This Amendment No. 1 amends the Prospectus in respect of the exchange-traded funds listed below (collectively, the ishares Funds ).

Transcription

1 Amendment No. 1 dated September 2, 2016 to the prospectus dated March 29, 2016 (the Prospectus ). This Amendment No. 1 amends the Prospectus in respect of the exchange-traded funds listed below (collectively, the ishares Funds ). ishares Conservative Short Term Strategic Fixed Income ETF ( XSC ) ishares Conservative Strategic Fixed Income ETF ( XSE ) ishares Short Term Strategic Fixed Income ETF ( XSI ) This Amendment No. 1 to the Prospectus provides certain additional information relating to the ishares Funds. The Prospectus should be read subject to this additional information. In all other respects, the disclosure in the Prospectus is not revised. All capitalized terms not defined herein have the respective meanings set out in the Prospectus. SUMMARY OF AMENDMENTS Investment Strategy Enhancements In a press release issued August 26, 2016, BlackRock Canada announced changes to the investment strategy of each of the ishares Funds to clarify and enhance the manner in which a proprietary portfolio optimization process is used in the construction of the ishares Funds portfolios. In constructing the portfolio of each ishares Fund, BlackRock Canada utilizes a proprietary portfolio optimization process to estimate efficient portfolios with total volatility levels that are consistent with a broadly diversified portfolio of Canadian fixed income securities. As an additional risk management technique, going forward, the process will also be configured to estimate efficient portfolios with expected yield or long-term expected returns that fall within a specified range relative to the broader Canadian bond market, as further described below. Prior to implementing any such portfolio, BlackRock Canada (or BTC) reviews the output of the portfolio optimization process and may make adjustments based on market outlook and other factors, such as trading costs. The additional optimization process will initially be configured to: (a) in the case of XSC, estimate an efficient portfolio with a targeted average yield to maturity ranging between +50 and +100 bps above the FTSE TMX Canada Universe Bond Index; (b) in the case of XSI, estimate an efficient portfolio with a targeted average yield to maturity ranging between +100 and +150 bps above the FTSE TMX Canada Universe Bond Index; and (c) in the case of XSE, estimate an efficient portfolio with a targeted long-term expected return ranging between +75 and +125 bps above the FTSE TMX Canada Universe Bond Index. In each case, the configuration of the optimization process may change from time to time in BlackRock Canada s discretion, subject to each fund s investment objective. The enhancements to the optimization process do not impact the risk rating currently assigned to each ishares Fund.

2 SUMMARY OF CERTAIN CHANGES TO PROSPECTUS DISCLOSURE The following amendments are made to the Prospectus: Investment Strategies In the section of the Prospectus entitled INVESTMENT STRATEGIES, the second paragraph under subheading ishares Conservative Short Term Strategic Fixed Income ETF on page 13 is deleted in its entirety and replaced with the following: In constructing XSC s portfolio, BlackRock Canada utilizes a proprietary portfolio optimization process to estimate an efficient portfolio with a total volatility level that is consistent with a broadly diversified portfolio of Canadian fixed income securities including government bonds, investment grade corporate bonds, high yield securities, and other types of fixed income securities. The optimization process is configured to estimate an efficient portfolio with a targeted average yield to maturity ranging between +50 and +100 bps above the FTSE TMX Canada Universe Bond Index. The configuration of the optimization process may change from time to time in BlackRock Canada s discretion, subject to XSC s investment objective. Prior to implementation of any such portfolio, BlackRock Canada (or BTC) reviews the output of the portfolio optimization process and may make adjustments based on market outlook and other factors, such as trading costs. BlackRock Canada also intends to: (i) limit XSC s exposure to interest rate risk (generally by limiting average portfolio duration to five years or less); and (ii) manage the concentration of XSC s portfolio to the individual sub-classes of the fixed income asset class on an overall portfolio basis. XSC s portfolio will generally be rebalanced on a quarterly basis, but it may also be rebalanced more frequently if BlackRock Canada determines that it is appropriate to do so. XSC s total direct and indirect exposure to high yield securities (securities rated below investment grade) will generally be limited to 25% when its portfolio is rebalanced. In the section of the Prospectus entitled INVESTMENT STRATEGIES, the second paragraph under subheading ishares Conservative Strategic Fixed Income ETF on page 13 is deleted in its entirety and replaced with the following: In constructing XSE s portfolio, BlackRock Canada utilizes a proprietary portfolio optimization process to estimate an efficient portfolio with a total volatility level that is consistent with a broadly diversified portfolio of Canadian fixed income securities including government bonds, investment grade corporate bonds, high yield securities, and other types of fixed income securities. The optimization process is also configured to estimate an efficient portfolio with a targeted long-term expected return ranging between +75 and +125 bps above the FTSE TMX Canada Universe Bond Index. The configuration of the optimization process may change from time to time in BlackRock Canada s discretion, subject to XSE s investment objective. Prior to implementation of any such portfolio, BlackRock Canada (or BTC) reviews the output of the portfolio optimization process and may make adjustments based on market outlook and other factors, such as trading costs. BlackRock Canada also intends to manage the concentration of XSE s portfolio to the individual sub-classes of the fixed income asset class on an overall portfolio basis. XSE s portfolio will generally be rebalanced on a quarterly basis, but it may also be rebalanced more frequently if BlackRock Canada determines that it is appropriate to do so. XSE s total direct and indirect exposure to high yield securities (securities rated below investment grade) will generally be limited to 25% when its portfolio is rebalanced. In the section of the Prospectus entitled INVESTMENT STRATEGIES, the third paragraph under sub-heading ishares Short Term Strategic Fixed Income ETF on pages is deleted in its entirety and replaced with the following: In constructing XSI s portfolio, BlackRock Canada utilizes a proprietary portfolio optimization process to estimate an efficient portfolio with a total volatility level that is consistent with a broadly diversified portfolio of Canadian fixed income securities. The optimization process is configured to estimate an efficient portfolio with a targeted average yield to maturity ranging between +100 and +150 bps above the FTSE TMX Canada Universe Bond Index. The configuration of the optimization process may change from time to time in BlackRock Canada s discretion, subject to XSI s investment objective. Prior to implementation of any such portfolio, BlackRock Canada (or BTC) reviews the output of the portfolio optimization process and may make adjustments based on market - 2 -

3 outlook and other factors, such as trading costs. BlackRock Canada also intends to: (i) limit XSI s exposure to interest rate risk (generally by limiting average portfolio duration to five years or less); and (ii) manage the concentration of XSI s portfolio to the individual sub-classes of the fixed income asset class on an overall portfolio basis; however, XSI s exposure to high yield securities may be significant from time to time. XSI s portfolio will generally be rebalanced on a quarterly basis, but it may also be rebalanced more frequently if BlackRock Canada determines that it is appropriate to do so

4 CERTIFICATE OF THE ishares FUNDS, THE TRUSTEE AND THE MANAGER ON BEHALF OF ishares Conservative Short Term Strategic Fixed Income ETF ishares Short Term Strategic Fixed Income ETF ishares Conservative Strategic Fixed Income ETF The prospectus dated March 29, 2016, as amended by this Amendment No. 1, together with the documents incorporated herein by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by the prospectus dated March 29, 2016, as amended by this Amendment No. 1, as required by the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon Territory, Northwest Territories and Nunavut. Dated the 2 nd day of September, BLACKROCK ASSET MANAGEMENT CANADA LIMITED, as Trustee and Manager of the ishares Funds (SIGNED) MARCIA MOFFAT Chief Executive Officer (SIGNED) KEVIN PERRY Chief Financial Officer On behalf of the Board of Directors of BlackRock Asset Management Canada Limited (SIGNED) WARREN COLLIER Director (SIGNED) LEE WANIE Director C - 1

5 No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. PROSPECTUS Continuous Offering March 29, 2016 This prospectus qualifies the distribution of units ( Units ) of the exchange-traded funds listed below (the ishares Funds ), each of which was created under the laws of the Province of Ontario by BlackRock Asset Management Canada Limited ( BlackRock Canada ). BlackRock Canada is the trustee, manager and portfolio adviser of the ishares Funds and is responsible for the day-to-day administration of the ishares Funds. See Organization and Management Details of the ishares Funds Trustee, Manager and Portfolio Adviser of the ishares Funds. The ishares Funds are organized as trusts and unitholders of the ishares Funds ( Unitholders ) are not shareholders of a corporation. ishares Conservative Short Term Strategic Fixed Income ETF ( XSC ) ishares Conservative Strategic Fixed Income ETF ( XSE ) ishares Short Term Strategic Fixed Income ETF ( XSI ) ishares Diversified Monthly Income ETF ( XTR ) Investment Objectives ishares Conservative Short Term Strategic Fixed Income ETF XSC seeks to generate income for Unitholders by investing primarily in securities of one or more exchange-traded funds managed by BlackRock Canada or an affiliate ( ishares ETFs ) that provide exposure to Canadian and international fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments, while adhering to certain portfolio constraints upon rebalancing. In seeking to generate income, XSC will, upon rebalancing, generally: (i) limit its total exposure to high yield securities to 25% of its portfolio; and, (ii) limit its exposure to interest rate risk by maintaining a portfolio duration of less than five years. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSC seeks to hedge any resulting U.S. dollar or other foreign currency exposure, as applicable, back to Canadian dollars. See Investment Objectives. ishares Conservative Strategic Fixed Income ETF XSE seeks to generate income for Unitholders by investing primarily in securities of one or more ishares ETFs that provide exposure to Canadian and international fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments, while adhering to certain portfolio constraints upon rebalancing. In seeking to generate income, XSE will, upon rebalancing, generally limit its total exposure to high yield securities to 25% of its portfolio. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSE seeks to hedge any resulting U.S. dollar or other foreign currency exposure, as applicable, back to Canadian dollars. See Investment Objectives.

6 ishares Short Term Strategic Fixed Income ETF XSI seeks to generate income for Unitholders by investing primarily in securities of one or more ishares ETFs that provide exposure to fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. See Investment Objectives. ishares Diversified Monthly Income ETF XTR seeks to provide Unitholders with a consistent monthly cash distribution, with the potential for modest long-term capital growth, by investing primarily in Canadian ishares Funds that provide exposure to a diversified portfolio of income-bearing investments. Exposure to these types of income-bearing investments may also be obtained by investing directly in them and/or through the use of derivatives. See Investment Objectives. Investment Strategies ishares Conservative Short Term Strategic Fixed Income ETF In order to achieve its investment objective, XSC invests primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSC may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSC may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Conservative Strategic Fixed Income ETF In order to achieve its investment objective, XSE invests primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSE may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSE may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Short Term Strategic Fixed Income ETF In order to achieve its investment objective, XSI will invest primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSI may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSI may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Diversified Monthly Income ETF The investment strategy of XTR is to invest primarily in income-bearing Canadian ishares Funds. XTR will invest in a portfolio that is a diversified representation of income-bearing asset classes, including, but not limited to, common equities, fixed income securities and real estate investment trusts. Exposure to these types of income-bearing investments may also be obtained by investing directly in them, by investing in other ishares ETFs, and/or through the use of derivatives. XTR may also invest in derivatives such as options, futures contracts, forward contracts, swaps, debt-like securities and index options to achieve its investment objectives and/or to hedge, or protect, against changes in asset class prices or foreign exchange risks. XTR may also invest in futures contracts in order to provide market exposure for cash held by XTR and may also hold money market instruments, securities of money market funds or cash to meet its current obligations. BlackRock Canada will develop and maintain a strategic asset allocation ( SAA ) policy for XTR that emphasizes income generation while maintaining the potential for modest long-term capital growth. XTR will - ii -

7 generally rebalance to its SAA on a quarterly basis, but may also do so more frequently if market conditions warrant. The majority of XTR s investment exposure will be to Canadian securities, but foreign asset classes may also be included as a result of their income properties or diversification benefits. BlackRock Canada will review, and may adjust, XTR s SAA from time to time, as market conditions change, and as the investible universe evolves. See Investment Strategies. Listing of Units The Units of each ishares Fund are listed on the TSX and are offered on a continuous basis. Each Unit of a class of an ishares Fund represents an equal, undivided interest in the net assets of the ishares Fund attributable to that class of Units. Investors may buy or sell Units on the TSX through a registered broker or dealer in the province or territory where the investor resides. Investors may incur customary brokerage commissions when buying or selling Units on the TSX. No fees are paid by a Unitholder to BlackRock Canada or the ishares Funds in connection with the buying or selling of Units on the TSX. Purchase, Redemption and Exchange Underwriters may purchase and redeem Units directly from the ishares Funds. Unitholders of the ishares Funds may dispose of their Units in two ways: (i) by selling their Units on the TSX at the full market price less customary brokerage commissions and expenses, or (ii) by redeeming Units for cash at a redemption price of 95% of the closing price for the applicable Units on the TSX on the effective Trading Day for the redemption. However, a cash redemption request will be subject to a maximum redemption price payable to a Unitholder of the Net Asset Value per Unit of the applicable ishares Fund. Unitholders are advised to consult their brokers or investment advisors before redeeming Units for cash. Each ishares Fund also offers additional redemption or exchange options which are available where a Unitholder redeems or exchanges a Prescribed Number of Units. See Purchase of Units and Exchange and Redemption of Units. Additional Considerations No underwriter has been involved in the preparation of the prospectus or has performed any review of the contents of the prospectus. For a discussion of the risks associated with an investment in Units of the ishares Funds, see Risk Factors. The registration and transfer of Units are effected through the book-entry only system administered by CDS Clearing and Depository Services Inc. ( CDS ). Investors in the ishares Funds do not have the right to receive physical certificates evidencing their ownership of Units. Trademarks ishares is a registered trademark of BlackRock, Inc. or its subsidiaries in the U.S. or elsewhere. Used with permission. Documents Incorporated by Reference During the period in which an ishares Fund is in continuous distribution, additional information will be available in its most recently filed comparative annual financial statements, its most recent interim financial statements filed after its most recent comparative annual financial statements, its most recently filed annual management report of fund performance ( MRFP ), its most recent interim MRFP filed after that annual MRFP and its most recently filed Summary Document. These documents are or will be incorporated by reference into, and legally form an integral part of, this prospectus. These documents are publicly available on the ishares Funds website at and may be obtained upon request, at no cost, by calling or by contacting a registered dealer. These documents and other information about the ishares Funds are publicly available at See Documents Incorporated by Reference. - iii -

8 IMPORTANT TERMS Unless otherwise indicated, all references to dollar amounts in this prospectus are to Canadian dollars and all references to times in this prospectus are to Toronto time. Basket as applicable, a group of securities of ishares ETFs, bonds, shares or other securities as BlackRock Canada may determine in its discretion from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes. BFA BlackRock Fund Advisors. BlackRock BlackRock, Inc., the ultimate parent company of BlackRock Canada. BlackRock Canada BlackRock Asset Management Canada Limited. BRAL BlackRock Advisors (UK) Limited, an affiliate of BlackRock Canada. BTC BlackRock Institutional Trust Company, N.A., an affiliate of BlackRock Canada. Canadian ishares Fund any ETF, other than the ishares Funds, that is listed on a recognized Canadian stock exchange and managed by BlackRock Canada or an affiliate. Canadian Trading Day each day on which trading takes place on the TSX. CDS CDS Clearing and Depository Services Inc. CDS Participant a participant in CDS, including a securities broker or dealer, bank, trust company or other institution that directly or indirectly maintains a custodial relationship with CDS, which holds Units on behalf of beneficial owners of Units. CRA Canada Revenue Agency. Creation Transaction Fee the fee payable in connection with payments of cash or securities, in whole or in part, for subscriptions of a Prescribed Number of Units of the applicable ishares Fund, representing, as applicable, brokerage expenses, commissions, transaction costs, costs or expenses related to market impact, and other costs or expenses that the ishares Fund incurs or expects to incur in effecting securities transactions on the market with such payments of cash or securities. Custody Agreement as described under Organization and Management Details of the ishares Funds Custodian. derivatives instruments that derive their value from the market price, value or level of an underlying security, commodity, economic indicator, index or financial instrument and which may include, options, futures contracts, forward contracts, swaps, debt-like securities or index options. Designated Broker a registered dealer that has entered into a Designated Broker Agreement with BlackRock Canada, on behalf of one or more ishares Funds pursuant to which the Designated Broker agrees to perform certain duties in relation to the ishares Funds. Designated Broker Agreement an agreement between BlackRock Canada, on behalf of an ishares Fund, and a Designated Broker. distribution record date a date designated by BlackRock Canada as a record date for the determination of Unitholders of an ishares Fund entitled to receive a distribution. Dublin ishares Fund any ETF that is primarily listed on the London Stock Exchange and managed by an affiliate of BlackRock Canada. ETF an exchange-traded fund. - iv -

9 Exchange Transaction Fee the fee payable in connection with payments of cash or securities, in whole or in part, for exchanges of a Prescribed Number of Units of the applicable ishares Fund, representing, as applicable, brokerage expenses, commissions, transaction costs, costs or expenses related to market impact and other costs or expenses that the ishares Fund incurs or expects to incur in effecting securities transactions on the market to obtain the necessary cash or securities for the exchange. HST federal harmonized sales tax. IFRS International Financial Reporting Standards. IFRS 13 IFRS 13, Fair Value Measurement. Investment Sub-Advisory Agreement as described under Organization and Management Details of the ishares Funds Details of the Investment Sub-Advisory Agreement. IRC the independent review committee of the ishares Funds as described under Organization and Management Details of the ishares Funds Independent Review Committee. ishares ETFs ETFs managed by BlackRock Canada or an affiliate, including Canadian ishares Funds, Dublin ishares Funds and U.S. ishares Funds. ishares Funds means, collectively, XSC, XSE, XSI and XTR, and an ishares Fund means any one of them. Management Fee Distribution as described under Fees and Expenses Fees and Expenses Payable by the ishares Funds Management Fee Distributions, an amount equal to the difference between the applicable management fee otherwise chargeable and a reduced fee determined by BlackRock Canada from time to time that is distributed quarterly in cash by an ishares Fund to Unitholders who hold large investments in the ishares Fund. Master Declaration of Trust the master declaration of trust amended and restated as of March 29, 2016 governing the ishares Funds, as may be further amended and/or restated from time to time. MRFP management report of fund performance. NAV or Net Asset Value in relation to an ishares Fund, the market value of the total assets held by that ishares Fund, less an amount equal to the total liabilities of that ishares Fund. NAV per Unit or Net Asset Value per Unit in relation to an ishares Fund, the Net Asset Value of that ishares Fund divided by the total number of Units of that ishares Fund outstanding. NI National Instrument Investment Funds. NI National Instrument Independent Review Committee for Investment Funds. Plan Agent SSTCC, plan agent for the Reinvestment Plan. Plan Units as defined under Distribution Policy Distribution Reinvestment Plan. Prescribed Number of Units in relation to an ishares Fund, the number of Units determined by BlackRock Canada from time to time for the purpose of subscription orders, exchanges, redemptions or for such other purposes as BlackRock Canada may determine. Registered Plans trusts governed by registered retirement savings plans, registered retirement income funds, registered disability savings plans, deferred profit sharing plans, registered education savings plans and tax-free savings accounts. Reinvestment Plan the distribution reinvestment plan of each ishares Fund as described under Distribution Policy Distribution Reinvestment Plan. REIT a real estate investment trust. - v -

10 RRIF registered retirement income fund. RRSP registered retirement savings plan. SAA strategic asset allocation, as described under Investment Strategies. Securities Lending Authorization Agreement as described under Organization and Management Details of the ishares Funds Securities Lending Agents. Securities Lending Management Agreement as described under Organization and Management Details of the ishares Funds Securities Lending Agents. SSBT State Street Bank and Trust Company, an affiliate of SSTCC. SSTCC State Street Trust Company Canada, the custodian, registrar and transfer agent and distribution reinvestment plan agent of the ishares Funds. Summary Document a document in respect of each class of Units of an ishares Fund, summarizing certain features of the Units and of that ishares Fund. Tax Act the Income Tax Act (Canada) and the regulations issued thereunder. TER trading expense ratio. TFSA tax-free savings account. Trading Day for each ishares Fund, a day on which (i) a regular session of the TSX is held; and (ii) the primary market or exchange for the securities held by the ishares Fund is open for trading. TSX the Toronto Stock Exchange. Underlying Fund as defined under Income Tax Considerations Taxation of the ishares Funds Investments in ishares ETFs and in Publicly-Traded Trust Securities. Underwriters registered brokers and dealers that enter into underwriting agreements with one or more ishares Funds and that subscribe for and purchase Units from such ishares Funds, and Underwriter means any one of them. Unit in relation to a particular ishares Fund, a unit of beneficial interest in that ishares Fund. Unitholder in respect of an ishares Fund, a holder of one or more Units of such ishares Fund. U.S. ishares Fund any ETF that is listed on a recognized U.S. stock exchange and managed by an affiliate of BlackRock Canada. XSC means ishares Conservative Short Term Strategic Fixed Income ETF. XSE means ishares Conservative Strategic Fixed Income ETF. XSI means ishares Short Term Strategic Fixed Income ETF. XTR means ishares Diversified Monthly Income ETF. - vi -

11 TABLE OF CONTENTS PROSPECTUS SUMMARY... 1 SUMMARY OF FEES AND EXPENSES... 9 Fees and Expenses Payable by the ishares Funds... 9 Fees and Expenses Payable Directly by You Annual Returns, Management Expense Ratio and Trading Expense Ratio OVERVIEW OF THE LEGAL STRUCTURE OF THE ishares FUNDS Former Legal Name and Material Amendments to the Master Declaration of Trust INVESTMENT OBJECTIVES ishares Conservative Short Term Strategic Fixed Income ETF ishares Conservative Strategic Fixed Income ETF ishares Short Term Strategic Fixed Income ETF ishares Diversified Monthly Income ETF INVESTMENT STRATEGIES ishares Short Term Strategic Fixed Income ETF ishares Diversified Monthly Income ETF Investment in Other ishares ETFs Securities Lending Use of Derivative Instruments OVERVIEW OF THE SECTORS THAT THE ishares FUNDS INVEST IN INVESTMENT RESTRICTIONS FEES AND EXPENSES Fees and Expenses Payable by the ishares Funds Fees and Expenses Payable Directly by You ANNUAL RETURNS, MANAGEMENT EXPENSE RATIO AND TRADING EXPENSE RATIO RISK FACTORS General Risks Relating to an Investment in the ishares Funds Additional Risks Relating to an Investment in XSC, XSE and XSI Additional Risks Relating to an Investment in XTR Additional Risks Relating to an ishares Fund s Investment in ishares ETFs Risk Ratings of the ishares Funds DISTRIBUTION POLICY Distribution Reinvestment Plan PURCHASE OF UNITS Issuance of Units Buying and Selling Units Registration and Transfer through CDS Non-Resident Unitholders Special Considerations for Unitholders EXCHANGE AND REDEMPTION OF UNITS Exchange of Units at Net Asset Value per Unit for Baskets and/or Cash Redemption of Units for Cash Suspension of Exchanges and Redemptions Administrative Fee to Offset Certain Costs of Transactions with Underwriters Short-Term Trading PRICE RANGE AND TRADING VOLUME OF UNITS INCOME TAX CONSIDERATIONS Status of the ishares Funds Taxation of the ishares Funds Taxation of Unitholders Taxation of Registered Plans INTERNATIONAL INFORMATION REPORTING ORGANIZATION AND MANAGEMENT DETAILS OF THE ishares FUNDS Trustee, Manager and Portfolio Adviser of the ishares Funds... 43

12 TABLE OF CONTENTS (continued) Details of the Management Services to be Provided by BlackRock Canada Governance Ownership of BlackRock Canada Executive Officers and Directors of BlackRock Canada Sub-Adviser Portfolio Manager of the Sub- Adviser Details of the Investment Sub- Advisory Agreement Conflicts of Interest Independent Review Committee Custodian Subcustodians Auditor 49 Registrar and Transfer Agent Securities Lending Agents CALCULATION OF NET ASSET VALUE Valuation Policies and Procedures Net Asset Value per Unit Reporting of Net Asset Value ATTRIBUTES OF THE SECURITIES Description of the Securities Distributed Subscriptions Certain Provisions of the Units Modification of Terms UNITHOLDER MATTERS Meetings of Unitholders Matters Requiring Unitholder Approval Change of Auditor Amendments to the Master Declaration of Trust Permitted Mergers Reporting to Unitholders TERMINATION OF THE ishares FUNDS PRINCIPAL HOLDERS OF SECURITIES OF THE ishares FUNDS PROXY VOTING DISCLOSURE FOR PORTFOLIO SECURITIES HELD MATERIAL CONTRACTS EXPERTS EXEMPTIONS AND APPROVALS PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION DOCUMENTS INCORPORATED BY REFERENCE CERTIFICATE OF THE ishares FUNDS, THE TRUSTEE AND THE MANAGER... C-1-2 -

13 PROSPECTUS SUMMARY The following is a summary of the principal features of this distribution and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus. Issuer: Continuous Distribution: Investment Objectives of the ishares Funds: ishares Conservative Short Term Strategic Fixed Income ETF ( XSC ) ishares Conservative Strategic Fixed Income ETF ( XSE ) ishares Short Term Strategic Fixed Income ETF ( XSI ) ishares Diversified Monthly Income ETF ( XTR ) (each, an ishares Fund and together, the ishares Funds ). Each ishares Fund is an exchange-traded fund established as a trust under the laws of the Province of Ontario. BlackRock Canada is the trustee, manager and portfolio adviser of the ishares Funds. Units of the ishares Funds are listed on the TSX and offered on a continuous basis. Each Unit of an ishares Fund represents an equal beneficial interest in that ishares Fund. The ishares Funds are organized as trusts and Unitholders of the ishares Funds are not shareholders of a corporation. Investors may purchase or sell Units on the TSX through a registered broker or dealer in the province or territory where the investor resides. Accordingly, investors may trade Units in the same way as other securities listed on the TSX, including by using market orders and limit orders. Investors may incur customary brokerage commissions when buying or selling Units on the TSX. Underwriters may purchase a Prescribed Number of Units from the ishares Funds at the Net Asset Value per Unit. See Purchase of Units Issuance of Units. ishares Conservative Short Term Strategic Fixed Income ETF XSC seeks to generate income for Unitholders by investing primarily in securities of one or more ishares ETFs that provide exposure to Canadian and international fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments, while adhering to certain portfolio constraints upon rebalancing. In seeking to generate income, XSC will, upon rebalancing, generally: (i) limit its total exposure to high yield securities to 25% of its portfolio; and, (ii) limit its exposure to interest rate risk by maintaining a portfolio duration of less than five years. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSC seeks to hedge any resulting U.S. dollar or other foreign currency exposure, as applicable, back to Canadian dollars. See Investment Objectives. ishares Conservative Strategic Fixed Income ETF XSE seeks to generate income for Unitholders by investing primarily in securities of one or more ishares ETFs that provide exposure to Canadian and international fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments, while adhering to certain portfolio constraints upon rebalancing. In seeking to generate income, XSE will, upon rebalancing, generally limit its total exposure to high yield securities to 25% of its portfolio. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSE seeks to hedge any resulting U.S. dollar or other foreign currency exposure, as applicable, back to Canadian dollars. See Investment Objectives. ishares Short Term Strategic Fixed Income ETF XSI seeks to generate income for Unitholders by investing primarily in securities of one or more ishares ETFs that provide exposure to fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. See Investment Objectives.

14 ishares Diversified Monthly Income ETF XTR seeks to provide Unitholders with a consistent monthly cash distribution, with the potential for modest long-term capital growth, by investing primarily in Canadian ishares Funds that provide exposure to a diversified portfolio of income-bearing investments. Exposure to these types of income-bearing investments may also be obtained by investing directly in them and/or through the use of derivatives. See Investment Objectives. Investment Strategies of the ishares Funds: ishares Conservative Short Term Strategic Fixed Income ETF In order to achieve its investment objective, XSC invests primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSC may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSC may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Conservative Strategic Fixed Income ETF In order to achieve its investment objective, XSE invests primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSE may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSE may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Short Term Strategic Fixed Income ETF In order to achieve its investment objective, XSI will invest primarily in securities of one or more ishares ETFs. Exposure to fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives. XSI may invest in, or obtain exposure to, securities denominated in Canadian dollars as well as securities denominated in U.S. dollars and other foreign currencies. XSI may also invest in derivatives such as options, futures contracts, forward contracts, swaps and debt-like securities to hedge or protect against changes in asset class prices or foreign exchange risks. See Investment Strategies. ishares Diversified Monthly Income ETF The investment strategy of XTR is to invest primarily in income-bearing Canadian ishares Funds. XTR will invest in a portfolio that is a diversified representation of income-bearing asset classes, including, but not limited to, common equities, fixed income securities and REITs. Exposure to these types of income-bearing investments may also be obtained by investing directly in them, by investing in securities of other ishares ETFs, and/or through the use of derivatives. XTR may also invest in derivatives such as options, futures contracts, forward contracts, swaps, debt-like securities and index options to achieve its investment objectives and/or to hedge, or protect, against changes in asset class prices or foreign exchange risks. XTR may also invest in futures contracts in order to provide market exposure for cash held by XTR and may also hold money market instruments, securities of money market funds or cash to meet its current obligations. BlackRock Canada will develop and maintain a strategic asset allocation ( SAA ) policy for XTR that emphasizes income generation while maintaining the potential for modest long-term capital growth. XTR will generally rebalance to its SAA on a quarterly basis, but may also do so more frequently if market conditions warrant. The majority of XTR s investment exposure will be to Canadian securities, but foreign asset classes may also be included as a result of their income properties or diversification benefits. BlackRock Canada will review, and may adjust, XTR s SAA from time to time, as market conditions change, and as the investible universe evolves. See Investment Strategies

15 Risk Factors: There are certain general risk factors inherent to an investment in the ishares Funds. These risks relate to the following factors: general risks of investments; general risks of debt instruments; risk that securities of the ishares Funds and ishares ETFs will trade at prices other than Net Asset Value per security; securities lending risk; derivative investments risk; foreign investments/currency risk; credit risk; high yield securities risk; liquidity risk; risks relating to tax changes; call risk; smaller issuer risk; and cease trading of securities risk. See Risk Factors General Risks Relating to an Investment in the ishares Funds. In addition to the general risk factors applicable to all ishares Funds, there are certain risk factors inherent to an investment in XSC, XSE and XSI, as indicated below: absence of an active market for Units and lack of operating history; general risks of U.S. debt investments; foreign debt issuer risk; currency hedging strategies risk; interest rate risk; extension risk; prepayment risk; U.S. Treasury securities risk; indirect investments in certain U.S. securities through U.S. ishares Funds risks; and European economic risk. See Risk Factors Additional Risks Relating to an Investment in XSC, XSE and XSI. In addition to the general risk factors applicable to all ishares Funds, there are certain risk factors inherent to an investment in XTR, as indicated below: general risks of equity investments; and risks relating to income trust investments; and risks relating to investments in real estate. See Risk Factors Additional Risks Relating to an Investment in XTR. Additional risks relating to an ishares Fund s investment in ishares ETFs include: general risks of investing in an index fund and passive investment risk; risks relating to index replication strategies; calculation of index levels and termination of the indices risk; purpose of the indices risk; index adjustments risk; and voting of securities risk. See Risk Factors Additional Risks Relating to an ishares Fund s Investment in ishares ETFs

16 Special Considerations for Unitholders: The provisions of the early warning requirements set out in Canadian securities legislation do not apply in connection with the acquisition of Units of the ishares Funds. In addition, based upon exemptive relief granted by the Canadian securities regulatory authorities, a Unitholder may acquire more than 20% of the Units of any ishares Fund through purchases on the TSX without regard to the takeover bid requirements of applicable securities legislation, provided that such Unitholder, as well as any person acting jointly or in concert with the Unitholder, undertakes to BlackRock Canada not to vote more than 20% of the Units of that ishares Fund. Market participants are permitted to sell Units of any ishares Fund short and at any price without regard to the restrictions of the Universal Market Integrity Rules applicable to trading on the TSX that generally prohibit selling securities short unless the price is at or above the last sale price. Units of the ishares Funds may be mark-to-market property for purposes of the markto-market rules in the Tax Act. These rules require taxpayers that are financial institutions within the meaning of the rules to recognize annually, on income account, any accrued gains and losses on securities that are mark-to-market property. See Purchase of Units Buying and Selling Units Special Considerations for Unitholders and Exemptions and Approvals. Exchange: Redemption: Distribution Policy: Unitholders may exchange the Prescribed Number of Units (or an integral multiple thereof) on any Trading Day for Baskets and cash, subject to the requirement that a minimum Prescribed Number of Units be exchanged. See Exchange and Redemption of Units Exchange of Units at Net Asset Value per Unit for Baskets and/or Cash. Unitholders may redeem Units of any ishares Fund for cash at a redemption price per Unit equal to 95% of the closing price for the applicable Units on the TSX on the effective Trading Day for the redemption. However, a cash redemption request will be subject to a maximum redemption price payable to a Unitholder of the Net Asset Value per Unit of the applicable ishares Fund. Unitholders will generally be able to sell (rather than redeem) Units at the full market price on the TSX through a registered broker or dealer subject only to customary brokerage commissions. Therefore, Unitholders are advised to consult their brokers, dealers or investment advisors before redeeming their Units for cash. No fees or expenses are paid by a Unitholder to BlackRock Canada or the ishares Funds in connection with selling Units on the TSX. See Exchange and Redemption of Units Redemption of Units for Cash. Each ishares Fund will ensure that in each taxation year the net income and net realized capital gains, if any, of the ishares Fund have been distributed to such an extent that the ishares Fund will not be liable in respect of the taxation year for ordinary income tax thereon. XTR seeks to provide a consistent monthly cash distribution and intends to set for each calendar year a monthly distribution rate that is expected to be maintained for that calendar year. Such rate will be set in order to ensure that XTR has distributed its net income to such an extent that XTR will not be liable for ordinary income tax thereon. XTR may make adjustments to the monthly distribution rate at any time in order to reflect changes in the income or net capital gains that XTR has received or is expected to receive. Cash distributions are expected to be composed of a mixture of ordinary income, interest, dividends, capital gains, and returns of capital. Cash distributions on Units of XTR are currently expected to be made at least monthly, although BlackRock Canada may, in its complete discretion, change the frequency of these distributions. Any change in the frequency of cash distributions on Units of XTR will be announced via press release

17 If XTR s net income and net realized capital gains in a year are less than the total monthly distributions for the year, the balance of the monthly distributions will constitute a return of capital to Unitholders. Returns of capital are generally non-taxable to a Unitholder but reduce the Unitholder s adjusted cost base of the Units for tax purposes. The tax treatment to Unitholders of distributions is discussed under the heading Income Tax Considerations Taxation of Unitholders. To the extent that any ishares Fund has not distributed the full amount of its net income or net realized capital gains in any taxation year, the difference between such amount and the amount actually distributed by the ishares Fund will be paid as a reinvested distribution. Reinvested distributions (if any), net of any required withholding tax, will be reinvested automatically in additional Units of the applicable ishares Fund at a price equal to the Net Asset Value per Unit of the applicable ishares Fund and the Units of such ishares Fund will be immediately consolidated such that the number of outstanding Units of such ishares Fund following the distribution will equal the number of Units of the applicable ishares Fund outstanding prior to the distribution. BlackRock Canada may determine in the future and upon notice to Unitholders of an ishares Fund that distributions will be automatically reinvested in additional Units of the same class of such ishares Fund. If BlackRock Canada determines to implement the automatic reinvestment of distributions, Unitholders may give notice that they wish to continue to receive their distributions in cash. Distribution Reinvestment: For the expected frequency and composition of distributions of the ishares Funds, see Distribution Policy. At any time, a Unitholder may elect to participate in the ishares Funds distribution reinvestment plan (the Reinvestment Plan ) by contacting the CDS Participant through which the Unitholder holds its Units. Under the Reinvestment Plan, cash distributions will be used to acquire additional Units (commission free to the Unitholder) of the same ishares Fund and class by purchasing them at market price on an exchange, which Units will be credited to the account of the Unitholder s broker through CDS. See Distribution Policy Distribution Reinvestment Plan for additional information relating to the Reinvestment Plan. Termination: Income Tax Considerations: The ishares Funds do not have a fixed termination date but may be terminated by BlackRock Canada on not less than 60 days and not more than 90 days notice to Unitholders. See Termination of the ishares Funds. This summary of Canadian federal income tax considerations for the ishares Funds and for Canadian resident Unitholders is subject in its entirety to the qualifications, limitations and assumptions set out in Income Tax Considerations. A Unitholder who is an individual (other than a trust) resident in Canada and who holds Units as capital property (all within the meaning of the Tax Act) will generally be required to include in the Unitholder s income for tax purposes for any year the amount of net income and net taxable capital gains of the ishares Fund paid or payable to the Unitholder in the year and deducted by the ishares Fund in computing its income. Any returns of capital paid or payable to a Unitholder in a taxation year will generally reduce the adjusted cost base of the Unitholder s Units of that ishares Fund. To the extent that a Unitholder s adjusted cost base would otherwise be a negative amount, the negative amount will be deemed to be a capital gain realized by the Unitholder and the adjusted cost base of the Unit to the Unitholder will be increased by the amount of such capital gain (i.e., the adjusted cost base will be reset to zero). Any loss of an ishares Fund cannot be allocated to, and cannot be treated as a loss of, the Unitholders of the ishares Fund. Upon the actual or deemed disposition of a Unit, including the exchange or redemption of a Unit, a capital gain (or a capital loss) will generally be realized by the Unitholder to the extent that the - 5 -