February 05, 2014 ETF-014-016 CHICAGO STOCK EXCHANGE, INC. MARKET REGULATION DEPARTMENT INFORMATION CIRCULAR RE: ISHARES 2019 AMT-FREE MUNI TERM ETF TO BEGIN TRADING ON CHX Pursuant to Information Circular MR 08-16, the Chicago Stock Exchange, Inc. ( CHX or the Exchange ) is issuing this Information Circular to advise that the following securities have been approved for trading on the Exchange as a UTP derivative securities product pursuant to Exchange Article 22, Rule 6: Security Symbol Security: (the Shares ) ishares 2019 AMT-Free Muni Term ETF MUAH Commencement of Trading: February 07, 2014 Issuer: ishares Trust (the Trust ) Issuer Website: www.ishares.com Primary Listing Exchange: NYSE Arca Primary Exchange Circular: RB-14-16 Issuer Registration Statement: Nos. 333-92935 and 811-09729 The purpose of this information circular is to outline various rules and policies that will be applicable to trading in this new product pursuant to the Exchange s unlisted trading privileges, as well as to provide certain characteristics and features of the Shares. For a more complete description of the Issuer, the Shares and the underlying market instruments or indexes, visit the Issuer Website, consult the Prospectus available on the Issuer Website, examine the Issuer Registration Statement or review the most current information bulletin issued by the Primary Listing Exchange (which as of the date hereof is set forth above as the Primary Exchange Circular ). The Issuer Website, the Prospectus, the Issuer Registration Statement and the Primary Exchange Circular are hereafter collectively referred to as the Issuer Disclosure Materials. The Primary Exchange Circular cited above contains the following information: As more fully explained in the applicable Registration Statement (File Nos. 333-92935 and 811-09729), the Trust is registered under the Investment Company Act of 1940 (the 1940 Act ) as an open-end management investment company. BlackRock Fund Advisors serves as the investment adviser for the Fund (the Adviser ). State Street Bank and Trust Company serves as the administrator, custodian and transfer agent
for the Fund (the Administrator ). BlackRock Investments, LLC serves as the Fund s Distributor (the Distributor ). The ishares 2019 AMT-Free Muni Term ETF (the Fund ) seeks to track the investment results of an index composed of investment-grade U.S. municipal bonds maturing after May 31 and before September 1, 2019. The Fund seeks to track the investment results of the S&P AMT- Free Municipal Series 2019 IndexTM (the Underlying Index ), which measures the performance of investment-grade, non-callable U.S. municipal bonds maturing in 2019. As of March 31, 2013, there were 1,455 issues in the Underlying Index. The Underlying Index includes municipal bonds primarily from issuers that are state or local governments or agencies (including the Commonwealth of Puerto Rico and U.S. territories such as the U.S. Virgin Islands and Guam) such that the interest on the bonds is exempt from U.S. federal income taxes and the federal alternative minimum tax ( AMT ). Each bond must have a rating of at least BBB- by Standard & Poor's Ratings Services, Baa3 by Moody s Investors Service, Inc. ( Moody's ), or BBB- by Fitch, Inc. and must have a minimum maturity par amount of $2 million to be eligible for inclusion in the Underlying Index. To remain in the Underlying Index, bonds must maintain a minimum par amount greater than or equal to $2 million as of each rebalancing date. All bonds in the Underlying Index will mature after May 31 and before September 1 of the year referenced in the name of the Underlying Index. When a bond matures in the Underlying Index, an amount representing its value at maturity will be included in the Underlying Index throughout the remaining life of the Underlying Index, and any such amount will be assumed to earn a rate equal to the performance of the Standard & Poor's Financial Services LLC's, a subsidiary of The McGraw-Hill Companies, Inc., Weekly High Grade Index, which consists of Moody's Investment Grade-1 municipal tax-exempt notes that are not subject to federal AMT. The Underlying Index is a market value weighted index and is rebalanced after the market close on the last business day of each month. BFA uses a passive or indexing approach to try to achieve the Fund s investment objective. Unlike many investment companies, the Fund does not try to beat the index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued. Indexing may eliminate the chance that the Fund will substantially outperform the Underlying Index but also may reduce some of the risks of active management, such as poor security selection. Indexing seeks to achieve lower costs and better after-tax performance by keeping portfolio turnover low in comparison to actively managed investment companies. BFA uses a representative sampling indexing strategy to manage the Fund. Representative sampling is an indexing strategy that involves investing in a representative sample of securities that collectively has an investment profile similar to the Underlying Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability, duration, maturity or credit ratings and yield) and liquidity measures similar to those of the Underlying Index. The Fund may or may not hold all of the securities in the Underlying Index. The Fund generally invests at least 80% of its assets in the securities of its Underlying Index, except during the last months of the Fund's operations, as described below. The Fund may invest the remainder of its assets in cash and cash equivalents (including money market funds affiliated with BFA), as well as in municipal bonds not included in the Underlying Index, but which BFA believes will help the Fund track its Underlying Index. The Fund will generally hold municipal bond securities issued by state and local municipalities whose interest payments
are exempt from U.S. federal income tax, the federal AMT and a federal Medicare contribution tax of 3.8% on net investment income, including dividends, interest and capital gains. In the last months of operation, as the bonds held by the Fund mature, the proceeds will not be reinvested in bonds but instead will be held in cash and cash equivalents, including, without limitation, money market funds affiliated with BFA, AMT-free tax-exempt municipal notes, variable rate demand notes and obligations, tender option bonds and municipal commercial paper. These cash equivalents may not be included in the Underlying Index. By August 31, 2019, the Underlying Index is expected to consist entirely of cash earned in this manner. Around the same time, the Fund will wind up and terminate, and its net assets will be distributed to thencurrent shareholders. The Fund seeks to track the investment results of the Underlying Index before fees and expenses of the Fund. The Fund may lend securities representing up to onethird of the value of the Fund's total assets (including the value of the collateral received). The Underlying Index is a product of an organization (the Index Provider ) that is independent of the Fund and BFA. The Index Provider determines the composition and relative weightings of the securities in the Underlying Index and publishes information regarding the market value of the Underlying Index. The Fund s Index Provider is S&P Dow Jones Indices LLC ( S&P ), a subsidiary of McGraw Hill Financial, Inc. Individual Fund shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than at NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). The Fund will only issue or redeem shares that have been aggregated into blocks of 50,000 shares or multiples thereof ( Creation Units ) to authorized participants who have entered into agreements with the Fund's distributor. The Fund generally will issue or redeem Creation Units in return for a designated portfolio of securities (and an amount of cash) that the Fund specifies each day. Dividends from net investment income, if any, generally are declared and paid at least once a year by the Fund. Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the Trust may make distributions on a more frequent basis for the Fund. The Trust reserves the right to declare special distributions if, in its reasonable discretion, such action is necessary or advisable to preserve its status as a regulated investment company ( RIC ) or to avoid imposition of income or excise taxes on undistributed income or realized gains. Principal Risks Interested persons are referred to the Fund s Prospectus for a description of risks associated with an investment in the Fund. These risks include, but are not limited to, Asset Class Risk; Concentration Risk; Credit Risk; Declining Yield Risk; Fluctuation of Yield and Liquidation Amount Risk; Income Risk; Index-Related Risk; Investment Rate Risk; Issuer Risk; Liquidity Risk; Management Risk; Market Risk; Market Trading Risk; Municipal Securities Risk; Non- Diversification Risk; Passive Investment Risk; Securities Lending Risk; Tax Risk; Tracking Error Risk; and Valuation Risk. In addition, as noted in the applicable Prospectus, the Shares may trade at market prices that may differ from their NAV. The NAV of the Shares will fluctuate with changes in the market value of the Fund s holdings. The market prices of the Shares will fluctuate in accordance with changes in NAV as well as the supply and demand for the Shares.
BECAUSE WHAT FOLLOWS IS ONLY A SUMMARY OF THE RELIEF OUTLINED IN THE NO-ACTION LETTER(S) REFERENCED ABOVE, THE EXCHANGE ADVISES INTERESTED PARTIES TO CONSULT THE NO-ACTION LETTER(S) FOR MORE COMPLETE INFORMATION REGARDING THE MATTERS COVERED THEREIN AND THE APPLICABILITY OF THE RELIEF GRANTED IN RESPECT OF TRADING IN THE SHARES. INTERESTED PARTIES SHOULD ALSO CONSULT THEIR PROFESSIONAL ADVISORS. Exchange Rules Applicable to Trading in the Shares The Shares are considered equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. The Shares are also a UTP Derivative Securities as specified in Exchange Article 22, Rule 6, and as such are subject to the additional provisions specific to that Rule. In particular, Participants are reminded of their obligations under the following CHX Rules: Trading Hours The shares will trade during the Exchange s Early Session (6:00 a.m. to 8:30 a.m. CT); the Regular Trading Session (8:30 a.m. to 3:00 p.m. CT) and the Late Trading Session (commences immediately after the Regular Trading Session and ends at 3:15 p.m. CT). Please note that trading in the Shares during the Exchange s various trading sessions may result in additional trading risks which include: (1) lower liquidity which may impact pricing, (2) higher volatility (3) wider spreads and (4) other risks including among other things, the lack of calculation or dissemination of the intra-day indicative value or a similar value. The minimum trading increment is $.01. Customer Dealings Suitability Exchange Article 8, Rule 11 provides that prior to the execution of a transaction recommended to a customer, a Participant shall make reasonable efforts to obtain information concerning: (1) the customer s financial status, (2) the customer s tax status, (3) the customer s investment objectives, and (4) such other information used or considered to be reasonable by such Participant in making recommendations to the customer. Based on this information, the Participant must have reasonable grounds to believe that the recommendation is suitable for such customer. Prospectus Delivery/Product Description Participants are subject to the prospectus delivery requirements under the Securities Act of 1933, unless the new derivative securities product is the subject of an order by the Securities and Exchange Commission exempting the product from certain prospectus delivery requirements under Section 24(d) of the Investment Company Act of 1940 and the product is not otherwise subject to prospectus delivery requirements under the Securities Act of 1933. The Exchange shall inform its Participants regarding the application of the provisions of this subparagraph to a particular derivative securities product by means of a Regulatory Information Circular: The Exchange requires that Participants provide to all purchasers of a derivative securities product a written description of the terms and characteristics of those securities, in a form approved by the Exchange or prepared by the open-ended management company issuing such securities, not later than the time a confirmation of
the first transaction in such series is delivered to such purchaser. In addition, Participants shall include a written description with any sales material relating to a derivative securities product that is provided to customers or the public. Any other written materials provided by a Participant to customers or the public making specific reference to the derivative securities product as an investment vehicle must include a statement substantially in the following form: "A circular describing the terms and characteristics of [the derivative securities product] has been prepared by the [open-ended management investment company name] and is available from your broker. It is recommended that you obtain and review such circular before purchasing [the derivative securities product]." A Participant carrying an omnibus account for a non-participant is required to inform such non-participant that execution of an order to purchase a derivative securities product for such omnibus account will be deemed to constitute an agreement by the non-participant to make such written description available to its customers on the same terms as are directly applicable to the Participant under this rule. Upon request of a customer, a Participant shall also provide a prospectus for the particular derivative securities product. Upon request of a customer, a Participant shall also provide a prospectus for the particular derivative securities product. Trading Halts Exchange Article 22, Rule 6(a)(iii) provides that, in addition to the Exchange s authority to suspend or halt trading under Article 20, Rule 1(d) (Trading Suspensions or Halts) and Article 20, Rule 2 (Trading Halts Due To Extraordinary Market Volatility), if a temporary interruption occurs in the calculation or wide dissemination of the intraday indicative value (or similar value) or the value of the underlying index or instrument and the listing market halts trading in the product, the Exchange, upon notification by the listing market of such halt due to such temporary interruption, also shall immediately halt trading in that product on the Exchange. The Shares will be traded following a trading halt in accordance with Interpretations and Policies.02 of Exchange Article 20, Rule 1. In addition, for a UTP Derivative Securities product where a net asset value is disseminated, if the primary listing exchange notifies the Exchange that the net asset value is not being disseminated to all market participants at the same time, the Exchange will immediately halt trading in such security. The Exchange may resume trading in the UTP Derivative Security only when the net asset value is disseminated to all market participants at the same time or trading in the UTP Derivative Security resumes on the listing market. THIS INFORMATION CIRCULAR IS NOT A STATUTORY PROSPECTUS. MEMBERS AND MEMBER ORGANIZATIONS SHOULD CONSULT THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR ALL RELEVANT INFORMATION RELATING TO SHARES OF THE FUND. * * * * Inquiries regarding this Information Memo should be directed to Peter D. Santori, Executive Vice President and Chief Regulatory Officer, at (312) 663-2402.