TAX IMPLICATIONS OF ishares FREQUENTLY ASKED QUESTIONS FOR CLIENTS IN THE UK ONLY

Transcription

1 TAX IMPLICATIONS OF ishares FREQUENTLY ASKED QUESTIONS FOR CLIENTS IN THE UK ONLY

2 Introduction Many clients have questions about the tax implications of investing in our range of ishares funds. This document aims to set out answers to some of our most frequently asked questions. It provides some broad factual information and does not represent tax advice. The tax treatment of ishares including rates and reliefs may change and will depend upon an investor s own tax circumstances. BlackRock Advisors (UK) Limited recommends that all clients seek specialist tax advice from their own tax advisers. Three levels of tax to consider: ``Investment level At the underlying investment level the source and type of the investment will have an impact on whether there are any taxes withheld on income or gains received into the fund. ``Fund level At the fund level it is important to note where the fund is domiciled and whether or not it pays tax in its domicile as this may have implications on the tax treaties that are available and whether taxes will be withheld on the distributions of the fund. ``Investor level At the investor level the tax status of the fund and the investor s personal tax status are important. [2] TAX IMPLICATIONS OF i SHARES

3 Contents Distributions general 4 Reporting Fund Status 4 Distributions Dublin 4 Withholding tax 5 Tax wrapper 6 Stamp duty 6 Remittance 6 EU Savings Directive (EUSD) 6 A comparison of fixed income Irish-domiciled ishares, UK bond funds and segregated bonds for individual investors 7 Tax rates applying to higher rate taxpayers 7 Physical ETCs: Tax FAQs 8 Inflation linked bonds: Tax FAQs 9 FATCA and AEOI 9 FREQUENTLY ASKED QUESTIONS [3]

4 Frequently asked questions DISTRIBUTIONS GENERAL What is the tax rate for investors on ishares distributions and/or capital gains? There is no typical tax rate, as each client will have their own unique tax status. Shareholders may be subject to taxation in their home jurisdiction on distributed income, undistributed income, realised capital gains and unrealised capital gains and any other returns from their investment in ishares funds. We advise clients to consult their own tax adviser to ascertain their individual tax situation. REPORTING FUND STATUS What is UK Offshore Funds Reporting Fund Status? Subject to some transitional arrangements, for accounting periods beginning on or after 1 December 2009, UK Offshore Fund Distributor Status has been replaced with a new UK Reporting Regime. Under the new regime, the erstwhile requirement to make physical distributions to investors has been replaced with a reporting of all income requirement. To cater for potential variances of treatment of income per audited accounts and UK tax basis of calculating such income, the UK tax basis must measure at least 90% of accounts income. Reporting funds are able to hold more than 5% of their portfolios in offshore funds 1, irrespective of whether or not those funds themselves have, or could have, UK Reporting or Distributing Fund status. Why is having UK Offshore Funds Reporting Fund Status important to investors? If the funds did not have UK Reporting Fund Status, any capital gains on disposal for UK retail investors would be effectively reclassified as income and taxed on that basis. The investor would then lose the potential benefit of their annual exemption and any capital loss relief. The current capital gains tax rate is 18% or 28% and it has been a much more significant benefit from having any gain on disposal of ishares taxed as capital rather than income at 40% tax rate for higher rate taxpayers and 45% tax rate for additional rate taxpayers. Does ishares have UK Offshore Funds Reporting Fund Status? All the Irish, Swiss domiciled ishares and some German domiciled ishares have UK Reporting Fund Status. No US-domiciled ishares have UK Reporting Fund status. DISTRIBUTIONS FROM UK REPORTING FUNDS How is an ishares distribution classified for UK tax purposes where that fund has UK reporting fund status? For UK resident individual investors distributions from equity index funds are taxed in the UK as dividends. Distributions from our fixed income index funds (with >60% income portfolio content), however, are taxed in the UK as interest. UK resident corporate investors are taxed on distributions from fixed income ETFs under the loan relationships regime. Distributions from equity ETFs are taxed under the foreign profits regime. Again, fixed income ETFs are those that broadly hold over 60% of assets in bonds, cash, or cash equivalents At what rate of UK tax are UK investors taxed on Dublin-domiciled ishares distributions? Where distributions are taxed as dividends, UK investors are generally taxed at 10% (lower and basic rate taxpayers), 32.5% (higher rate taxpayers), or 37.5% (additional rate taxpayers). Where treated as interest, normal marginal rates apply (20%, 40% and 45% respectively). Is there a 10% UK tax credit on Dublin-domiciled ishares dividend distributions? A UK resident individual can claim a 10% tax credit where he holds less than 10% in offshore funds that are not bond funds. This brings the dividend tax rate on ishares distributions down from 37.5% to 30.6% for additional rate taxpayers (applicable from 6 April 2015 onwards), 32.5% to 25% for higher rate taxpayers, and from 10% to 0% for basic rate taxpayers. The 10% UK tax credit is not available to offshore bond funds; bond funds are funds that broadly hold over 60% of assets in bonds, cash, or cash equivalents, i.e. ishares fixed income ETFs. [4] TAX IMPLICATIONS OF i SHARES

5 Are distributions from Dublin-domiciled ishares bond funds paid out as interest with a 20% UK income tax deduction? As above, distributions from fixed income ishares will be taxed in the UK as interest. However, neither Irish nor UK tax will be deducted on these distributions. WITHHOLDING TAX Why do Dublin-Domiciled ishares not suffer any Irish withholding tax on distributions made to investors? Distributions from Exchange Traded Funds (ETFs) such as Dublin-domiciled ishares are exempt from Irish withholding tax by virtue of the shares issued by Dublin-domiciled ishares being settled via a recognised clearing system (Crest). What are the withholding tax implications for a UK investor of investing in US-Domiciled ishares? US-domiciled ishares are subject to withholding taxes on distribution payments to investors, the rate of which may be dependent on: ``Type of entity. ``Domicile of entity and level of access to double tax treaties. ``Documentation (i.e. has the client supplied a W-8BEN form?). Typical rates for UK individual investors are 15% and 30%. Please note that this withholding tax may, depending upon the circumstances, be used to offset the UK tax liability on the US dividend. What are the German withholding tax implications for a UK investor investing in German-Domiciled ishares? What are the Swiss withholding tax implications for a UK investor investing in Swiss-Domiciled ishares? Distributions from Swiss-domiciled Exchange Traded Funds (ETFs) may be subject to 35% Swiss withholding tax, where the ETF invests more than 20% of its assets in Swiss securities. However, where the investor is eligible for benefits under the UK/Switzerland tax treaty, such investor should contact their custodian to make any reclaims for this Swiss withholding tax. Do the Irish- and German-Domiciled ishares hold any special tax status in any jurisdictions? Certain Dublin-domiciled ishares hold the following specific special statuses: ``Germany transparent status. ``Austria reporting status. ``UK reporting fund status ``UK ISA/SIPP eligible ``France PEA status ``Switzerland Swiss tax status for some Irish ishares Certain German-domiciled ishares hold the following statuses: ``Germany transparent status ``Austria reporting status ``UK some German ishares have reporting fund status ``France PEA status ``Switzerland Swiss tax status for some German ishares Please contact ishares for details of which funds hold which status. German withholding tax may be applied on the distribution from German-domiciled ishares dependent, for example, on the underlying income and expenses that make up the amount available for distribution. Please note that this withholding tax may, depending upon the circumstances, be used to offset the UK tax liability on the distribution.. FREQUENTLY ASKED QUESTIONS [5]

6 TAX WRAPPER Which ishares ETFs can be put into an ISA/SIPP? Under current ISA/SIPP regulations, all current Irish-domiciled ishares funds are eligible investments for an ISA, Junior ISA or a SIPP wrapper. No US domiciled and some German domiciled ishares funds are eligible for inclusion in an ISA wrapper. We are advised, on an interpretation of UK law, that our US-domiciled and German-domiciled funds do however qualify for inclusion in a SIPP wrapper. After the introduction of NISA from 1 July 2014, Irish domiciled ishares should be eligible to be held in a NISA too. STAMP DUTY Will I have to pay UK stamp duty when I trade ishares on exchange (i.e. in the secondary market)? Shares in ishares are not subject to UK stamp duty on the secondary market. REMITTANCE Are Irish-Domiciled ishares taxable on the remittance basis of taxation? UK resident but non-domiciled investors are subject to UK tax on an arising basis on any income or gains derived from their holding in Irish-domiciled ishares except such individuals who have elected for the remittance basis of UK taxation to apply making only income or gains remitted to the UK subject to UK tax.. EU SAVINGS DIRECTIVE (EUSD) What are the tax implications of the EU Savings Directive? The EUSD s purpose is to enable tax authorities to eliminate international tax evasion by European Union residents, summarised by the directive as: to enable savings income in the form of interest payments made in one member state to beneficial owners resident for tax purposes in another member state to be made subject to effective taxation. The EUSD achieves its objective by causing interest from savings to be either reportable to local tax authorities or subject to withholding tax HOW ARE ISHARES FUNDS AFFECTED BY THE EUSD? Returns (distributions, redemptions and secondary market sale proceeds) from investing in an ishares fund could be subject to tax under the EUSD, provided certain conditions are met: ``The fund holds bonds (fixed income ishares are impacted by the EUSD). ``The investor s investment is held with an intermediary (bank/broker/custodian) in either: Austria, Belgium, Luxembourg, Switzerland, Guernsey, Jersey or the Isle of Man. ``The investor is resident in a different EU jurisdiction to the intermediary. ``The investor has not elected to have their income reported rather than taxed. The tax is calculated and deducted by the intermediary. For the Dublin, Swiss and German-domiciled funds this can be done using information provided by the fund administrators about the fund s income. However, this information is not available for funds domiciled in any other jurisdiction. In such cases, the relevant defaults specified for the intermediary s jurisdiction would apply and tax would be deducted on this basis. HOW ARE GRANTOR TRUSTS AFFECTED BY THE EUSD? Grantor Trusts are legally prohibited from disclosing any public tax information about the fund. This gives Grantor Trusts the tax status of unknown and makes them automatically subject to tax reporting requirements under the EUSD. In Switzerland, paying agents are able to assess whether they consider an undeclared fund to be in or out of scope by seeking independent tax advice. Further to the advice received, they are able to determine for themselves whether the fund is in or out of scope of the EUSD and take the appropriate action. [6] TAX IMPLICATIONS OF i SHARES

7 A COMPARISON OF FIXED INCOME DUBLIN-DOMICILED ISHARES, UK BOND FUNDS AND SEGREGATED BONDS FOR INDIVIDUAL INVESTORS Fixed income Dublin- Domiciled ishares UK bond funds (OEIC) Segregated bonds Tax on underlying assets WHT at Applicable Rate (Generally no WHT 1 ) WHT at Applicable Rate (Generally no WHT 1 ) WHT at Applicable Rate (Generally no WHT 1 ) Income 0% Generally 0% N/A Fund level taxation Gains 0% Exempt N/A Tax withheld on distributions to investor 0% Generally 0% (nontaxable investor) or 20% (taxable investor) N/A Investor level taxation Income 45% income tax 45% income tax 45% income tax Gains: Fund has UK reporting fund status 28% 2 CGT 28% CGT 28% CGT (but quoted Eurobonds, gilts etc are exempt) (higher rate taxpayer) Gains: Fund does not have UK reporting fund status 45% income tax (taxed as offshore income gain) 28% CGT 28% CGT (but quoted Eurobonds, gilts etc are exempt) Investor level taxation Income Exempt Exempt (the 20% tax withheld by the fund is credited back to the investor) Exempt (higher rate taxpayer) when held through an ISA Gains: Fund has UK reporting fund status Gains: Fund does not have UK reporting fund status Exempt Exempt Exempt Exempt Exempt Exempt TAX RATES APPLYING TO HIGHER RATE TAXPAYERS UK resident Res non dom taxed on ARISING basis Res non dom taxed on REMITTANCE basis Non Res Non Dom ishares Core UK Gilts UCITS ETF ishares $ Treasury Bond 1-3yr UCITS ETF ishares Euro Government Bond 1-3yr UCITS ETF Income: 45% Gains: 28% ishares Core UK Gilts UCITS ETF ishares $ Treasury Bond 1-3yr UCITS ETF ishares Euro Government Bond 1-3yr UCITS ETF Income: 45% Gains: 28% ishares Core UK Gilts UCITS ETF ishares $ Treasury Bond 1-3yr UCITS ETF ishares Euro Government Bond 1-3yr UCITS ETF Income: 45% Gains: 28% ishares Core UK Gilts UCITS ETF ishares $ Treasury Bond 1-3yr UCITS ETF ishares Euro Government Bond 1-3yr UCITS ETF Not taxable in the UK Funds mentioned for illustrative purposes only. 1 WHT = Withholding tax. 2 Additional rate taxpayers will be subject to 28% capital gains tax. Please note that the above is provided for information purposes only and does not constitute tax advice. If investors have any concerns they are advised to consult their own tax advisers. The above is subject to legislation currently in force and may be subject to change. Note: The above funds all have UK Reporting Fund status so gains are taxable at 28%. FREQUENTLY ASKED QUESTIONS [7]

8 PHYSICAL ETCS: TAX FAQS Is there any withholding tax payable on ishares ETCs? Under current UK tax law, no UK withholding tax will be payable on any payments that are due from the Issuer on the redemption or repurchase of the ishares ETCs. Are ishares ETCs a stock or a fund for tax purposes? Each of ishares ETCs will represent an interest in an offshore fund for UK tax purposes. ishares intends to seek and maintain UK reporting fund status for each series of ishares ETCs and on an ongoing basis to satisfy any necessary conditions in order for the ishares ETCs to be treated as being interests in an offshore reporting fund. I m a private investor how will I be taxed on holding this? BlackRock has been in discussion with HM Revenue & Customs ( HMRC ) on the UK tax treatment of any profit or loss arising on the disposal of an ishares ETC that is held by an individual otherwise than for the purposes of a trade. On the basis of these discussions, it is expected that any such profit should not be treated as a profit arising on a deeply discounted security. Accordingly, provided UK reporting fund status is obtained and maintained for each series of ishares ETCs, it is expected that (unless any special circumstances apply to an individual Securityholder) HMRC will accept that any profit or loss arising on the disposal of an ishares ETC should be subject to capital gains tax and not income tax. The capital gain or allowable loss will be computed by comparing the sterling equivalent of the purchase price and the sterling equivalent of the disposal proceeds, determined using the exchange rates for the date of subscription and disposal respectively. Were, contrary to expectation, an ishare ETC to be treated as a deeply discounted security any gain would be taxed as an income gain for UK tax purposes and an investor would be unable to obtain relief for any loss. How does this tax treatment compare with buying gold, silver, platinum or palladium directly? Were a person to purchase gold, silver, platinum or palladium directly, otherwise than for the purposes of a trade, any profit or loss arising on the disposal of the relevant metal would be subject to capital gains tax. Provided that the ishares ETC maintains the UK reporting fund status as intended, there should be no difference in the tax treatment. Do I need to show something on my tax return each year, or only on final disposal? Private investors who are holding the ishares ETCs for the purposes of a trade will not need to include an entry on their tax return each year and will only need to disclose any profit or loss arising on the disposal (including redemption) of the ishares ETCs in their tax return for the tax year in which the disposal (including redemption) takes place. Does the EU Savings Directive apply to the ishares ETCs? The ishares ETCs may fall within the scope of the EU Savings Directive. However, even if this is the case there are no identifiable income coupons or yield underlying the ishares ETCs to which the EU Savings Directive might apply. Thus a UK paying agent will not be required to report to HMRC any payments that it makes to a holder on the redemption of the securities. Would there be any UK Stamp Duty or Stamp Duty Reserve Tax on ETCs? On the basis that ishares, the issuer, is resident outside the UK and the register of shareholders is also kept and maintained outside the UK, there should be no UK stamp duty or stamp duty reserve tax on transfers of ishares ETCs. Can the ishares ETCs be held in ISA or SIPP Accounts? Yes, ishares ETCs can be held in ISA and SIPP accounts. In the event that, contrary to intention, UK reporting fund status was not obtained or maintained for a series of ishares ETCs, any gain would, generally, be taxed as an income gain under the UK offshore fund rules. [8] TAX IMPLICATIONS OF ISHARES

9 INFLATION LINKED BONDS: TAX FAQS How do ishares funds account for inflationlinked securities? Inflation-linked securities are debt instruments where the principle is linked to inflation. This protects the return on the bond in the case of rises in inflation. Irish Global Accepted Accounting Practices (GAAP) require funds to account for the returns on debt instruments, including any inflation uplift on inflationlinked securities, as income. This is done on an effective yield basis. How is inflation treated with regards to distributions? ETFs may pay out dividends if the underlying securities within the fund pay out dividends or coupons. ETF investors are entitled to receive any dividend distributions from their fund, less fees and expenses. ishares funds currently distribute the impact of inflation as income. What is the tax impact of this? The inflation impact will be treated as income and taxed as such by the relevant tax regime. Where the fund distributes this inflation impact, the income will be subject to UK income tax as interest income. What if the fund has UK Reporting Status (UKRS)? UK Reporting Status allows investors in offshore funds to pay capital gains tax on disposal of their interest in a fund. If a fund is not deemed a Reporting Fund, disposals are subject to income tax on any capital gain. (Further reading available on ishares website). In order to comply with UKRS, funds must account for income in line with the Investment Managers Association (IMA) Statement of Recommended Practice (SORP). The IMA SORP requires the indexation element of the return on inflation linked bonds to be recorded as income as part of the effective yield return. This means that the inflation impact on indexlinked securities will be recognised as income and reported as such in the reportable income per share of the fund. UK resident investors should pay income tax on this number. Can offshore funds use the exemption allowed to UK funds under COLL? Currently, offshore funds cannot utilise this exemption. The result is that the investors in UK funds that further invest in UK gilts are only subject to capital gains tax at the time of disposal of their units. On the other hand, investors in offshore reporting funds that invest in UK gilts are subject to income tax each year on the distribution/excess income received from such fund. How are equivalent securities treated in UK domiciled funds? The Financial Conduct Authority Collective Investment Schemes Handbook (COLL) allows for certain UK funds, which seek to protect capital and income from inflation, to ignore the inflation impact on UK Gilts only when calculating distributions. Where a UK fund chooses to ignore this inflation impact, such funds will also be exempt from 20% UK corporation tax charge it may otherwise suffer on this income. As a result, the investors are only subject to capital gains tax on such inflation at the time of disposal of their units in the UK fund FATCA AND AEOI What is FATCA? FATCA stands for the Foreign Account Tax Compliance Act. It refers to provisions included in the Hiring Incentives to Restore Employment Act. It adds a new chapter to the Internal Revenue Code (Chapter 4) aimed at addressing perceived tax abuse by US persons through the use of offshore accounts. The new rules require Foreign Financial Institutions (FFIs) to provide the Internal Revenue Service (IRS) with information on certain US persons invested in accounts outside of the US and for certain non-us entities to provide information about any US owners. If the local government of an FFI has signed an Intergovernmental Agreement (IGA), then reporting is usually done to the IRS via the local tax authorities and not to the IRS directly. BlackRock does not provide tax advice. The content of this document is provided for information purposes only and is meant to provide investors and intermediaries with an overview as to some of the tax statuses of the ishares products. This information is not intended to, nor does it, provide specific investment or tax advice, or to make any recommendations about the suitability of ishares ETCs for the circumstances of any particular investor. We recommend that you consult with your own independent tax advisor should you have any further queries about how investing in an ishares ETC will affect your own tax position. FREQUENTLY ASKED QUESTIONS [9]

10 How has BlackRock ensured compliance with FATCA commencing 1 July 2014? BlackRock s Global FATCA programme has now concluded all tasks required for day one compliance with its FATCA obligations. We have registered and obtained Global Intermediary Identification Numbers (GIINs) for our sponsoring entities and stand-alone funds where required to and will now turn our attention to those activities such as reporting that have a later deadline for compliance. From 1 July 2014, the new FATCA due diligence procedures for onboarding investors commenced for our funds domiciled in EMEA. These new due diligence procedures include the collection of additional information from clients at onboarding to determine where they are tax resident. BlackRock Application Forms and Offer documents for our EMEA pooled funds have been updated to collect the additional information for FATCA. What is FATCA Registration? FFIs that are required to register are able to register on an IRS web site, the FATCA Registration Portal. This portal has a search tool which allows anybody to view the entities who have registered previously, as well as their GIINs. This means that when a GIIN is provided, the receiver is able to validate it using the portal. What is a GIIN? GIIN stands for Global Intermediary Identification Number. This refers to the number that is assigned to a participating FFI or registered deemed-compliant FFI including a reporting Model 1 FFI for purposes of identifying such entity to withholding agents. All GIINs will appear on the IRS FFI list, which is published monthly. What is a sponsoring entity? Will my investment in ishares funds be subject to FATCA withholding tax of 30%? With regards to our ishares funds within Germany, Ireland and Switzerland, all jurisdictions have a signed Intergovernmental Agreement (IGA) in place with the US, which broadly removes all withholding obligations except for Switzerland where withholding could apply in very limited circumstances. Both our German and Swiss ishares are classified as Collective Investment Vehicles i.e. Non reporting Financial Institutions per Annex II of their respective IGAs and as such are not required to be registered so do not have a GIIN assigned to them. Whereas our Irish ishares are Reporting Model 1 Financial Institutions, which are required to be registered with the IRS as a condition of compliance. This has been done, however note as we are utilising the sponsorship route we can only register the sponsoring entity, which are the applicable Fund Manager entities and not the sponsored funds (as this functionality has yet to become available). Sponsored funds can use the GIIN of their sponsoring entity until the end of With regard to our US ishares funds, US funds are simply classified as a USFI (i.e. a US Financial Institution) which, as such, have no additional registration requirements for FATCA, so would not have a GIIN (i.e. a number that identifies them as compliant for the purposes of FATCA). The concept of being FATCA compliant simply doesn t apply to US Financial Institutions as they must comply with US tax rules. You should also confirm that any intermediaries you use are FATCA compliant, by simply asking them or you could independently verify the status of providers through the IRS website. The term sponsoring entity means an entity that registers with the IRS and agrees to perform the due diligence, withholding, and reporting obligations of one or more sponsored entities. Sponsored entities are allowed to rely on the GIINs of their sponsoring entities until the end of [10] TAX IMPLICATIONS OF ISHARES

11 Investment in the products mentioned in this document may not be suitable for all investors. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. The price of the investments may go up or down and the investor may not get back the amount invested. Your income is not fixed and may fluctuate. The value of investments involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from, taxation can change. BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. The data displayed provides summary information, investment should be made on the basis of the relevant Prospectus which is available from your Broker, Financial Adviser or BlackRock Advisors (UK) Limited. We recommend you seek independent professional advice prior to investing. Regulatory Information BlackRock Advisors (UK) Limited, which is authorised and regulated by the Financial Conduct Authority ( FCA ), registered office at 12 Throgmorton Avenue, London, EC2N 2DL, England, Tel +44 (0) For your protection, calls are usually recorded. ishares plc, ishares II plc, ishares III plc, ishares IV plc, ishares V plc, ishares VI plc and ishares VII plc (together the Companies ) are open-ended investment companies with variable capital having segregated liability between their funds organised under the laws of Ireland and authorised by the Central Bank of Ireland. For investors in the UK Most of the protections provided by the UK regulatory system do not apply to the operation of the Companies, and compensation will not be available under the UK Financial Services Compensation Scheme on its default. The Companies are recognised schemes for the purposes of the Financial Services and Markets Act Any decision to invest must be based solely on the information contained in the Company s Prospectus, Key Investor Information Document and the latest half-yearly report and unaudited accounts and/or annual report and audited accounts. Investors should read the fund specific risks in the Key Investor Information Document and the Company s Prospectus. Restricted Investors This document is not, and under no circumstances is to be construed as an advertisement or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof, where the companies/securities are not authorised or registered for distribution and where no prospectus has been filed with any securities commission or regulatory authority. The companies/securities may not be acquired or owned by, or acquired with the assets of, an ERISA Plan. Risk Warnings Investment in the products mentioned in this document may not be suitable for all investors. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. The price of the investments may go up or down and the investor may not get back the amount invested. Your income is not fixed and may fluctuate. The value of investments involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from, taxation can change. BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. The data displayed provides summary information, investment should be made on the basis of the relevant Prospectus which is available from your Broker, Financial Adviser or BlackRock Advisors (UK) Limited. We recommend you seek independent professional advice prior to investing. In respect of the products mentioned this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the securities described within. This document may not be distributed without authorisation from the manager. Index Disclaimers Barclays Capital Inc. and Barclays US Treasury 1-3 Year Term Index and Barclays Euro Government Bond 1-3 Year Term Index are trademarks of Barclays Bank PLC and have been licensed for use for certain purposes by BlackRock Fund Advisors or its affiliates. ishares is a registered trademark of BlackRock Fund Advisors or its affiliates.the Underlying Indices are maintained by Barclays Capital. Barclays Capital is not affiliated with the Funds, BFA, State Street, the Distributor or any of their respective affiliates. BFA has entered into a license agreement with the Index Provider to use the Underlying Indices. BFA, or its affiliates, sublicenses rights in the Underlying Indices to the Company at no charge. FTSE is a trade mark jointly owned by the London Stock Exchange plc and the Financial Times Limited (the FT ) and is used by FTSE International Limited ( FTSE ) under licence. The FTSE Actuaries Government Securities UK Gilts All Stocks Index and FTSE UK Conventional Gilts - Up To 5 Years Index are calculated by or on behalf of FTSE International Limited ( FTSE ). None of the Exchange, the FT nor FTSE sponsors, endorses or promotes ishares Core UK Gilts UCITS ETF and ishares UK Gilts 0-5yr UCITS ETF nor is in any way connected to the funds or accepts any liability in relation to their issue, operation and trading. All copyright and database rights within the index values and constituent list vest in FTSE. BlackRock Advisors (UK) Limited has obtained full licence from FTSE to use such copyright and database rights in the creation of these products BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ishares, BUILD ON BLACKROCK, SO WHAT DO I DO WITH MY MONEY and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners a-IS-FEB15-EMIEAiS s FREQUENTLY ASKED QUESTIONS [11]

12 Want to know more? ishares.co.uk