Fund will 
be rated investment grade. The Fund does not intend to invest in any 
unrated money market securities. However, the Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality.
---------------------------------------------------------------------------

    \102\ See note 10, supra.
    \103\ See note 11, supra.
    \104\ See note 12, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Fund will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by the Fund will require the 
Fund to purchase from a foreign exchange dealer selected by the 
Investment Adviser, at a specified purchase price expressed in United 
States dollars, a specified amount of Turkish lira. The Fund will enter 
into spot foreign exchange contracts only in Turkish lira and mainly 
for the purpose of taking long positions in the Turkish lira. Because 
the spot foreign exchange contracts entered into by the Fund will be 
spot transactions and typically settle within two business days, in 
order to maintain exposure to the Turkish lira, the Fund will 
continuously enter into new spot foreign exchange contracts by entering 
into two simultaneous trades.\105\ The Fund will not enter into forward 
foreign exchange contracts.\106\
---------------------------------------------------------------------------

    \105\ See note 13, supra.
    \106\ See note 14, supra.
---------------------------------------------------------------------------

    According to the Investment Adviser, the Turkish lira (``TRY'') is 
a managed freely floating currency, and is freely convertible. The 
Central Bank of the Republic of Turkey is responsible for carrying out 
the government's monetary policy. Turkey's spot transactions market is 
one of the most liquid in the emerging markets, and has an Interbank 
minimum transaction size of $1,000. The average spot transaction is $1 
million. The average bid/ask spread is 5 pips (0.0005 TRY). The average 
daily trading volume for Turkish lira spot transactions is $8 
billion.\107\ The average daily volatility over the last five years was 
2.579%. Emerging European currencies such as the Turkish lira are 
supported by the major global banks and liquidity providers. Trading 
volume is deepest throughout the European trading session.
---------------------------------------------------------------------------

    \107\ See note 15, supra.
---------------------------------------------------------------------------

Other Investments
    According to the Registration Statement, in addition to the 
principal investments described above, each Fund will invest in other 
short-term instruments, including other money market instruments, on an 
ongoing basis to provide liquidity or for other reasons.
    While each Fund may invest in money market instruments as part of 
its principal investment strategies, the Investment Adviser expects 
that, under normal circumstances, each Fund also intends to invest in 
money market securities (as described below) in a manner consistent 
with its investment objective in order to help manage cash flows in and 
out of the Fund, such as in connection with payment of dividends or 
expenses, and to satisfy margin requirements, or to provide collateral. 
For the Funds' purposes, money market securities include: short-term, 
high-quality obligations issued or guaranteed by the U.S. Treasury or 
the agencies or instrumentalities of the U.S. government; short-term, 
high-quality securities issued or guaranteed by non-U.S. governments, 
agencies and instrumentalities; non-convertible corporate debt 
securities with remaining maturities of not more than 397 days that 
satisfy ratings requirements under Rule 2a-7 of the 1940 Act; 
repurchase agreements backed by U.S. government securities; money 
market mutual funds; commercial paper; U.S. municipal variable rate 
demand notes and deposits and other obligations of U.S. and non-U.S. 
banks and financial institutions. All money market securities acquired 
by the Funds will be rated investment grade. The Funds do not intend to 
invest in any unrated money market securities. However, a Fund may do 
so, to a limited extent, such as where a rated money market security 
becomes unrated, if such money market security is determined by the 
Investment Adviser to be of comparable quality.
    According to the Registration Statement, each Fund may hold up to

[[Page 14613]]

15% of its net assets in securities that are illiquid (calculated at 
the time of investment), including Rule 144A Securities.\108\ The 
aggregate value of all of a Fund's illiquid securities and Rule 144A 
Securities shall not exceed 15% of a Fund's total assets. Each Fund 
will monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid securities.
---------------------------------------------------------------------------

    \108\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the 1933 Act).
---------------------------------------------------------------------------

    According to the Registration Statement, a Fund may not concentrate 
its investments (i.e., invest 25% or more of its total assets in the 
securities of a particular industry or industry group),\109\ provided 
that this restriction does not limit a Fund's: (i) Investments in its 
FX Base Currency, (ii) investments in securities of other investment 
companies, (iii) investments in securities issued or guaranteed by the 
U.S. government, its agencies or instrumentalities, certificates of 
deposit, and bankers' acceptances, (iv) investments in repurchase 
agreements collateralized by U.S. government securities, or (v) 
investments in U.S. municipal securities.
---------------------------------------------------------------------------

    \109\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
---------------------------------------------------------------------------

    Each Fund intends to qualify as a regulated investment company 
under Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue 
Code.\110\ The Funds will not invest in any non-U.S registered equity 
securities. The Funds will not invest in options contracts, futures 
contracts or swap agreements.\111\ Each Fund's investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage.
---------------------------------------------------------------------------

    \110\ 26 U.S.C. 851.
    \111\ The Investment Adviser believes that the foreign exchange 
contracts entered into by the Funds are properly characterized as 
``spot'' foreign exchange transactions as of the date of this 
filing. However, legal requirements and interpretations surrounding 
such transactions may change, which may lead market participants 
such as the Funds' foreign exchange counterparties to characterize 
such transactions as swap agreements.
---------------------------------------------------------------------------

    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca 
Equities Rule 8.600(d)(2)(B)(ii), the Investment Adviser will implement 
and maintain, or be subject to, procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
actual components of the Funds' portfolios. The Exchange represents 
that, for initial and/or continued listing, the Funds will be in 
compliance with Rule 10A-3 \112\ under the Exchange Act, as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the net asset value per Share (``NAV'') \113\ will be calculated 
daily and that the NAV and the Disclosed Portfolio as defined in NYSE 
Arca Equities Rule 8.600(c)(2) will be made available to all market 
participants at the same time.
---------------------------------------------------------------------------

    \112\ 17 CFR 240.10A-3.
    \113\ For more information regarding the valuation of Fund 
investments in calculating a Fund's NAV, see the Registration 
Statement.
---------------------------------------------------------------------------

Determination of Net Asset Value
    According to the Registration Statement, the NAV for each Fund 
normally will be determined once daily Monday through Friday, generally 
as of the regularly scheduled close of business of the New York Stock 
Exchange (``NYSE'') (normally 4:00 p.m. E.T.) on each day that the NYSE 
is open for trading, based on prices at the time of closing provided 
that (a) any Fund assets or liabilities denominated in currencies other 
than the United States dollar will be translated into United States 
dollars at the prevailing market rates on the date of valuation as 
quoted by one or more data service providers and (b) U.S. fixed-income 
assets may be valued as of the announced closing time for trading in 
fixed-income instruments in a particular market or exchange. The NAV of 
each Fund will be 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.
    The value of the securities and other assets and liabilities held 
by each Fund, are determined pursuant to valuation policies and 
procedures approved by the Trust's Board of Trustees (the ``Board'').
    Generally, trading in non-U.S. securities, U.S. government 
securities, money market instruments and certain fixed-income 
securities is substantially completed each day at various times prior 
to the close of business on the NYSE. The values of such securities 
used in computing the NAV of the Funds will be determined as of such 
times. Non-U.S. securities held by the Funds may trade on weekends or 
other days when the Funds do not price their Shares. As a result, the 
NAV of the Funds may change on days when authorized participants will 
not be able to purchase or redeem Fund Shares, as described below.
    When market quotations are not readily available or are believed by 
the Investment Adviser to be unreliable, each Fund's investments will 
be valued at fair value.\114\ Fair value determinations will be made by 
the Investment Adviser in accordance with policies and procedures 
approved by the Funds' Board. The Investment Adviser may conclude that 
a market quotation is not readily available or is unreliable if a 
security or other asset or liability does not have a price source due 
to its lack of liquidity, if a market quotation differs significantly 
from recent price quotations or otherwise no longer appears to reflect 
fair value, where the security or other asset or liability is thinly 
traded, or where there is a significant event subsequent to the most 
recent market quotation. A ``significant event'' is an event that, in 
the judgment of the Investment Adviser, is likely to cause a material 
change to the closing market price of the asset or liability held by a 
Fund. Non-U.S. securities or other instruments whose values are 
affected by volatility that occurs in U.S. markets on a trading day

[[Page 14614]]

after the close of non-U.S. securities markets may be fair valued.
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    \114\ According to the Registration Statement, fair value 
represents a good faith approximation of the value of an asset or 
liability. The fair value of an asset or liability held by a Fund is 
the amount the Fund might reasonably expect to receive from the 
current sale of that asset or the cost to extinguish that liability 
in an arm's-length transaction. Valuing a Fund's investments using 
fair value pricing will result in prices that may differ from 
current market valuations and that may not be the prices at which 
those investments could have been sold during the period in which 
the particular fair values were used.
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    The value of assets or liabilities denominated in foreign 
currencies will be converted into United States dollars using 
prevailing or generally accepted exchange rates.
Creations and Redemptions of Shares
    According to the Registration Statement, the Trust will issue and 
redeem Shares of each Fund on a continuous basis only in large 
specified numbers of Shares through the Distributor or its agent, 
without a sales load, at a price based on the Fund's NAV next 
determined after receipt, on any business day, of an order received by 
the Distributor or its agent in proper form. The Funds generally will 
offer and redeem Shares solely for cash. However, each Fund may also 
accept securities in lieu of cash at the discretion of the Fund 
(``Deposit Securities'').\115\
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    \115\ According to the Fund, the Deposit Securities would be 
composed of United States dollar-denominated money market 
instruments.
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    The consideration for purchase of Shares of a Fund will generally 
consist of an amount of cash equal in value to the holdings of the Fund 
in exchange for a specified number of Fund Shares (which must be equal 
to or greater than the Fund's ``Minimum Subscription Size''). It is 
currently anticipated that the Minimum Subscription Size for the Funds 
will generally be 50,000 Shares (although may range from 25,000 to 
100,000 Shares, representing Minimum Subscription Sizes ranging from 
$1.25 million to $10 million, and may vary from Fund to Fund), though 
the number may change from time to time, including prior to the listing 
of the Funds. The exact number of Shares that will constitute each 
Fund's Minimum Subscription Size will be disclosed in the Registration 
Statement of the Fund. In the case of an in-kind transaction, the 
Investment Adviser will make available through the C[uuml]rex Group's 
technology platform on each business day prior to the opening of 
business on the Exchange, (1) the list of names and the required number 
of shares of each Deposit Security and the amount of cash necessary to 
purchase the shares (together, the cash and any Deposit Securities are 
referred to herein as the ``Fund Deposit''), and (2) the designated 
portfolio of securities that will be applicable (subject to possible 
amendment or correction) to redemption requests received in proper form 
on that day (``Fund Securities''), and an amount of cash applicable to 
a redemption (the ``Cash Amount,'' as described below), in each case 
based on information as of the end of the previous business day for 
each Fund.
    Shares may be purchased or redeemed only by or through a Depository 
Trust Company participant that has entered into an Authorized Purchaser 
Agreement with the Distributor.
    To initiate an order for Shares or to submit a request to redeem 
Shares of a Fund (except the iShares New Zealand Dollar Cash Rate 
Fund), an authorized participant must submit to the Distributor or its 
agent an irrevocable order to purchase or redeem Shares of a Fund 
generally before 4:00 p.m. E.T. on any business day to receive that 
day's NAV. To initiate an order for Shares or to submit a request to 
redeem Shares of the iShares New Zealand Dollar Cash Rate Fund, an 
authorized participant must submit to the Distributor or its agent an 
irrevocable order to purchase or redeem Shares of a Fund generally 
before 7:00 a.m., New Zealand Time on any business day to receive that 
day's NAV.
    To purchase Shares of a Fund, the authorized participant must make 
available on or before the contractual settlement date, by means 
satisfactory to a Fund, cash in immediately available or same day funds 
estimated by a Fund to be sufficient to pay the Fund Deposit (exclusive 
of any Deposit Securities) next determined after acceptance of the 
purchase order, together with the applicable transaction fees.
    Shares of a Fund may be redeemed by authorized participants only in 
aggregations equal to or greater than such Fund's Minimum Subscription 
Size at their NAV next determined after receipt of a redemption request 
in proper form by the Distributor or its agent and only on a business 
day. The Trust may, in its sole discretion, substitute a ``cash in 
lieu'' amount to replace any Fund Security.
    For all cash redemptions, a Fund will deliver cash to the 
authorized participant equal to the NAV of the Shares being redeemed. 
If redemptions are not paid in cash, the redemption proceeds for Shares 
generally will consist of Fund Securities, plus an amount equal to the 
difference between the NAV of the Shares being redeemed, as next 
determined after the receipt of a redemption request in proper form, 
and the value of Fund Securities (the ``Cash Amount''), less a 
redemption transaction fee.
    Additional information regarding the Trust, the Funds and the 
Shares, including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings, disclosure policies, 
distributions and taxes is included in the Registration Statement. All 
terms relating to the Funds that are referred to but not defined in 
this proposed rule change are defined in the Registration Statement.
Availability of Information
    The Funds' Web site (www.iShares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Funds that may be downloaded. The Funds' Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Funds, (1) the prior business day's 
reported closing price, NAV and mid-point of the bid/ask spread at the 
time of calculation of such NAV (the ``Bid/Ask Price''),\116\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
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    \116\ The Bid/Ask Price of a Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by each Fund and its service 
providers.
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    On each business day, before commencement of trading in Shares in 
the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the 
Exchange, the Funds will disclose on www.iShares.com the identities and 
quantities of the Funds' portfolio holdings that will form the basis 
for the Funds' calculation of NAV at the end of the business day.\117\
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    \117\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, a Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Funds will disclose on www.iShares.com for 
each portfolio security and other financial instrument of the Funds the 
following information: ticker symbol (if applicable), name of 
securities and financial instruments, number of shares or dollar value 
of securities and financial instruments held in the portfolio, and 
percentage weighting of the securities and financial instruments in the 
portfolio. The Web site information will be publicly available at no 
charge. In addition, intra-day, closing and settlement prices or other 
values of the debt securities, fixed income instruments, and other 
investments held by the Funds are also generally readily available from 
the national securities exchanges trading such securities,

[[Page 14615]]

automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters. Foreign 
currency exchange rates are generally readily available from on-line 
information services such as Bloomberg or Reuters.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for a Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the NYSE via the National Securities Clearing Corporation. The NAV of 
the Funds will normally be determined as of the close of the regular 
trading session on the NYSE (ordinarily 4:00 p.m. E.T.) on each 
business day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' Shareholder Reports, and their Form 
N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov. 
Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares will be available via the Consolidated Tape Association 
(``CTA'') high-speed line.
    In addition, the Indicative Optimized Portfolio Value 
(``IOPV''),\118\ which is the Portfolio Indicative Value as defined in 
NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated at 
least every 15 seconds during the Core Trading Session by one or more 
major market data vendors.\119\ The dissemination of the IOPV, together 
with the Disclosed Portfolio, will allow investors to determine the 
value of the underlying portfolio of the Funds on a daily basis and to 
provide a close estimate of that value throughout the trading day. The 
intra-day, closing and settlement prices or other values of the 
portfolio securities and other Fund investments are also generally 
readily available from the national securities exchanges trading such 
securities, automated quotation systems, published or other public 
sources, or on-line information services such as Bloomberg or Reuters.
---------------------------------------------------------------------------

    \118\ According to the Registration Statement, the IOPV will be 
based on the current value of the securities, spot foreign exchange 
contracts and/or cash required to be deposited in exchange for Fund 
Shares. The IOPV will not necessarily reflect the precise 
composition of the current portfolio of securities held by a Fund at 
a particular point in time or the best possible valuation of the 
current portfolio. Therefore, the IOPV should not be viewed as a 
``real-time'' update of each Fund's NAV, which is computed only once 
a day. The IOPV will be generally determined by using both current 
market quotations and/or price quotations obtained from broker-
dealers that may trade in the portfolio securities and other 
instruments held by the Funds.
    \119\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values published on CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds.\120\ Trading in Shares of a Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the 
relevant Fund; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. Trading in the Shares will be subject to NYSE Arca Equities 
Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares 
of a Fund may be halted.
---------------------------------------------------------------------------

    \120\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\121\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and applicable federal securities laws.
---------------------------------------------------------------------------

    \121\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations. FINRA, on 
behalf of the Exchange, will communicate as needed regarding trading in 
the Shares with other markets that are members of the Intermarket 
Surveillance Group (``ISG'') or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\122\
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    \122\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders (``ETP Holders'') in an Information 
Bulletin (``Bulletin'') of the special characteristics and risks 
associated with trading the Shares. Specifically, the Bulletin will 
discuss the following: (1) The procedures for purchases and redemptions 
of Shares in aggregations equal to or greater than the relevant Fund's 
Minimum Subscription Size (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares

[[Page 14616]]

during the Opening and Late Trading Sessions when an updated Portfolio 
Indicative Value will not be calculated or publicly disseminated; (4) 
how information regarding the Portfolio Indicative Value is 
disseminated; (5) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) of the Act \123\ that an exchange 
have rules that are designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to, and perfect the mechanism of a free and open 
market and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Investment Adviser has 
implemented a ``fire wall'' with respect to its affiliated broker-
dealers regarding access to information concerning the composition and/
or changes in the Funds' portfolios. All short-term debt and money 
market securities acquired by the Funds will be rated investment grade 
by at least one NRSRO or, if unrated, deemed by the Investment Adviser 
to be of equivalent quality.\124\ The Fund will invest only in 
corporate bonds that the Investment Adviser deems to be sufficiently 
liquid at time of investment. Generally a non-U.S. corporate bond must 
have $200 million (or an equivalent value if denominated in a currency 
other than United States dollars) or more par amount outstanding and 
significant par value traded to be considered as an eligible 
investment, and a U.S. corporate bond must have $100 million (or an 
equivalent value if denominated in a currency other than United States 
dollars) or more par amount outstanding and significant par value 
traded to be considered as an eligible investment. The Exchange may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. The aggregate value of all of each 
Fund's illiquid securities and Rule 144A Securities shall not exceed 
15% of the Fund's total assets. The Funds will not invest in any non-
U.S registered equity securities. Each Fund's investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage. The Funds will not invest in options contracts, 
futures contracts or swap agreements.\125\
---------------------------------------------------------------------------

    \124\ See note 12, supra.
    \125\ See note 111, supra.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Funds and the Shares, 
thereby promoting market transparency. Moreover, the IOPV will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during the Exchange's Core Trading Session. On each 
business day, before commencement of trading in Shares in the Core 
Trading Session on the Exchange, the Funds will disclose on their Web 
site the Disclosed Portfolio that will form the basis for the Funds' 
calculation of NAV at the end of the business day. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotation 
and last sale information will be available via the CTA high-speed 
line. Price information for the debt securities, fixed income 
instruments, and other investments held by the Funds will be available 
through major market data vendors and/or the securities exchange on 
which they are listed and traded. Foreign currency exchange rates are 
generally readily available from on-line information services such as 
Bloomberg or Reuters. The Web site for the Funds will include a form of 
the prospectus for the Funds and additional data relating to NAV and 
other applicable quantitative information. Moreover, prior to the 
commencement of trading, the Exchange will inform its ETP Holders in an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of a Fund will be 
halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable, and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of a Fund may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Funds' 
holdings, the IOPV, the Disclosed Portfolio, and quotation and last 
sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Funds' holdings, 
the IOPV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Exchange Act. The Exchange notes 
that the proposed rule change will facilitate the listing and trading 
of additional types of actively-managed exchange-traded products that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

[[Page 14617]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-18 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2013-18. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NYSEArca-2013-18 and should be 
submitted on or before March 27, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\126\
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    \126\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05124 Filed 3-5-13; 8:45 am]
BILLING CODE 8011-01-P