As filed with the Securities and Exchange Commission on August 31, 2009
File Nos. 333-______
811-07332
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ______
Post-Effective Amendment No. ______
(Check appropriate box or boxes)
Barclays Global Investors Funds
(Exact Name of Registrant as Specified in Charter)
1-877-244-1544
(Area Code and Telephone Number)
400 Howard Street
San Francisco, CA 94105
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
c/o State Street Bank and Trust Company
200 Clarendon Street
Boston, MA 02116
(Name and Address of Agent for Service)
Copies to:
Leonard A. Pierce, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is due because of reliance on Section 24(f) of the Investment Company Act of
1940, which permits registration of an indefinite number of securities.
Title of Securities Being Registered: Shares of beneficial interest of the
Registrant.
It is proposed that this filing will become effective on September 30, 2009
pursuant to Rule 488 under the Securities Act of 1933.
BARCLAYS GLOBAL INVESTORS FUNDS
LifePath 2010 Portfolio
LifePath Retirement Portfolio
September 30, 2009
IMPORTANT INFORMATION
Dear Shareholder:
I am writing to inform you about a reorganization that will affect your
investment in the LifePath 2010 Portfolio ("your fund"). As the target date of
the LifePath 2010 Portfolio approaches in 2010 (as indicated in the LifePath
2010 Portfolio's name), the investment objective, policies and strategies of the
LifePath 2010 Portfolio are converging with the investment objective, policies
and strategies of the LifePath Retirement Portfolio. Barclays Global Investors,
N.A. ("BGI") serves as the administrator of the LifePath 2010 Portfolio and the
LifePath Retirement Portfolio, each a series of Barclays Global Investors Funds
(the "Trust")./1/ Rather than run two separate funds with the same portfolio
allocation, BGI intends to reorganize the LifePath 2010 Portfolio into the
LifePath Retirement Portfolio as provided in an Agreement and Plan of
Reorganization (the "Agreement"), approved by the Board of Trustees of the Trust
(the "Board").
The enclosed combined information statement and prospectus contains
information about the reorganization of your fund into the LifePath Retirement
Portfolio. As a result of the reorganization, you will receive shares of the
same class in the LifePath Retirement Portfolio equal in value to the value of
your shares of the same class you hold in the LifePath 2010 Portfolio on the
closing date of the reorganization, and you will become a shareholder of the
LifePath Retirement Portfolio, which has an investment objective, policies and
strategies substantially the same as to your fund. We expect that this
reorganization will enable the combined fund to operate more efficiently in the
future.
Why is the Reorganization Taking Place?
In approving the reorganization, the Board determined that the
reorganization is in the best interests of the shareholders of your fund and the
LifePath Retirement Portfolio and that the interests of each fund's shareholders
will not be diluted as a result of the reorganization. Both funds are part of
the LifePath investment program pursuant to which your fund will have the
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/1/ The LifePath 2010 Portfolio and the LifePath Retirement Portfolio each
operate in a master-feeder structure and invest all of their assets in
corresponding Master Portfolios -- the LifePath 2010 Master Portfolio and
the LifePath Retirement Portfolio, respectively. Each of these Master
Portfolios is a series of Master Investment Portfolio and is advised by
Barclays Global Fund Advisors (the "Adviser"). For simplicity's sake, all
discussion of investment objectives, strategies and risks of the LifePath
2010 Portfolio and the LifePath Retirement Portfolio refers also to the
investment objectives, strategies and risks of their corresponding Master
Portfolios, unless otherwise indicated. The LifePath 2010 Master Portfolio
is also being reorganized into the LifePath Retirement Master Portfolio in
connection with the reorganization of the LifePath 2010 Portfolio into the
LifePath Retirement Portfolio.
same investment objective, investment policies, strategies and restrictions, and
will be subject to the same investment risks, as the LifePath Retirement
Portfolio as the target date of your fund approaches in 2010 (as indicated in
your fund's name). The portfolio management of a larger combined fund may be
easier than for two separate smaller funds.
No Change in Investment Adviser or Portfolio Managers and No Impact on Fund Fees
and Expenses as a Result of the Reorganization
The Adviser will continue as the investment adviser of the combined fund
after the reorganization and no change in portfolio managers will result from
the reorganization. In addition, no increase in advisory, administration or
other fee rates will result from the reorganization. Your fund and the LifePath
Retirement Portfolio have the same expense structure, the same types of fees,
the same fee rates and the same or substantially the same annual fund operating
expense ratios.
No Shareholder Action Required as a Result of the Reorganization
In accordance with the Trust's declaration of trust and applicable Delaware
state and U.S. federal law (including Rule 17a-8 under the Investment Company
Act of 1940 ("Investment Company Act")), the reorganization may be effected
without the approval of shareholders of either fund. Prior to the
reorganization, you may purchase and redeem shares of your fund as usual in
accordance with the procedures described in the enclosed prospectus for the
funds. On or about November 20, 2009, the expected closing date of the
reorganization, your fund will transfer all of its assets and liabilities to the
LifePath Retirement Portfolio, and your shares in the LifePath 2010 Portfolio
will automatically be exchanged for shares of the LifePath Retirement Portfolio.
This will not be a taxable transaction for federal income tax purposes and you
will not recognize gain or loss upon the exchange of your shares as part of this
transaction. The basis of the shares in the LifePath Retirement Portfolio
exchanged for your shares in your fund will be the same as the basis of your
shares in your fund.
Please note that on June 16, 2009, Barclays PLC, the ultimate parent
company of BGI and the Adviser, accepted a binding offer and entered into an
agreement to sell its interests in the Adviser, BGI and certain affiliated
companies, to BlackRock, Inc. (the "BlackRock Transaction"). The BlackRock
Transaction is subject to certain regulatory approvals, as well as other
conditions to closing. Under the Investment Company Act, completion of the
BlackRock Transaction will cause the automatic termination of the LifePath 2010
Master Portfolio's and the LifePath Retirement Master Portfolio's current
investment advisory agreements with the Adviser. In order for the investment
management of each such Master Portfolio and Portfolio to continue
uninterrupted, the Board of Trustees of the Master Portfolios (the "Master
Portfolios' Board") will be asked to approve a new investment advisory agreement
for each such Master Portfolio. If approved by the Master Portfolios' Board, the
new investment advisory agreement will be submitted for approval by the
investors in such Master Portfolios, including the LifePath 2010 Portfolio and
each LifePath Retirement Portfolio. Each such Portfolio will in turn call a
meeting of its shareholders at which shareholders will vote to instruct the
Portfolio how to vote on the applicable Master Portfolio's new investment
advisory agreement. The BlackRock Transaction and the reorganization are
separate and independent transactions.
If you have any questions or need additional information, please contact
SEI Distributors Inc. at 1-877-244-1544.
Sincerely,
/s/ H. Michael Williams
---------------------------------------
H. Michael Williams
President and Trustee
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Barclays Global Investors Funds
INFORMATION STATEMENT
For LifePath 2010 Portfolio
PROSPECTUS
for LifePath Retirement Portfolio
September 30, 2009
400 Howard Street
San Francisco, CA 94105
1-877-244-1544
This combined information statement and prospectus (the "Information
Statement/Prospectus") is being furnished to you because you are a shareholder
of the LifePath 2010 Portfolio (the "Acquired Fund" or "your fund"), a series of
Barclays Global Investors Funds (the "Trust"). As provided in an Agreement and
Plan of Reorganization (the "Agreement"), your fund will be reorganized into
another series of the Trust, the LifePath Retirement Portfolio (the "Acquiring
Fund" and, together with the LifePath 2010 Portfolio, the "funds"). In exchange
for your shares of your fund, you will receive shares of the same class in the
LifePath Retirement Portfolio equal in value to the value of your shares of the
same class in your fund.
The Board of Trustees (the "Board") of the Trust determined that the
reorganization is in the best interests of the funds and their respective
shareholders, and that the interests of each fund's shareholders will not be
diluted as a result of the reorganization. For federal income tax purposes, the
reorganization will not result in income, gain or loss being recognized by your
fund, the Acquiring Fund or the shareholders of your fund.
This Information Statement/Prospectus sets forth concisely the information
about the Acquiring Fund you should know before the reorganization and should be
retained for future reference. It is both your fund's information statement and
a prospectus for the Acquiring Fund. This Information Statement/Prospectus is
being mailed on or about October 5, 2009 to the shareholders of record of your
fund as of the close of business on September 18, 2009 (the "Shareholders").
Additional information (a) with respect to the Acquiring Fund is set forth
in the Statement of Additional Information relating to and dated the date of
this Information Statement/Prospectus, which is incorporated herein by reference
and (b) with respect to the funds is contained in the prospectuses dated May 1,
2009 as supplemented from time to time (collectively, the "May 2009
Prospectus"), included herein, as well as in the statement of additional
information relating to and dated the date of the May 2009 Prospectus as
supplemented from time to time, which is incorporated therein by reference. A
copy of the funds' Annual Report for the fiscal year ended December 31, 2008 was
previously mailed to the shareholders of the funds on or about February 27, 2009
and is incorporated by reference herein.
A copy of the funds' Semi-Annual Report for the period ended June 30, 2009 was
previously mailed to the shareholders of the funds on or about August 28, 2009
and is incorporated by reference herein. Additional copies of these documents
may be obtained without charge by writing the Trust at Barclays Global Investors
Fund, c/o SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA
19456, by e-mail to BGIFunds@barclaysglobal.com, or by calling 1-877-BGI-1544
(1-877-244-1544) (toll-free).
Information about each fund (including its statement of additional
information) can be reviewed and copied at the Public Reference Room of the
Securities and Exchange Commission ("SEC") in Washington, D.C., and information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 1-202-551-8090. Reports and other information about the funds are available
on the EDGAR Database on the SEC's website at www.sec.gov, and copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following e-mail address: publicinfo@sec.gov, or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
No vote of the Shareholders will be taken with respect to the matters
described in this Information Statement/Prospectus. THE TRUST IS NOT ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY TO THE TRUST WITH RESPECT
TO THE MATTERS DESCRIBED IN THIS INFORMATION STATEMENT/PROSPECTUS.
AS WITH ALL MUTUAL FUNDS, THE SEC HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES SUBJECT TO THIS INFORMATION STATEMENT/PROSPECTUS OR DETERMINED
WHETHER THE INFORMATION IN THIS INFORMATION STATEMENT/PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
-ii-
TABLE OF CONTENTS
Summary ................................................................. 1
The Reorganization ...................................................... 6
Capitalization .......................................................... 10
Board's Evaluation and Recommendation ................................... 11
Ownership of Shares of the Funds ........................................ 11
Experts ................................................................. 11
Exhibit A - FORM OF AGREEMENT AND PLAN OF REORGANIZATION ................ A-1
Exhibit B - EXPENSES AND RELATED INFORMATION ............................ B-1
Exhibit C - PERFORMANCE INFORMATION ..................................... C-1
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SUMMARY
The Reorganization and the Agreement and Plan of Reorganization
As the target date of the LifePath 2010 Portfolio approaches in 2010 (as
indicated in the LifePath 2010 Portfolio's name), the investment objective,
policies and strategies of the LifePath 2010 Portfolio are converging with the
investment objective, policies and strategies of the LifePath Retirement
Portfolio. Barclays Global Investors, N.A. ("BGI") serves as the administrator
of the LifePath 2010 Portfolio and the LifePath Retirement Portfolio, each a
series of the Trust./2/ Rather than run two separate funds with the same
portfolio allocation, BGI intends to reorganize the LifePath 2010 Portfolio into
the LifePath Retirement Portfolio, as provided in an Agreement and Plan of
Reorganization (the "Agreement").
The Board of Trustees of the Trust (the "Board") has approved the
Agreement, which provides for the reorganization of your fund into the Acquiring
Fund. The Board concluded that the reorganization is in the best interests of
your fund and that interests of the shareholders of your fund will not be
diluted as a result of the reorganization. Similarly, the Board concluded that
the reorganization is in the best interests of the Acquiring Fund and that
interests of the shareholders of the Acquiring Fund will not be diluted as a
result of the reorganization.
Under the Agreement, your fund will transfer all of its assets to the
Acquiring Fund in exchange for shares of the Acquiring Fund and the Acquiring
Fund will assume all of the liabilities of your fund. You will receive shares of
the same class in the Acquiring Fund equal in value to the value of your shares
of the same class in your fund on the closing date of the reorganization.
Following the closing of the reorganization, your fund will then be dissolved.
BGI will pay for all of the expenses of the reorganization. Notwithstanding the
foregoing, the Agreement provides that your fund and/or the Acquiring Fund will
bear any expense to the extent necessary under tax law applicable to "regulated
investment companies."
The implementation of the reorganization is subject to a number of
conditions set forth in the Agreement. Among the significant conditions is the
receipt by your fund of an opinion of counsel to the effect that the
reorganization will not result in income, gain or loss being recognized by your
fund, the Acquiring Fund or the shareholders of your fund for federal income tax
purposes as described further below. This description of the reorganization is
qualified by reference to the full text of the form of the Agreement, which is
attached as Exhibit A.
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/2/ The LifePath 2010 Portfolio and the LifePath Retirement Portfolio each
operate in a master-feeder structure and invest all of their assets in
corresponding Master Portfolios -- the LifePath 2010 Master Portfolio and
the LifePath Retirement Portfolio, respectively. Each of these Master
Portfolios is a series of Master Investment Portfolio and is advised by
Barclays Global Fund Advisors ("BGFA" or the "Adviser"). For simplicity's
sake, all discussion of investment objectives, strategies and risks of the
LifePath 2010 Portfolio and the LifePath Retirement Portfolio refers also
to the investment objectives, strategies and risks of its corresponding
Master Portfolio, unless otherwise indicated. As discussed below, the
LifePath 2010 Master Portfolio is also being reorganized into the LifePath
Retirement Master Portfolio in connection with the reorganization of the
LifePath 2010 Portfolio into the LifePath Retirement Portfolio.
Comparison of Your Fund to the Acquiring Fund
The following is a summary of more complete information appearing later in
this Information Statement/Prospectus or incorporated herein by reference. You
should read carefully this entire Information Statement/Prospectus, including
the form of Agreement and Plan of Reorganization attached as Exhibit A. See also
the May 2009 Prospectus. If a row extends across the entire table, the policy
disclosed applies to both funds. Please see "Comparison of Principal Risks of
Investing in the Funds" after the table below for a comparison of the risks of
investing in the funds.
LIFEPATH 2010 PORTFOLIO LIFEPATH RETIREMENT PORTFOLIO
(Your fund) (Acquiring Fund)
---------------------------------------------------- -----------------------------------------------------
Business Each fund is a series of the Trust, an open-end investment management company organized as a Delaware
statutory trust.
Net assets, as of $360,845,150 $134,943,982
June 30, 2009
INVESTMENT INFORMATION
Investment Each of the Acquiring Fund and the Acquired Fund (each, a "LifePath Portfolio") is a feeder fund that invests
adviser/3/ and all of its assets in a corresponding master portfolio ("Master Portfolio") that has a substantially identical
portfolio managers investment objective, strategies and policies as the LifePath Portfolio. The Master Portfolios, in turn,
invest in a combination of underlying funds ("Underlying Funds"). BGFA, a registered investment adviser,
serves as investment adviser to each Master Portfolio, and also serves as investment adviser to each
Underlying Fund, other than the BGIF Institutional Money Market Fund, which invests in a Master Portfolio
advised by BGFA. BGFA manages the investing of the Master Portfolios' assets and provides the Master
Portfolios with investment guidance and policy direction in connection with daily portfolio management,
subject to the supervision of the Master Portfolios' Board of Trustees. For its services to the Master
Portfolios, BGFA is entitled to receive an advisory fee at the annual rate of 0.35% of each Master
Portfolio's average daily net assets. A discussion regarding the basis for the Master Portfolios' Board of
Trustees' approval of the investment advisory agreements with BGFA is available in each LifePath Portfolio's
semi-annual report for the six-month period ended June 30, 2009.
BGFA receives investment advisory fees from the Underlying Funds for the investment advisory services it
provides to those funds. In addition, BGI provides administration services to certain of the Underlying Funds
and, for those services, may receive administration fees from those Underlying Funds. BGFA has contractually
agreed through April 30, 2011 to waive its advisory fees at the Master Portfolio level in an amount equal to
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/3/ On June 16, 2009, Barclays PLC, the ultimate parent company of BGI and the
Adviser, accepted a binding offer and entered into an agreement to sell its
interests in the Adviser, BGI and certain affiliated companies, to
BlackRock, Inc. (the "BlackRock Transaction"). The BlackRock Transaction is
subject to certain regulatory approvals, as well as other conditions to
closing. Under the Investment Company Act of 1940, as amended, completion
of the BlackRock Transaction will cause the automatic termination of the
LifePath 2010 Master Portfolio's and the LifePath Retirement Master
Portfolio's current investment advisory agreements with the Adviser. In
order for the investment management of each such Master Portfolio and such
Portfolio to continue uninterrupted, the Board of Trustees of the Master
Portfolios (the "Master Portfolios' Board") will be asked to approve a new
investment advisory agreement for each such Master Portfolio. If approved
by the Master Portfolios' Board, a new investment advisory agreement will
be submitted for approval by the investors in such Master Portfolios,
including the LifePath 2010 Portfolio and each LifePath Retirement
Portfolio. Each such Portfolio will in turn call a meeting of its
shareholders at which shareholders will vote to instruct the Portfolio how
to vote on the applicable Master Portfolio's new investment advisory
agreement. The BlackRock Transaction and the reorganization are separate
and independent transactions.
-2-
LIFEPATH 2010 PORTFOLIO LIFEPATH RETIREMENT PORTFOLIO
(Your fund) (Acquiring Fund)
---------------------------------------------------- -----------------------------------------------------
advisory and administration fees paid to BGFA and BGI by the Underlying Funds that are part of the same
"group of investment companies."
Dagmar Nikles, Leslie Gambon and Dale Hogan (the "Portfolio Managers") are the portfolio managers primarily
responsible for the day-to-day management of the Master Portfolios and act collaboratively on all aspects
concerning the Master Portfolios. Ms. Nikles, Ms. Gambon and Mr. Hogan have been Portfolio Managers primarily
responsible for the day-to-day management of the Master Portfolios since June 2005, May 2007 and October
2008, respectively.
For more information about the Adviser and the Portfolio Managers (including information about the Portfolio
Managers' background, compensation, other accounts managed by the Portfolio Managers and ownership of shares
in the LifePath Portfolios that invest in the Master Portfolios for which they are Portfolio Managers), see
the May 2009 Prospectus and the LifePath Portfolios' SAI.
Investment objective Each fund seeks to maximize return consistent with the quantitatively measured risk that investors on average
and restrictions may be willing to accept given their investment time horizon. Each fund's investment objective may be changed
by the Board without shareholder approval. Each fund has the identical fundamental and non-fundamental
investment restrictions
Your fund is managed for investors planning to retire The Acquiring Fund is managed for investors seeking
(or begin to withdraw substantial portions of their income and moderate long-term growth of capital.
investment) approximately in the year 2010.
As indicated in the table below, as the target date
of the LifePath 2010 Portfolio approaches in 2010,
the investment objective, policies and strategies of
the LifePath 2010 Portfolio are converging with the
investment objective, policies and strategies of the
LifePath Retirement Portfolio.
The Adviser has reported that (1) as of October 2009, your fund and the Acquiring Fund will both have the
same investment objective, strategies, policies and restrictions and the most conservative allocation within
the LifePath strategy and (2) at the closing of the reorganization, their portfolios of Underlying Funds are
expected to be identical.
Primary investments Each fund invests all of its assets in a corresponding Master Portfolio which allocates and re-allocates its
and strategies assets among Underlying Funds. The Underlying Funds invest in a mix of equity securities, bonds and money
market instruments. Certain Underlying Funds invest in real estate investment trusts, foreign securities,
emerging markets, below investment grade bonds and derivatives, which are subject to additional risks.
Your fund's allocation of assets among Underlying The Acquiring Fund is in its most conservative phase
Funds that invest primarily in equity securities and and therefore its allocation generally does not
those that invest primarily in bonds was designed to become more conservative over time.
become more conservative over time and to have lower
expected returns as the stated time horizon of 2010
approaches.
Allocation: As of November 2009 the allocation of your fund is expected to be the same as the allocation of
the Acquiring Fund.
Each Fund is expected to have approximately 38% of its assets in Underlying Funds that invest primarily in
equity securities, 62% of its assets in Underlying Funds that invest primarily in bonds and the remainder in
Underlying Funds that invest primarily in money market instruments.
Other investments In addition to investing in Underlying Funds, each fund may borrow, lend its securities to brokers, dealers
and financial institutions, and may invest the collateral in short-term instruments either directly or
through one or more joint accounts or money market funds.
Benchmarks The funds use custom benchmarks that are hypothetical representations of the performance of the applicable
LifePath Portfolio's asset classes according to their weightings as of the most recent quarter end. The
weightings
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LIFEPATH 2010 PORTFOLIO LIFEPATH RETIREMENT PORTFOLIO
(Your fund) (Acquiring Fund)
---------------------------------------------------- -----------------------------------------------------
of the various indexes that are included in the LifePath Portfolios' custom benchmarks are adjusted quarterly
to equal the LifePath Portfolios' changing asset allocations over time. The following indexes are currently
used to calculate the LifePath Portfolios' custom benchmarks: S&P 500 Index, S&P 400 Index, S&P 600 Index,
Barclays Capital U.S. Aggregate Bond Index, Citigroup 3-Month Treasury Bill Index, Barclays Capital U.S.
Treasury TIPS Index (Series-L), MSCI All Country World Index ex US IMI Index and FTSE EPRA/NAREIT Global Real
Estate Index.
SHARES
No sales charges; The sales charge and Rule 12b-1 fee structure are the same for each fund:
Rule 12b-1 fees for
Class R Shares . Shares of each fund are purchased and sold without paying a sales charge.
. Class I and Class S shares are not subject to Rule 12b-1 fees.
. Rule 12b-1 fees are paid out of the assets of Class R shares of each fund at an annual rate of 0.25%
of the average daily net assets of the Class R shares.
. Holders of Class R Shares may be charged additional fees by the shareholder servicing agent.
Buying shares The procedures for buying shares of the Acquiring Fund are identical to those of your fund. You may buy
shares
. through an employer-sponsored or individual retirement savings plan,
. through a custodian or shareholder servicing agent of the funds,
. through an account with State Street Bank and Trust ("State Street"), the funds' transfer agent and
custodian (Class R Shares only), or
. directly from the funds (Class I Shares only).
You can purchase shares at their net asset value, next determined after receipt of the purchase order.
Purchases generally must be made in U.S. dollars.
Minimum initial The minimum initial investment for both funds are the same:
investment
. Classes R and S have no minimum initial investment.
. Class I has no minimum initial investment (except a $1 million initial investment that applies only
to direct investment).
Selling shares The procedures for selling shares of the Acquiring Fund are identical to those of your fund. You may sell
shares on any business day at their net asset value, next determined after receipt of the order.
Net asset value The procedure for calculating net asset value is the same for both funds:
For each fund class, net asset value is calculated by deducting all of its liabilities (including
accrued expenses) from the total value of its assets (including securities held by the fund plus any
cash or other assets, including interest and dividends accrued but not yet received) and dividing the
result by the number of shares outstanding, and generally rounded to the nearest cent. Each fund
calculates a net asset value for its shares at the close of regular trading on the New York Stock
Exchange (generally, 4:00 p.m. Eastern Time) on any business day.
TAX
Federal income tax For federal income tax purposes, the reorganization will not result in income, gain or loss being recognized
consequences by your fund, the Acquiring Fund or the shareholders of your fund. For further information see "Federal
Income Tax Consequences" below.
Investment Objective and Investment Strategies
For information about each fund's investment objective and investment
strategies, please refer to the comparison chart above.
-4-
Comparison of Principal Risks of Investing in the Funds
As your fund's investment horizon date (2010) approaches, its investment
objective, policies and strategies will become substantially identical to those
of the Acquiring Fund. Accordingly, the funds are generally subject to the same
types of principal risks./4/ These principal risks are:
. Equity Securities Market Risk: The price of the equity securities in
which the Underlying Funds invest may fluctuate or fall in response to
economic events or trends.
. Bond Investment Risks: Risks associated with investment in bonds
include (a) interest rate risk, which means that the prices of bonds
in which the Underlying Funds invest may fall because of a rise in
interest rates, and credit risk, which is the risk that the price of
an individual bond may fall with the decline in an issuer's real or
apparent ability to meet its financial obligations; (b) extension
risk, which is the risk that borrowers may extend the prepayment of
their mortgages or loans for longer periods than expected, thereby
affecting the security's average life and, potentially, its yield; and
(c) prepayment risk, which is the risk that borrowers may prepay their
mortgages or loans faster than expected, thereby affecting the
security's average life and, potentially, its yield. The risk of
default and price volatility of high yield securities is greater than
the risk usually associated with higher-rated securities. The funds'
yields may decline during times of falling interest rates.
. Investments in Foreign Securities: Investments in foreign securities
by the Underlying Funds are subject to certain special risks and
considerations, including potentially less liquidity and greater price
volatility than investments in securities traded in U.S. markets.
These risks are greater for investments in foreign securities issued
by companies or sovereign entities in emerging market countries.
. Passive Investment Risk: Because the Adviser does not select
individual companies in the underlying indexes for certain Underlying
Funds, those Underlying Funds may hold stocks in companies that
present risks that an adviser researching individual stocks might seek
to avoid.
. Security Selection Risk: In the case of the Underlying Funds where
BGFA does select securities based on its analysis, these funds are
subject to the risk that security selection will contribute to
underperformance.
. Concentration Risk: The risk that an Underlying Fund that concentrates
in a single industry or group of industries may be more susceptible to
any single economic, market, political or regulatory occurrence in
that industry or group of industries.
. Real Estate Investment Risk: The risk that investment in securities
exposed to real estate carries many of the same risks associated with
the direct ownership of real estate.
. Derivatives: Investments in derivatives by certain Underlying Funds
are subject to special risks and considerations. Derivatives are
financial instruments whose values
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/4/ Historically, as a result of differences in the funds' time horizons and
the resulting differences in their Master Portfolios' investment allocation
between Underlying Funds that invest in equity securities and bonds, the
Acquired Fund may have had greater exposure to certain risks described
below than the Acquiring Fund. However, those differences are of limited
relevance as the Acquired Fund will reach its target date and Master
Portfolios will have the same portfolio allocation in November 2009.
-5-
are derived, at least in part, from the prices of other securities or
specified assets, indexes or rates.
. Market Trading Risk: The risk certain Underlying Funds face due to
their shares being listed and traded on securities exchanges
(including potential halts in trading or a fluctuation in trading
price in accordance with changes in net asset value), and tracking
error risk, in that the return of an Underlying Fund that seeks to
track an index may deviate from the return of such index.
The funds cannot eliminate risk or assure achievement of their investment
objectives and you may lose money by investing in the funds.
The Funds' Fees and Expenses
The Acquiring Fund and the Acquired Fund have the same expense structure,
the same fees and fee rates and the same or substantially the same annual fund
operating expense ratios. More detailed information regarding expenses appears
in Exhibit B.
Performance
Historically, as contemplated by the LifePath strategy, the performance of
the Acquiring Fund and the Acquired Fund have differed due to their different
time horizons and portfolio allocations. However, the differences are of limited
relevance since the Acquired Fund will reach its target date in November 2009,
and thereafter the Acquiring Fund and the Acquired Fund would have the most
conservative allocation of the LifePath strategy and the same portfolio
allocation. For further information regarding historical performance, see
Exhibit C.
THE REORGANIZATION
Agreement and Plan of Reorganization
The Board approved the Agreement regarding the reorganization, a copy of
which is attached to this Information Statement/Prospectus as Exhibit A. The
description of the Agreement contained herein is qualified in its entirety by
the attached copy.
The Reorganization
The Agreement provides for the reorganization on the following terms:
. The reorganization is scheduled to occur on the close of business on
November 20, 2009, but may occur on a later date as the Board
determines. Your fund will transfer all of its assets to the Acquiring
Fund, and the Acquiring Fund will assume all of your fund's
liabilities. This will result in the addition of your fund's assets to
the Acquiring Fund's portfolio. The net asset value of both funds will
be computed as of the close of regular trading on the New York Stock
Exchange on the reorganization date.
. The Acquiring Fund will issue shares to your fund with a value equal
to the net assets attributable to your fund's shares. As part of the
liquidation of your fund, these shares will immediately be distributed
to shareholders of record of your fund so that
-6-
you will receive shares of the same class in the Acquiring Fund with a
value equal to the value of your shares of the same class in your fund
on the reorganization date. As a result, shareholders of your fund
will become shareholders of the Acquiring Fund.
. After the shares are issued, the existence of your fund will be
terminated.
Since each fund is a feeder fund that invests all of its assets in a Master
Portfolio, there are other aspects of the reorganization that are not covered in
the Agreement or this Information Statement/Prospectus because they do not
relate to your fund or the Acquiring Fund directly. Prior to the reorganization
of your fund into the Acquiring Fund, the LifePath 2010 Master Portfolio and the
LifePath Retirement Master Portfolio will be combined. That combination is not
governed by the Agreement or this Information Statement/Prospectus.
Reasons for the Reorganization
At a meeting held on May 20, 2009, the Board approved the Agreement on
behalf of your fund. The Board also determined that the reorganization is in the
best interests of your fund and that the interests of shareholders of your fund
will not be diluted as a result of the reorganization. The Board believes that
the reorganization will be advantageous to the shareholders of your fund for
several reasons. The Board considered the following matters, among others, in
approving the reorganization:
FIRST, both funds are part of the LifePath investment program pursuant to
which the combined fund will have the same investment objective, investment
policies, strategies and restrictions as your fund, and will be subject to the
same investment risks.
SECOND, there will be no change in the investment adviser or in the persons
managing the portfolios,/5/ and BGFA advised the Board that it does not
anticipate that the reorganization will result in any decline in the level of
investment advisory services from that historically provided to the funds.
THIRD, no increase in advisory, administration or other fees, as a
percentage of average daily net assets, will occur as a result of the
reorganization, nor will there be any change in the contractual terms of the
existing investment advisory agreement with BGFA or other service agreements
with BGI as a result of the reorganization.
FOURTH, your fund and the Acquiring Fund have the same expense structure,
the same fees and fee rates and the same or substantially the same annual fund
operating expense ratio.
FIFTH, in addition to having the same investment adviser and administrator,
your fund and the Acquiring Fund have the same service providers, such as the
custodian, transfer agent, subadministrator, principal underwriter, auditors and
counsel.
SIXTH, for federal income tax purposes, the reorganization will not result
in income, gain, or loss being recognized by your fund, the Acquiring Fund or
the shareholders of your fund (as further discussed below).
- ----------
/5/ See footnote 3.
-7-
SEVENTH, the shareholder services and privileges available to the Acquiring
Fund are the same as those available to your fund.
EIGHTH, the funds use the same methodology for valuing their assets and
that each shareholder of your fund will receive shares of the same class of the
Acquiring Fund with an aggregate net asset value identical to that of the shares
of the same class of your fund that such shareholder held immediately prior to
the reorganization. As a result, the existing interests of the shareholders
would not be diluted as a result of the reorganization.
NINTH, because it can be more efficient to run a single larger fund than
smaller separate funds, over time lower expenses may result from the combined
funds' larger asset and income base./6/
The Board considered that BGI will pay all of the expenses of the funds in
connection with the reorganization, including expenses associated with the
preparation, printing and mailing of any shareholder communications, including
this Information Statement/Prospectus, and any filings with the SEC and other
governmental agencies in connection with the reorganization (except that the
Acquired Fund and the Acquiring Fund will bear any expense to the extent
necessary under tax law applicable to "regulated investment companies"). It is
expected that the reorganization will not result in any additional expenses
being incurred by the shareholders of the funds either directly as a result of
effectuating the reorganization or indirectly over time.
The Board further considered that the funds' shareholders approved in 2007
as amendment to the Trust's Declaration of Trust to allow the Board to authorize
a LifePath series' merger or consolidation with, or sale of assets to, another
LifePath series without shareholder approval (unless shareholder approval is
required by the Investment Company Act). The Board considered the reason for
this amendment was, among other things, to permit the Board to approve a merger
or reorganization of one LifePath series whose target date was approaching into
another LifePath series that had already reached its target date, without the
necessity of a shareholder vote and this reason was explained in the Proxy
Statement to shareholders relating to such amendment.
The Board, to the extent it deemed relevant, also considered the funds'
investment performance records in light of the overall LifePath strategy and the
funds' different time horizons.
The Board considered that the funds are series of BGIF. As such, there will
be no change in the governance of the funds, including without limitation the
composition of the Boards, as a result of the reorganization. In addition, there
will be no change in the compliance program of the Acquiring Fund, including
without limitation the person serving as the chief compliance officer, as a
result of the reorganization.
- ----------
/6/ The Board noted that since the LifePath Retirement Master Portfolio pays
advisory fees to BGFA and the Acquiring Fund pays administration fees to
BGI, out of which BGI pays virtually all of the Acquiring Funds' other
expenses, any such economies and savings would accrue to BGFA and BGI under
the current expense structure.
-8-
In addition, the Board considered possible alternatives to the
reorganization, including maintaining the status quo. The Board, however,
determined that, given the Funds' LifePath strategy, the opportunity presented
by the reorganization and the factors in favor of the reorganization made the
reorganization more compelling than these alternatives. For the reasons stated
above and other factors considered by the Board, the Board determined that the
reorganization is in the best interests of your fund and its shareholders.
Tax Status of the Reorganization
The reorganization is intended to result in no income, gain or loss for
federal income tax purposes to the Acquiring Fund, your fund or the shareholders
of your fund. Consummation of the reorganization is subject to the condition
that your fund and the Acquiring Fund receive an opinion from Wilmer Cutler
Pickering Hale and Dorr LLP, counsel to the Trust, substantially to the effect
that
. the reorganization will be a "reorganization" within the meaning of
section 368(a) of the Internal Revenue Code of 1986;
. the reorganization will not result in taxable income, gain or loss to
any fund or to its shareholders;
. the basis of the Acquiring Fund shares received by you in the
Reorganization will be the same as the basis of your shares of the
Acquired Fund surrendered in exchange; and
. the tax holding period of the Acquiring Fund shares you receive will
include the tax holding period of the shares of the Acquired Fund
surrendered in the exchange, provided that the shares of the Acquired
Fund were held as capital assets on the date of the exchange.
In rendering such opinion, counsel will rely upon, among other things,
reasonable assumptions as well as representations of the Acquiring Fund, your
fund, the Master Portfolios, and certain Underlying Funds.
No ruling has been or will be received from the Internal Revenue Service
("IRS") in connection with the reorganization. An opinion of counsel is not
binding on the IRS or a court, and no assurance can be given that the IRS would
not assert, or a court would not sustain, a contrary position.
The foregoing discussion does not address certain classes of taxpayers who
are subject to special circumstances, such as shareholders who are not citizens
or residents of the United States, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities or foreign
currencies, or persons who hold their shares as part of a straddle or conversion
transaction.
You should consult your own advisor for the particular tax consequences to
you of the reorganization, including the applicability of any state, local or
foreign tax laws.
-9-
Additional Terms of the Agreement and Plan of Reorganization
Conditions to Closing the Reorganization. The obligation of the Acquiring
Fund to consummate the reorganization is subject to the satisfaction of
customary conditions, including your fund's performance of its obligations under
the Agreement, the receipt of certain documents and financial statements from
your fund and the receipt of all consents, orders and permits necessary to
consummate the reorganization (see Agreement, section 6).
The obligation of your fund to consummate the reorganization is subject to
the satisfaction of customary conditions, including the performance by the
Acquiring Fund of its obligations under the Agreement, and the receipt of all
consents, orders and permits necessary to consummate the reorganization (see
Agreement, section 7).
The funds' obligations are also subject to the receipt of a favorable
opinion of Wilmer Cutler Pickering Hale and Dorr LLP as to the federal income
tax consequences of the reorganization (see Agreement, section 8).
Termination of Agreement. The Board may terminate the Agreement at any time
before the reorganization date if the Board believes that proceeding with the
reorganization would no longer be advisable (see Agreement, section 11).
CAPITALIZATION
The following table sets forth the capitalization of each fund as of June
30, 2009, and the pro forma combined capitalization of both funds as if the
reorganization had occurred on that date. When the reorganization is
consummated, the actual exchange ratios on the reorganization date may vary from
the exchange ratios indicated. This is due to changes in the market value of the
portfolio securities of both funds between June 30, 2009, and the reorganization
date, changes in the amount of undistributed net investment income and net
realized capital gains of both funds during that period resulting from income
and distributions, and changes in the accrued liabilities of both funds during
the same period.
June 30, 2009
LifePath Retirement Acquiring Fund
LifePath 2010 Portfolio Portfolio (Combined)
(Your Fund) (Acquiring Fund) Pro Forma
----------------------- ------------------- --------------
Net Assets
Class I $272,234,759 $108,539,452 $380,774,211
Class R 88,533,196 26,368,275 114,901,471
Class S 77,195 36,255 113,450
Net Asset Value Per Share
Class I $ 10.84 $ 9.73 $ 9.73
Class R 10.65 9.05 9.05
Class S 10.81 9.72 9.72
Shares Outstanding
Class I $ 25,108,982 $ 11,158,953 $ 39,147,439
Class R 8,315,896 2,914,706 12,696,295
Class S 7,139 3,731 11,675
-10-
It is impossible to predict how many shares of the Acquiring Fund will
actually be received and distributed by your fund on the closing date of the
reorganization. The table should not be relied upon to determine the amount of
the Acquiring Fund's shares that will actually be received and distributed.
BOARD'S EVALUATION AND RECOMMENDATION
For the reasons described above, the Board, including a majority of the
trustees who are not "interested persons" of the Trust within the meaning of the
Investment Company Act (the "Independent Trustees"), approved the
reorganization. In particular, the Board determined that the reorganization is
in the best interests of your fund and that the interests of your fund's
shareholders will not be diluted as a result of the reorganization. Similarly,
the Board, including the Independent Trustees, approved the reorganization on
behalf of the Acquiring Fund. The Board also determined that the reorganization
is in the best interests of the Acquiring Fund and that the interests of the
Acquiring Fund's shareholders will not be diluted as a result of the
reorganization.
OWNERSHIP OF SHARES OF THE FUNDS
As of July 31, 2009, the following persons owned of record or, to the
knowledge of each fund, beneficially 5% or more of the outstanding shares of
LifePath Retirement Portfolio or LifePath 2010 Portfolio as indicated in the
table below:
Percentage of Combined
Percentage of LifePath Percentage of LifePath Fund Assuming Completion
Shareholder Name and Address 2010 Portfolio Retirement Portfolio of Reorganization
- ----------------------------------------- ---------------------- ---------------------- ------------------------
Charles Schwab & Co. Inc.
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery Street
San Francisco, CA 94104 15.55% 9.61% 13.78%
Hartford Life Separate Account 457
P.O. Box 2999
Hartford, CT 06104 16.71% 11.79% 15.83%
Merrill Lynch, Pierce, Fenner & Smith
For the Sole Benefit of its Customers
4800 Deer Lake Drive East
Jacksonville, FL 32246 5.01% 6.69% 5.47%
New York Life Trust Company
169 Lackawanna Avenue
Parsippany, NJ 07054 13.94% 25.82% 17.07%
NFS LLC FEBO
State Street Bank Trust Co. Trustee
Various Retirement Plans
4 Manhattanville Road
Purchase, NY 10577 13.37% 14.77% 13.62%
Northern Trust Company Custodian
FBO Texas Instruments Corporate
Custody Account #26-10712
P.O. Box 92956
Chicago, IL 60675 5.89% n/a n/a
As of July 31, 2009, the trustees and officers of the Trust, as a group,
beneficially owned less than 1% of the outstanding shares of the Trust.
EXPERTS
The financial statements and the financial highlights of the funds for the
fiscal year ended December 31, 2008 are incorporated by reference into this
Information Statement/Prospectus. The financial statements and financial
highlights for each fund as of and for the year ended December 31, 2008 have
been independently audited by PricewaterhouseCoopers LLP, independent registered
public accounting firm, as stated in their report appearing in the statement of
additional information. These financial statements and financial highlights have
been included in reliance on their report given on their authority as experts in
accounting and auditing. The unaudited financial statements and financial
highlights of your fund and the Acquiring Fund, appearing in the Funds' 2009
semi-annual report, are also incorporated by reference into the Statement of
Additional Information relating to this Information Statement/Prospectus.
-11-
Exhibit A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of the
__ day of ________, 2009, by and between Barclays Global Investors Funds, a
Delaware statutory trust ("Trust"), on behalf of its series, LifePath Retirement
Portfolio ("Acquiring Fund"), with its principal place of business at 400 Howard
Street, San Francisco, California 94105, and the Trust on behalf of its series,
LifePath 2010 Portfolio ("Acquired Fund"). The Acquiring Fund and the Acquired
Fund are sometimes referred to collectively herein as "Funds" and individually
as "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(D) of the United States
Internal Revenue Code of 1986, as amended ("Code"), and the Treasury Regulations
thereunder. The reorganization ("Reorganization") will consist of (1) the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund solely
in exchange for (A) the issuance of shares of beneficial interest of the
Acquiring Fund that correspond to the shares of the Acquired Fund equal to the
net asset value represented by such shares (collectively, "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
on the closing date of the Reorganization ("Closing Date") ("Assumed
Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly
after the Closing Date as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Fund and the Acquired Fund are each series of the
Trust, a registered investment company classified as a management company of the
open-end type, and the Acquired Fund owns securities that are assets of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest;
WHEREAS, the Board of Trustees of the Trust ("Board") has determined that
the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares
and the assumption of the Assumed Liabilities of the Acquired Fund by the
Acquiring Fund are in the best interests of the Acquiring Fund shareholders and
that the interests of the existing shareholders of the Acquiring Fund will not
be diluted as a result of the Reorganization; and
WHEREAS, the Board has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares and the assumption of the Assumed
Liabilities of the Acquired Fund by the Acquiring Fund are in the best interests
of the Acquired Fund shareholders and that the interests of the existing
shareholders of the Acquired Fund will not be diluted as a result of the
Reorganization.
A-1
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Transfer of Assets by Acquired Fund; Issuance of Shares and Assumption
of Liabilities by Acquiring Fund. Subject to the requisite approvals, the terms
and conditions herein set forth and on the basis of the representations and
warranties contained herein, the Acquired Fund will sell, assign, convey,
transfer and deliver all of its property and assets as set forth in Section 1.2
("Acquired Assets") to the Acquiring Fund free and clear of all liens and
encumbrances (other than those, if any, arising under the Securities Act of
1933, as amended ("Securities Act"), liens for Taxes (as defined below) not yet
due, and, as disclosed to the Trust in accordance with Section 3.2 hereof,
contractual restrictions, if any, on the transfer of the Acquired Assets), and
the Acquiring Fund agrees in exchange therefor: (i) to issue to the Acquired
Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, of the applicable class with an aggregate net asset value ("NAV") equal
to the NAV of the Acquired Fund's shares of the corresponding class, as
determined in the manner set forth in Article 2; and (ii) to assume all of the
liabilities (whether absolute or contingent, known or unknown) of the Acquired
Fund ("Assumed Liabilities"). Such transactions shall take place at the Closing
(as defined in Section 3.1 below).
1.2 Assets to be Acquired; Investments by Acquired Fund Pending Closing.
(a) The Acquired Assets shall consist of all of the Acquired Fund's
assets and property as of the Valuation Time (as defined in Article 2),
including, without limitation, all portfolio securities and instruments,
dividends, receivables (including dividends, interest and other receivables),
cash, cash equivalents, deferred or prepaid expenses, goodwill, rights and
choses in action of the Acquired Fund or the Trust in respect of the Acquired
Fund, all other tangible and intangible property owned by the Acquired Fund,
originals or copies of all books and records of the Acquired Fund, and all other
assets of the Acquired Fund. The Acquiring Fund shall also be entitled to
receive copies of all records that the Acquired Fund is required to maintain
under the Investment Company Act of 1940, as amended ("Investment Company Act"),
and the rules of the Securities and Exchange Commission ("Commission")
thereunder.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's securities and other assets as of the date of
execution of this Agreement, specifically describing all contractual
restrictions, if any, on the transfer of such assets. The Acquired Fund reserves
the right to sell any of such securities or other assets before the Closing Date
(except to the extent sales may be limited by representations of the Acquired
Fund contained herein and made in connection with the issuance of the tax
opinion provided for in Section 8.4 hereof). The Acquired Fund agrees not to
acquire any portfolio security or other asset that is not an eligible investment
for, or that would violate any investment policy or restriction of, the
Acquiring Fund. For avoidance of doubt, reference is hereby made to Section 5.1
of this Agreement pursuant to which the Acquired Fund agrees to operate its
business
A-2
in the ordinary course and to comply in all material respects with all
applicable laws, rules and regulations between the date hereof and the Closing
Date.
1.3 Assumed Liabilities. The Acquired Fund will endeavor to discharge all
of its known liabilities and obligations that are or will become due prior to
the Valuation Time. Notwithstanding the foregoing, any liabilities not so
discharged as of the Valuation Time shall be Assumed Liabilities, which shall
include all of the Acquired Fund's liabilities, debts, obligations, and duties
of whatever kind or nature, whether absolute, accrued, contingent, or otherwise,
whether known or unknown, whether or not arising in the ordinary course of
business, whether or not determinable at the Closing Date, and whether or not
specifically referred to in this Agreement. The Acquiring Fund shall assume the
Assumed Liabilities at the Closing.
1.4 Liquidation of Acquired Fund; Distribution of Acquiring Fund Shares. On
the Closing Date or as soon thereafter as is practicable, the Acquired Fund
shall distribute pro rata to its shareholders of record, determined as of the
close of regular trading on the New York Stock Exchange ("NYSE") on the Closing
Date ("Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Section 1.1 hereof. Each Acquired Fund Shareholder
shall receive the number of Acquiring Fund Shares of the class corresponding to
the shares of beneficial interest of the same class in the Acquired Fund
("Acquired Fund Shares") held by such Acquired Fund Shareholder that have an
aggregate NAV equal to the aggregate NAV of the Acquired Fund Shares held of
record by such Acquired Fund Shareholder on the Closing Date. Such distribution
will be accomplished by the Trust instructing its transfer agent ("Transfer
Agent") to transfer the Acquiring Fund Shares then credited to the account of
the Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund established and maintained by the Transfer
Agent in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due the Acquired Fund
Shareholders. The Transfer Agent shall retain evidence of such distribution. All
issued and outstanding Acquired Fund Shares will simultaneously be cancelled on
the books of the Acquired Fund, and as soon as practicable thereafter, the Trust
shall terminate the existence of the Acquired Fund as a series of the Trust
under the laws of the State of Delaware and in accordance with the Trust's
Agreement and Declaration of Trust ("Trust Instrument") and By-Laws. The
Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5 Cancellation of Acquired Fund Share Certificates. Ownership of
Acquiring Fund Shares will be shown on the books of the Transfer Agent. Any
certificates representing ownership of Acquired Fund Shares that remain
outstanding on the Closing Date shall be deemed to be cancelled and shall no
longer evidence ownership of Acquired Fund Shares.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
Shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 Acquired Fund Reporting Responsibility. Any reporting responsibility of
the Trust with respect to the Acquired Fund for taxable periods ending on or
before the Closing Date, including, but not limited to, the responsibility for
filing of regulatory reports, Tax Returns
A-3
(as defined in Section 4.1(j)(O) below), or other documents with the Commission,
any state securities commissions, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall remain the
responsibility of the Trust on behalf of the Acquired Fund.
2. VALUATION
The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund
shall, in each case, be determined as of the close of regular trading on the
NYSE, and after the declaration of any dividends by the Acquired Fund, on the
Closing Date (such time and date being hereinafter called the "Valuation Time"),
computed using the valuation procedures previously approved by the Board. All
computations of value shall be made by the fund accountant for the Trust
("Administrator"). The Acquired Fund shall cause the Administrator to deliver a
copy of its valuation report to the Acquiring Fund at the Closing.
3. CLOSING AND CLOSING DATE
3.1 Closing Date and Place. The Closing Date shall be November 20, 2009, or
such later date as the parties may agree to in writing. All acts necessary to
consummate the Reorganization ("Closing") shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
agreed to by the parties. The close of business on the Closing Date shall be as
of 4:00 p.m. (Eastern time) or such later time on that date as the Acquired
Fund's NAV is calculated in accordance with Article 2 and after the declaration
of any dividends by the Acquired Fund. The Closing shall be held at the offices
of the Trust, or at such other place as the parties may agree.
3.2 Delivery of Acquired Assets by Acquired Fund. State Street Bank & Trust
Company ("SSB&T") serves as custodian and record holder for each Fund, and in
that capacity for the Acquiring Fund ("Acquiring Fund Custodian"), SSB&T shall
examine the portfolio securities, if any, that are held other than in book-entry
form in the name of SSB&T as custodian and record holder for the Acquired Fund
("Acquired Fund Custodian") no later than three (3) business days preceding the
Closing Date, together with a description of all contractual restrictions on the
transfer of the Acquired Assets. Such portfolio securities shall be delivered by
the Acquired Fund to the Acquiring Fund Custodian for the account of the
Acquiring Fund on the Closing Date, duly endorsed in proper form for transfer,
in such condition as to constitute good delivery thereof in accordance with the
custom of brokers, and shall be accompanied by all necessary federal and state
stock transfer stamps or a check or other appropriate means for the appropriate
purchase price thereof. Portfolio securities held of record by the Acquired Fund
Custodian in book-entry form on behalf of the Acquired Fund shall be delivered
by the Acquired Fund Custodian through the Depository Trust Company to the
Acquiring Fund Custodian and by the Acquiring Fund Custodian recording the
beneficial ownership thereof by the Acquiring Fund on the Acquiring Fund
Custodian's records in accordance with the customary practices of the Acquiring
Fund Custodian and of each securities depository, as defined by Rule 17f-4 under
the Investment Company Act. Any cash balances maintained by the Acquired Fund
shall be delivered by the Acquired Fund Custodian and the Acquiring Fund
Custodian crediting such amounts to the account of the Acquiring Fund from the
account of the Acquired Fund.
A-4
3.3 Custodian Certificate with respect to Delivery of Acquired Assets. The
Trust shall direct the Acquired Fund Custodian to deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired Assets have
been delivered in proper form to the Acquiring Fund on the Closing Date; and (b)
all necessary transfer Taxes including all applicable federal and state stock
transfer stamps, if any, have been paid, or provision for payment has been made
in conjunction with the delivery of portfolio securities as part of the Acquired
Assets.
3.4 Trading Restriction on Scheduled Closing Date. If on the Closing Date
(a) the NYSE is closed to trading or trading thereon shall be restricted or (b)
trading or the reporting of trading on such exchange or elsewhere is disrupted
so that accurate appraisal of the NAV of the Acquiring Fund Shares or the
Acquired Fund pursuant to Article 2 is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.5 Acquired Fund Shareholder List. The Acquired Fund shall deliver at the
Closing a list of the names, addresses, federal taxpayer identification numbers
and backup withholding and nonresident alien withholding status and certificates
of the Acquired Fund Shareholders and the number and percentage ownership of
outstanding Acquired Fund Shares owned by each Acquired Fund Shareholder as of
the Valuation Time, certified by the President or the Secretary of the Trust and
its Treasurer, Secretary or other authorized officer ("Shareholder List") as
being an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund's transfer agent, or (c) derived
from the Trust's records by such officers or one of the Trust's service
providers.
3.6 Acquiring Fund Shares Credited to Acquired Fund. The Acquiring Fund
shall issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts or other documents as such other party
or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties by Acquired Fund. Except as set forth on
Schedule 4.1 hereto, the Trust, on behalf of the Acquired Fund, represents,
warrants and covenants to the Acquiring Fund, which representations, warranties
and covenants are true and correct on the date hereof, as follows:
(a) The Acquired Fund is a series of the Trust. The Trust is a
statutory trust duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Trust has the power to own all of its
properties and assets and to perform its obligations under this Agreement. The
Acquired Fund is not required to qualify to do business in any jurisdiction in
which it is not so qualified or where failure to qualify would subject it to any
material liability or disability. Each of the Trust and the Acquired Fund has
all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;
A-5
(b) The Trust is a series registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Trust is not in violation of, and the execution and delivery
of this Agreement and the performance of its obligations under this Agreement
will not result in (i) a violation of, any provision of the Trust Instrument or
Bylaws or any material agreement, indenture, instrument, contract, lease or
other undertaking with respect to the Acquired Fund to which the Trust is a
party or by which the Acquired Fund or any of its assets are bound, or (ii) the
acceleration of any obligation, or the imposition of any penalty under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust, on behalf of the Acquired Fund, is a party or by which it is bound;
(d) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as may be required under the
Securities Act, the Securities Exchange Act of 1934, as amended ("Exchange
Act"), the Investment Company Act, and state securities laws;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Fund or any of the Acquired Fund's properties or
assets. The Acquired Fund knows of no facts that might form the basis for the
institution of such proceedings. Neither the Trust nor the Acquired Fund is a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects the Acquired
Fund's business or its ability to consummate the transactions contemplated
herein or would be binding upon the Acquiring Fund as the successor to the
Acquired Fund;
(f) All material contracts or other commitments of the Acquired Fund
(other than this Agreement, contracts listed in Schedule 4.1 and certain
investment contracts, including options, futures and forward contracts) will
terminate without liability to the Acquired Fund on or prior to the Closing
Date. Each contract listed in Schedule 4.1 is a valid, binding and enforceable
obligation of the Acquired Fund and, to the Acquired Fund's knowledge, the other
parties thereto (assuming due authorization, execution and delivery by the other
parties thereto) and the assignment by the Acquired Fund to the Acquiring Fund
of each such contract will not result in the termination of such contract, any
breach or default thereunder by the Acquired Fund or the imposition of any
penalty thereunder;
(g) The Statement of Assets and Liabilities of the Acquired Fund, and
the related Statements of Operations and Changes in Net Assets and Schedule of
Investments, as of and for the fiscal year ended December 31, 2008, have been
audited by PricewaterhouseCoopers LLP, independent registered public accounting
firm, and are in accordance with U.S. generally accepted accounting principles
("GAAP") consistently applied and fairly reflect, in all material respects, the
financial condition of the Acquired Fund as of such date and the results of its
operations for the period then ended, and all liabilities, whether actual or
contingent, of the Acquired Fund as of the date thereof required to be reflected
on a balance sheet (including the notes thereto) in accordance with GAAP are
disclosed therein. The Statement of Assets and
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Liabilities of the Acquired Fund, and the related Statements of Operations and
Changes in Net Assets and Schedule of Investments (unaudited) as of and for the
six months ended June 30, 2009 are in accordance with GAAP consistently applied
and fairly reflect, in all material respects, the financial condition of the
Acquired Fund as of such date and the results of its operations for the period
then ended, and all liabilities, whether actual or contingent, of the Acquired
Fund as of such date required to be reflected on a balance sheet (including the
notes thereto) in accordance with GAAP are disclosed therein. No significant
deficiency, material weakness, fraud, significant change or other factor that
could significantly affect the internal controls of the Acquired Fund has been
disclosed or is required to be disclosed in the Acquired Fund's reports on Form
N-CSR to enable the chief executive officer and chief financial officer or other
officers of the Acquired Fund to make the certifications required by the
Sarbanes-Oxley Act;
(h) The current prospectus and statement of additional information of
the Acquired Fund included in the Trust's registration statement on Form N-1A
(true and correct copies of which have been delivered to the Acquiring Fund) and
each prospectus and statement of additional information of the Acquired Fund
used at all times prior to the date of this Agreement conforms or conformed at
the time of its use in all material respects to the applicable requirements of
the Securities Act and the Investment Company Act and the rules and regulations
of the Commission thereunder and does not or did not at the time of its use
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading;
(i) Since the most recent fiscal year end, except as specifically
disclosed in the Acquired Fund's prospectus, its statement of additional
information as in effect on the date of this Agreement, or its semi-annual
report for the six-month period ended June 30, 2009, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities, business or prospects, or any incurrence by the Acquired Fund of
indebtedness, except for normal contractual obligations incurred in the ordinary
course of business or in connection with the settlement of purchases and sales
of portfolio securities. For the purposes of this subsection (i) (but not for
any other purpose of this Agreement), a decline in NAV per Acquired Fund Share
arising out of its normal investment operations or a decline in market values of
securities in the Acquired Fund's portfolio or a decline in net assets of the
Acquired Fund as a result of redemptions shall not constitute a material adverse
change;
(j) (A) For each taxable year of its operation, the Acquired Fund has
satisfied, and for the current taxable year the Acquired Fund shall have
satisfied, the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company." The Acquired Fund shall have been
eligible to compute its federal income tax under Section 852 of the Code and
shall have computed its federal income tax under Section 852 of the Code. The
Acquired Fund will qualify as a regulated investment company as of the Closing
Date and will satisfy the diversification requirements of Section 851(b)(3) of
the Code without regard to the last sentence of Section 851(d) of the Code. The
Acquired Fund has not taken any action, caused any action to be taken or caused
any action to fail to be taken which action or failure could cause the Acquired
Fund to fail to qualify as a regulated investment
A-7
company under the Code. The Acquired Fund is a separate fund of the Trust within
the meaning of Section 851(g) of the Code;
(B) Within the times and in the manner prescribed by law, the
Acquired Fund has properly filed on a timely basis all Tax Returns (as defined
below) that it was required to file, and all such Tax Returns were complete and
accurate in all material respects. The Acquired Fund has not been informed by
any jurisdiction that the jurisdiction believes that the Acquired Fund was
required to file any Tax Return that was not filed; and the Acquired Fund does
not know of any basis upon which a jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed
by law, all Taxes, which were due and payable or which were claimed to be due;
(D) All Tax Returns filed by the Acquired Fund constitute
complete and accurate reports of the respective Tax liabilities and all
attributes of the Acquired Fund or, in the case of information returns and payee
statements, the amounts required to be reported, and accurately set forth all
items required to be included or reflected in such returns;
(E) The Acquired Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquired Fund has not been notified that any examinations
of the Tax Returns of the Acquired Fund are currently in progress or threatened,
and no deficiencies have been asserted or assessed against the Acquired Fund as
a result of any audit by the Internal Revenue Service or any state, local or
foreign taxing authority, and, to its knowledge, no such deficiency has been
proposed or threatened;
(G) The Acquired Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquired Fund is not
and has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns. The
Acquired Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(H) The unpaid Taxes of the Acquired Fund for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes (excluding
accruals and reserves for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the Statement of Assets
and Liabilities, as defined in Section 5.5, rather than in any notes thereto.
All Taxes that the Acquired Fund is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been timely paid to the proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all Tax Returns
of the Acquired Fund, together with all related examination reports and
statements of deficiency for all periods not closed under the applicable
statutes of limitations and complete and correct copies of all private letter
rulings, revenue agent reports, information document requests, notices of
proposed deficiencies, deficiency notices, protests, petitions, closing
agreements, settlement agreements,
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pending ruling requests and any similar documents submitted by, received by or
agreed to by or on behalf of the Acquired Fund. The Acquired Fund has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a result of
the transactions contemplated in this Agreement to undergo) a change in its
method of accounting resulting in an adjustment to its taxable income pursuant
to Section 481 of the Code. The Acquired Fund will not be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable period ending on
or prior to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law);
(ii) "closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) installment sale or open
transaction disposition made on or prior to the Closing Date; or (iv) prepaid
amount received on or prior to the Closing Date;
(K) The Acquired Fund will not have taken or agreed to take any
action, and will not be aware of any agreement, plan or other circumstance, that
is inconsistent with the representations set forth in the acquired fund tax
representation certificate to be delivered pursuant to Section 7.4 ("Acquired
Fund Tax Representation Certificate");
(L) There are (and as of immediately following the Closing there
will be) no liens on the assets of the Acquired Fund relating to or attributable
to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are
accurately reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward limitations
under Sections 382 or 383 of the Code and the Treasury Regulations thereunder)
or comparable provisions of state law; and
(O) For purposes of this Agreement, "Taxes" or "Tax" shall mean
all taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, unemployment, insurance, social security, business
license, business organization, environmental, workers compensation, payroll,
profits, license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof; and "Tax Returns" shall mean all reports, returns,
declarations, statements or other information required to be supplied to a
governmental or regulatory authority or agency, or to
A-9
any other person, in connection with Taxes and any associated schedules or work
papers produced in connection with such items;
(k) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly authorized, legally issued and outstanding, fully
paid and non-assessable by the Trust. All of the issued and outstanding Acquired
Fund Shares will, at the time of Closing, be held of record by the persons and
in the amounts set forth in the Shareholder List submitted to the Acquiring Fund
pursuant to Section 3.5 hereof. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any Acquired Fund
Shares, nor is there outstanding any security convertible into any Acquired Fund
Shares;
(l) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Assets, and full right, power and authority to
sell, assign, transfer and deliver the Acquired Assets to the Acquiring Fund,
and, upon delivery and payment for the Acquired Assets, the Acquiring Fund will
acquire good and marketable title thereto, subject to no restrictions on the
full transfer thereof, except such restrictions as might arise under the
Securities Act;
(m) The Trust has the trust power and authority to enter into and
perform its obligations under this Agreement on behalf of the Acquired Fund. The
execution, delivery and performance of this Agreement by the Trust on behalf of
the Acquired Fund have been duly authorized by all necessary action on the part
of the Board and does not require the approval or consent of the Acquired Fund
Shareholders, and assuming due authorization, execution and delivery by the
Trust on behalf of the Acquiring Fund, this Agreement will constitute a valid
and binding obligation of the Acquired Fund, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information furnished or to be furnished by the Acquired Fund
to the Acquiring Fund for use in applications for orders, registration
statements, information statements and other documents which may be necessary in
connection with the transactions contemplated hereby and any information
necessary to compute the performance record of the Acquired Fund is and shall be
accurate and complete in all material respects and complies and shall comply in
all material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended, and shall not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the information provided not
misleading;
(o) The information included or to be included in the information
statement ("Information Statement") forming part of the Trust's Registration
Statement on Form N-14 filed or to be filed in connection with this Agreement
("Registration Statement") that has been or will be furnished in writing by the
Acquired Fund to the Acquiring Fund for inclusion in the Registration Statement,
on the date thereof and at all times prior to the Closing Date, will (i) not
contain any statement which, at the time and in the light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or which omits to state any material fact necessary in order to make the
statements therein not false or misleading, and
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(ii) comply or will comply in all material respects with the provisions of the
Securities Act, the Exchange Act and the Investment Company Act and the rules
and regulations thereunder.
(p) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in compliance in all material respects with all
applicable federal and state securities laws;
(q) The Acquired Fund currently complies in all material respects
with, and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquired Fund currently
complies in all material respects with, and since its organization has complied
in all material respects with, all investment objectives, policies, guidelines
and restrictions and any compliance procedures established by the Trust with
respect to the Acquired Fund. All advertising and sales material used by the
Acquired Fund complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and, to the
extent applicable, the conduct rules of the Financial Industry Regulatory
Authority ("FINRA") and any applicable state regulatory authority. All
registration statements, prospectuses, reports or other filings required to be
made or filed with the Commission, FINRA, or any state securities authorities by
the Trust with respect to the Acquired Fund have been duly filed and have been
approved or declared effective, if such approval or declaration of effectiveness
is required by law. Such registration statements, prospectuses, reports and
other filings under the Securities Act, the Exchange Act and the Investment
Company Act (i) are or were in compliance in all material respects with the
requirements of all applicable statutes and the rules and regulations thereunder
and (ii) do not or did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not false or misleading; and
(r) The Acquired Fund Tax Representation Certificate will not on the
Closing Date contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
4.2 Representations and Warranties by Acquiring Fund. Except as set forth
in Schedule 4.2 hereto, the Trust, on behalf of the Acquiring Fund, represents,
warrants and covenants to the Acquired Fund, which representations, warranties
and covenants are true and correct on the date hereof, as follows:
(a) The Acquiring Fund is a series of the Trust. The Trust is a
statutory trust duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Trust has the power to own all of its
properties and assets and to perform the obligations under this Agreement. The
Acquiring Fund is not required to qualify to do business in any jurisdiction in
which it is not so qualified or where failure to qualify would subject it to any
material liability or disability. Each of the Trust and the Acquiring Fund has
all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;
A-11
(b) The Trust is a series registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Registration Statement, including the Information Statement
and any amendments or supplements to the Registration Statement (other than
written information furnished by the Acquired Fund for inclusion therein, as
covered by the Acquired Fund's warranties in Sections 4.1(n) and 4.1(o) hereof),
on the date thereof and at all times prior to the Closing Date relates, will (i)
not contain any statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or which omits to state any material fact necessary in order to
make the statements therein not false or misleading and (ii) comply in all
material respects with the provisions of the Securities Act, the Exchange Act
and the Investment Company Act and the rules and regulations thereunder.
(d) The Trust is not in violation of, and the execution and delivery
of this Agreement and performance of its obligations under this Agreement will
not result in (i) a violation of, any provisions of the Trust Instrument or
Bylaws of the Trust or any material agreement, indenture, instrument, contract,
lease or other undertaking with respect to the Acquiring Fund to which the Trust
is a party or by which the Acquiring Fund or any of its assets is bound or (ii)
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Trust, on behalf of the Acquiring Fund, is a party or by which it is bound;
(e) No consent, approval, authorization or order of or filing with any
court or governmental authority is required for the execution of this Agreement
or the consummation of the transactions contemplated by the Agreement by the
Acquiring Fund, except such as may be required under the Securities Act, the
Exchange Act, the Investment Company Act, and state securities laws;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquiring Fund or any of the Acquiring Fund's properties
or assets. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings. Neither the Trust nor the Acquiring Fund is
a party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects the Acquiring
Fund's business or its ability to consummate the transactions contemplated
herein;
(g) The Statement of Assets and Liabilities of the Acquiring
Fund, and the related Statements of Operations and Changes in Net Assets and
Schedule of Investments, as of and for the fiscal year ended December 31, 2008,
have been audited by PricewaterhouseCoopers LLP, independent registered public
accounting firm, and are in accordance with GAAP consistently applied and fairly
reflect, in all material respects, the financial condition of the Acquiring Fund
as of such date and the results of its operations for the period then ended, and
all liabilities, whether actual or contingent, of the Acquiring Fund as of the
date thereof required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP are disclosed therein. The Statement of Assets
and Liabilities of the Acquiring Fund, and the related Statements of Operations
and Changes in Net Assets and Schedule of Investments (unaudited) as
A-12
of and for the six months ended June 30, 2009 are in accordance with GAAP
consistently applied and fairly reflect, in all material respects, the financial
condition of the Acquiring Fund as of such date and the results of its
operations for the period then ended, and all liabilities, whether actual or
contingent, of the Acquiring Fund as of such date required to be reflected on a
balance sheet (including the notes thereto) in accordance with GAAP are
disclosed therein. No significant deficiency, material weakness, fraud,
significant change or other factor that could significantly affect the internal
controls of the Acquiring Fund has been disclosed or is required to be disclosed
in the Acquiring Fund's reports on Form N-CSR to enable the chief executive
officer and chief financial officer or other officers of the Acquiring Fund to
make the certifications required by the Sarbanes-Oxley Act;
(h) The current prospectus and statement of additional information of
the Acquiring Fund included in the Trust's registration statement on Form N-1A
(true and correct copies of which have been delivered to the Acquired Fund) and
each prospectus and statement of additional information of the Acquiring Fund
used at all times prior to the date of this Agreement conforms or conformed at
the time of its use in all material respects to the applicable requirements of
the Securities Act and the Investment Company Act and the rules and regulations
of the Commission thereunder and does not or did not at the time of its use
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading;
(i) Since the most recent fiscal year end, except as specifically
disclosed in the Acquiring Fund's prospectus, its statement of additional
information as in effect on the date of this Agreement, or its semi-annual
report for the six-month period ended June 30, 2009, there has not been any
material adverse change in the Acquiring Fund's financial condition, assets,
liabilities, business or prospects, or any incurrence by the Acquiring Fund of
indebtedness, except for normal contractual obligations incurred in the ordinary
course of business or in connection with the settlement of purchases and sales
of portfolio securities. For the purposes of this subsection (i) (but not for
any other purpose of this Agreement), a decline in NAV per Acquiring Fund share
arising out of its normal investment operations or a decline in market values of
securities in the Acquiring Fund's portfolio or a decline in net assets of the
Acquiring Fund as a result of redemptions shall not constitute a material
adverse change;
(j) (A) For each taxable year of its operation, the Acquiring Fund has
satisfied, and for the current taxable year the Acquiring Fund shall have
satisfied, the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company." The Acquiring Fund shall have
been eligible to compute its federal income tax under Section 852 of the Code
and shall have computed its federal income tax under Section 852 of the Code.
The Acquiring Fund will qualify as a regulated investment company as of the
Closing Date and will satisfy the diversification requirements of Section
851(b)(3) of the Code without regard to the last sentence of Section 851(d) of
the Code. For any taxable year not yet completed as of the end of the day on the
Closing Date, the Trust reasonably expects that the Acquiring Fund will be able
to meet the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will be eligible to compute its
federal income tax under Section 852 of the Code. The Acquiring Fund has not
taken any action,
A-13
caused any action to be taken or caused any action to fail to be taken which
action or failure could cause the Acquiring Fund to fail to qualify as a
regulated investment company under the Code. The Acquiring Fund is a separate
fund of the Trust within the meaning of Section 851(g) of the Code;
(B) Within the times and in the manner prescribed by law, the
Acquiring Fund has properly filed on a timely basis all Tax Returns that it was
required to file, and all such Tax Returns were complete and accurate in all
material respects. The Acquiring Fund has not been informed by any jurisdiction
that the jurisdiction believes that the Acquiring Fund was required to file any
Tax Return that was not filed; and the Acquiring Fund does not know of any basis
upon which a jurisdiction could assert such a position;
(C) The Acquiring Fund has timely paid, in the manner prescribed
by law, all Taxes, which were due and payable or which were claimed to be due;
(D) All Tax Returns filed by the Acquiring Fund constitute
complete and accurate reports of the respective Tax liabilities and all
attributes of the Acquiring Fund or, in the case of information returns and
payee statements, the amounts required to be reported, and accurately set forth
all items required to be included or reflected in such returns;
(E) The Acquiring Fund has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquiring Fund has not been notified that any
examinations of the Tax Returns of the Acquiring Fund are currently in progress
or threatened, and no deficiencies have been asserted or assessed against the
Acquiring Fund as a result of any audit by the Internal Revenue Service or any
state, local or foreign taxing authority, and, to its knowledge, no such
deficiency has been proposed or threatened;
(G) The Acquiring Fund has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquiring Fund is not
and has never been a member of a group of corporations with which it has filed
(or been required to file) consolidated, combined or unitary Tax Returns. The
Acquiring Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(H) The unpaid Taxes of the Acquiring Fund for tax periods
through the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) included in the calculation of
the Acquiring Fund's NAV as of the Valuation Time. All Taxes that the Acquiring
Fund is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been timely paid to the proper
governmental agency;
(I) The Acquiring Fund has delivered to the Acquiring Fund or
made available to the Acquiring Fund complete and accurate copies of all Tax
Returns of the Acquiring Fund, together with all related examination reports and
statements of deficiency for all periods not closed under the applicable
statutes of limitations and complete and correct copies of
A-14
all private letter rulings, revenue agent reports, information document
requests, notices of proposed deficiencies, deficiency notices, protests,
petitions, closing agreements, settlement agreements, pending ruling requests
and any similar documents submitted by, received by or agreed to by or on behalf
of the Acquiring Fund. The Acquiring Fund has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code;
(J) The Acquiring Fund has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a result of
the transactions contemplated in this Agreement to undergo) a change in its
method of accounting resulting in an adjustment to its taxable income pursuant
to Section 481 of the Code. The Acquiring Fund will not be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable period ending on
or prior to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law);
(ii) "closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) installment sale or open
transaction disposition made on or prior to the Closing Date; or (iv) prepaid
amount received on or prior to the Closing Date;
(K) The Acquiring Fund will not have taken or agreed to take any
action, and will not be aware of any agreement, plan or other circumstance, that
is inconsistent with the representations set forth in the Acquiring Fund tax
representation certificate to be delivered pursuant to Section 6.4 ("Acquiring
Fund Tax Representation Certificate");
(L) There are (and as of immediately following the Closing there
will be) no liens on the assets of the Acquiring Fund relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquiring Fund are
accurately reflected on the Acquiring Fund's Tax books and records; and
(N) The Acquiring Fund's Tax attributes have not been limited
under the Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury Regulations
thereunder) or comparable provisions of state law other than by reason of the
Reorganization; and
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the
terms of this Agreement will have been duly authorized on the Closing Date and,
when so issued and delivered, will be legally issued and outstanding, fully paid
and non-assessable by the Trust. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquiring
Fund shares, nor is there outstanding any security convertible into any
Acquiring Fund shares;
(l) The Trust has the trust power and authority to enter into and
perform its obligations under this Agreement on behalf of the Acquiring Fund.
The execution, delivery and
A-15
performance of this Agreement by the Trust on behalf of the Acquiring Fund have
been duly authorized by all necessary action on the part of the Board, and,
assuming due authorization, execution and delivery by the Trust on behalf of the
Acquired Fund, this Agreement will constitute a valid and binding obligation of
the Acquiring Fund, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(m) The information furnished or to be furnished in writing by the
Acquiring Fund to the Acquired Fund for use in applications for orders,
registration statements, information statements and other documents which may be
necessary in connection with the transactions contemplated hereby is and shall
be accurate and complete in all material respects and complies and shall comply
in all material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended, and shall not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the information provided not
misleading;
(n) The Acquiring Fund currently complies in all material respects
with, and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquiring Fund currently
complies in all material respects with, and since its organization has complied
in all material respects with, all investment objectives, policies, guidelines
and restrictions and any compliance procedures established by the Trust with
respect to the Acquiring Fund. All advertising and sales material used by the
Acquiring Fund complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and, to the
extent applicable, the Conduct Rules of FINRA and any applicable state
regulatory authority. All registration statements, prospectuses, reports, proxy
materials or other filings required to be made or filed with the Commission,
FINRA or any state securities authorities by the Trust with respect to the
Acquiring Fund have been duly filed and have been approved or declared
effective, if such approval or declaration of effectiveness is required by law.
Such registration statements, prospectuses, reports, proxy materials and other
filings under the Securities Act, the Exchange Act and the Investment Company
Act (i) are or were in compliance in all material respects with the requirements
of all applicable statutes and the rules and regulations thereunder and (ii) do
not or did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
false or misleading; and
(o) The Acquiring Fund Tax Representation Certificate will not on the
Closing Date contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
5. COVENANTS OF THE FUNDS
5.1 Ordinary Course Pending Closing. Each Fund will operate its respective
business in the ordinary course of business and will comply in all material
respects with all applicable laws, rules and regulations between the date hereof
and the Closing Date. It is understood that
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such ordinary course of business will include the declaration and payment of
customary dividends and other distributions and any other dividends and other
distributions necessary or advisable (except to the extent dividends or other
distributions that are not customary may be limited by representations made in
connection with the issuance of the tax opinion described in Article 8 hereof),
in each case payable either in cash or in additional shares.
5.2 Form N-14. The Acquiring Fund will promptly prepare and file with the
Commission the Registration Statement. The Acquired Fund will provide the
Acquiring Fund with information reasonably requested for the preparation of the
Registration Statement in compliance with the Securities Act, the Exchange Act,
and the Investment Company Act.
5.3 Distribution of Acquiring Fund Shares in Liquidation Only. The Acquired
Fund covenants that the Acquiring Fund Shares to be issued hereunder are not
being acquired by the Acquired Fund for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.4 Information Regarding Acquired Fund Shareholders. The Acquired Fund
will assist the Acquiring Fund in obtaining such information as the Acquiring
Fund reasonably requests concerning the beneficial ownership of the Acquired
Fund Shares.
5.5 Closing Statement. The Acquired Fund shall furnish to the Acquiring
Fund on the Closing Date an unaudited statement of assets and liabilities of the
Acquired Fund ("Statement of Assets and Liabilities") as of the Valuation Time
setting forth the NAV (as computed pursuant to Article 2) of the Acquired Fund
as of the Valuation Time, which statement shall be prepared in accordance with
GAAP consistently applied and certified by the Acquired Fund's Treasurer or
Assistant Treasurer. As promptly as practicable, but in any case within 30 days
after the Closing Date, the Acquired Fund shall furnish to the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for federal income tax purposes,
and of any capital loss carryovers and other items that will be carried over to
the Acquiring Fund under the Code, and which statement will be certified by the
Treasurer of the Acquired Fund.
5.6 Further Assurances.
(a) Subject to the provisions of this Agreement, each Fund will take,
or cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
(b) The Trust, on behalf of the Funds, will use its reasonable best
efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.7 Cooperation.
(a) The Trust, on behalf of the Acquired Fund, will, from time to
time, as and when reasonably requested by the Trust, on behalf of the Acquiring
Fund, execute and deliver or cause to be executed and delivered all such
assignments and other instruments and will take or
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cause to be taken such further actions as the Trust, on behalf of the Acquiring
Fund, may reasonably deem necessary or desirable in order to carry out the
intent and purpose of this Agreement.
(b) The Trust, on behalf of the Acquiring Fund, will, from time to
time, as and when reasonably requested by the Trust, on behalf of the Acquired
Fund, execute and deliver or cause to be executed and delivered all such
assumptions and other instruments and will take or cause to be taken such
further actions as the Trust, on behalf of the Acquired Fund, may reasonably
deem necessary or desirable in order to carry out the intent and purpose of this
Agreement.
5.8 Tax Compliance.
(a) Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund, the
Acquiring Fund Tax Representation Certificate.
(b) From and after the date of this Agreement and until the Closing
Date, each of the Trust and the Funds shall use its commercially reasonable
efforts to cause the Reorganization to qualify, and will not knowingly take any
action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken, which action or failure to act could prevent the
Reorganization from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code. The parties hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the income tax regulations promulgated under the Code. Unless otherwise required
pursuant to a "determination" within the meaning of Section 1313(a) of the Code,
the parties hereto shall treat and report the transactions contemplated hereby
as a reorganization within the meaning of Section 368(a)(1)(C) of the Code and
shall not take any position inconsistent with such treatment.
(c) From and after the date of this Agreement and through the time of
the Closing, each Fund shall use its commercially reasonable efforts to cause it
to qualify, and will not knowingly take any action, cause any action to be
taken, fail to take any action or cause any action to fail to be taken, which
action or failure to act could prevent it from qualifying as a regulated
investment company under the provisions of Subchapter M of the Code.
(d) The Acquired Fund shall prepare, or cause to be prepared, all Tax
Returns of the Acquired Fund for taxable periods that end on or before the
Closing Date and shall timely file, or cause to be timely filed, all such Tax
Returns. The Acquired Fund shall make any payments of Taxes required to be made
by it with respect to any such Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Fund in writing:
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6.1 Acquiring Fund Representations and Warranties. All representations and
warranties by the Trust, on behalf of the Acquiring Fund, contained in this
Agreement shall be true and correct in all material respects as of the date
hereof (in each case, as such representations and warranties would read as if
all qualifications as to materiality were deleted therefrom) and, except as they
may be affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date;
6.2 Acquiring Fund Covenants. The Trust, on behalf of the Acquiring Fund,
shall have performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied with by the
Trust, on behalf of the Acquiring Fund, on or before the Closing Date. The
Trust, on behalf of the Acquiring Fund, shall have executed and delivered an
assumption of the Assumed Liabilities and all such other agreements and
instruments as the Trust may reasonably deem necessary or desirable in order to
vest in and confirm (a) the Acquired Fund's title to and possession of the
Acquiring Fund Shares to be delivered hereunder and (b) the Acquiring Fund's
assumption of the Assumed Liabilities, and to otherwise carry out the intent and
purpose of this Agreement;
6.3 Acquiring Fund Officer's Certificate. The Trust, on behalf of the
Acquiring Fund, shall have delivered on the Closing Date to the Trust, on behalf
of the Acquired Fund, a certificate executed in its name by its President or
Vice President and its Treasurer or Assistant Treasurer and dated as of the
Closing Date, to the effect that (i) the representations and warranties of the
Trust, on behalf of the Acquiring Fund, made in this Agreement are true and
correct in all material respects at and as of the Closing Date, except as they
may be affected by the transactions contemplated by this Agreement, (ii) each of
the conditions to Closing in this Article 6 has been met, and (iii) as to such
other matters as the Trust, on behalf of the Acquired Fund, shall reasonably
request;
6.4 Acquiring Fund Tax Representation Certificate. The Trust, on behalf of
the Acquiring Fund, shall have delivered to the Trust, on behalf of the Acquired
Fund, and Wilmer Cutler Pickering Hale and Dorr LLP an Acquiring Fund Tax
Representation Certificate, satisfactory to the Acquired Fund and Wilmer Cutler
Pickering Hale and Dorr LLP, concerning certain tax-related matters with respect
to the Acquiring Fund; and
6.5 Board Approval. The Board shall have approved this Agreement and the
transactions contemplated hereby.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be, at its election, subject to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions, unless
waived by the Acquiring Fund in writing:
7.1 Acquired Fund Representations and Warranties. All representations and
warranties of the Trust, on behalf of the Acquired Fund, contained in this
Agreement shall be true and correct in all material respects as of the date
hereof (in each case, as such
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representations and warranties would read as if all qualifications as to
materiality were deleted therefrom) and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
7.2 Acquired Fund Covenants. The Trust, on behalf of the Acquiring Fund,
shall have performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied with by the
Trust, on behalf of the Acquiring Fund, on or before the Closing Date. The
Trust, on behalf of the Acquired Fund, shall have delivered to the Acquiring
Fund the Statement of Assets and Liabilities of the Acquired Fund pursuant to
Section 5.5, together with a list of its portfolio securities showing the
federal income Tax bases and holding periods of such securities, as of the
Closing Date, certified by the Trust's Treasurer or Assistant Treasurer. The
Trust, on behalf of the Acquired Fund, shall have executed and delivered all
such assignments and other instruments of transfer as the Trust, on behalf of
the Acquiring Fund, may reasonably deem necessary or desirable in order to vest
in and confirm the Acquiring Fund's title to and possession of all the Acquired
Assets and to otherwise carry out the intent and purpose of this Agreement.
7.3 Acquired Fund Officer's Certificate. The Trust, on behalf of the
Acquired Fund, shall have delivered on the Closing Date to the Trust, on behalf
of the Acquiring Fund, a certificate executed in its name by its President or
Vice President and a Treasurer or Assistant Treasurer and dated as of the
Closing Date, to the effect that (i) the representations and warranties of the
Trust, on behalf of the Acquired Fund, made in this Agreement are true and
correct in all material respects at and as of the Closing Date, except as they
may be affected by the transactions contemplated by this Agreement, (ii) each of
the conditions to Closing in this Article 7 has been met, and (iii) as to such
other matters as the Trust, on behalf of the Acquiring Fund, shall reasonably
request;
7.4 Acquired Fund Tax Representation Certificate. The Trust, on behalf of
the Acquired Fund, shall have delivered to the Trust, on behalf of the Acquiring
Fund, and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired Fund Tax
Representation Certificate, satisfactory to the Acquiring Fund and Wilmer Cutler
Pickering Hale and Dorr LLP, concerning certain tax-related matters with respect
to the Acquired Fund; and
7.5 Board Approval. The Board shall have approved this Agreement and the
transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 No Proceedings. On the Closing Date, no action, suit or other
proceeding shall be pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated herein;
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8.2 Consents. All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
either party hereto, provided that either party may waive any such conditions
for itself;
8.3 Registration Statement Effective. The Registration Statement shall have
become effective under the Securities Act and no stop orders suspending the
effectiveness of the Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act;
8.4 Tax Opinion. The parties shall have received the opinion of Wilmer
Cutler Pickering Hale and Dorr LLP, dated the Closing Date, satisfactory to the
Trust and subject to customary assumptions and qualifications, substantially to
the effect that for federal income tax purposes the acquisition by the Acquiring
Fund of the Acquired Assets in exchange for the issuance of Acquiring Fund
Shares to the Acquired Fund and the assumption of the Assumed Liabilities by the
Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code; and
8.5 Distribution by Acquired Fund of Income and Capital Gains. The Acquired
Fund shall have distributed to its shareholders, in a distribution or
distributions qualifying for the deduction for dividends paid under Section 561
of the Code, all of its investment company taxable income (as defined in Section
852(b)(2) of the Code determined without regard to Section 852(b)(2)(D) of the
Code) for its taxable year ending on the Closing Date, all of the excess of (i)
its interest income excludable from gross income under Section 103(a) of the
Code over (ii) its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for its taxable year ending on the Closing Date, and all of its net capital
gain (as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after
reduction by any available capital loss carry-forward, for its taxable year
ending on the Closing Date.
9. BROKERAGE FEES AND EXPENSES
9.1 No Broker Fees. Each party hereto represents and warrants to the other
party hereto that there are no brokers or finders entitled to receive any
payments in connection with the transactions provided for herein.
9.2 Expenses. The expenses relating to the Reorganization will be borne by
Barclays Global Investors, N.A. (or an affiliate thereof); provided, however,
that expenses will in any event be paid by the party directly incurring such
expenses if and to the extent that the payment by another person of such
expenses would result in the disqualification of such party as a "regulated
investment company" within the meaning of Section 851 of the Code.
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10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 Entire Agreement. Neither party has made any representation, warranty
or covenant not set forth herein and this Agreement constitutes the entire
agreement between the parties.
10.2 Survival. The covenants to be performed after the Closing by either
party shall survive the Closing. The representations and warranties and all
other covenants contained in this Agreement or in any document delivered
pursuant hereto or in connection herewith shall not survive the consummation of
the transactions contemplated hereunder and shall terminate on the Closing.
Notwithstanding any other provision of this Agreement to the contrary, neither
the Trust nor the Acquired Fund nor any of the trustees, officers or agents
thereof shall have any liability for any damages that result from, arise out of
or are connected with any breach of any representation or warranty of the Trust
on behalf of the Acquired Fund made in Section 4.1 or pursuant to Section 7.3 of
this Agreement. Notwithstanding any other provision of this Agreement to the
contrary, neither the Trust nor the Acquiring Fund nor any of the trustees,
officers or agents thereof shall have any liability for any damages that result
from, arise out of or are connected with any breach of any representation or
warranty of the Trust on behalf of the Acquiring Fund made in Section 4.2 or
pursuant to Section 6.3 of this Agreement.
11. TERMINATION
11.1 Termination. This Agreement may be terminated by the Trust at any time
prior to the Closing Date.
11.2 Expenses upon Termination. In the event of any such termination, there
shall be no liability for damages on the part of the Trust, the Acquiring Fund,
the Trust or the Acquired Fund, or the trustees or officers of the Trust or the
Trust, but, subject to Section 9.2, each party shall bear the expenses incurred
by it incidental to the preparation and carrying out of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
the Trust may determine.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Trust at its address set
forth in the first paragraph of this Agreement.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 Headings. The article and section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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14.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to conflict of laws principles (other than Delaware Code Title 6 (S)
2708); provided that, in the case of any conflict between those laws and the
federal securities laws, the latter shall govern.
14.3 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns, but
no assignment or transfer hereof or of any rights or obligations hereunder shall
be made by either party without the prior written consent of the other party
hereto. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation, or other entity, other than
the parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.4 Binding on Trust Only. It is expressly agreed that the obligations of
the Trust shall not be binding upon any of its trustees, shareholders, nominees,
officers, agents or employees personally, but bind only to the property of the
Acquiring Fund or the Acquired Fund, as the case may be, as provided in the
Trust Instrument. The execution and delivery of this Agreement have been
authorized by the trustees of the Trust and this Agreement has been executed by
authorized officers of the Trust, acting as such, and neither such authorization
by such trustees nor such execution and delivery by such officers shall be
deemed to have been made by any of them individually or to imposed any liability
on any of them personally, but shall bind only the property of the Acquiring
Fund or the Acquired Fund, as the case may be, as provided in the Trust
Instrument. The debts, liabilities, obligations, and expenses incurred,
contracted for or otherwise existing with respect to any particular series of
the Trust, including without limitation the Acquired Fund and the Acquiring
Fund, shall be enforceable against the assets of such series only, and not
against the assets of any other series of the Trust, or the Trust generally.
[End of Text]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first set forth above by its President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: BARCLAYS GLOBAL INVESTORS FUNDS on
behalf of its series, LIFEPATH
RETIREMENT PORTFOLIO
By: By:
--------------------------------- -----------------------------------
Name: Name:
Title: Title:
Attest: BARCLAYS GLOBAL INVESTORS FUNDS on
behalf of its series, LIFEPATH 2010
PORTFOLIO
By: By:
--------------------------------- -----------------------------------
Name: Name:
Title: Title:
[Signature Page to Agreement and Plan of Reorganization]
A-24
Exhibit B
EXPENSES AND RELATED INFORMATION
The table below shows the fees and expenses that you would pay if you were
to buy and hold shares of each fund. The table does not reflect any charges that
may be imposed by institutions directly on their customer accounts in connection
with investments in either fund. The expenses appearing in the table below for
each fund are based on the fund's expenses for the twelve-month period ended
December 31, 2008. Future expenses may be greater (after expiration of the
contractual expense limitations described below) or less. The table also shows
the estimated ("pro forma") expenses of the combined fund assuming the
reorganization occurred on December 31, 2008. Pro forma expense levels shown
should not be considered an actual representation of future expenses or
performance. Such pro forma expense levels project anticipated expenses but
actual expenses may be greater or less than those shown.
Shareholder Transaction Fees (paid directly from your investment) -- Classes I,
R and S Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
ended December 31, 2008 December 31, 2008 ended December 31, 2008
-------------------------- -------------------- ---------------------------
Maximum Sales None None None
Charge (load)
Maximum Deferred None None None
Sales Charge (load)
Redemption Fee None None None
B-1
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment) - Class I Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
ended December 31, 2008 December 31, 2008 ended December 31, 2008
-------------------------- -------------------- ------------------------
Management Fee /(1)/ 0.35% 0.35% 0.35%
Other expenses (Administration 0.51% 0.51% 0.51%
fees; Independent Expenses)/(2)/
Acquired fund fees and 0.34% 0.34% 0.34%
expenses (Underlying Funds)/(3)/
Total Annual Class Operating 1.20% 1.20% 1.20%
Expenses/(1)/, /(2)/, /(3)/
Less Fee Waivers and/or 0.35% 0.35% 0.35%
Expense Reimbursements
Net Total Annual Class 0.85% 0.85% 0.85%
Operating Expenses
/(1)/ BGFA, the investment adviser to the Master Portfolios, has contractually
agreed through April 30, 2011 to waive its advisory fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, paid to BGFA or BGI by the Underlying Funds that are part of
the same "group of investment companies."
/(2)/ "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master Portfolios,
counsel to the Independent Trustees of the LifePath Portfolios and the
Master Portfolios and the independent registered public accounting firm
that provides audit and non-audit services in connection with the LifePath
Portfolios and the Master Portfolios that are allocated to the Class I
Shares of the LifePath Portfolios. BGI and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to, the
Class I Shares of the LifePath Portfolios and the Master Portfolios for
Independent Expenses through April 30, 2011. After giving effect to such
contractual arrangements, Independent Expenses will be 0.00%.
/(3)/ Acquired fund fees and expenses (Underlying Funds) reflect each LifePath
Portfolio's pro rata share of the fees and expenses incurred by investing
in the Underlying Funds.
/(4)/ The LifePath Portfolios' service providers may voluntarily waive certain
of their fees or reimburse certain expenses, as they determine, from time
to time; this table does not reflect such voluntary waivers or
reimbursements.
B-2
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment) - Class R Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
ended December 31, 2008 December 31, 2008 ended December 31, 2008
-------------------------- -------------------- ------------------------
Management Fee /(1)/ 0.35% 0.35% 0.35%
Distribution (12b-1) fees 0.25% 0.25% 0.25%
Other expenses (Administration 0.51% 0.51% 0.51%
fees; Independent Expenses)/(2)/
Acquired fund fees and expenses 0.34% 0.34% 0.34%
(Underlying Funds)/(3)/
Total Annual Class Operating 1.45% 1.45% 1.45%
Expenses/(1)/, /(2)/, /(3)/
Less Fee Waivers and/or Expense 0.35% 0.35% 0.35%
Reimbursements
Net Total Annual Class Operating 1.10% 1.10% 1.10%
Expenses
/(1)/ BGFA, the investment adviser to the Master Portfolios, has contractually
agreed through April 30, 2011 to waive its advisory fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, paid to BGFA or BGI by the Underlying Funds that are part of
the same "group of investment companies."
/(2)/ "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master Portfolios,
counsel to the Independent Trustees of the LifePath Portfolios and the
Master Portfolios and the independent registered public accounting firm
that provides audit and non-audit services in connection with the LifePath
Portfolios and the Master Portfolios that are allocated to the Class R
Shares of the LifePath Portfolios. BGI and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to, the
Class R Shares of the LifePath Portfolios and the Master Portfolios for
Independent Expenses through April 30, 2011. After giving effect to such
contractual arrangements, Independent Expenses will be 0.00%.
/(3)/ Acquired fund fees and expenses (Underlying Funds) reflect each LifePath
Portfolio's pro rata share of the fees and expenses incurred by investing
in the Underlying Funds.
/(4)/ The LifePath Portfolios' service providers may voluntarily waive certain
of their fees or reimburse certain expenses, as they determine, from time
to time; this table does not reflect such voluntary waivers or
reimbursements.
B-3
Annual Fund Operating Expenses (expenses that you pay each year as a percentage
of the value of your investment) - Class S Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
ended December 31, 2008 December 31, 2008 ended December 31, 2008
-------------------------- -------------------- ------------------------
Management Fee /(1)/ 0.35% 0.35% 0.35%
Other expenses (Administration 0.16% 0.17% 0.16%
fees; Independent Expenses)/(2)/
Acquired fund fees and expenses 0.34% 0.34% 0.34%
(Underlying Funds)/(3)/
Total Annual Class Operating 0.85% 0.86% 0.85%
Expenses/(1)/, /(2)/, /(3)/
Less Fee Waivers and/or Expense 0.35% 0.36% 0.35%
Reimbursements
Net Total Annual Class Operating 0.50% 0.50% 0.50%
Expenses
/(1)/ BGFA, the investment adviser to the Master Portfolios, has contractually
agreed through April 30, 2011 to waive its advisory fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, paid to BGFA or BGI by the Underlying Funds that are part of
the same "group of investment companies."
/(2)/ "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master Portfolios,
counsel to the Independent Trustees of the LifePath Portfolios and the
Master Portfolios and the independent registered public accounting firm
that provides audit and non-audit services in connection with the LifePath
Portfolios and the Master Portfolios that are allocated to the Class S
Shares of the LifePath Portfolios. BGI and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to, the
Class S Shares of the LifePath Portfolios and the Master Portfolios for
Independent Expenses through April 30, 2011. After giving effect to such
contractual arrangements, Independent Expenses will be 0.00%.
/(3)/ Acquired fund fees and expenses (Underlying Funds) reflect each LifePath
Portfolio's pro rata share of the fees and expenses incurred by investing
in the Underlying Funds.
/(4)/ The LifePath Portfolios' service providers may voluntarily waive certain
of their fees or reimburse certain expenses, as they determine, from time
to time; this table does not reflect such voluntary waivers or
reimbursements.
B-4
Example
The hypothetical example below helps you compare the cost of investing in
each fund with the cost of investing in other mutual funds. The example
illustrates the cost you would have incurred on an initial $10,000 investment in
each class of each fund over the time periods shown. It assumes your investment
earns an annual return of 5% over the periods, that total operating expenses
remain the same and that the contractual fee waivers and reimbursements by BGFA
and BGI are in effect for two years.
THE FUNDS DO NOT CHARGE A SALES LOAD OR OTHER FEE UPON REDEMPTION. This
means that your cost for each period would be the same whether or not you sell
your shares at the end of a period. Your actual costs may be higher or lower
than this hypothetical example:
Class I Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
Number of Years ended December 31, 2008 December 31, 2008 ended December 31, 2008
- --------------- -------------------------- -------------------- ------------------------
1 Year $ 87 $ 87 $ 87
3 Years $ 346 $ 346 $ 346
5 Years $ 626 $ 626 $ 626
10 Years $1,424 $1,424 $1,424
Class R Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
Number of Years ended December 31, 2008 December 31, 2008 ended December 31, 2008
- --------------- -------------------------- -------------------- ------------------------
1 Year $ 112 $ 112 $ 112
3 Years $ 424 $ 424 $ 424
5 Years $ 759 $ 759 $ 759
10 Years $1,705 $1,705 $1,705
Class S Shares
LifePath Retirement
Portfolio Acquiring Fund
LifePath 2010 Portfolio (Acquiring Fund) (Combined)
(Your Fund) for the period for the period ended Pro Forma for the period
Number of Years ended December 31, 2008 December 31, 2008 ended December 31, 2008
- --------------- -------------------------- -------------------- ------------------------
1 Year $ 51 $ 51 $ 51
3 Years $ 236 $ 238 $ 236
5 Years $ 437 $ 441 $ 437
10 Years $1,017 $1,027 $1,017
B-5
Exhibit C
PERFORMANCE INFORMATION
Comparison of Fund Performance
Set forth below is performance information for each fund, which indicates
some of the risks of investing in each fund. The first set of tables shows how
each fund's total return has varied from year to year for each full calendar
year. The first set of tables shows the returns for each class of each fund for
each of the last ten calendar years. The second set of tables shows average
annual total return (before and after taxes) for each fund over time as compared
with a broad-based securities market index. The average annual total return
tables compare the average annual total returns (before and after taxes) of
class of each fund to those of a corresponding index for various periods of
time.
Effective March 15, 2004, the returns for each fund reflects its Master
Portfolio's investment in Underlying Funds. For periods prior to March 15, 2004,
the returns for each fund reflect the direct investment by its Master Portfolio
in a portfolio of securities and also reflect investment in accordance with a
model that included "tactical," or short-term, shifts in allocation between
stocks and bonds. In addition, as of December 31, 2003, BGFA made certain
changes to its asset allocation strategies for the funds, including a change to
the frequency with which the funds' respective holdings were rebalanced among
asset classes from monthly to quarterly.
How the funds performed in the past (before and after taxes) is not
necessarily an indication of how they will perform in the future. You should
note that the investment adviser and portfolio managers of the combined fund
after the reorganization will be the same as your fund's and the Acquiring
Fund's investment adviser and portfolio managers. BGFA has reported that as of
November 2009, your fund and the Acquiring Fund will both have the same
investment objective, strategies, policies and restrictions and the most
conservative allocation within the LifePath strategy. However, prior to November
2009, the investment objective and policies of your fund were similar, but not
identical, to the investment objective, policies and strategies of the Acquiring
Fund, which causes the funds to have different risk/return profiles. Both your
fund and the Acquiring Fund benefited from an expense limitation agreement
during various periods. In the absence of such expense limitation agreement, the
funds' performance would have been lower.
Annual Return of LifePath Retirement Portfolio (Acquiring Fund)
(Years ended December 31)
Year Class I Shares Class R Shares Class S Shares
- ---- -------------- -------------- --------------
1999 4.85% 4.60% 5.20%
2000 4.73% 4.48% 5.08%
2001 3.60% 1.40% 3.95%
2002 -2.70% -4.98% -2.35%
2003 11.95% 15.51% 12.30%
2004 6.35% 6.07% 6.70%
2005 4.32% 4.05% 4.67%
C-1
Year Class I Shares Class R Shares Class S Shares
- ---- -------------- -------------- --------------
2006 8.80% 8.52% 9.15%
2007 4.50% 4.17% 4.85%
2008 -15.04% -15.24% -15.04%
Class I Shares: The best calendar quarter return during the years shown above
was 7.22% in the 2nd quarter of 2003; the worst was -7.08% in the 4th quarter of
2008.
Class R Shares: The best calendar quarter return during the years shown above
was 11.32% in the 2nd quarter of 2003; the worst was -7.90% in the 4th quarter
of 2008. The performance information for the periods from January 1, 1999
through April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class R Shares. Performance from April 30,
2001 through December 31, 2008 reflects the actual performance of Class R
Shares.
Class S Shares: The best calendar quarter return during the years shown above
was 7.31% in the 2nd quarter of 2003; the worst was -7.85% in the 4th quarter of
2008. The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to reflect
the fees and expenses of the Class S Shares. Performance from May 30, 2008
through December 31, 2008 reflects the actual performance of Class S Shares.
Annual Return of LifePath 2010 Portfolio (Your Fund)
(Years ended December 31)
Year Class I Shares Class R Shares Class S Shares
- ---- -------------- -------------- --------------
1999 9.48% 9.23% 9.83%
2000 0.71% 0.46% 1.06%
2001 -0.75% -1.92% -0.40%
2002 -8.32% -8.57% -7.97%
2003 15.66% 15.45% 16.01%
2004 7.38% 7.23% 7.73%
2005 5.20% 4.94% 5.55%
2006 10.15% 9.89% 10.50%
2007 4.18% 3.92% 4.53%
2008 -17.00% -17.23% -17.01%
Class I Shares: The best calendar quarter return during the years shown above
was 9.14% in the 2nd quarter of 2003; the worst was -8.87% in the 4th quarter of
2008.
Class R Shares: The best calendar quarter return during the years shown above
was 9.13% in the 2nd quarter of 2003; the worst was -9.00% in the 4th quarter of
2008. The performance formation for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to reflect
the fees and expenses of the Class R Shares. Performance from April 30, 2001
through December 31, 2008 reflects the actual performance of Class R Shares.
Class S Shares: The best calendar quarter return during the years shown above
was 9.23% in the 2nd quarter of 2003; the worst was -8.81% in the 4th quarter of
2008. The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to reflect
the fees and expenses of the Class S Shares. Performance from May 30, 2008
through December 31, 2008 reflects the actual performance of Class S Shares.
C-2
Average Annual Total Returns
(For the periods ended December 31, 2008)
Class I Shares
1 Year 5 Years 10 Years Since Inception /(2)/
------ ------- -------- ---------------------
LIFEPATH RETIREMENT
FUND (ACQUIRING
FUND)
Return Before Taxes -15.04% 1.40% 2.88% 4.76%
Return After Taxes on
Distribution /(3)/ -15.87% 0.18% 1.43% 3.13%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -9.56% 0.71% 1.76% 3.24%
LifePath Retirement
Portfolio Custom
Benchmark /(4)(5)/ -14.53% 2.42% 3.91% 5.83%
LIFEPATH 2010
PORTFOLIO (YOUR
FUND)
Return Before Taxes -17.00% 1.49% 2.25% 5.73%
Return After Taxes on
Distribution /(3)/ -17.92% 0.34% 0.85% 4.18%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -10.67% 0.90% 1.34% 4.26%
LifePath 2010
Portfolio Custom
Benchmark /(4)(5)/ -16.51% 2.52% 3.39% 6.54%
S&P 500 Index /(5)/ -36.72% -1.89% -0.76% N/A
Barclays Capital U.S.
Aggregate Bond
Index /(5)(6)/ 5.24% 4.65% 5.63% N/A
MSCI All Country World
Index ex US IMI
Index /(5)/ -45.98% 2.62% 2.26% N/A
MSCI All Country World
Index ex USA /(5)/ -45.53% 2.56% 1.90% N/A
Citigroup 3-month
Treasury Bill Index
/(5)/ 1.81% 3.10% 3.30% N/A
Barclays Capital U.S.
Treasury Inflation
Protected
Securities (TIPS)
Index (Series-L)
/(5)(6)/ -2.35% 4.07% 6.79% N/A
C-3
1 Year 5 Years 10 Years Since Inception /(2)/
------ ------- -------- ---------------------
FTSE EPRA/NAREIT
Global Real Estate
Index /(5)/ -47.72% 1.96% N/A N/A
Cohen & Steers Realty
Majors Index /(5)/ -40.93% 1.17% N/A N/A
/(1)/ Effective March 15, 2004, the returns for each LifePath Portfolio reflect
its Master Portfolio's investment in Underlying Funds. For all periods
prior to March 15, 2004, the returns for each LifePath Portfolio reflect
the direct investment by its Master Portfolio in a portfolio of securities
and also reflect investment in accordance with a model that included
"tactical," or short-term, shifts in allocation between stocks and bonds.
In addition, as of December 31, 2003, BGFA made certain changes to its
asset allocation strategies for the LifePath Portfolios, including a
change to the frequency with which the LifePath Portfolios' respective
holdings were rebalanced among asset classes from monthly to quarterly.
/(2)/ The inception date of the Class I Shares of the LifePath Retirement
Portfolio and LifePath 2010 Portfolio is March 1, 1994. The inception date
of the LifePath Retirement Portfolio Custom Benchmark and LifePath 2010
Portfolio Custom Benchmark is March 1, 1994.
/(3)/ After tax returns in the table above are calculated using the historical
highest individual federal marginal income tax rates and do not reflect
the impact of state, local or foreign taxes. Actual after-tax returns
depend on an investor's tax situation and may differ from those shown, and
after-tax returns shown are not relevant to tax-exempt investors or
investors who hold shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts ("IRAs"). A LifePath
Portfolio's returns after taxes on distributions and sale of LifePath
Portfolio shares are calculated assuming that an investor has sufficient
capital gains of the same character from other investments to offset any
capital losses from the sale of LifePath Portfolio shares. As a result, a
LifePath Portfolio's returns after taxes on distributions and sale of
LifePath Portfolio shares may exceed the LifePath Portfolio's returns
before taxes and/or returns after taxes on distributions.
/(4)/ The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath Portfolio's
asset classes according to their weightings as of the most recent quarter
end. The weightings of the various indexes that are included in the
LifePath Portfolios' custom benchmarks are adjusted quarterly to reflect
the LifePath Portfolios' changing asset allocations over time. As of
December 31, 2008, the following indexes are used to calculate the
LifePath Portfolios' custom benchmarks: S&P 500 Index, S&P 400 Index, S&P
600 Index, Barclays Capital U.S. Aggregate Bond Index, Citigroup 3-Month
Treasury Bill Index, Barclays Capital U.S. Treasury Inflation Protected
Securities (TIPS) Index (Series-L), MSCI All Country World Index ex US IMI
Index and FTSE EPRA/NAREIT Global Real Estate Index. The MSCI All Country
World Index ex US IMI Index replaced the MSCI All Country World Index ex
USA Index on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index
replaced the Cohen & Steers Realty Majors Index on July 1, 2008.
/(5)/ Reflects no deductions for fees, expenses or taxes.
/(6)/ Effective November 3, 2008, the names of the noted indexes changed from
the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S. Treasury
TIPS Index to the Barclays Capital U.S. Aggregate Bond Index and Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), respectively. Changes to these indexes are discussed further
in the May 2009 Prospectus.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses tables above.
In the absence of such waivers and/or reimbursements, the applicable LifePath
Portfolio's total return would be lower.
C-4
Class R Shares
1 Year 5 Years 10 Years Since Inception /(2)/
------ ------- -------- ---------------------
LIFEPATH RETIREMENT
FUND (ACQUIRING
FUND)
Return Before Taxes -15.24% 1.13% 2.55% 4.49%
Return After Taxes on
Distribution /(3)/ -16.08% -0.09% 1.21% 2.93%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -9.68% 0.49% 1.60% 3.02%
LifePath Retirement
Portfolio Custom
Benchmark /(4)(5)/ -14.53% 2.42% 3.91% 5.83%
LIFEPATH 2010
PORTFOLIO (YOUR
FUND)
Return Before Taxes -17.23% 1.24% 1.91% 5.47%
Return After Taxes on
Distribution /(3)/ -18.11% 0.15% 0.67% 4.02%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -10.82% 0.72% 1.23% 4.02%
LifePath 2010
Portfolio Custom
Benchmark /(4)(5)/ -16.51% 2.52% 3.39% 6.54%
S&P 500 Index /(5)/ -36.72% -1.89% -0.76% N/A
Barclays Capital U.S.
Aggregate Bond
Index /(5)(6)/ 5.24% 4.65% 5.63% N/A
MSCI All Country World
Index ex US IMI
Index /(5)/ -45.98% 2.62% 2.26% N/A
MSCI All Country World
Index ex USA /(5)/ -45.53% 2.56% 1.90% N/A
Citigroup 3-month
Treasury Bill Index
/(5)/ 1.81% 3.10% 3.30% N/A
Barclays Capital U.S.
Treasury Inflation
Protected
Securities (TIPS)
Index (Series-L)
/(5)(6)/ -2.35% 4.07% 6.79% N/A
FTSE EPRA/NAREIT
Global Real Estate
Index /(5)/ -47.72% 1.96% N/A N/A
Cohen & Steers Realty
Majors Index /(5)/ -40.93% 1.17% N/A N/A
C-5
/(1)/ Performance shown for the periods prior to April 30, 2001 (the date the
Class R Shares commenced operations) reflects the performance of the Class
I Shares adjusted to reflect the fees and expenses of the Class R Shares.
Performance from April 30, 2001 reflects the actual performance of Class R
Shares. Effective May 1, 2005, Class R Shares are sold without any sales
charges. Effective March 15, 2004, the returns for each LifePath Portfolio
reflect its Master Portfolio's investment in Underlying Funds. For all
periods prior to March 15, 2004, the returns for each LifePath Portfolio
reflect the direct investment by its Master Portfolio in a portfolio of
securities and also reflect investment in accordance with a model that
included "tactical," or short-term, shifts in allocation between stocks
and bonds. In addition, as of December 31, 2003, BGFA made certain changes
to its asset allocation strategies for the LifePath Portfolios, including
a change to the frequency with which the LifePath Portfolios' respective
holdings were rebalanced among asset classes from monthly to quarterly.
/(2)/ The inception date of the Class R Shares of the LifePath Retirement
Portfolio and LifePath 2010 Portfolio is April 30, 2001. The inception
date of the LifePath Retirement Portfolio Custom Benchmark and LifePath
2010 Portfolio Custom Benchmark is March 1, 1994.
/(3)/ After tax returns in the table above are calculated using the historical
highest individual federal marginal income tax rates and do not reflect
the impact of state, local or foreign taxes. Actual after-tax returns
depend on an investor's tax situation and may differ from those shown, and
after-tax returns shown are not relevant to tax-exempt investors or
investors who hold shares through tax-deferred arrangements, such as
401(k) plans or IRAs. A LifePath Portfolio's returns after taxes on
distributions and sale of LifePath Portfolio shares are calculated
assuming that an investor has sufficient capital gains of the same
character from other investments to offset any capital losses from the
sale of LifePath Portfolio shares. As a result, a LifePath Portfolio's
returns after taxes on distributions and sale of LifePath Portfolio shares
may exceed the LifePath Portfolio's returns before taxes and/or returns
after taxes on distributions.
/(4)/ The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath Portfolio's
asset classes according to their weightings as of the most recent quarter
end. The weightings of the various indexes that are included in the
LifePath Portfolios' custom benchmarks are adjusted quarterly to reflect
the LifePath Portfolios' changing asset allocations over time. As of
December 31, 2008, the following indexes are used to calculate the
LifePath Portfolios' custom benchmarks: S&P 500 Index, S&P 400 Index, S&P
600 Index, Barclays Capital U.S. Aggregate Bond Index, Citigroup 3-Month
Treasury Bill Index, Barclays Capital U.S. Treasury Inflation Protected
Securities (TIPS) Index (Series-L), MSCI All Country World Index ex US IMI
Index and FTSE EPRA/NAREIT Global Real Estate Index. The MSCI All Country
World Index ex US IMI Index replaced the MSCI All Country World Index ex
USA Index on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index
replaced the Cohen & Steers Realty Majors Index on July 1, 2008.
/(5)/ Reflects no deductions for fees, expenses or taxes.
/(6)/ Effective November 3, 2008, the names of the noted indexes changed from
the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S. Treasury
TIPS Index to the Barclays Capital U.S. Aggregate Bond Index and Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), respectively. Changes to these indexes are discussed further
in the May 2009 Prospectus.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses tables above.
In the absence of such waivers and/or reimbursements, the applicable LifePath
Portfolio's total return would be lower.
C-6
Class S Shares
1 Year 5 Years 10 Years Since Inception /(2)/
------ ------- -------- ---------------------
LIFEPATH RETIREMENT
FUND (ACQUIRING
FUND)
Return Before Taxes -15.04% 1.61% 3.08% 4.89%
Return After Taxes on
Distribution /(3)/ -15.93% 0.39% 1.65% 3.29%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -9.51% 1.77% 2.40% 3.71%
LifePath Retirement
Portfolio Custom
Benchmark /(4)(5)/ -14.53% 2.42% 3.91% 5.83%
LIFEPATH 2010
PORTFOLIO (YOUR
FUND)
Return Before Taxes -17.01% 1.70% 2.46% 5.85%
Return After Taxes on
Distribution /(3)/ -18.01% 0.54% 1.07% 4.31%
Return After Taxes on
Distribution and
Sales of Fund
Shares /(3)/ -10.62% 2.10% 2.03% 4.76%
LifePath 2010
Portfolio Custom
Benchmark /(4)(5)/ -16.51% 2.52% 3.39% 6.54%
S&P 500 Index /(5)/ -36.72% -1.89% -0.76% N/A
Barclays Capital U.S.
Aggregate Bond
Index /(5)(6)/ 5.24% 4.65% 5.63% N/A
MSCI All Country World
Index ex US IMI
Index /(5)/ -45.98% 2.62% 2.26% N/A
MSCI All Country World
Index ex USA /(5)/ -45.53% 2.56% 1.90% N/A
Citigroup 3-month
Treasury Bill Index
/(5)/ 1.81% 3.10% 3.30% N/A
Barclays Capital U.S.
Treasury Inflation
Protected
Securities (TIPS)
Index (Series-L)
/(5)(6)/ -2.35% 4.07% 6.79% N/A
FTSE EPRA/NAREIT
Global Real Estate
Index /(5)/ -47.72% 1.96% N/A N/A
Cohen & Steers Realty
Majors Index /(5)/ -40.93% 1.17% N/A N/A
/(1)/ Performance shown for the periods prior to May 30, 2008 (the date the
Class S Shares commenced operations) reflects the performance of the Class
I Shares adjusted to reflect the fees and expenses of the Class S Shares.
Performance from May 30, 2008 reflects the actual performance of Class S
Shares. Effective March 15, 2004, the returns for each LifePath Portfolio
reflect its Master Portfolio's investment in Underlying Funds. For all
periods prior to March 15, 2004, the returns for each LifePath Portfolio
reflect the direct investment by its Master
C-7
Portfolio in a portfolio of securities and also reflect investment in
accordance with a model that included "tactical," or short-term, shifts in
allocation between stocks and bonds. In addition, as of December 31, 2003,
BGFA made certain changes to its asset allocation strategies for the
LifePath Portfolios, including a change to the frequency with which the
LifePath Portfolios' respective holdings were rebalanced among asset
classes from monthly to quarterly.
/(2)/ The inception date of the Class S Shares of the LifePath Retirement
Portfolio and LifePath 2010 Portfolio is May 30, 2008. The inception date
of the LifePath Retirement Portfolio Custom Benchmark and LifePath 2010
Portfolio Custom Benchmark is March 1, 1994.
/(3)/ After tax returns in the table above are calculated using the historical
highest individual federal marginal income tax rates and do not reflect
the impact of state, local or foreign taxes. Actual after-tax returns
depend on an investor's tax situation and may differ from those shown, and
after-tax returns shown are not relevant to tax-exempt investors or
investors who hold shares through tax-deferred arrangements, such as
401(k) plans or IRAs. A LifePath Portfolio's returns after taxes on
distributions and sale of LifePath Portfolio shares are calculated
assuming that an investor has sufficient capital gains of the same
character from other investments to offset any capital losses from the
sale of LifePath Portfolio shares. As a result, a LifePath Portfolio's
returns after taxes on distributions and sale of LifePath Portfolio shares
may exceed the LifePath Portfolio's returns before taxes and/or returns
after taxes on distributions.
/(4)/ The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath Portfolio's
asset classes according to their weightings as of the most recent quarter
end. The weightings of the various indexes that are included in the
LifePath Portfolios' custom benchmarks are adjusted quarterly to reflect
the LifePath Portfolios' changing asset allocations over time. As of
December 31, 2008, the following indexes are used to calculate the
LifePath Portfolios' custom benchmarks: S&P 500 Index, S&P 400 Index, S&P
600 Index, Barclays Capital U.S. Aggregate Bond Index, Citigroup 3-Month
Treasury Bill Index, Barclays Capital U.S. Treasury Inflation Protected
Securities (TIPS) Index (Series-L), MSCI All Country World Index ex US IMI
Index and FTSE EPRA/NAREIT Global Real Estate Index. The MSCI All Country
World Index ex US IMI Index replaced the MSCI All Country World Index ex
USA Index on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index
replaced the Cohen & Steers Realty Majors Index on July 1, 2008.
/(5)/ Reflects no deductions for fees, expenses or taxes.
/(6)/ Effective November 3, 2008, the names of the noted indexes changed from
the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S. Treasury
TIPS Index to the Barclays Capital U.S. Aggregate Bond Index and Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), respectively. Changes to these indexes are discussed further
in the May 2009 Prospectus.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses tables above.
In the absence of such waivers and/or reimbursements, the applicable LifePath
Portfolio's total return would be lower.
C-8
[GRAPHIC APPEARS HERE]
- --------------------------------------------------------------------------------
Prospectus
May 1, 2009
LIFEPATH(Reg. TM) PORTFOLIOS
CLASS I SHARES
LifePath(Reg. TM) Retirement
LifePath 2010(Reg. TM)
LifePath 2020(Reg. TM)
LifePath 2030(Reg. TM)
LifePath 2040(Reg. TM)
LifePath(Reg. TM) 2050
THE FIRST MUTUAL FUNDS DESIGNED TO OFFER INDIVIDUAL INVESTORS
COMPREHENSIVE ASSET ALLOCATION STRATEGIES THAT ADJUST OVER TIME.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
LifePath(Reg. TM) is a registered servicemark of Barclays Global Investors,
N.A. and the LifePath Products are covered by U.S. Patents 5,812,987 and
6,336,102.
[GRAPHIC APPEARS HERE]
Table of Contents
Overview ............................................................. 1
Investment Objectives ................................................ 3
Summary of Principal Investment Strategies ........................... 4
Summary of Principal Risk Factors .................................... 5
Investment Returns ................................................... 6
Fees and Expenses .................................................... 11
A Further Discussion of Principal Investment Strategies .............. 13
A Further Discussion of Principal Risk Factors ....................... 22
Management of the LifePath Portfolios ................................ 26
Shareholder Information .............................................. 28
Financial Highlights ................................................. 34
Disclaimers .......................................................... 40
- --------------------------------------------------------------------------------
i
Overview
INTRODUCTION
The LifePath Portfolios/1/ are designed to offer individual investors
comprehensive asset allocation strategies tailored to the time when they expect
to begin withdrawing assets. Asset allocation is the distribution of
investments among broad types of asset classes: equity securities, bonds and
money market instruments. Each LifePath Portfolio invests all of its assets in
a separate mutual fund, called a Master Portfolio, that has a substantially
identical investment objective as the LifePath Portfolio. To implement the
asset allocation strategy, each Master Portfolio, in turn, invests in a
combination of equity securities, bond and money market funds (the "Underlying
Funds") in proportions based on its own comprehensive investment strategy that
gradually becomes more conservative as the year in the LifePath Portfolio's
name approaches, except for the LifePath Retirement Portfolio, which is already
in its most conservative phase. Barclays Global Fund Advisors ("BGFA") is the
investment adviser to the Master Portfolios.
WHICH LIFEPATH PORTFOLIO TO CONSIDER
The first step in choosing which LifePath Portfolio to consider is answering a
key question: When will you need the money you are thinking of investing? Will
it be in ten years, when your kids are ready for college? Or 30 years, when you
retire?
The number in the name of most of the LifePath Portfolios is actually a year -
a "target year" when you might expect to begin withdrawing your money.
Selecting the LifePath Portfolio that may be most appropriate for your
investment may be as simple as matching your target year with the closest
LifePath Portfolio target year.
For example, let's say that you are investing for retirement purposes, and that
you expect to retire at age 60. If you are 45 years old, you have 15 years
before retirement. By adding 15 to the current year, you can define your
"target year." If you expect to retire in the year 2023, as in this example,
you may conclude that the LifePath 2020 Portfolio is the most appropriate
LifePath Portfolio for you.
- -------
(1)For simplicity's sake, all discussion of investment objective, strategies
and risks of a particular LifePath Portfolio refers also to the investment
objective, strategies and risks of the Master Portfolio, unless otherwise
indicated. A detailed description of the relationship of the LifePath
Portfolios to their Master Portfolios appears under the heading
"Shareholder Information - Master/Feeder Mutual Fund Structure" in this
Prospectus.
- --------------------------------------------------------------------------------
1
LIFEPATH(Reg. TM) PORTFOLIOS - HOW THEY WORK
[GRAPHIC APPEARS HERE]
NOTE: THE ABOVE CHART IS FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT REPRESENT
THE ACTUAL ALLOCATION PERCENTAGES OF THE LIFEPATH PORTFOLIOS.
The chart shows that over time, the investment mix of each LifePath Portfolio
gradually shifts from a greater concentration of higher-risk investments
(namely, equity securities funds) to a greater concentration of lower-risk
investments (namely, bond funds), thereby making the LifePath Portfolio
increasingly conservative.
In making your investment decision, you should keep in mind:
[] Each LifePath Portfolio's investment strategy derives from the risk
tolerance of average investors with a particular time horizon.
[] Each LifePath Portfolio's time horizon is based on the year in its name,
except for the LifePath Retirement Portfolio, which is designed for investors
who are currently withdrawing, or plan in the near future to begin
withdrawing, a substantial portion of their investment.
If you are willing to accept a greater risk of short-term loss in exchange for
the potential to achieve higher long-term returns, you may invest some or all
of your assets in a LifePath Portfolio with a longer time horizon. If you
desire a more conservative investment and are willing to forego some potential
returns, you may invest some or all of your assets in a LifePath Portfolio with
a shorter time horizon. The final choice is yours.
- --------------------------------------------------------------------------------
2 BARCLAYS GLOBAL INVESTORS FUNDS
Investment Objectives
Each LifePath Portfolio seeks to maximize return consistent with the
quantitatively measured risk that investors on average may be willing to accept
given their investment time horizon. An investor's time horizon marks the point
when the investor plans to start making net withdrawals from his or her
investments. As a general rule, investors with a longer time horizon have a
greater tolerance for risk than investors with a shorter time horizon.
Long-term investors are more likely to accept a greater risk of short-term loss
in exchange for the potential to achieve higher long-term returns. Each
LifePath Portfolio has its own time horizon, which affects the targeted risk
level of the LifePath Portfolio and, in turn, its asset allocation.
SPECIFICALLY:
[] LifePath Retirement Portfolio is managed for investors seeking income and
moderate long-term growth of capital.
[] LifePath 2010 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2010.
[] LifePath 2020 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2020.
[] LifePath 2030 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2030.
[] LifePath 2040 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2040.
[] LifePath 2050 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2050.
Each LifePath Portfolio's investment objective may be changed by the LifePath
Portfolio's Board of Trustees without shareholder approval.
- --------------------------------------------------------------------------------
3
Summary of Principal Investment Strategies
Each LifePath Portfolio invests all of its assets in a corresponding Master
Portfolio which allocates and reallocates its assets among the Underlying
Funds. The Master Portfolios with longer time horizons invest a greater portion
of their assets in Underlying Funds that invest in equity securities, which
provide a greater opportunity for capital appreciation over the long-term but
have a greater risk of short-term loss. The Master Portfolios with shorter time
horizons invest a greater portion of their assets in Underlying Funds that
invest in bonds and money market instruments, which typically offer reduced
risk and price volatility but forego some potential returns. Accordingly, under
normal circumstances, the LifePath Portfolios with shorter time horizons have
lower expected returns than the LifePath Portfolios with longer time horizons.
[] LifePath Retirement Portfolio is designed for investors seeking current
income and moderate long-term growth of capital. As of March 31, 2009, the
LifePath Retirement Portfolio held approximately 38% of its assets in
Underlying Funds that invest primarily in equity securities, 62% of its assets
in Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
Because the LifePath Retirement Portfolio is in its most conservative phase,
its allocation generally does not become more conservative over time, although
its allocation may change to maintain the LifePath Retirement Portfolio's risk
profile.
[] LifePath 2010 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2010. As of March 31, 2009, the
LifePath 2010 Portfolio held approximately 40% of its assets in Underlying
Funds that invest primarily in equity securities, 60% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2020 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2020. As of March 31, 2009, LifePath
2020 Portfolio held approximately 61% of its assets in Underlying Funds that
invest primarily in equity securities, 39% of its assets in Underlying Funds
that invest primarily in bonds and the remainder of its assets in Underlying
Funds that invest primarily in money market instruments. As the stated time
horizon approaches, the allocation will become more conservative and have
lower expected returns.
[] LifePath 2030 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2030. As of March 31, 2009, the
LifePath 2030 Portfolio held approximately 76% of its assets in Underlying
Funds that invest primarily in equity securities, 24% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2040 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2040. As of March 31, 2009, the
LifePath 2040 Portfolio held approximately 89% of its assets in Underlying
Funds that invest primarily in equity securities, 11% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2050 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2050. As of March 31, 2009, the
LifePath 2050 Portfolio held approximately 99% of its assets in Underlying
Funds that invest primarily in equity securities, 1% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, that allocation will become more
conservative and have lower expected returns.
When a LifePath Portfolio reaches its stated time horizon and enters its most
conservative phase - E.G., the LifePath 2010 Portfolio - the allocation of its
assets is expected to be similar to that of the LifePath Retirement Portfolio.
Such LifePath Portfolio and the LifePath Retirement Portfolio may then continue
to operate as separate funds or, subject to approval by the LifePath
Portfolios' Board of Trustees, they may be merged into a single fund.
- --------------------------------------------------------------------------------
4 BARCLAYS GLOBAL INVESTORS FUNDS
Summary of Principal Risk Factors
As with any investment, your investment in the LifePath Portfolios could lose
money or the Portfolios' performance could trail that of other investments.
EACH LIFEPATH PORTFOLIO HAS A DIFFERENT LEVEL OF RISK.
The value of your investment is subject to equity securities market risk, which
means the price of the equity securities in which the Underlying Funds invest
may fluctuate or fall in response to economic events or trends.
The value of your investment is also subject to bond investment risks,
including interest rate risk, which means that the prices of bonds in which the
Underlying Funds invest may fall because of a rise in interest rates; credit
risk, which is the risk that the price of an individual bond may fall with the
decline in an issuer's real or apparent ability to meet its financial
obligations; extension risk, which is the risk that borrowers may extend the
prepayment of their mortgages or loans for longer periods than expected,
thereby affecting the security's average life and, potentially, its yield; and
prepayment risk, which is the risk that borrowers may prepay their mortgages or
loans faster than expected, thereby affecting the security's average life and,
potentially, its yield. The risk of default and price volatility of high yield
securities is greater than the risk usually associated with higher-rated
securities.
Investments in foreign securities by the Underlying Funds are subject to
certain special risks and considerations, including potentially less liquidity
and greater price volatility than investments in securities traded in the U.S.
markets. These risks are greater for investments in foreign securities issued
by companies or sovereign entities in emerging market countries.
The allocation of each LifePath Portfolio's assets is managed using a
quantitative model that has been developed based on a number of factors.
Neither the LifePath Portfolios nor BGFA can offer any assurance that the
recommended asset allocation will either maximize returns or minimize risk or
be the appropriate allocation in all circumstances for every investor with a
particular time horizon.
The value of your investment is also subject to passive investment risk,
security selection risk and concentration risk. Because BGFA does not select
individual companies in the underlying indexes for certain Underlying Funds,
those Underlying Funds may hold stocks in companies that present risks that an
adviser researching individual stocks might seek to avoid. This is known as
passive investment risk. In the case of the Underlying Funds where BGFA does
select securities based on its analysis, these funds are subject to the risk
that security selection will contribute to underperformance. Concentration risk
is the risk that an Underlying Fund that concentrates in a single industry or
group of industries may be more susceptible to any single economic, market,
political or regulatory occurrence in that industry or group of industries.
The value of your investment is subject to real estate investment risk, which
includes many of the same risks associated with the direct ownership of real
estate.
Investments in derivatives by certain Underlying Funds are subject to special
risks and considerations. Derivatives are financial instruments whose values
are derived, at least in part, from the prices of other securities or specified
assets, indexes or rates.
Certain Underlying Funds are also subject to market trading risks due to their
shares being listed and traded on securities exchanges (including potential
halts in trading or a fluctuation in trading price in accordance with changes
in net asset value), and tracking error risk, in that the return of an
Underlying Fund that seeks to track an index may deviate from the return of
such index.
- --------------------------------------------------------------------------------
5
The LifePath Portfolios must maintain cash balances to meet redemption
requests, which may lower overall portfolio performance.
An investment in a LifePath Portfolio is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Investment Returns
TOTAL RETURNS
The bar charts and table in this section provide some indication of the risks
of investing in the LifePath Portfolios by showing the changes in their
performance from year to year. The bar charts show the returns for Class I of
each LifePath Portfolio for each of the last ten calendar years. The average
annual total return table compares the average annual total returns (before and
after taxes) of Class I of each LifePath Portfolio to those of a corresponding
index for various periods of time. Effective March 15, 2004, the returns for
each LifePath Portfolio reflect its Master Portfolio's investment in Underlying
Funds. For all periods prior to March 15, 2004, the returns for each LifePath
Portfolio reflect the direct investment by its Master Portfolio in a portfolio
of securities and also reflect investment in accordance with a model that
included "tactical," or short-term, shifts in allocation between stocks and
bonds. In addition, as of December 31, 2003, BGFA made certain changes to its
asset allocation strategies for the LifePath Portfolios, including a change to
the frequency with which the LifePath Portfolios' respective holdings were
rebalanced among asset classes from monthly to quarterly.
How the LifePath Portfolios performed in the past (before and after taxes) is
not necessarily an indication of how they will perform in the future.
LIFEPATH RETIREMENT PORTFOLIO - CLASS I
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 4.85%
2000 4.73%
2001 3.60%
2002 -2.70%
2003 11.95%
2004 6.35%
2005 4.32%
2006 8.80%
2007 4.50%
2008 -15.04%
The best calendar quarter return during the years shown above was 7.22% in the
2nd quarter of 2003; the worst was -7.80% in the 4th quarter of 2008.
- --------------------------------------------------------------------------------
6 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2010 PORTFOLIO - CLASS I
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 9.48%
2000 0.71%
2001 -0.75%
2002 -8.32%
2003 15.66%
2004 7.38%
2005 5.20%
2006 10.15%
2007 4.18%
2008 -17.00%
The best calendar quarter return during the years shown above was 9.14% in the
2nd quarter of 2003; the worst was -8.87% in the 4th quarter of 2008.
LIFEPATH 2020 PORTFOLIO - CLASS I
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 14.12%
2000 -3.74%
2001 -6.42%
2002 -12.59%
2003 20.61%
2004 9.27%
2005 6.54%
2006 13.01%
2007 3.34%
2008 -25.42%
The best calendar quarter return during the years shown above was 11.35% in the
2nd quarter of 2003; the worst was -14.21% in the 4th quarter of 2008.
- --------------------------------------------------------------------------------
7
LIFEPATH 2030 PORTFOLIO - CLASS I
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 16.85%
2000 -5.65%
2001 -9.94%
2002 -15.73%
2003 23.86%
2004 10.78%
2005 7.63%
2006 15.12%
2007 2.64%
2008 -31.03%
The best calendar quarter return during the years shown above was 13.45% in the
2nd quarter of 2003; the worst was -17.90% in the 4th quarter of 2008.
LIFEPATH 2040 PORTFOLIO - CLASS I
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 21.38%
2000 -9.71%
2001 -13.41%
2002 -18.73%
2003 27.64%
2004 11.43%
2005 8.24%
2006 16.97%
2007 2.03%
2008 -35.40%
The best calendar quarter return during the years shown above was 16.35% in the
4th quarter of 1999; the worst was -20.80% in the 4th quarter of 2008.
LIFEPATH 2050 PORTFOLIO - CLASS I
The LifePath 2050 Portfolio commenced operations on June 30, 2008. Because the
LifePath 2050 Portfolio does not have a full year of operations, it does not
disclose its performance history in this Prospectus.
- --------------------------------------------------------------------------------
8 BARCLAYS GLOBAL INVESTORS FUNDS
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 2008
CLASS I SHARES(1)
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(2)
------------ --------- ---------- -------------
LIFEPATH RETIREMENT
PORTFOLIO
Return Before Taxes -15.04% 1.40% 2.88% 4.76%
Return After Taxes on -15.87% 0.18% 1.43% 3.13%
Distributions(3)
Return After Taxes on -9.55% 0.71% 1.76% 3.24%
Distributions and Sale
of Fund Shares(3)
LifePath Retirement -14.53% 2.42% 3.91% 5.83%
Portfolio Custom
Benchmark(4)(5)
LIFEPATH 2010 PORTFOLIO
Return Before Taxes -17.00% 1.49% 2.25% 5.73%
Return After Taxes on -17.92% 0.34% 0.85% 4.18%
Distributions(3)
Return After Taxes on -10.67% 0.90% 1.34% 4.26%
Distributions and Sale
of Fund Shares(3)
LifePath 2010 Portfolio -16.51% 2.52% 3.39% 6.54%
Custom Benchmark(4)(5)
LIFEPATH 2020 PORTFOLIO
Return Before Taxes -25.42% 0.28% 0.95% 5.73%
Return After Taxes on -25.86% -0.41% -0.01% 4.53%
Distributions(3)
Return After Taxes on -16.11% 0.10% 0.49% 4.50%
Distributions and Sale
of Fund Shares(3)
LifePath 2020 Portfolio -25.39% 1.13% 2.01% 6.25%
Custom Benchmark(4)(5)
LIFEPATH 2030 PORTFOLIO
Return Before Taxes -31.03% -0.57% 0.07% 5.77%
Return After Taxes on -31.31% -1.42% -1.07% 4.52%
Distributions(3)
Return After Taxes on -19.77% -0.47% -0.15% 4.68%
Distributions and Sale
of Fund Shares(3)
LifePath 2030 Portfolio -31.34% 0.12% 1.03% 5.99%
Custom Benchmark(4)(5)
LIFEPATH 2040 PORTFOLIO
Return Before Taxes -35.40% -1.44% -0.88% 5.72%
Return After Taxes on -35.58% -1.80% -1.60% 4.79%
Distributions(3)
Return After Taxes on -22.63% -1.12% -0.79% 4.81%
Distributions and Sale
of Fund Shares(3)
LifePath 2040 Portfolio -36.01% -0.80% 0.14% 5.90%
Custom Benchmark(4)(5)
LIFEPATH 2050 PORTFOLIO
Return Before Taxes N/A N/A N/A -32.18%
Return After Taxes on N/A N/A N/A -32.27%
Distributions(3)
Return After Taxes on N/A N/A N/A -20.81%
Distributions and Sale
of Fund Shares(3)
LifePath 2050 Portfolio N/A N/A N/A -32.47%
Custom Benchmark(4)(5)
S&P 1500 Index(5) -36.72% -1.89% -0.76% N/A
Barclays Capital U.S. 5.24% 4.65% 5.63% N/A
Aggregate Bond
Index(5)(6)
MSCI All Country World -45.98% 2.62% 2.26% N/A
Index ex US IMI
Index(5)
MSCI All Country World -45.53% 2.56% 1.90% N/A
Index ex USA(5)
Citigroup 3-Month 1.81% 3.10% 3.30% N/A
Treasury Bill Index(5)
Barclays Capital U.S.
Treasury Inflation
Protected Securities
(TIPS) Index
(Series-L)(5)(6) -2.35% 4.07% 6.79% N/A
FTSE EPRA/NAREIT Global -47.72% 1.96% N/A N/A
Real Estate Index(5)
Cohen & Steers Realty -40.93% 1.17% N/A N/A
Majors Index(5)
- --------------------------------------------------------------------------------
9
- -------
(1) Effective March 15, 2004, the returns for each LifePath Portfolio
reflect its Master Portfolio's investment in Underlying Funds. For all
periods prior to March 15, 2004, the returns for each LifePath
Portfolio reflect the direct investment by its Master Portfolio in a
portfolio of securities and also reflect investment in accordance with
a model that included "tactical," or short-term, shifts in allocation
between stocks and bonds. In addition, as of December 31, 2003, BGFA
made certain changes to its asset allocation strategies for the
LifePath Portfolios, including a change to the frequency with which the
LifePath Portfolios' respective holdings were rebalanced among asset
classes from monthly to quarterly.
(2) The inception date of the Class I Shares of the LifePath Retirement
Portfolio, LifePath 2010 Portfolio, LifePath 2020 Portfolio, LifePath
2030 Portfolio and LifePath 2040 Portfolio is March 1, 1994. The
inception date of the Class I Shares of the LifePath 2050 Portfolio is
June 30, 2008. The returns for the Class I Shares of the LifePath 2050
Portfolio are not annualized. The inception date of the LifePath
Retirement Portfolio Custom Benchmark, LifePath 2010 Portfolio Custom
Benchmark, LifePath 2020 Portfolio Custom Benchmark, LifePath 2030
Portfolio Custom Benchmark and LifePath 2040 Portfolio Custom Benchmark
is March 1, 1994. The inception date of the LifePath 2050 Portfolio
Custom Benchmark is June 30, 2008.
(3) After tax returns in the table above are calculated using the
historical highest individual federal marginal income tax rates and do
not reflect the impact of state, local or foreign taxes. Actual
after-tax returns depend on an investor's tax situation and may differ
from those shown, and after-tax returns shown are not relevant to
tax-exempt investors or investors who hold shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts
("IRAs"). A LifePath Portfolio's returns after taxes on distributions
and sale of LifePath Portfolio shares are calculated assuming that an
investor has sufficient capital gains of the same character from other
investments to offset any capital losses from the sale of LifePath
Portfolio shares. As a result, a LifePath Portfolio's returns after
taxes on distributions and sale of LifePath Portfolio shares may exceed
the LifePath Portfolio's returns before taxes and/or returns after
taxes on distributions.
(4) The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath
Portfolio's asset classes according to their weightings as of the most
recent quarter end. The weightings of the various indexes that are
included in the LifePath Portfolios' custom benchmarks are adjusted
quarterly to reflect the LifePath Portfolios' changing asset
allocations over time. As of December 31, 2008, the following indexes
are used to calculate the LifePath Portfolios' custom benchmarks: S&P
500 Index, S&P 400 Index, S&P 600 Index, Barclays Capital U.S.
Aggregate Bond Index, Citigroup 3-Month Treasury Bill Index, Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), MSCI All Country World Index ex US IMI Index and FTSE
EPRA/NAREIT Global Real Estate Index. The MSCI All Country World Index
ex US IMI Index replaced the MSCI All Country World Index ex USA Index
on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index replaced
the Cohen & Steers Realty Majors Index on July 1, 2008.
(5) Reflects no deductions for fees, expenses or taxes.
(6) Effective November 3, 2008, the names of the noted indexes changed
from the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S.
Treasury TIPS Index to the Barclays Capital U.S. Aggregate Bond Index
and Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L), respectively. Changes to these indexes are
discussed further on page 21.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses table on the
immediately following page. In the absence of such waivers and/or
reimbursements, the applicable LifePath Portfolio's total return would be
lower.
- --------------------------------------------------------------------------------
10 BARCLAYS GLOBAL INVESTORS FUNDS
Fees and Expenses
The table below describes the fees and expenses that you may pay if you buy and
hold Class I Shares of a LifePath Portfolio. The expenses are deducted from
each LifePath Portfolio's assets, which means you pay them indirectly. This
table does not reflect charges that may be imposed in connection with an
account in which you hold the shares. A broker-dealer or financial institution
maintaining the account in which you hold shares may charge a separate account,
service or transaction fee on the purchase or sale of Class I Shares that would
be in addition to the fees and expenses shown here.
The total annual operating expense ratios in the table and the example on the
next page reflect the expenses of the Class I Shares of each LifePath Portfolio
and its corresponding Master Portfolio and also reflect a weighted average of
the total operating expense ratios of the Underlying Funds in which each Master
Portfolio invests:
ANNUAL CLASS OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
(Expenses that are Deducted from Class Assets)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
Management fees(1) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other expenses 0.51% 0.51% 0.50% 0.51% 0.51% 0.51%
(Administration fees ;
Independent
Expenses(2))
Acquired fund fees and 0.34% 0.34% 0.35% 0.35% 0.35% 0.42%
expenses (Underlying
Funds)(3)
Total annual class 1.20% 1.20% 1.20% 1.21% 1.21% 1.28%
operating
expenses(1)(2)(3)
Less fee waivers and/or 0.35% 0.35% 0.35% 0.36% 0.36% 0.43%
expense
reimbursements(1)(2)
Net expenses(1)(2)(4) 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
- -------
(1) BGFA, the investment adviser to the Master Portfolios, has
contractually agreed to waive its management fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, charged to the Underlying Funds through April 30, 2011
(the "contractual waiver").
(2) "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master
Portfolios, counsel to the Independent Trustees of the LifePath
Portfolios and the Master Portfolios and the independent registered
public accounting firm that provides audit and non-audit services in
connection with the LifePath Portfolios and the Master Portfolios that
are allocated to the Class I Shares of the LifePath Portfolios.
Barclays Global Investors, N.A. ("BGI") and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to,
the Class I Shares of the LifePath Portfolios and the Master Portfolios
for Independent Expenses through April 30, 2011. After giving effect to
such contractual arrangements, Independent Expenses will be 0.00%. For
the LifePath 2050 Portfolio, other expenses are based on estimated
amounts for 2009.
(3) Acquired fund fees and expenses (Underlying Funds) reflect each
LifePath Portfolio's PRO RATA share of the fees and expenses incurred
by investing in the Underlying Funds. For the LifePath 2050 Portfolio,
these fees and expenses are based on estimated amounts for 2009.
(4) The LifePath Portfolios' service providers may voluntarily waive
certain of their fees or reimburse certain expenses, as they determine,
from time to time; this table does not reflect such waivers or
reimbursements.
- --------------------------------------------------------------------------------
11
EXAMPLE
The example below is intended to help you compare the cost of investing in
Class I Shares of the LifePath Portfolios with the cost of investing in other
mutual funds. The example illustrates the cost you would have incurred on an
initial $10,000 investment in Class I Shares of each LifePath Portfolio over
the time periods shown. It assumes your investment earns an annual return of 5%
over the periods, that total operating expenses remain the same and that the
contractual fee waivers and reimbursements by BGFA and BGI are in effect for
two years.
THE LIFEPATH PORTFOLIOS DO NOT CHARGE A SALES LOAD OR OTHER FEE UPON
REDEMPTION. This means that your cost for each period would be the same whether
or not you sell your shares at the end of a period. Your actual costs may be
higher or lower than this hypothetical example:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- ------------- -----------
LifePath Retirement $87 $310 $590 $1,391
Portfolio
LifePath 2010 Portfolio $87 $310 $590 $1,391
LifePath 2020 Portfolio $87 $310 $590 $1,391
LifePath 2030 Portfolio $87 $311 $594 $1,400
LifePath 2040 Portfolio $87 $311 $594 $1,400
LifePath 2050 Portfolio $87 $319 N/A N/A
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12 BARCLAYS GLOBAL INVESTORS FUNDS
A Further Discussion of Principal Investment Strategies
INTRODUCTION
Each LifePath Portfolio pursues a common strategy of allocating and
reallocating its assets among the Underlying Funds. The LifePath Portfolios
with longer time horizons invest a greater portion of their assets in
Underlying Funds that invest in equity securities, which provide a greater
potential to achieve higher returns over the long-term but have a greater risk
of short-term loss. In addition to investing in Underlying Funds, each LifePath
Portfolio may borrow, lend its portfolio securities to brokers, dealers and
financial institutions, and may invest the collateral in certain short-term
instruments either directly or through one or more joint accounts or money
market funds, as described in greater detail in the LifePath Portfolios'
combined Statement of Additional Information ("SAI").
The LifePath Portfolios with shorter time horizons invest a greater portion of
their assets in Underlying Funds that invest in bonds and money market
instruments, which typically offer reduced risk and price volatility, but
forego some potential returns. Accordingly, under normal circumstances, the
LifePath Portfolios with shorter time horizons have lower expected returns than
the LifePath Portfolios with longer time horizons. As each LifePath Portfolio
approaches its designated time horizon, it systematically seeks to reduce the
level of risk by allocating assets more conservatively among the Underlying
Funds. This systematic shift toward more conservative investments is designed
to reduce the risk of significant reductions in the value of an investment in a
LifePath Portfolio as it approaches its time horizon.
For example, the LifePath Retirement Portfolio has entered its "retirement
phase" and seeks to maximize returns consistent with the risk that an average
investor in retirement may be willing to accept. This does not mean, however,
that it invests exclusively, or primarily, in Underlying Funds that are money
market funds. Rather, because BGFA believes that most investors are still
willing to take some risks in pursuing returns even while drawing on their
investments, a portion of the LifePath Retirement Portfolio's assets will
continue to be allocated to Underlying Funds that are equity and bond funds, in
addition to Underlying Funds that are money market funds.
In determining the allocation of assets to the Underlying Funds, BGFA uses a
proprietary investment model that analyzes securities market data, including
risk, asset class correlations, and expected returns, to provide portfolio
allocations among the asset classes represented by the Underlying Funds. The
allocations are periodically monitored and rebalanced in an effort to maximize
expected return for a given level of risk. In managing the LifePath Portfolios,
BGFA focuses on long-term targets and objectives. The progression over time of
a LifePath Portfolio's asset allocation to more conservative asset classes is a
relatively steady process resulting in only gradual changes to the asset
allocation from quarter to quarter. The Underlying Funds invest in a mix of
equity securities, bonds and money market instruments. Certain Underlying Funds
invest in real estate investment trusts ("REITs"), foreign securities, emerging
markets, below investment-grade bonds and derivatives, which are subject to
additional risks, as described in the "Further Discussion of Principal Risk
Factors" section of this Prospectus. The investment model adjusts each LifePath
Portfolio's risk level by gradually making it more conservative as the year in
the LifePath Portfolio's name approaches, except for the LifePath Retirement
Portfolio, which is already in its most conservative phase.
THE UNDERLYING FUNDS
Two of the Underlying Funds - the Active Stock Master Portfolio and the
CoreAlpha Bond Master Portfolio (collectively, the "Underlying Master
Portfolios") - are diversified portfolios of Master Investment Portfolio
("MIP"). The Active Stock Master Portfolio seeks to provide long-term
appreciation of capital. BGFA invests the Active Stock Master Portfolio's
assets using a proprietary quantitative model that is designed to select stocks
based on an analysis of a wide range of company-specific factors. The CoreAlpha
Bond Master Portfolio seeks to provide a combination of income and capital
growth. BGFA invests the CoreAlpha Bond Master Portfolio's assets pursuant to a
systematic method that relies on
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13
proprietary quantitative models to allocate assets among various bond sectors
by evaluating each sector's relative value and risk-adjusted return.
The remaining Underlying Funds, other than the Barclays Global Investors Funds
("BGIF") Institutional Money Market Fund (the "Underlying Money Market Fund")
are exchange-traded funds ("ETFs") that are part of the iShares family of funds
("Underlying iShares Funds"). Each of the Underlying iShares Funds seeks
investment results that correspond generally to the performance, before fees
and expenses, of its underlying index. As a result, adverse performance of a
particular security in an Underlying iShares Fund's portfolio will ordinarily
not result in the elimination of the security from the Underlying iShares
Fund's portfolio. Each Underlying iShares Fund offers and issues iShares at
their net asset value per share only to certain institutional investors in
aggregations of a specified number of iShares, generally in exchange for a
basket of securities included in its underlying index, together with the
deposit of a specified cash payment. The iShares for these Underlying iShares
Funds are listed and traded on national securities exchanges and also may be
listed on certain non-U.S. exchanges. BGFA purchases iShares on behalf of the
Master Portfolios in the secondary market.
The relative weightings for each Master Portfolio in the various Underlying
Funds will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time.
Each Master Portfolio currently expects to invest in some or all of the
Underlying Funds described below:
ACTIVE STOCK MASTER PORTFOLIO
Seeks to provide long-term appreciation of capital. The Active Stock Master
Portfolio invests, under normal circumstances, at least 80% of its assets in
common stocks. The Active Stock Master Portfolio invests primarily in equity
securities of U.S. companies with market capitalizations similar to the range
of market capitalizations represented in the Standard & Poor's S&P 500 Index.
BGFA invests the Active Stock Master Portfolio's assets using a proprietary
quantitative model that is designed to select stocks based on an analysis of a
wide range of company-specific factors, such as relative values based on
earnings and cash flows; earnings quality as measured by the company's
financial condition and earnings reports; sentiment as expressed through
management and market participant behavior; and industry classification. BGFA
considers risk parameters in deciding upon the Active Stock Master Portfolio's
aggregate holdings, and factors trading costs into its stock selection process.
COREALPHA BOND MASTER PORTFOLIO
Seeks to provide a combination of income and capital growth. BGFA invests the
CoreAlpha Bond Master Portfolio's assets pursuant to a systematic method that
relies on proprietary quantitative models to allocate assets among various bond
sectors by evaluating each sector's relative value and risk-adjusted return.
BGFA's models also allocate assets among bonds of different maturities based on
yield characteristics and expectations. Specific investment selection decisions
are made on the basis of evaluations of relative value, credit quality and
other factors. The CoreAlpha Bond Master Portfolio invests, under normal
circumstances, at least 80% of its assets in bonds. For the purposes of this
strategy, "bonds" include the following: obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including U.S. agency mortgage pass-through securities;
commercial mortgage-backed securities; debt obligations of U.S. corporations;
dollar-denominated debt obligations of foreign issuers; municipal securities;
and asset-backed securities. The CoreAlpha Bond Master Portfolio invests a
substantial portion of its assets in U.S.-registered, dollar-denominated bonds.
The CoreAlpha Bond Master Portfolio may invest in bonds of any maturity or
duration.
BGIF INSTITUTIONAL MONEY MARKET FUND
Seeks a high level of income consistent with liquidity and the preservation of
capital. The BGIF Institutional Money Market Fund invests in high-quality,
short-term money market instruments that include fixed-rate, floating-rate and
variable-rate debt securities. The BGIF Institutional Money Market Fund also
may invest in high-quality, short-term U.S.
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14 BARCLAYS GLOBAL INVESTORS FUNDS
and foreign government debt, including the debt of agencies and
instrumentalities, such as the Federal National Mortgage Association ("Fannie
Mae"), U.S. and foreign bank obligations, corporate obligations, repurchase
agreements and asset-backed securities.
UNDERLYING ISHARES FUNDS
In managing each of the Underlying iShares Funds, BGFA uses a representative
sampling index strategy. Representative sampling is an indexing strategy that
involves investing in a representative sample of securities that 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 applicable
underlying index. Underlying iShares Funds that use representative sampling may
or may not hold all of the securities in the relevant underlying index.
ISHARES S&P 500 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P 500 Index. The S&P 500 Index
measures the performance of the large-capitalization sector of the U.S. equity
market. The component stocks are weighted according to the float-adjusted
market value of their outstanding shares.
ISHARES S&P MIDCAP 400 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P MidCap 400 Index. The S&P
MidCap 400 Index measures the performance of the mid-capitalization sector of
the U.S. equity market. The stocks in the S&P MidCap 400 Index have a market
capitalization between $1.5 billion and $5.5 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P SMALLCAP 600 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P SmallCap 600 Index. The S&P
SmallCap 600 Index measures the performance of the small-capitalization sector
of the U.S. equity market. The stocks in the S&P SmallCap 600 Index have a
market capitalization between $300 million and $2 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P NATIONAL MUNICIPAL BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the municipal bond sector of the U.S.
as defined by the S&P National Municipal Bond Index. The S&P National Municipal
Bond Index measures the performance of the investment-grade segment of the U.S.
municipal bond market. As of March 31, 2009, there were 523 issues in the S&P
National Municipal Bond Index.
ISHARES S&P NORTH AMERICAN NATURAL RESOURCES SECTOR INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P North American Natural
Resources Sector Index(TM). The S&P North American Natural Resources Sector
Index(TM) measures the performance of U.S.-traded stocks of natural
resource-related companies in the U.S. and Canada, and includes companies in
the following categories: producers of oil, gas and consumable fuels, energy
equipment and services, metals and mining, manufacturers of paper and forest
products, and producers of construction materials, containers and packaging.
ISHARES RUSSELL MIDCAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell Midcap(Reg. TM) Index.
The Russell Midcap(Reg. TM) Index measures the performance of the
mid-capitalization sector of the
- --------------------------------------------------------------------------------
15
U.S. equity market. The Russell Midcap(Reg. TM) Index is a float-adjusted,
capitalization-weighted index of the 800 smallest issuers in the Russell
1000(Reg. TM) Index.
ISHARES RUSSELL 2000 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell 2000(Reg. TM) Index. The
Russell 2000(Reg. TM) Index measures the performance of the small
capitalization sector of the U.S. equity market. The Russell 2000(Reg. TM)
Index is a float-adjusted, capitalization-weighted index of equity securities
issued by the approximately 2,000 smallest issuers in the Russell 3000(Reg. TM)
Index.
ISHARES COHEN & STEERS REALTY MAJORS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Cohen & Steers Realty Majors
Index (the "Cohen & Steers Index"). The Cohen & Steers Index consists of
selected U.S. REITs. The objective of the Cohen & Steers Index is to represent
relatively large and liquid REITs that may benefit from future consolidation
and securitization of the U.S. real estate industry. REITs are selected for
inclusion in the Cohen & Steers Index based on a rigorous review of several
factors, including management, portfolio quality, and sector and geographic
diversification. The REITs selected for inclusion in the Cohen & Steers Index
must meet minimum market capitalization and liquidity requirements. The Cohen &
Steers Index is weighted according to the total market value of each REIT's
outstanding shares and is adjusted quarterly so that no REIT represents more
than 8% of the Cohen & Steers Index.
ISHARES FTSE EPRA/NAREIT DEVELOPED REAL ESTATE EX-U.S. INDEX FUND(1)
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE EPRA/NAREIT Developed Real
Estate ex-U.S. Index. The FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
measures the stock performance of companies engaged in the ownership and
development of the Canadian, European, Middle East and Asian real estate
markets. As of March 31, 2009, the FTSE EPRA/NAREIT Developed Real Estate
ex-U.S. Index was comprised of stocks of companies in the following countries:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom.
ISHARES MSCI CANADA INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Canada Index developed by
MSCI, Inc. ("MSCI"). The MSCI Canada Index consists of stocks traded primarily
on the Toronto Stock Exchange.
ISHARES MSCI EAFE INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE(Reg. TM) Index. The
MSCI EAFE(Reg. TM) Index has been developed by MSCI as an equity benchmark for
its international stock performance. The MSCI EAFE Index includes stocks from
Europe, Australasia and the Far East.
- -------
(1)Effective March 23, 2009, the name of the fund changed from the iShares
FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund to the iShares FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund to reflect changes in
the name of the fund's corresponding underlying index from FTSE
EPRA/NAREIT Global Real Estate ex-U.S. Index to FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index.
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16 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES MSCI EAFE SMALL CAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE Small Cap Index. The
MSCI EAFE Small Cap Index targets 40% of the eligible small-capitalization
universe in each industry group of each country represented by the MSCI
EAFE(Reg. TM) Index. The MSCI EAFE(Reg. TM) Index includes securities from
Europe, Australasia and the Far East. MSCI defines the small-capitalization
universe as all listed securities that have a market capitalization between
$200 million and $1,500 million (which may fluctuate depending on the overall
level of the equity markets). In addition to this capitalization range, MSCI
uses a specialized framework of foreign inclusion factors to adjust the market
capitalization of securities for free float available to foreign investors.
ISHARES MSCI EMERGING MARKETS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Emerging Markets Index. The
MSCI Emerging Markets Index is designed to measure equity market performance in
the global emerging markets. As of March 31, 2009, the MSCI Emerging Markets
Index consisted of the following 25 emerging market country indexes: Argentina,
Brazil, Chile, China, Columbia, the Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand and
Turkey. Emerging market country indexes may be added to or deleted from the
MSCI Emerging Markets Index from time to time. The iShares MSCI Emerging
Markets Index Fund, in order to improve its portfolio liquidity and its ability
to track the MSCI Emerging Markets Index, may invest up to 10% of its assets in
shares of other iShares funds that invest in securities in the MSCI Emerging
Markets Index. BGFA will not charge advisory fees on that portion of the
iShares MSCI Emerging Markets Index Fund's assets invested in shares of other
iShares funds.
ISHARES BARCLAYS 1-3 YEAR CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. 1-3 Year
Credit Bond Index. The Barclays Capital U.S. 1-3 Year Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are U.S.
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than three years.
ISHARES BARCLAYS 1-3 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 1-3 Year Treasury Bond
Index. The Barclays Capital U.S. 1-3 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to one year and less than three years.
ISHARES BARCLAYS 3-7 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 3-7 Year Treasury
Bond Index. The Barclays Capital U.S. 3-7 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to three years and less than seven years.
ISHARES BARCLAYS 7-10 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury
Bond Index. The Barclays Capital U.S. 7-10 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to seven years and less than ten
years.
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17
ISHARES BARCLAYS 10-20 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 10-20 Year Treasury
Bond Index. The Barclays Capital U.S. 10-20 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to ten years and less than 20
years.
ISHARES BARCLAYS 20+ YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 20+ Year Treasury Bond
Index. The Barclays Capital U.S. 20+ Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of 20 or more years.
ISHARES BARCLAYS AGGREGATE BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the total U.S. investment-grade bond
market as defined by the Barclays Capital U.S. Aggregate Bond Index (the
"Barclays Capital Index"). The Barclays Capital Index measures the performance
of the U.S. investment-grade bond market, which includes investment-grade U.S.
Treasury bonds, government-related bonds, investment-grade corporate bonds,
mortgage pass-through securities, commercial mortgage-backed securities and
asset-backed securities that are publicly offered for sale in the United
States. The securities in the Barclays Capital Index must have $250 million or
more of outstanding face value and must have at least one year remaining to
maturity. In addition, the securities must be denominated in U.S. dollars and
must be fixed-rate and non-convertible. Certain types of securities, such as
state and local government series bonds, structured notes with embedded swaps
or other special features, private placements, floating-rate securities and
Eurobonds are excluded from the Barclays Capital Index. The Barclays Capital
Index is market capitalization weighted and the securities in the Barclays
Capital Index are updated on the last calendar day of each month.
ISHARES BARCLAYS CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade credit sector of
the United States bond market as defined by the Barclays Capital U.S. Credit
Bond Index. The Barclays Capital U.S. Credit Bond Index measures the
performance of investment-grade corporate debt and sovereign, supranational,
local authority and non-U.S. agency bonds that are dollar-denominated and have
a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Government/Credit Bond Index. The Barclays Capital U.S.
Government/Credit Bond Index measures the performance of dollar-denominated
U.S. Treasuries, government-related (I.E., U.S. and foreign agencies,
sovereign, supranational and local authority debt), and investment-grade credit
securities that have a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS INTERMEDIATE CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. Intermediate
Credit Bond Index. The Barclays Capital U.S. Intermediate Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than ten years.
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18 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES BARCLAYS INTERMEDIATE GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Intermediate Government/Credit Bond Index. The Barclays
Capital U.S. Intermediate Government/Credit Bond Index measures the performance
of dollar-denominated U.S. Treasuries, government-related (I.E., U.S. and
foreign agencies, sovereign, supranational and local authority debt), and
investment-grade credit securities that have a remaining maturity of greater
than or equal to one year and less than ten years.
ISHARES BARCLAYS MBS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade agency
mortgage-backed securities sector of the U.S. as defined by the Barclays
Capital U.S. MBS Index. The Barclays Capital U.S. MBS Index measures the
performance of investment-grade mortgage-backed pass-through securities of the
Government National Mortgage Association, Fannie Mae and the Federal Home Loan
Mortgage Corporation.
ISHARES BARCLAYS SHORT TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. Short Treasury Bond
Index. The Barclays Capital U.S. Short Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of between one and 12 months.
ISHARES BARCLAYS TIPS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the inflation-protected sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. Treasury Inflation
Protected Securities (TIPS) Index (Series-L). The Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L) measures the
performance of the inflation-protected public obligations of the U.S. Treasury,
commonly known as "TIPS."
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*Effective December 8, 2008, the names of the funds changed from the iShares
Lehman 1-3 Year Credit Bond Fund, iShares Lehman 1-3 Year Treasury Bond
Fund, iShares Lehman 3-7 Year Treasury Bond Fund, iShares Lehman 7-10 Year
Treasury Bond Fund, iShares Lehman 10-20 Year Treasury Bond Fund, iShares
Lehman 20+ Year Treasury Bond Fund, iShares Lehman Aggregate Bond Fund,
iShares Lehman Credit Bond Fund, iShares Lehman Government/Credit Bond
Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman
Intermediate Government/Credit Bond Fund, iShares Lehman MBS Bond Fund,
iShares Lehman Short Treasury Bond Fund and iShares Lehman TIPS Bond Fund
to the iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3
Year Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund,
iShares Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year
Treasury Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares
Barclays Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares
Barclays Government/Credit Bond Fund, iShares Barclays Intermediate Credit
Bond Fund, iShares Barclays Intermediate Government/Credit Bond Fund,
iShares Barclays MBS Bond Fund, iShares Barclays Short Treasury Bond Fund
and iShares Barclays TIPS Bond Fund, respectively, to reflect changes in
the names of the funds' corresponding underlying indexes from Lehman
Brothers 1-3 Year U.S. Credit Index, Lehman Brothers 1-3 Year U.S.
Treasury Index, Lehman Brothers 3-7 Year U.S. Treasury Index, Lehman
Brothers 7-10 Year U.S. Treasury Index, Lehman Brothers 10-20 Year U.S.
Treasury Index, Lehman Brothers 20+ Year U.S. Treasury Index, Lehman
Brothers U.S. Aggregate Index, Lehman Brothers U.S. Credit Index, Lehman
Brothers U.S. Government/Credit Index, Lehman Brothers Intermediate U.S.
Credit Index, Lehman Brothers Intermediate U.S. Government/
Credit Index, Lehman Brothers U.S. MBS Index, Lehman Brothers Short U.S.
Treasury Index and Lehman Brothers U.S. Treasury TIPS Index to Barclays
Capital U.S. 1-3 Year Credit Bond Index, Barclays Capital U.S. 1-3 Year
Treasury Bond Index, Barclays Capital U.S. 3-7 Year Treasury Bond Index,
Barclays Capital U.S. 7-10 Year Treasury Bond Index, Barclays Capital U.S.
10-20 Year Treasury Bond Index, Barclays Capital U.S. 20+ Year Treasury
Bond Index, Barclays Capital U.S. Aggregate Bond Index, Barclays Capital
U.S. Credit Bond Index, Barclays Capital U.S. Government/Credit Bond Index,
Barclays Capital U.S. Intermediate Credit Bond Index, Barclays Capital U.S.
Intermediate Government/Credit Bond Index, Barclays Capital U.S. MBS Index,
Barclays Capital U.S. Short Treasury Bond Index and Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L),
respectively.
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19
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the JPMorgan EMBI Global Core Index.
The JPMorgan EMBI Global Core Index is a broad, diverse U.S. dollar-denominated
emerging markets debt benchmark which tracks the total return of actively
traded external debt instruments in emerging market countries.
ISHARES IBOXX $ HIGH YIELD CORPORATE BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. dollar high yield corporate
bond market as defined by the iBoxx(Reg. TM) $ Liquid High Yield Index. The
iBoxx(Reg. TM) $ Liquid High Yield Index is a rules-based index consisting of
the most liquid U.S. dollar-denominated, high yield corporate bonds for sale in
the United States, as determined by the International Index Company Limited
("IIC"). The iBoxx(Reg. TM) $ Liquid High Yield Index is designed to provide a
balanced representation of the U.S. dollar-denominated high yield corporate
bond market through some of the most liquid high yield corporate bonds
available. The number of issues in the iBoxx(Reg. TM) $ Liquid High Yield Index
is typically 50, although this may change from time to time.
The following table lists the Underlying Funds and the asset allocation for
each Master Portfolio as of March 31, 2009. BGFA allocates each Master
Portfolio's assets among the Underlying Funds based on the Master Portfolio's
investment objective and policies. The asset allocation for each Master
Portfolio will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time:
UNDERLYING FUNDS
(as of March 31, 2009)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
CAPITAL GROWTH
Master Investment 19.08% 20.63% 31.27% 38.76% 44.87% 45.73%
Portfolio-Active Stock
Master
Portfolio
iShares S&P MidCap 400 4.67% 4.87% 5.90% 6.79% 7.46% 10.81%
Index Fund
iShares S&P SmallCap 600 2.34% 2.42% 2.87% 3.26% 3.65% 5.34%
Index Fund
iShares MSCI EAFE Index 7.70% 8.36% 12.41% 15.12% 17.39% 20.34%
Fund
iShares Cohen & Steers 0.49% 0.58% 1.38% 1.94% 2.39% 1.76%
Realty Majors Index
Fund
iShares FTSE EPRA/NAREIT 1.01% 1.31% 2.77% 3.76% 4.65% 3.72%
Developed Real
Estate ex-U.S. Index
Fund
iShares MSCI Emerging 2.32% 2.55% 3.71% 4.56% 5.26% 6.01%
Markets Index Fund
iShares MSCI Canada 0.77% 0.85% 1.25% 1.57% 1.87% 2.10%
Index Fund
iShares MSCI EAFE Small 0.85% 0.93% 1.38% 1.76% 1.94% 2.27%
Cap Index Fund
CAPITAL GROWTH AND INCOME
Master Investment 51.29% 48.48% 31.36% 19.06% 8.95% 0.89%
Portfolio-CoreAlpha
Bond
Master Portfolio
iShares Barclays TIPS 9.11% 8.80% 5.40% 3.14% 1.21% N/A
Bond Fund
INCOME
BGIF Institutional Money 0.37% 0.22% 0.30% 0.28% 0.36% 1.03%
Market Fund SL Agency
Shares
- -------
Note: The allocation percentages may not add to, or may appear to exceed, 100%
due to rounding.
"Standard & Poor's(Reg. TM)," "S&P(Reg. TM)," "S&P 500(Reg. TM)," "Standard &
Poor's 500," "S&P 500 Index(TM)," "S&P MidCap 400 Index(TM)," "S&P SmallCap 600
Index(TM)," "S&P National Municipal Bond Index," and "the S&P North American
Natural Resources Sector Index(TM)" are trademarks of Standard & Poor's (a
division of The McGraw-Hill Companies, Inc.) licensed for use for certain
purposes by BGI. The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index
Fund, iShares S&P SmallCap 600 Index Fund, iShares S&P National Municipal Bond
Fund and iShares S&P North American Natural Resources
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20 BARCLAYS GLOBAL INVESTORS FUNDS
Sector Index Fund that are based on S&P Indexes are not sponsored, endorsed,
sold or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in iShares.
"iBoxx(Reg. TM) $ Liquid High Yield Index" is a trademark of IIC licensed for
use for certain purposes by BGI. The iShares iBoxx $ High Yield Corporate Bond
Fund is not sponsored, endorsed, sold or promoted by IIC, and IIC makes no
representation regarding the advisability of investing in iShares.
"FTSE," "EPRA," "NAREIT" and "FTSE EPRA/NAREIT Developed Real Estate ex-U.S.
Index" are marks that have been licensed for use for certain purposes by BGI.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by FTSE, the London Stock Exchange plc,
Euronext N.V., the Financial Times Limited, EPRA or NAREIT (together the "FTSE
Licensor Parties") and the FTSE Licensor Parties make no representation
regarding the advisability of investing in iShares.
"JPMorgan" and "JPMorgan EMBI Global Core Index" are trademarks of JPMorgan
Chase & Co.(Copyright) ("JPMorgan") licensed for use for certain purposes by
BGI. The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored,
endorsed, sold or promoted by JPMorgan, and JPMorgan makes no representation
regarding the advisability of investing in iShares.
"Cohen & Steers" and "Cohen & Steers Realty Majors Index" are trademarks of
Cohen & Steers Capital Management, Inc. ("Cohen & Steers") licensed for use for
certain purposes by BGI. The iShares Cohen & Steers Realty Majors Index Fund is
not sponsored, endorsed, sold or promoted by Cohen & Steers, and Cohen & Steers
makes no representation regarding the advisability of investing in iShares.
"Barclays Capital," "Barclays Capital U.S. 1-3 Year Credit Bond Index,"
"Barclays Capital U.S. 1-3 Year Treasury Bond Index," "Barclays Capital U.S.
3-7 Year Treasury Bond Index," "Barclays Capital U.S. 7-10 Year Treasury Bond
Index," "Barclays Capital U.S. 10-20 Year Treasury Bond Index," "Barclays
Capital U.S. 20+ Year Treasury Bond Index," "Barclays Capital U.S. Aggregate
Bond Index," "Barclays Capital U.S. Credit Bond Index," "Barclays Capital U.S.
Government/Credit Bond Index," "Barclays Capital U.S. Intermediate Credit Bond
Index," "Barclays Capital U.S. Intermediate Government/Credit Bond Index,"
"Barclays Capital U.S. MBS Index," "Barclays Capital U.S. Short Treasury Bond
Index," and the "Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L)" (collectively referred to as the "iShares Bond Fund
Indexes") are trademarks of Barclays Capital Inc. ("Barclays Capital") and have
been licensed for use for certain purposes by BGI. The iShares Barclays 1-3
Year Credit Bond Fund, iShares Barclays 1-3 Year Treasury Bond Fund, iShares
Barclays 3-7 Year Treasury Bond Fund, iShares Barclays 7-10 Year Treasury Bond
Fund, iShares Barclays 10-20 Year Treasury Bond Fund, iShares Barclays 20+ Year
Treasury Bond Fund, iShares Barclays Aggregate Bond Fund, iShares Barclays
Credit Bond Fund, iShares Barclays Government/Credit Bond Fund, iShares
Barclays Intermediate Credit Bond Fund, iShares Barclays Intermediate
Government/Credit Bond Fund, iShares Barclays MBS Bond Fund, iShares Barclays
Short Treasury Bond Fund and the iShares Barclays TIPS Bond Fund are not
sponsored or endorsed by Barclays Capital, and Barclays Capital does not make
any representations or warranties, expressed or implied, regarding the
advisability of investing in iShares. The iShares Bond Fund Indexes are
maintained by Barclays Capital, which is an affiliate of, and a separate legal
entity from, BGI and BGFA. Neither BGI nor BGFA has or will have a role in
maintaining the iShares Bond Fund Indexes.
"MSCI Canada Index/SM/," "MSCI EAFE(Reg. TM) Index" and "MSCI Emerging Markets
Index/SM/" are servicemarks and "MSCI EAFE Small Cap Index" is a trademark of
MSCI, and such marks have been licensed for use for certain purposes by BGI.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund are not
sponsored, endorsed, sold or promoted by MSCI, and MSCI makes no representation
regarding the advisability of investing in iShares.
- --------------------------------------------------------------------------------
21
A Further Discussion of Principal Risk Factors
In addition to the principal risks of investing described in the "Summary of
Principal Risk Factors" section of this Prospectus, the LifePath Portfolios
have the following risks:
GENERAL
The net asset value of each LifePath Portfolio's shares ("NAV") is neither
insured nor guaranteed, is not fixed and will fluctuate.
GENERAL RISKS APPLICABLE TO THE LIFEPATH PORTFOLIOS
EQUITY SECURITIES MARKET RISKS
The risks of investing in the equity securities market include both short-term
and prolonged price declines. The value of an equity security may decline in
value due to factors affecting equity securities markets generally or
particular industries represented in the markets. Equity securities may
underperform fixed-income investments and securities market indexes that track
other markets, segments and sectors. Equity securities of mid- to small-cap
companies tend to present greater risks than equity securities of large-cap
companies because they are generally more volatile and can be less liquid.
BOND INVESTMENT RISKS
The risks of fixed-income investing include short-term and prolonged price
declines because of a rise in interest rates, issuer quality considerations and
other economic considerations; however, such price declines in the bond market
have historically been less severe than stock declines.
CREDIT RISK
Credit risk is the risk that issuers or guarantors of debt instruments or the
counterparty to a derivatives contract, repurchase agreement or loan of
portfolio securities is unable or unwilling to make timely interest and/or
principal payments or to otherwise honor its obligations. There is the chance
that any of an Underlying Fund's holdings will have their credit ratings
downgraded or will default (fail to make scheduled interest or principal
payments), potentially reducing an Underlying Fund's income level and share
price. Debt instruments are subject to varying degrees of credit risk, which
may be reflected in credit ratings. Securities issued by the U.S. government
have limited credit risk. However, securities issued by U.S. government
agencies (such as U.S. agency mortgage pass-through securities) are not
necessarily backed by the full faith and credit of the U.S. government.
INTEREST RATE RISK
Interest rate risk is the risk that bond prices will decline over short or even
long periods due to rising market interest rates. All bonds, including those
issued by the U.S. government and its agencies, are subject to interest rate
risk. Their prices tend to move in the opposite direction from market interest
rate movements. When interest rates go up, bond prices tend to fall; when rates
fall, prices tend to rise. Bonds with longer maturities are affected more by
interest rate movements than bonds with shorter maturities, bonds with interest
rate reset provisions, notes or money market instruments. If prices throughout
the economy were to decline over time, resulting in "deflation," the principal
and income of inflation-protected bonds held by an Underlying Fund would likely
decline in price, which would result in losses for the Underlying Fund.
Mortgage-backed securities represent interests in or instruments backed by a
pool of loans secured by mortgages and asset-backed securities represent
interests in or instruments backed by a pool of loans secured by other assets.
Mortgage-backed securities and asset-backed securities are also subject to
prepayment risk and extension risk. Prepayment risk is the risk that during
periods of falling interest rates, an issuer of mortgages and other securities
may be able to repay principal prior to the security's maturity, causing the
Underlying Fund to have to
- --------------------------------------------------------------------------------
22 BARCLAYS GLOBAL INVESTORS FUNDS
reinvest in securities with a lower yield. Extension risk is the risk that when
interest rates rise, certain mortgage-backed securities will be paid off
substantially more slowly than originally anticipated and the value of those
securities may fall sharply. Both prepayment risk and extension risk may result
in a decline to the Underlying Funds' income.
HIGH YIELD SECURITIES RISK
High yield securities risk is the risk that securities that are rated below
investment-grade (commonly referred to as "junk bonds," include those bonds
rated lower than "BBB-" by S&P, a division of The McGraw-Hill Companies, Inc.
and Fitch Rating Service Inc. or "Baa3" by Moody's(Reg. TM) Investor's
Services, Inc.) or are unrated but judged by an Underlying Fund to be of
comparable quality, at the time of purchase, may be more volatile than
higher-rated securities of similar maturity.
High yield securities may also be subject to greater levels of credit or
default risk than higher-rated securities. The value of high yield securities
can be adversely affected by overall economic conditions, such as an economic
downturn or a period of rising interest rates, and high yield securities may be
less liquid and more difficult to sell at an advantageous time or price or to
value than higher-rated securities.
NON-U.S. SECURITIES RISKS
Investments in the securities of non-U.S. issuers are subject to all the risks
of investing in the market of such issuers, including market fluctuations
caused by factors such as economic and political developments, changes in
interest rates and abrupt changes in stock prices. As a result of Underlying
Funds' investing in non-U.S. securities, the Fund may be subject to the risks
listed below. These risks may decrease the value of your investment:
[] Lower levels of liquidity and market efficiency;
[] Greater securities price volatility;
[] Exchange rate fluctuations and exchange controls;
[] Less availability of public information about issuers;
[] Imposition of withholding or other taxes;
[] Imposition of restrictions on the expatriation of funds or other assets of
the Underlying Fund;
[] Higher transaction and custody costs and delays in settlement procedures;
[] Difficulties in enforcing contractual obligations;
[] Substantial government involvement in the economy;
[] Higher rates of inflation;
[] Greater social, economic and political uncertainty, the risk of
nationalization or expropriation of assets and risk of war;
[] Lower levels of regulation of the securities markets;
[] Different accounting, disclosure and reporting requirements; and
[] Legal principles relating to corporate governance, director's fiduciary
duties and liabilities and stockholder's rights in markets in which the
Underlying Funds invest may differ and/or may not be as extensive or
protective as those that apply in the United States.
Investments in non-U.S. securities may be made by an Underlying Fund directly
or through investments in American Depositary Receipts ("ADRs") and other
similar investments. ADRs are receipts for shares of non-U.S. stocks held on
deposit in U.S. banks or banks of major European countries. The receipts trade
on the U.S. or local European stock markets as would normal stocks, entitling
their owners to the dividends and capital gains earned by the real shares
stored in bank vaults. ADRs reduce some of the risks of foreign investing
because a large, liquid market generally exists
- --------------------------------------------------------------------------------
23
and U.S. trading and settlement practices reduce currency, custodial and other
operational risks. Similar investments (European and Global Depositary
Receipts) are receipts for stock deposited in non-U.S. bank and trust
companies, trade across foreign and domestic markets, and can involve different
or greater risks than ADRs.
EMERGING MARKETS RISK
Some foreign markets are considered to be emerging markets. Investment in these
emerging markets is subject to a greater risk of loss than investments in a
developed market. This is due to, among other things, greater market
volatility, lower trading volume, political and economic instability, greater
risk of market shut down and more governmental limitations on foreign
investment policy than those typically found in a developed market.
MODEL RISK
Although the quantitative model used to manage the Master Portfolios' assets
has been developed and refined over many years, neither the Master Portfolios
nor BGFA can offer any assurance that the recommended allocation will either
maximize returns or minimize risks, nor can the Master Portfolios or BGFA offer
assurance that a recommended allocation will be the appropriate allocation in
all circumstances for every investor with a particular time horizon.
REAL ESTATE INVESTMENT RISK
Investment in equity securities in the real estate sector is subject to many of
the same risks associated with the direct ownership of real estate, such as
adverse changes in national, state or local real estate conditions (resulting
from, for example, oversupply of or reduced demand for space and changes in
market rental rates); obsolescence of properties; changes in the availability,
cost and terms of mortgage funds; and the impact of tax, environmental, and
other laws.
DERIVATIVES
Derivatives include, among other instruments, futures contracts, options on
futures contracts, other types of options that may be exchange-traded or traded
over-the-counter, indexed and inverse floating-rate securities, and swap
agreements. Derivatives are financial instruments whose values are derived, at
least in part, from the prices of other securities or specified assets, indexes
or rates. Some derivatives may be more sensitive than direct securities to
changes in interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
PASSIVE INVESTMENT RISK
Because BGFA does not select individual companies in the underlying indexes for
the Underlying iShares Funds, those Underlying iShares Funds may hold stocks in
companies that present risks that an investment adviser researching individual
stocks might seek to avoid.
SECURITY SELECTION RISK
For each of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio,
BGFA bases security selection on its analysis of securities and therefore each
of these Master Portfolios is subject to the risk that poor security selection
will result in underperformance of the Master Portfolio in comparison with
other investment vehicles with similar investment objectives and strategies.
SECURITIES LENDING RISK
The LifePath Portfolios may also lend portfolio securities to borrowers that
provide collateral at least equal to the current market value of the securities
loaned, plus accrued interest or dividends. BGI acts as securities lending
agent for, and is compensated by, the LifePath Portfolios. Securities lending
collateral is generally reinvested in a joint account or money market funds,
including those advised by BGFA. Risks related to securities lending include
operational, credit, legal, counterparty and market risk, as well as investment
risks related to the collateral and risk of loss if the collateral is
liquidated.
- --------------------------------------------------------------------------------
24 BARCLAYS GLOBAL INVESTORS FUNDS
CONCENTRATION RISK
To the extent that an underlying index of an Underlying iShares Fund is
concentrated in the securities of companies, a particular market industry,
group of industries, sector or asset class countries, regions or groups of
countries, that Underlying iShares Fund may be adversely affected by the
performance of those securities, may be subject to increased price volatility
and may be more susceptible to adverse economic, market, political or
regulatory occurrences affecting that market, industry, group of industries,
sector or asset class country, region or group of countries.
MARKET TRADING RISKS
The Underlying iShares Funds are subject to certain additional risks due to
their shares being listed and traded on securities exchanges. There can be no
assurance that an active trading market for these particular ETFs will develop
or be maintained. Trading in ETFs may be halted because of market conditions or
for reasons that, in the view of the listing exchange, make trading in ETFs
inadvisable. In addition, trading in ETFs is subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules. There can
be no assurance that the requirements necessary to maintain the listing of ETFs
will continue to be met or will remain unchanged. An ETF may trade at, above or
below its NAV. The NAV of an ETF will fluctuate with changes in the market
value of its holdings. The trading price of an ETF will generally fluctuate in
accordance with changes in its NAV, as well as market supply and demand.
TRACKING ERROR RISK
Imperfect correlation between an Underlying iShares Fund's securities and those
in its underlying index, rounding of prices, changes to the underlying index
and regulatory requirements, may cause "tracking error," which is measured as
the divergence of the Underlying iShares Fund's performance from that of its
underlying index. Tracking error also may result because an Underlying iShares
Fund incurs fees and expenses while its underlying index does not incur the
same expenses.
FOR A DESCRIPTION OF THE LIFEPATH PORTFOLIOS' POLICIES AND PROCEDURES WITH
RESPECT TO DISCLOSURE OF THEIR MASTER PORTFOLIOS' PORTFOLIO HOLDINGS, AND A
FURTHER DISCUSSION OF THE LIFEPATH PORTFOLIOS' INVESTMENTS AND RISKS, PLEASE
REFER TO THE LIFEPATH PORTFOLIOS' SAI.
- --------------------------------------------------------------------------------
25
Management of the LifePath Portfolios
INVESTMENT ADVISER
Each LifePath Portfolio is a feeder fund that invests all of its assets in a
Master Portfolio that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. The Master Portfolios, in
turn, invest in a combination of the Underlying Funds. BGFA, a registered
investment adviser, serves as investment adviser to each Master Portfolio, and
also serves as investment adviser to each Underlying Fund, with the exception
of the Underlying Money Market Fund, which invests in a Master Portfolio
advised by BGFA. BGFA manages the investing of the Master Portfolios' assets
and provides the Master Portfolios with investment guidance and policy
direction in connection with daily portfolio management, subject to the
supervision of the Master Portfolios' Board of Trustees. For its services to
the Master Portfolios, BGFA is entitled to receive an annual advisory fee of
0.35% of each Master Portfolio's average daily net assets.
For its services to the Underlying Funds, BGFA receives fees that differ from
the fees described for the LifePath Portfolios in this Prospectus. BGFA
provides investment advisory services for the Underlying Funds that differ from
the investment advisory services it provides for the Master Portfolios. For
those services, BGFA receives investment advisory fees from the Underlying
Funds. In addition, BGI provides administration services to certain of the
Underlying Funds and, for those services, may receive administration fees from
those Underlying Funds. BGFA has contractually agreed to waive its management
fees at the Master Portfolio level in an amount equal to advisory and
administration fees, if any, paid by the Underlying Funds to BGFA and BGI,
respectively, through April 30, 2011.
BGFA is located at 400 Howard Street, San Francisco, CA 94105. It is a
wholly-owned subsidiary of BGI, which in turn is a majority-owned subsidiary of
Barclays Bank PLC. As of February 28, 2009, BGI and its affiliates, including
BGFA, provided investment advisory services for assets in excess of $1.36
trillion. BGI, BGFA, Barclays Global Investors Services, Barclays Bank PLC and
their affiliates deal, trade and invest for their own accounts in the types of
securities in which the Master Portfolios invest.
A discussion regarding the basis for the Master Portfolios' Board of Trustees'
approval of the investment advisory agreements with BGFA is available in each
LifePath Portfolio's semi-annual report for the six-month period ending June
30.
PORTFOLIO MANAGERS
Dagmar Nikles, Leslie Gambon and Dale Hogan (the "Portfolio Managers") are
primarily responsible for the day-to-day management of the Master Portfolios
and act collaboratively on all aspects concerning the Master Portfolios. Each
Portfolio Manager is responsible for various functions related to portfolio
management, including, but not limited to, investing cash inflows, coordinating
with members of their team to focus on certain asset classes, implementing
investment strategy, researching and reviewing investment strategy, and
overseeing members of his or her portfolio management team with more limited
responsibilities.
Ms. Nikles is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since June 2005. Ms. Nikles has been a member of the asset
allocation portfolio management team since July 2003. From September 2002 to
June 2003, Ms. Nikles was pursuing her Financial Risk Manager certification.
Ms. Gambon is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since May 2007. Ms. Gambon has been a member of the asset allocation
portfolio management team since April 2007. Prior to becoming a member of the
asset allocation portfolio
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26 BARCLAYS GLOBAL INVESTORS FUNDS
management team, Ms. Gambon was an Active Equity Product Manager with BGI from
2001 to 2004 and in October 2004 became Head of Defined Contribution Portfolio
Management at BGI.
Mr. Hogan is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since October 2008. Mr. Hogan has been a member of the asset
allocation portfolio management team since May 2007. Prior to becoming a
Portfolio Manager, Mr. Hogan was a derivatives trader with Credit Suisse from
2004 to 2006. From April 2002 through April 2004, Mr. Hogan was a currency
trader at BGI.
The LifePath Portfolios' SAI provides additional information about the
Portfolio Managers' compensation, other accounts managed by the Portfolio
Managers, and the Portfolio Managers' ownership of shares in the LifePath
Portfolios that invest in the Master Portfolios for which they are Portfolio
Managers.
ADMINISTRATIVE SERVICES
BGI provides the following services, among others, as the LifePath Portfolios'
administrator:
[] Supervise the LifePath Portfolios' administrative operations;
[] Provide or cause to be provided management reporting and treasury
administration services;
[] Financial reporting;
[] Legal, blue sky and tax services;
[] Preparation of proxy statements and shareholder reports; and
[] Engaging and supervising shareholder servicing agents (the "Shareholder
Servicing Agents") on behalf of the LifePath Portfolios.
BGI is entitled to receive fees for these services at the annual rate of 0.50%
of the average daily net assets of the Class I Shares of each LifePath
Portfolio. In addition to performing these services, BGI has agreed to bear all
costs of operating the LifePath Portfolios, other than brokerage expenses,
advisory fees, distribution fees, certain fees and expenses related to the
LifePath Portfolios' Independent Trustees and their counsel, auditing fees,
litigation expenses, taxes or other extraordinary expenses.
The Shareholder Servicing Agents service individual and omnibus LifePath
Portfolio accounts pursuant to agreements with the LifePath Portfolios and/or
BGI. In addition to serving as agents of the LifePath Portfolios for purposes
of accepting orders for purchases and redemptions of LifePath Portfolio shares,
Shareholder Servicing Agents may provide administrative support and account
services such as processing purchases and redemptions of shares on behalf of
individual and omnibus LifePath Portfolio accounts, answering shareholder
inquiries, keeping records, transmitting reports and communications from the
LifePath Portfolios, and providing reports on the status of individual and
omnibus accounts. Shareholder Servicing Agents may provide these services, in
whole or in part, by operating electronic transaction systems or websites
through which shareholders may obtain information or engage in purchase or
redemption transactions of LifePath Portfolio shares. By operating these
systems or providing other services described above, the Shareholder Servicing
Agents make the LifePath Portfolios available to their clients.
BGI pays shareholder servicing fees to certain Shareholder Servicing Agents in
amounts not exceeding the maximum fee rates approved by the LifePath
Portfolios' Board of Trustees for those services that the Shareholder Servicing
Agents perform for their clients that would otherwise be performed by BGI or
the LifePath Portfolios' other service providers. In addition, BGFA and/or BGI
pay additional amounts to certain Shareholder Servicing Agents for more
services or to other intermediaries that perform services in connection with a
LifePath Portfolio's shares. These amounts, which may be significant, are paid
by BGFA and/or BGI from their own resources, which generally come directly or
indirectly from fees paid by funds advised by BGFA or administered by BGI. The
LifePath Portfolios' distributor may also pay certain Shareholder Servicing
Agents or intermediaries for such services from its own resources, which
generally come directly or indirectly from fees paid by BGI.
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27
A Shareholder Servicing Agent may make decisions about which investment options
it will service and make available to its clients based on the payments the
Shareholder Servicing Agent may be eligible to receive for its services.
Therefore, payments to a Shareholder Servicing Agent may create potential
conflicts of interest between the Shareholder Servicing Agent and its clients
where the Shareholder Servicing Agent determines which investment options it
will make available to those clients. Additional information regarding the
LifePath Portfolios' shareholder servicing arrangements can be found in the
LifePath Portfolios' SAI, which is available upon request.
Shareholder Information
WHO IS ELIGIBLE TO INVEST
To be eligible to purchase LifePath Portfolio Class I Shares, you must:
[] Invest through an employer-sponsored or individual retirement savings plan;
[] Invest the proceeds rolled over from such retirement savings plan into an
IRA;
[] Maintain an account with State Street Bank and Trust Company ("State
Street"), the LifePath Portfolios' custodian, transfer agent and dividend
disbursing agent, or with one of the LifePath Portfolios' Shareholder
Servicing Agents; or
[] Initially invest a minimum of $1 million directly through State Street (in
certain situations this minimum initial investment may be reduced or waived;
please contact your Shareholder Servicing Agent or State Street for more
information).
The LifePath Portfolios offer other classes of shares (Class R Shares and Class
S Shares) with different features and expense levels, which you may be eligible
to buy. Please see the LifePath Portfolios' Class R Shares and Class S Shares
prospectuses for more information.
In order to invest, a completed account application form must be submitted to,
and processed by, your Shareholder Servicing Agent or State Street and an
account number assigned. You may be asked to provide information to verify your
identity when opening an account.
Your Shareholder Servicing Agent may charge you a fee and may offer additional
account services. Additionally, your Shareholder Servicing Agent may have
procedures for placing orders for Class I Shares that differ from those of the
LifePath Portfolios, such as different investment minimums or earlier trading
deadlines. Please contact your Shareholder Servicing Agent directly for more
information and details.
HOW TO BUY SHARES
[] PLAN PARTICIPANT. Invest through payroll deductions or make a direct
contribution by rolling over an amount from another 401(k) plan or from a
rollover IRA (make arrangements through your employer). If you are investing
through a Shareholder Servicing Agent, your Shareholder Servicing Agent is
responsible for properly transmitting your purchase order to State Street and
may impose an earlier deadline than the LifePath Portfolios, as described
below.
[] TAX-DEFERRED INVESTOR. Invest through a Shareholder Servicing Agent as
provided in your benefit plan documents. Your Shareholder Servicing Agent,
plan sponsor or administrator is responsible for properly transmitting your
purchase order to State Street and may impose an earlier deadline for purchase
and redemption orders than the LifePath Portfolios, as described below.
[] QUALIFIED BUYER. Invest through an account set up with State Street or your
Shareholder Servicing Agent. Your Shareholder Servicing Agent is responsible
for properly transmitting your purchase order to State Street and may impose
an earlier deadline than the LifePath Portfolios, as described below.
- --------------------------------------------------------------------------------
28 BARCLAYS GLOBAL INVESTORS FUNDS
[] DIRECT BUYER. See the "Special Instructions for Direct Buyers" section of
this Prospectus.
You may buy LifePath Portfolio shares without paying a sales charge. Your
purchase order must be received in proper form, as determined by State Street
or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time) (or if regular trading on the NYSE closes early, at such closing
time) on any day the LifePath Portfolios are open (a "Business Day") to
purchase shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day. The LifePath
Portfolios are generally open Monday through Friday and are generally closed on
weekends and any day on which the NYSE is closed.
Each LifePath Portfolio reserves the right to suspend or discontinue the offer
and sale of its shares and reject or cancel any purchase order for any reason.
Purchases generally must be made in U.S. dollars. You may be charged for any
costs incurred in connection with a purchase order that has been placed but for
which the LifePath Portfolio has not received full payment.
HOW TO SELL SHARES
[] PLAN PARTICIPANT AND TAX-DEFERRED INVESTOR. Contact your plan sponsor,
administrator or Shareholder Servicing Agent. Your Shareholder Servicing Agent
is responsible for properly transmitting your sale order to State Street.
[] QUALIFIED BUYER. Contact your Shareholder Servicing Agent. Your Shareholder
Servicing Agent is responsible for properly transmitting your sale order to
State Street.
[] DIRECT BUYER. See the "Special Instructions for Direct Buyers" section of
this Prospectus.
You may sell LifePath Portfolio shares without paying a sales charge. Your
order to sell shares must be received in proper form, as determined by State
Street or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the NYSE (generally 4:00 p.m. Eastern Time) (or if regular
trading on the NYSE closes early, at such closing time) on any Business Day to
sell shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day.
The LifePath Portfolios generally remit the proceeds from a sale the next
Business Day after receiving a properly executed order to sell and no longer
than seven days after the sale. Each LifePath Portfolio reserves the right to
suspend your right of redemption and to delay delivery of your redemption
proceeds up to seven days, as permitted under applicable law. Each LifePath
Portfolio further reserves the right to automatically redeem your shares and
close your account for any reason, subject to applicable law, and send you the
proceeds, which would reflect the NAV on the day the LifePath Portfolio
automatically redeems your shares. For example, a LifePath Portfolio may
automatically redeem your shares to reimburse the LifePath Portfolio for any
losses sustained by reason of your failure to make full payment for shares
purchased or to collect any charge relating to a transaction effected for your
benefit that is applicable to the LifePath Portfolio's shares as provided from
time to time in this Prospectus.
In addition, each LifePath Portfolio reserves the right to send your redemption
proceeds in the form of securities from its Master Portfolio.
Upon redemption, the identity of the holder of the account to which the
proceeds are being sent may need to be verified.
SPECIAL INSTRUCTIONS FOR DIRECT BUYERS
A direct buyer who has established an account with a LifePath Portfolio can add
to or redeem from that account by phone or through the mail.
[] To add or redeem shares by phone, call 1-888-204-3956 between 8:30 a.m. and
5:00 p.m. Eastern Time on any Business Day. State Street will employ
procedures designed to confirm that your order is valid. These may include
- --------------------------------------------------------------------------------
29
asking for identifying information and recording the phone call. Neither State
Street nor the LifePath Portfolios may be held liable for acting on telephone
instructions that State Street reasonably believes to be valid. For
redemptions, State Street will wire proceeds directly to your designated bank
account./1/
[] To invest by mail, make your check payable to the LifePath Portfolio of your
choice and mail it to State Street Bank and Trust Company, P.O. Box 642,
Boston, MA 02117-0642. Please include the LifePath Portfolio's Share Class
number and your account number on your check. You will find the numbers on
your monthly statements.
For purchases, you should instruct your bank to wire funds as follows:
State Street Bank and Trust Company
ABA # 011000028
Attn: Transfer Agent
Account # DDA 00330860
For Further Credit to: Barclays Global Investors Funds
Shareholder Account Name:
Shareholder Account Number:
LifePath Portfolio Share Class Numbers:
1002 (LifePath Retirement Portfolio - Class I)
1012 (LifePath 2010 Portfolio - Class I)
1022 (LifePath 2020 Portfolio - Class I)
1032 (LifePath 2030 Portfolio - Class I)
1042 (LifePath 2040 Portfolio - Class I)
1051 (LifePath 2050 Portfolio - Class I)
[] To redeem shares by mail, indicate the dollar amount you wish to receive or
the number of shares you wish to sell in your order to sell. Include your
LifePath Portfolio's Share Class number and your account and taxpayer
identification numbers. All account signatories must sign the order.
[] A direct buyer can ask State Street to wire proceeds directly to its
designated bank account./2/
[] When a direct buyer purchases LifePath Portfolio shares and then quickly
sells (E.G., sells before clearance of the purchase check), the LifePath
Portfolio may delay the payment of proceeds up to ten days to ensure that
purchase checks have cleared.
- -------
(1)The following procedures are intended to help prevent fraud. If you wish
to make a change to your list of authorized traders, you must provide a
written request signed by an authorized signer on your account. If you
wish to change your bank wire instructions or list of authorized signers,
you must make your request in writing and include a medallion signature
guarantee or provide a corporate resolution of a recent date or other
documentation as determined by the Fund's transfer agent. You can obtain a
medallion signature guarantee from most banks and securities dealers. A
medallion signature guarantee is not a notarized signature.
(2)To help prevent fraud, if you direct the sale proceeds to someone other
than your account's owner of record, to an address other than your
account's address of record or to a bank not designated previously, you
must make your request in writing and include a medallion signature
guarantee or provide a corporate resolution of a recent date or other
documentation as determined by the Fund's transfer agent. You can obtain a
medallion signature guarantee from most banks and securities dealers. A
medallion signature guarantee is not a notarized signature.
CALCULATING THE LIFEPATH PORTFOLIOS' SHARE PRICE
Each LifePath Portfolio's share price (also known as a LifePath Portfolio's
NAV) is calculated by dividing the value of the net assets of the LifePath
Portfolio (I.E., the value of its total assets less total liabilities) by the
total number of outstanding shares of the LifePath Portfolio, generally rounded
to the nearest cent.
Each LifePath Portfolio's NAV is calculated at the close of regular trading on
the NYSE (generally, 4:00 p.m. Eastern Time) on any Business Day. If regular
trading on the NYSE closes early, the time for calculating each LifePath
Portfolio's NAV and the deadline for share transactions will be accelerated to
the earlier closing time. The NAV of each LifePath Portfolio is calculated
based on the net asset value of the Master Portfolio in which the LifePath
Portfolio invests. The LifePath Portfolios' SAI includes a description of the
methods for valuing the Master Portfolios' investments, including a
- --------------------------------------------------------------------------------
30 BARCLAYS GLOBAL INVESTORS FUNDS
description of the circumstances in which the Master Portfolios' investments
would be valued using fair value pricing and the effects of using fair value
pricing.
LIFEPATH PORTFOLIO DISTRIBUTIONS
The LifePath Portfolios distribute their net investment income to shareholders
quarterly. The LifePath Portfolios distribute their net realized capital gains,
if any, to shareholders at least annually. Distributions payable to you will be
automatically reinvested in additional Class I Shares of your LifePath
Portfolio, unless you have elected to receive distribution payments in cash.
FREQUENT TRADING IN LIFEPATH PORTFOLIO SHARES
Frequent purchases and redemptions of mutual fund shares ("frequent trading")
may have a detrimental effect on a fund and its shareholders. Depending on
various factors, such as the size of the fund's investment portfolio and the
amount of assets maintained in cash, frequent trading may harm the performance
of the fund by interfering with the implementation of its investment strategies
and/or increasing transaction costs and taxes, and/or may dilute the value of
fund shares held by long-term investors. Frequent trading may include activity
that appears to attempt to take advantage of a potential arbitrage opportunity
presented by a lag between a change in the value of a fund's investment
portfolio securities after the close of the primary markets for those portfolio
securities and the reflection of that change in the fund's net asset value
("market timing").
Each LifePath Portfolio invests only in interests of its Master Portfolio, and
the Boards of Trustees of the Master Portfolios and the LifePath Portfolios
have each considered the issues of frequent trading and market timing.
The Master Portfolios' Board of Trustees has adopted a policy of not monitoring
for possible market timing activity because the Master Portfolios' holdings are
valued as of the same time that the net asset value of the Master Portfolios is
calculated (generally 4:00 p.m. Eastern Time), which eliminates the potential
arbitrage opportunity presented by a lag between a change in the value of the
Master Portfolios' holdings and the reflection of that change in the Master
Portfolios' respective net asset values. The Master Portfolios' Board of
Trustees has not adopted a policy of monitoring for other forms of frequent
trading because daily flows into and out of the Master Portfolios are
aggregated, and the process of aggregation is expected to reduce the potential
for frequent trading to disrupt the implementation of the Master Portfolios'
investment strategies.
The LifePath Portfolios' Board of Trustees has not adopted a policy of
monitoring for market timing or other frequent trading activity in the LifePath
Portfolios in light of the nature of the LifePath Portfolios' investment in
Master Portfolios, the policies of the Master Portfolios, as described in the
preceding paragraphs, and the historical nature of flows into and out of the
LifePath Portfolios.
BGI's ability to monitor trades that are placed by participants in plans that
are shareholders in the LifePath Portfolios or other shareholders in the
LifePath Portfolios that trade through omnibus accounts maintained by
intermediaries will be severely limited to the extent BGI does not receive
transaction information showing individual investment decisions. Upon request
by the LifePath Portfolios, intermediaries are required to provide certain
transaction information that may enable the LifePath Portfolios to identify
trading activity that is potentially harmful to the LifePath Portfolios. The
LifePath Portfolios may, but do not have the obligation to, respond to any
potentially harmful trading activity that is identified. In the event any
potentially harmful trading activity is identified, responses may include the
imposition of trading restrictions, the rejection of purchases, or such other
steps the LifePath Portfolios determine are appropriate. Intermediaries'
ability to impose restrictions on the trading practices of their clients may,
however, be affected by legal or technological limitations.
TAXES
The following discussion regarding U.S. federal income taxes is based upon laws
in effect as of the date of this Prospectus and summarizes only some of the
important U.S. federal income tax considerations affecting the LifePath
Portfolios and their U.S. shareholders. This discussion is not intended as a
substitute for careful tax planning. Please see the SAI for additional U.S.
federal income tax information.
- --------------------------------------------------------------------------------
31
Distributions from your LifePath Portfolio's net investment income and net
realized capital gains are taxable, whether you choose to receive them in cash
or automatically reinvest them in additional LifePath Portfolio shares. The
amount of taxes you owe will vary depending on your tax status and on your tax
rate and the amount and character of the LifePath Portfolio's distributions to
you. Normally, distributions are taxable to you when paid. However, when
distributions are declared in the last three months of a year and paid in
January of the next year, they are taxable as if paid on December 31 of the
prior year.
Distributions from the LifePath Portfolios generally are taxable as follows:
DISTRIBUTION TYPE TAX STATUS
- --------------------------- --------------------------------
Qualified dividend
income................... Qualified dividend income(1)(2)
Other income............... Ordinary income(2)
Short-term capital gain.... Ordinary income
Long-term capital gain..... Long-term capital gain(3)
- -------
(1) If you are an individual, your distributions attributable to the
LifePath Portfolio's qualified dividend income generally are taxable to
you at a maximum 15% U.S. federal income tax rate, as long as you meet
certain holding period and other requirements. Qualified dividend
income is, in general, dividend income received from taxable U.S. and
certain foreign corporations. Absent further legislation, the reduced
rates of tax for qualified dividend income will expire after December
31, 2010.
(2) A portion of distributions paid to corporate shareholders of the
LifePath Portfolios may qualify for the dividends-received deduction
available to corporations.
(3) An individual's net long-term capital gain currently is subject to a
reduced maximum 15% U.S. federal income tax rate. Absent further
legislation, this reduced 15% maximum tax rate on long-term capital
gain is scheduled to expire after December 31, 2010.
In addition, if you sell your LifePath Portfolio shares you generally will have
a taxable capital gain or loss in an amount equal to the difference between the
net amount of sale proceeds that you receive and your tax basis for the shares
that you sell. In certain circumstances, a loss on the sale may be disallowed:
TRANSACTION TAX STATUS
- --------------------------- --------------------------------
You sell shares owned
for more than one year .... Long-term capital gain or loss
You sell shares owned
for one year or less ...... Short-term capital gain or loss
If you buy a LifePath Portfolio's shares shortly before it makes a
distribution, you will, in effect, receive part of your purchase back in the
form of a taxable distribution. Similarly, if you buy shares of a LifePath
Portfolio that holds appreciated securities, you will, in effect, receive part
of your purchase back in a taxable distribution if and when the LifePath
Portfolio sells the appreciated securities and distributes the realized gain on
the sale. The LifePath Portfolios have built up, or have the potential to build
up, high levels of unrealized appreciation in their investments.
After the end of each year, the LifePath Portfolios will send to you a notice
that tells you how much you have received in distributions during the year and
their U.S. federal income tax status. You could also be subject to foreign,
state and local taxes on such distributions.
In certain circumstances, you may be subject to back-up withholding taxes on
distributions to you from the LifePath Portfolios if you fail to provide the
LifePath Portfolios with your correct social security number or other taxpayer
identification number, or to make required certifications, or if you have been
notified by the Internal Revenue Service that you are subject to back-up
withholding.
TAX CONSIDERATIONS FOR TAX-EXEMPT OR FOREIGN INVESTORS OR THOSE HOLDING
LIFEPATH PORTFOLIO SHARES THROUGH A TAX-DEFERRED ACCOUNT, SUCH AS A 401(K) PLAN
OR IRA, WILL BE DIFFERENT. FOR EXAMPLE, SHAREHOLDERS THAT ARE EXEMPT FROM U.S.
FEDERAL INCOME TAX, SUCH AS RETIREMENT PLANS THAT ARE QUALIFIED UNDER SECTION
401 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, GENERALLY ARE NOT SUBJECT
TO U.S. FEDERAL INCOME TAX ON LIFEPATH PORTFOLIO DIVIDENDS OR DISTRIBUTIONS OR
ON SALES OF LIFEPATH PORTFOLIO SHARES. BECAUSE EACH INVESTOR'S TAX
CIRCUMSTANCES ARE UNIQUE AND BECAUSE TAX LAWS ARE SUBJECT TO CHANGE, YOU SHOULD
CONSULT YOUR TAX ADVISOR ABOUT YOUR INVESTMENT.
- --------------------------------------------------------------------------------
32 BARCLAYS GLOBAL INVESTORS FUNDS
MASTER/FEEDER MUTUAL FUND STRUCTURE
The LifePath Portfolios do not have their own investment adviser. Instead, each
LifePath Portfolio invests all of its assets in a separate mutual fund, called
a Master Portfolio, that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. BGFA serves as investment
adviser to each Master Portfolio. The Master Portfolios may accept investments
from other feeder funds. Certain actions involving other feeder funds, such as
a substantial withdrawal, could affect the Master Portfolios and, therefore,
the LifePath Portfolios.
FEEDER FUND EXPENSES
Feeder funds, including the LifePath Portfolios, bear their respective Master
Portfolio's expenses in proportion to the amount of assets each invests in the
Master Portfolio. Each feeder fund can set its own transaction minimums,
fund-specific expenses and conditions.
FEEDER FUND RIGHTS
Under the master/feeder structure, the LifePath Portfolios' Board of Trustees
retains the right to withdraw a LifePath Portfolio's assets from its Master
Portfolio if it believes doing so is in the best interests of the LifePath
Portfolio's shareholders. If the Board of Trustees decides to withdraw a
LifePath Portfolio's assets, it would then consider whether the LifePath
Portfolio should hire its own investment adviser, invest in another master
portfolio or take other action.
FUND OF FUNDS
The Master Portfolios do not invest directly in a portfolio of securities.
Instead, they invest in the Underlying Money Market Fund and other Underlying
Funds that are also advised by BGFA. Each Master Portfolio charges for its own
direct expenses, in addition to bearing a PRO RATA share of the expenses
charged by the Underlying Funds in which it invests.
- --------------------------------------------------------------------------------
33
Financial Highlights
The financial tables in this section are intended to help investors understand
the financial performance of the Class I Shares of each LifePath Portfolio for
the past five years or, if shorter, the period of the LifePath Portfolio's
operations. Certain information reflects financial results for a single Class I
Share of each LifePath Portfolio. The total returns in the tables represent the
rate of return that an investor would have earned (or lost) on an investment in
Class I Shares of a given LifePath Portfolio, assuming reinvestment of all
distributions. The information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the LifePath Portfolios' financial statements, is
included in the LifePath Portfolios' annual report. You may obtain copies of
the annual report, at no cost, by calling 1-877-BGI-1544 (1-877-244-1544)
(toll-free) Monday through Friday from 8:30 a.m. to 6:30 p.m. Eastern Time.
LIFEPATH RETIREMENT PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, $ 11.46 $ 11.59 $ 11.22 $ 11.18 $ 11.03
------- -------- ------- ------- -------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.37 0.39 0.39 0.30 0.20
Net realized and (2.06) 0.12 0.58 0.17 0.49
------- -------- ------- ------- -------
unrealized gain (loss)
TOTAL FROM INVESTMENT (1.69) 0.51 0.97 0.47 0.69
------- -------- ------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.31) (0.37) (0.39) (0.33) (0.24)
Net realized gain (0.04) (0.27) (0.21) (0.10) (0.30)
------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.35) (0.64) (0.60) (0.43) (0.54)
------- -------- ------- ------- -------
NET ASSET VALUE, END OF $ 9.42 $ 11.46 $ 11.59 $ 11.22 $ 11.18
======= ======== ======= ======= =======
YEAR
TOTAL RETURN (15.04)% 4.50% 8.80% 4.32% 6.35%
======= ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $92,717 $136,923 $91,518 $99,349 $90,871
(000s)
Ratio of expenses to
average net
assets(a) 0.76% 0.77% 0.78% 0.81% 0.82%
Ratio of expenses to
average net assets
prior to expense 1.11% 1.12% 1.13% 1.15% 1.10%
reductions
Ratio of net investment
income to
average net assets(a) 3.29% 3.43% 3.28% 2.72% 1.92%
Portfolio turnover 11% 6% 10% 11% 138%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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34 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2010 PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, $ 13.19 $ 13.52 $ 12.92 $ 12.74 $ 12.30
-------- -------- -------- -------- --------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.40 0.43 0.41 0.31 0.20
Net realized and (2.60) 0.14 0.90 0.34 0.69
-------- -------- -------- -------- --------
unrealized gain (loss)
TOTAL FROM INVESTMENT (2.20) 0.57 1.31 0.65 0.89
-------- -------- -------- -------- --------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.35) (0.42) (0.42) (0.34) (0.24)
Net realized gain (0.15) (0.48) (0.29) (0.13) (0.21)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.50) (0.90) (0.71) (0.47) (0.45)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF $ 10.49 $ 13.19 $ 13.52 $ 12.92 $ 12.74
======== ======== ======== ======== ========
YEAR
TOTAL RETURN (17.00)% 4.18% 10.15% 5.20% 7.38%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $248,679 $391,606 $333,298 $350,226 $296,439
(000s)
Ratio of expenses to
average net
assets(a) 0.76% 0.76% 0.77% 0.80% 0.81%
Ratio of expenses to
average net assets
prior to expense 1.10% 1.10% 1.11% 1.14% 1.09%
reductions
Ratio of net investment
income to
average net assets(a) 3.15% 3.14% 2.96% 2.45% 1.78%
Portfolio turnover 12% 7% 12% 12% 130%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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35
LIFEPATH 2020 PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, $ 16.98 $ 17.48 $ 15.85 $ 15.19 $ 14.13
-------- -------- -------- -------- --------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.44 0.45 0.40 0.30 0.21
Net realized and (4.67) 0.14 1.64 0.68 1.09
-------- -------- -------- -------- --------
unrealized gain (loss)
TOTAL FROM INVESTMENT (4.23) 0.59 2.04 0.98 1.30
-------- -------- -------- -------- --------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.31) (0.44) (0.41) (0.32) (0.24)
Net realized gain (0.12) (0.65) - - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.43) (1.09) (0.41) (0.32) (0.24)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF $ 12.32 $ 16.98 $ 17.48 $ 15.85 $ 15.19
======== ======== ======== ======== ========
YEAR
TOTAL RETURN (25.42)% 3.34% 13.01% 6.54% 9.27%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $432,717 $781,519 $598,633 $578,497 $446,486
(000s)
Ratio of expenses to
average net
assets(a) 0.73% 0.74% 0.75% 0.78% 0.79%
Ratio of expenses to
average net assets
prior to expense 1.07% 1.08% 1.08% 1.12% 1.07%
reductions
Ratio of net investment
income to
average net assets(a) 2.65% 2.52% 2.37% 2.01% 1.49%
Portfolio turnover 13% 7% 16% 17% 140%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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36 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2030 PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, $ 16.19 $ 16.90 $ 15.39 $ 14.87 $ 14.13
-------- ------- -------- -------- --------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35 0.34 0.32 0.24 0.19
Net realized and (5.29) 0.11 1.99 0.88 1.32
-------- ------- -------- -------- --------
unrealized gain (loss)
TOTAL FROM INVESTMENT (4.94) 0.45 2.31 1.12 1.51
-------- ------- -------- -------- --------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.25) (0.35) (0.36) (0.26) (0.19)
Net realized gain (0.08) (0.81) (0.44) (0.34) (0.58)
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS ( 0.33) (1.16) (0.80) (0.60) (0.77)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF $ 10.92 $ 16.19 $ 16.90 $ 15.39 $ 14.87
======== ======== ======== ======== ========
YEAR
TOTAL RETURN (31.03)% 2.64% 15.12% 7.63% 10.78%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $315,028 $564,348 $408,564 $352,800 $265,166
(000s)
Ratio of expenses to
average net
assets(a) 0.72% 0.73% 0.74% 0.76% 0.78%
Ratio of expenses to
average net assets
prior to expense 1.06% 1.07% 1.08% 1.10% 1.06%
reductions
Ratio of net investment
income to
average net assets(a) 2.29% 2.10% 1.95% 1.69% 1.37%
Portfolio turnover 13% 7% 22% 24% 138%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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37
LIFEPATH 2040 PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, $ 20.32 $ 20.90 $ 18.18 $ 17.03 $ 15.47
-------- -------- -------- -------- --------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35 0.34 0.31 0.21 0.21
Net realized and (7.45) 0.08 2.76 1.18 1.55
-------- -------- -------- -------- --------
unrealized gain (loss)
TOTAL FROM INVESTMENT (7.10) 0.42 3.07 1.39 1.76
-------- -------- -------- -------- --------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.26) (0.35) (0.35) (0.24) (0.20)
Net realized gain (0.08) (0.65) - - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.34) (1.00) (0.35) (0.24) (0.20)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF $ 12.88 $ 20.32 $ 20.90 $ 18.18 $ 17.03
======== ======== ======== ======== ========
YEAR
TOTAL RETURN (35.40)% 2.03% 16.97% 8.24% 11.43%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $248,491 $383,391 $278,716 $221,359 $125,063
(000s)
Ratio of expenses to
average net
assets(a) 0.69% 0.72% 0.73% 0.76% 0.78%
Ratio of expenses to
average net assets
prior to expense 1.04% 1.06% 1.07% 1.09% 1.06%
reductions
Ratio of net investment
income to
average net assets(a) 2.02% 1.71% 1.62% 1.45% 1.15%
Portfolio turnover 14% 8% 29% 38% 147%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
- --------------------------------------------------------------------------------
38 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2050 PORTFOLIO - CLASS I SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
JUN. 30, 2008(A)
TO DEC. 31, 2008
-----------------
NET ASSET VALUE, $ 20.00
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.10
Net realized and (6.52)
----------
unrealized loss
TOTAL FROM INVESTMENT (6.42)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.09)
Net realized gain (0.00)(b)
Return of capital (0.03)
----------
TOTAL DISTRIBUTIONS (0.12)
----------
NET ASSET VALUE, END OF $ 13.46
==========
PERIOD
TOTAL RETURN (32.18)%(c)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 444
period (000s)
Ratio of expenses to 0.68%
average net
assets(d)(e)
Ratio of expenses to 12.80%
average net assets prior
to expense
reductions(e)
Ratio of net investment 2.14%
income to average net
assets(d)(e)
Portfolio turnover 0%(g)
rate(f)
- -------
(a) Commencement of operations.
(b) Rounds to less than $0.01.
(c) Not annualized.
(d) These ratios include net expenses charged to the corresponding Master
Portfolio.
(e) Annualized for periods of less than one year.
(f) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
(g) Rounds to less than 1%.
- --------------------------------------------------------------------------------
39
Disclaimers
The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index Fund, iShares S&P
Small Cap 600 Index Fund, iShares S&P National Municipal Bond Fund and the
iShares S&P North America Natural Resources Sector Index Fund are not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the owners of
shares of the iShares Trust (as used in these Disclaimers, the "Trust") or to
any member of the public regarding the advisability of investing in securities
generally or in shares of the Trust (as used in these Disclaimers, "shares") or
the ability of the Standard & Poor's Indexes to track general stock
performance. Standard & Poor's only relationship to the Trust, BGI or BGFA is
the licensing of certain trademarks, trade names and service marks of Standard
& Poor's and of the Standard & Poor's Indexes, which are determined, composed,
and calculated by Standard & Poor's without regard to the Trust, BGI or BGFA.
Standard & Poor's has no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the Standard & Poor's Indexes. Standard & Poor's is not responsible for and has
not participated in the determination of the prices and amount of shares, or
the timing of the issuance or sale of such shares or in the determination or
calculation of the equation by which shares are to be converted into cash.
Standard & Poor's has no obligation or liability in connection with the
administration of the Trust, or the marketing or trading of shares. Standard &
Poor's does not guarantee the accuracy or the completeness of the Standard &
Poor's Indexes or any data included therein and Standard & Poor's shall have no
liability for any errors, omissions, or interruptions therein. Standard &
Poor's makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares, or any other person or entity from the use of the
Standard & Poor's Indexes or any data included therein. Standard & Poor's makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Standard & Poor's Indexes or any data included therein. Without limiting any of
the foregoing, in no event shall Standard & Poor's have any liability for any
special, punitive, indirect, or consequential damages (including lost profits)
resulting from the use of the Standard & Poor's Indexes or any data included
therein, even if notified of the possibility of such damages. There are no
third party beneficiaries of any agreements between Standard & Poor's and BGI
and BGFA.
The iShares Russell Midcap Index Fund and the iShares Russell 2000 Index Fund
(the "iShares Russell Funds") are not sponsored, endorsed, sold or promoted by
Russell Investment Group. Russell Investment Group makes no representation or
warranty, express or implied, to the owners of shares or to any member of the
public regarding the advisability of investing in securities generally or in
shares or the ability of the Russell Indexes to track general stock market
performance. Russell Investment Group's only relationship to the Trust, BGI or
BGFA is the licensing of certain trademarks, service marks, and trade names of
Russell Investment Group's and of the Russell Indexes, which are determined,
composed, and calculated by Russell Investment Group without regard to the
iShares Russell Funds, BGI or BGFA. Russell Investment Group has no obligation
to take the needs of BGI, BGFA or the owners of shares into consideration in
determining, composing or calculating the Russell Indexes. Russell Investment
Group is not responsible for and has not participated in the determination of
the prices and amount of shares, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. Russell Investment Group has no obligation or
liability in connection with the administration of the Trust, or the marketing
or trading of shares. Russell Investment Group does not guarantee the accuracy
or the completeness of the Russell Indexes or any data included therein and
Russell Investment Group shall have no liability for any errors, omissions, or
interruptions therein. Russell Investment Group makes no warranty, express or
implied, as to results to be obtained by BGI, BGFA, owners of shares, or any
other person or entity from the use of the Russell Indexes or any data included
therein. Russell Investment Group makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Russell Indexes or any data
included therein. Without limiting any of the foregoing, in no event shall
Russell Investment Group have any liability for any special, punitive,
indirect, or consequential damages (including lost profits) resulting from the
use of the Russell Indexes or any data included therein, even if notified of
the possibility of such damages. There are no third party beneficiaries of any
agreements between Russell Investment Group and BGI and BGFA.
- --------------------------------------------------------------------------------
40 BARCLAYS GLOBAL INVESTORS FUNDS
The iShares Cohen & Steers Realty Majors Index Fund is not sponsored, endorsed,
sold or promoted by Cohen & Steers. Cohen & Steers makes no representation or
warranty, express or implied, to the owners of shares or any member of the
public regarding the advisability of investing in securities generally or in
the iShares Cohen & Steers Realty Majors Index Fund particularly or the ability
of the Cohen & Steers Realty Majors Index to track general stock market
performance. Cohen & Steers' only relationship to the Trust, BGI and BGFA is
the licensing of certain trademarks and trade names of Cohen & Steers and of
the Cohen & Steers Realty Majors Index, which is determined, composed and
calculated by Cohen & Steers without regard to the Trust, BGI, BGFA or the
iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers has no
obligation to take the needs of BGI, BGFA or the owners of shares into
consideration in determining, composing or calculating the Cohen & Steers
Realty Majors Index. Cohen & Steers is not responsible for and has not
participated in the determination of the prices and amount of the iShares Cohen
& Steers Realty Majors Index Fund or the timing of the issuance or sale of the
iShares Cohen & Steers Realty Majors Index Fund or in the determination or
calculation of the equation by which shares of the iShares Cohen & Steers
Realty Majors Index Fund are to be converted into cash. Cohen & Steers has no
obligation or liability in connection with the administration, marketing, or
trading of the iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers
does not guarantee the accuracy or the completeness of the Cohen & Steers
Realty Majors Index or any data included therein and Cohen & Steers shall have
no liability for any errors, omissions, or interruptions therein. Cohen &
Steers makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares of the iShares Cohen & Steers Realty Majors Index
Fund, or any other person or entity from the use of the Cohen & Steers Realty
Majors Index or any data included therein. Cohen & Steers makes no express or
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Cohen & Steers
Realty Majors Index or any data included therein. Without limiting any of the
foregoing, in no event shall Cohen & Steers have any liability for any special,
punitive, indirect, or consequential damages (including lost profits) resulting
from the use of the Cohen & Steers Realty Majors Index or any data included
therein, even if notified of the possibility of such damages.
The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored, endorsed,
sold or promoted by JPMorgan. JPMorgan makes no representation or warranty,
express or implied, to the owners of the iShares JPMorgan USD Emerging Markets
Bond Fund or any member of the public regarding the advisability of investing
in securities generally or in the iShares JPMorgan USD Emerging Markets Bond
Fund particularly or the ability of the JPMorgan EMBI Global Core Index to
track general bond market performance. JPMorgan's only relationship to the
Trust, BGI, or BGFA is the licensing of the JPMorgan EMBI Global Core Index
which is determined, composed and calculated by JPMorgan without regard to the
Trust, BGI, or BGFA or the iShares JPMorgan USD Emerging Markets Bond Fund.
JPMorgan has no obligation to take the needs of Trust, BGI, or BGFA or the
owners of the iShares JPMorgan USD Emerging Markets Bond Fund into
consideration in determining, composing or calculating the JPMorgan EMBI Global
Core Index. JPMorgan is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the iShares
JPMorgan USD Emerging Markets Bond Fund to be issued or in the determination or
calculation of the equation by which the iShares JPMorgan USD Emerging Markets
Bond Fund is to be converted into cash. JPMorgan has no obligation or liability
in connection with the administration, marketing or trading of the iShares
JPMorgan USD Emerging Markets Bond Fund. The JPMorgan EMBI Global Core Index
and the iShares JPMorgan USD Emerging Markets Bond Fund are provided "as is"
with any and all faults. JPMorgan does not guarantee the availability,
sequence, timeliness, quality, accuracy and/or the completeness of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund and/or any data included therein, or otherwise obtained by the Trust, BGI,
BGFA, owners of the iShares JPMorgan USD Emerging Markets Bond Fund, or by any
other person or entity from any use of the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund. JPMorgan makes no
express or implied warranties, and hereby expressly disclaims all warranties of
merchantability of fitness for a particular purpose or use with respect to the
JPMorgan EMBI Global Core Index or any data included therein, or otherwise
obtained by the Trust, BGI, BGFA, owners of the iShares JPMorgan USD Emerging
Markets Bond Fund or by any other person or entity from any use of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund. There are no representations or warranties which extend beyond the
description on the face of this document, if any. All warranties and
representations of any kind with regard to the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund, are disclaimed
including any implied warranties of merchantability, quality, accuracy, fitness
for a particular purpose and/or against infringement and/or warranties as to
any results to be obtained by and/or from the use of the JPMorgan EMBI Global
Core Index and/or the
- --------------------------------------------------------------------------------
41
iShares JPMorgan USD Emerging Markets Bond Fund. Without limiting any of the
foregoing, in no event shall JPMorgan have any liability for any special,
punitive, direct, indirect, or consequential damages, including lost profits,
even if notified of the possibility of such damages.
The iShares iBoxx $ High Yield Corporate Bond Fund is not sponsored, endorsed
or promoted by IIC. IIC makes no representation or warranty, express or
implied, to the owners of the iShares iBoxx $ High Yield Corporate Bond Fund or
any member of the public regarding the advisability of owning or trading in the
iShares iBoxx $ High Yield Corporate Bond Fund, investing in securities
generally, or the ability of the iBoxx $ Liquid High Yield Index to track the
appropriate bond market performance. IIC's only relationship to the Trust, BGI
or BGFA is the licensing of certain trademarks, servicemarks and trade names of
the iShares iBoxx $ High Yield Corporate Bond Fund, which is determined,
composed and calculated by IIC or its agents without regard to BGI, BGFA or the
owners of the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation to take the needs of BGI, BGFA, or the owners of the iShares iBoxx
$ High Yield Corporate Bond Fund into consideration in determining, composing
or calculating the iBoxx $ Liquid High Yield Index. IIC is not responsible for
and has not participated in the determination or timing of prices, or
quantities of shares to be listed or in the determination or calculation of the
redemption price per share, or the determination of the representative sampling
of bonds used by the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation or liability in connection with the administration, marketing or
trading of the iShares iBoxx $ High Yield Corporate Bond Fund or shares of the
Fund. IIC does not guarantee the accuracy and/or the completeness of the iBoxx
$ Liquid High Yield Index or any data included therein. IIC expressly disclaims
and shall have no liability for any errors, omissions or interruptions therein.
IIC makes no warranty, express or implied, as to the results to be obtained by
BGI and BGFA, the iShares iBoxx $ High Yield Corporate Bond Fund or owners of
the shares of the Fund, or any other person or entity, from the use of the
iBoxx $ Liquid High Yield Index or any data included therein. IIC makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
iBoxx $ Liquid High Yield Index or any data included therein. Without limiting
any of the foregoing, in no event shall IIC have any liability for any lost
profits or special, punitive, direct, indirect or consequential damages even if
notified thereof. There are no third party beneficiaries of any agreements or
arrangements between IIC and BGI and BGFA.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by the FTSE Licensor Parties. The FTSE
Licensor Parties make no representation or warranty, express or implied,
regarding the advisability of investing in securities generally or in the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund particularly or the
ability of the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index to track
general stock market performance. The FTSE Licensor Parties' only relationship
to the Trust, BGI and BGFA is the licensing of certain trademarks, trade names,
and service marks of FTSE Licensor Parties and of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index, which are determined, composed and
calculated by FTSE without regard to the Trust, BGI, and BGFA. The FTSE
Licensor Parties have no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index. The FTSE Licensor
Parties are not responsible for and have not participated in the determination
of the prices and amount of shares of the iShares FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index Fund, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. The FTSE Licensor Parties have no obligation or
liability in connection with the administration, marketing or trading of the
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund. The FTSE
Licensor Parties do not guarantee the accuracy or the completeness of the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index or any data included therein
and the FTSE Licensor Parties shall have no liability for any errors,
omissions, or interruptions therein. The FTSE Licensor Parties make no
warranty, express or implied, as to results to be obtained by BGI, BGFA, owners
of shares of the iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
Fund or any other person or entity from the use of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index or any data included therein. The FTSE
Licensor Parties make no express or implied warranties and expressly disclaim
all warranties of merchantability or fitness for a particular purpose or use
with respect to the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index or any
data included therein. Without limiting any of the foregoing, in no event shall
the FTSE Licensor Parties have any liability for any special, punitive,
indirect, or consequential damages (including lost profits), even if notified
of the possibility of such damages. There are no third party beneficiaries of
any agreements between FTSE and
- --------------------------------------------------------------------------------
42 BARCLAYS GLOBAL INVESTORS FUNDS
BGI and BGFA. None of the FTSE Licensor Parties shall be liable (whether in
negligence or otherwise) to any person for any error in the Index and none of
the Licensor Parties shall be under any obligation to advise any person
therein.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund (the
"iShares MSCI Index Funds") are not sponsored, endorsed, sold or promoted by
MSCI or any affiliate of MSCI. Neither MSCI nor any other party makes any
representation or warranty, express or implied, to the owners of shares of the
iShares MSCI Index Funds or any member of the public regarding the advisability
of investing in securities generally or in the iShares MSCI Index Funds
particularly or the ability of the MSCI Indexes to track general stock market
performance. MSCI is the licensor of certain trademarks, service marks and
trade names of MSCI and of the MSCI Indexes, which are determined, composed and
calculated by MSCI without regard to BGI, BGFA or the iShares MSCI Index Funds.
MSCI has no obligation to take the needs of BGI, BGFA or the owners of shares
of the iShares MSCI Index Funds into consideration in determining, composing or
calculating the MSCI Indexes. MSCI is not responsible for and has not
participated in the determination of the timing of, prices at, or quantities of
the iShares MSCI Index Funds to be issued or in the determination or
calculation of the equation by which the iShares MSCI Index Funds are
redeemable for cash. Neither MSCI nor any other party has any obligation or
liability to owners of shares of the iShares MSCI Index Funds in connection
with the administration, marketing or trading of the iShares MSCI Index Funds.
Although MSCI shall obtain information for inclusion in or for use in the
calculation of the MSCI Indexes from sources which MSCI considers reliable,
neither MSCI nor any other party guarantees the accuracy and/or the
completeness of the MSCI Indexes or any data included therein. Neither MSCI nor
any other party makes any warranty, express or implied, as to results to be
obtained by BGI, BGFA, the owners of shares of the iShares MSCI Index Funds, or
any other person or entity from the use of the MSCI Indexes or any data
included hereunder or for any other use. Neither MSCI nor any other party makes
any express or implied warranties, and MSCI hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the MSCI Indexes or any data included therein. Without limiting any of the
foregoing, in no event shall MSCI or any other party have any liability for any
direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
No purchaser, seller or holder of the iShares MSCI Index Funds, or any other
person or entity, should use or refer to any MSCI trade name, trademark or
service mark to sponsor, endorse, market or promote iShares without first
contacting MSCI to determine whether MSCI's permission is required. Under no
circumstances may any person or entity claim any affiliation with MSCI without
the prior written permission of MSCI.
The iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3 Year
Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund, iShares
Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year Treasury
Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares Barclays
Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares Barclays
Government/Credit Bond Fund, iShares Barclays Intermediate Credit Bond Fund,
iShares Barclays Intermediate Government/Credit Bond Fund, iShares Barclays MBS
Bond Fund, iShares Barclays Short Treasury Bond Fund and the iShares Barclays
TIPS Bond Fund (collectively, the "Barclays Capital Funds") are not sponsored,
endorsed or promoted by Barclays Capital. Barclays Capital makes no
representation or warranty, express or implied, to the owners of shares of the
Barclays Capital Funds or any member of the public regarding the advisability
of owning or trading in the Barclays Capital Funds. The Barclays Capital Funds'
underlying indexes (the "Underlying Indexes") are determined, composed and
calculated by Barclays Capital without regard to the iShares Trust or the
owners of shares of the Barclays Capital Funds. Barclays Capital has no
obligation to take the needs of BGFA or the owners of shares of the Barclays
Capital Funds into consideration in determining, composing or calculating the
Underlying Indexes. Barclays Capital is not responsible for and has not
participated in the determination or the timing of prices, or quantities of
shares to be listed or in the determination or calculation of the equation by
which shares are to be converted into cash. Barclays Capital has no obligation
or liability in connection with the administration of iShares Trust or the
marketing or trading of shares of the Barclays Capital Funds. Barclays Capital
does not guarantee the accuracy and/or the completeness of the Underlying
Indexes or any data included therein. Barclays Capital shall have no liability
for any errors, omissions or interruptions therein. Barclays Capital makes no
warranty, express or implied, as to the results to be obtained by BGI and BGFA
or owners of shares of the Barclays Capital Funds, or any other person or
entity, from the use of the Underlying Indexes or any data included therein.
Barclays Capital makes no express or
- --------------------------------------------------------------------------------
43
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Underlying
Indexes or any data included therein. Without limiting any of the foregoing, in
no event shall Barclays Capital have any liability for any lost profits or
special, punitive, direct, indirect, or consequential damages even if notified
thereof.
BGFA does not guarantee the accuracy or the completeness of any underlying
index or any data included therein and BGFA shall have no liability for any
errors, omissions, or interruptions therein.
BGFA makes no warranty, express or implied, as to results to be obtained by the
series of the Trust, to the owners of shares, or to any other person or entity,
from the use of any underlying index or any data included therein. BGFA makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to any
underlying index or any data included therein. Without limiting any of the
foregoing, in no event shall BGFA have any liability for any special, punitive,
direct, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.^
- --------------------------------------------------------------------------------
44 BARCLAYS GLOBAL INVESTORS FUNDS
- --------------------------------------------------------------------------------
Copies of the Prospectus, SAI, annual and semi-annual reports to shareholders
and other information are available, without charge, upon request by calling
the number below. For more detailed information about Barclays Global Investors
Funds and the LifePath Portfolios, you may request a copy of the SAI. The SAI
provides information about the LifePath Portfolios and is incorporated by
reference into this Prospectus. This means that the SAI, for legal purposes, is
a part of this Prospectus.
Additional information about the LifePath Portfolios' investments is available
in the LifePath Portfolios' annual or semi-annual reports to shareholders. In
the LifePath Portfolios' annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
LifePath Portfolios' performance during the last fiscal year.
If you have any questions about the LifePath Portfolios or you wish to obtain
the SAI or semi-annual or annual reports free of charge, please:
Call: 1-877-BGI-1544 (1-877-244-1544) (toll-free)
Monday through Friday
8:30 a.m. to 6:30 p.m. (Eastern Time)
E-mail: BGIFunds@barclaysglobal.com
Write: Barclays Global Investors Funds
c/o SEI Investments Distribution Co.
One Freedom Valley Drive, Oaks, PA 19456
The LifePath Portfolios do not have a website, but the LifePath Portfolios'
annual and semi-annual shareholder reports, prospectus and SAI are available
free of charge online at the SEC's website www.sec.gov.
Information about a LifePath Portfolio (including its SAI) can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C., and information
on the operation of the Public Reference Room may be obtained by calling the
SEC at 1-202-551-8090. Reports and other information about the LifePath
Portfolios are available on the EDGAR Database on the SEC's website at
www.sec.gov, and copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
ABOUT ANY LIFEPATH PORTFOLIO AND ITS SHARES NOT CONTAINED IN THIS PROSPECTUS
AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION. READ AND KEEP THE PROSPECTUS
FOR FUTURE REFERENCE.
Investment Company Act File No.: 811-07332
For more information call
1-877-BGI-1544 (1-877-244-1544) (toll-free)
[GRAPHIC APPEARS HERE]
BGF-PR-LPI0509
[GRAPHIC APPEARS HERE]
- --------------------------------------------------------------------------------
Prospectus
May 1, 2009
LIFEPATH(Reg. TM) PORTFOLIOS
CLASS R SHARES
LifePath(Reg. TM) Retirement
LifePath 2010(Reg. TM)
LifePath 2020(Reg. TM)
LifePath 2030(Reg. TM)
LifePath 2040(Reg. TM)
LifePath(Reg. TM) 2050
THE FIRST MUTUAL FUNDS DESIGNED TO OFFER INDIVIDUAL INVESTORS COMPREHENSIVE
ASSET ALLOCATION STRATEGIES THAT ADJUST OVER TIME.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
LifePath(Reg. TM) is a registered servicemark of Barclays Global Investors,
N.A. and the LifePath Products are covered by U.S. Patents 5,812,987 and
6,336,102.
[GRAPHIC APPEARS HERE]
Table of Contents
Overview .................................................................. 1
Investment Objectives ..................................................... 3
Summary of Principal Investment Strategies ................................ 4
Summary of Principal Risk Factors ......................................... 5
Investment Returns ........................................................ 6
Fees and Expenses ......................................................... 11
A Further Discussion of Principal Investment Strategies ................... 13
A Further Discussion of Principal Risk Factors ............................ 22
Management of the LifePath Portfolios ..................................... 26
Shareholder Information ................................................... 28
Financial Highlights ...................................................... 33
Disclaimers ............................................................... 39
- --------------------------------------------------------------------------------
i
Overview
INTRODUCTION
The LifePath Portfolios/1/ are designed to offer individual investors
comprehensive asset allocation strategies tailored to the time when they expect
to begin withdrawing assets. Asset allocation is the distribution of
investments among broad types of asset classes: equity securities, bonds and
money market instruments. Each LifePath Portfolio invests all of its assets in
a separate mutual fund, called a Master Portfolio, that has a substantially
identical investment objective as the LifePath Portfolio. To implement the
asset allocation strategy, each Master Portfolio, in turn, invests in a
combination of equity securities, bond and money market funds (the "Underlying
Funds") in proportions based on its own comprehensive investment strategy that
gradually becomes more conservative as the year in the LifePath Portfolio's
name approaches, except for the LifePath Retirement Portfolio, which is already
in its most conservative phase. Barclays Global Fund Advisors ("BGFA") is the
investment adviser to the Master Portfolios.
WHICH LIFEPATH PORTFOLIO TO CONSIDER
The first step in choosing which LifePath Portfolio to consider is answering a
key question: When will you need the money you are thinking of investing? Will
it be in ten years, when your kids are ready for college? Or 30 years, when you
retire?
The number in the name of most of the LifePath Portfolios is actually a year -
a "target year" when you might expect to begin withdrawing your money.
Selecting the LifePath Portfolio that may be most appropriate for your
investment may be as simple as matching your target year with the closest
LifePath Portfolio target year.
For example, let's say that you are investing for retirement purposes, and that
you expect to retire at age 60. If you are 45 years old, you have 15 years
before retirement. By adding 15 to the current year, you can define your
"target year." If you expect to retire in the year 2023, as in this example,
you may conclude that the LifePath 2020 Portfolio is the most appropriate
LifePath Portfolio for you.
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(1)For simplicity's sake, all discussion of investment objective, strategies
and risks of a particular LifePath Portfolio refers also to the investment
objective, strategies and risks of the Master Portfolio, unless otherwise
indicated. A detailed description of the relationship of the LifePath
Portfolios to their Master Portfolios appears under the heading
"Shareholder Information - Master/Feeder Mutual Fund Structure" in this
Prospectus.
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1
LIFEPATH(Reg. TM) PORTFOLIOS - HOW THEY WORK
[GRAPHIC APPEARS HERE]
NOTE: THE ABOVE CHART IS FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT REPRESENT
THE ACTUAL ALLOCATION PERCENTAGES OF THE LIFEPATH PORTFOLIOS.
The chart shows that over time, the investment mix of each LifePath Portfolio
gradually shifts from a greater concentration of higher-risk investments
(namely, equity securities funds) to a greater concentration of lower-risk
investments (namely, bond funds), thereby making the LifePath Portfolio
increasingly conservative.
In making your investment decision, you should keep in mind:
[] Each LifePath Portfolio's investment strategy derives from the risk
tolerance of average investors with a particular time horizon.
[] Each LifePath Portfolio's time horizon is based on the year in its name,
except for the LifePath Retirement Portfolio, which is designed for investors
who are currently withdrawing, or plan in the near future to begin
withdrawing, a substantial portion of their investment.
If you are willing to accept a greater risk of short-term loss in exchange for
the potential to achieve higher long-term returns, you may invest some or all
of your assets in a LifePath Portfolio with a longer time horizon. If you
desire a more conservative investment and are willing to forego some potential
returns, you may invest some or all of your assets in a LifePath Portfolio with
a shorter time horizon. The final choice is yours.
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2 BARCLAYS GLOBAL INVESTORS FUNDS
Investment Objectives
Each LifePath Portfolio seeks to maximize return consistent with the
quantitatively measured risk that investors on average may be willing to accept
given their investment time horizon. An investor's time horizon marks the point
when the investor plans to start making net withdrawals from his or her
investments. As a general rule, investors with a longer time horizon have a
greater tolerance for risk than investors with a shorter time horizon.
Long-term investors are more likely to accept a greater risk of short-term loss
in exchange for the potential to achieve higher long-term returns. Each
LifePath Portfolio has its own time horizon, which affects the targeted risk
level of the LifePath Portfolio and, in turn, its asset allocation.
SPECIFICALLY:
[] LifePath Retirement Portfolio is managed for investors seeking income and
moderate long-term growth of capital.
[] LifePath 2010 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2010.
[] LifePath 2020 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2020.
[] LifePath 2030 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2030.
[] LifePath 2040 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2040.
[] LifePath 2050 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2050.
Each LifePath Portfolio's investment objective may be changed by the LifePath
Portfolio's Board of Trustees without shareholder approval.
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3
Summary of Principal Investment Strategies
Each LifePath Portfolio invests all of its assets in a corresponding Master
Portfolio which allocates and reallocates its assets among the Underlying
Funds. The Master Portfolios with longer time horizons invest a greater portion
of their assets in Underlying Funds that invest in equity securities, which
provide a greater opportunity for capital appreciation over the long-term but
have a greater risk of short-term loss. The Master Portfolios with shorter time
horizons invest a greater portion of their assets in Underlying Funds that
invest in bonds and money market instruments, which typically offer reduced
risk and price volatility but forego some potential returns. Accordingly, under
normal circumstances, the LifePath Portfolios with shorter time horizons have
lower expected returns than the LifePath Portfolios with longer time horizons.
[] LifePath Retirement Portfolio is designed for investors seeking current
income and moderate long-term growth of capital. As of March 31, 2009, the
LifePath Retirement Portfolio held approximately 38% of its assets in
Underlying Funds that invest primarily in equity securities, 62% of its assets
in Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
Because the LifePath Retirement Portfolio is in its most conservative phase,
its allocation generally does not become more conservative over time, although
its allocation may change to maintain the LifePath Retirement Portfolio's risk
profile.
[] LifePath 2010 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2010. As of March 31, 2009, the
LifePath 2010 Portfolio held approximately 40% of its assets in Underlying
Funds that invest primarily in equity securities, 60% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2020 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2020. As of March 31, 2009, LifePath
2020 Portfolio held approximately 61% of its assets in Underlying Funds that
invest primarily in equity securities, 39% of its assets in Underlying Funds
that invest primarily in bonds and the remainder of its assets in Underlying
Funds that invest primarily in money market instruments. As the stated time
horizon approaches, the allocation will become more conservative and have
lower expected returns.
[] LifePath 2030 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2030. As of March 31, 2009, the
LifePath 2030 Portfolio held approximately 76% of its assets in Underlying
Funds that invest primarily in equity securities, 24% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2040 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2040. As of March 31, 2009, the
LifePath 2040 Portfolio held approximately 89% of its assets in Underlying
Funds that invest primarily in equity securities, 11% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2050 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2050. As of March 31, 2009, the
LifePath 2050 Portfolio held approximately 99% of its assets in Underlying
Funds that invest primarily in equity securities, 1% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, that allocation will become more
conservative and have lower expected returns.
When a LifePath Portfolio reaches its stated time horizon and enters its most
conservative phase - E.G., the LifePath 2010 Portfolio - the allocation of its
assets is expected to be similar to that of the LifePath Retirement Portfolio.
Such LifePath Portfolio and the LifePath Retirement Portfolio may then continue
to operate as separate funds or, subject to approval by the LifePath
Portfolios' Board of Trustees, they may be merged into a single fund.
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4 BARCLAYS GLOBAL INVESTORS FUNDS
Summary of Principal Risk Factors
As with any investment, your investment in the LifePath Portfolios could lose
money or the Portfolios' performance could trail that of other investments.
EACH LIFEPATH PORTFOLIO HAS A DIFFERENT LEVEL OF RISK.
The value of your investment is subject to equity securities market risk, which
means the price of the equity securities in which the Underlying Funds invest
may fluctuate or fall in response to economic events or trends.
The value of your investment is also subject to bond investment risks,
including interest rate risk, which means that the prices of bonds in which the
Underlying Funds invest may fall because of a rise in interest rates; credit
risk, which is the risk that the price of an individual bond may fall with the
decline in an issuer's real or apparent ability to meet its financial
obligations; extension risk, which is the risk that borrowers may extend the
prepayment of their mortgages or loans for longer periods than expected,
thereby affecting the security's average life and, potentially, its yield; and
prepayment risk, which is the risk that borrowers may prepay their mortgages or
loans faster than expected, thereby affecting the security's average life and,
potentially, its yield. The risk of default and price volatility of high yield
securities is greater than the risk usually associated with higher-rated
securities.
Investments in foreign securities by the Underlying Funds are subject to
certain special risks and considerations, including potentially less liquidity
and greater price volatility than investments in securities traded in the U.S.
markets. These risks are greater for investments in foreign securities issued
by companies or sovereign entities in emerging market countries.
The allocation of each LifePath Portfolio's assets is managed using a
quantitative model that has been developed based on a number of factors.
Neither the LifePath Portfolios nor BGFA can offer any assurance that the
recommended asset allocation will either maximize returns or minimize risk or
be the appropriate allocation in all circumstances for every investor with a
particular time horizon.
The value of your investment is also subject to passive investment risk,
security selection risk and concentration risk. Because BGFA does not select
individual companies in the underlying indexes for certain Underlying Funds,
those Underlying Funds may hold stocks in companies that present risks that an
adviser researching individual stocks might seek to avoid. This is known as
passive investment risk. In the case of the Underlying Funds where BGFA does
select securities based on its analysis, these funds are subject to the risk
that security selection will contribute to underperformance. Concentration risk
is the risk that an Underlying Fund that concentrates in a single industry or
group of industries may be more susceptible to any single economic, market,
political or regulatory occurrence in that industry or group of industries.
The value of your investment is subject to real estate investment risk, which
includes many of the same risks associated with the direct ownership of real
estate.
Investments in derivatives by certain Underlying Funds are subject to special
risks and considerations. Derivatives are financial instruments whose values
are derived, at least in part, from the prices of other securities or specified
assets, indexes or rates.
Certain Underlying Funds are also subject to market trading risks due to their
shares being listed and traded on securities exchanges (including potential
halts in trading or a fluctuation in trading price in accordance with changes
in net asset value), and tracking error risk, in that the return of an
Underlying Fund that seeks to track an index may deviate from the return of
such index.
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5
The LifePath Portfolios must maintain cash balances to meet redemption
requests, which may lower overall portfolio performance.
An investment in a LifePath Portfolio is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Investment Returns
TOTAL RETURNS
The bar charts and table in this section provide some indication of the risks
of investing in the LifePath Portfolios by showing the changes in their
performance from year to year. The bar charts show the returns for Class R of
each LifePath Portfolio for each of the last ten calendar years./1/ The average
annual total return table compares the average annual total returns (before and
after taxes) of Class R of each LifePath Portfolio to those of a corresponding
index for various periods of time. Effective March 15, 2004, the returns for
each LifePath Portfolio reflect its Master Portfolio's investment in Underlying
Funds. For all periods prior to March 15, 2004, the returns for each LifePath
Portfolio reflect the direct investment by its Master Portfolio in a portfolio
of securities and also reflect investment in accordance with a model that
included "tactical," or short-term, shifts in allocation between stocks and
bonds. In addition, as of December 31, 2003, BGFA made certain changes to its
asset allocation strategies for the LifePath Portfolios, including a change to
the frequency with which the LifePath Portfolios' respective holdings were
rebalanced among asset classes from monthly to quarterly.
How the LifePath Portfolios performed in the past (before and after taxes) is
not necessarily an indication of how they will perform in the future.
LIFEPATH RETIREMENT PORTFOLIO - CLASS R(2)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 4.60%
2000 4.48%
2001 1.40%
2002 -4.98%
2003 15.51%
2004 6.07%
2005 4.05%
2006 8.52%
2007 4.17%
2008 -15.24%
The best calendar quarter return during the years shown above was 11.32% in the
2nd quarter of 2003; the worst was -7.90% in the 4th quarter of 2008.
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(1)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
(2)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
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6 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2010 PORTFOLIO - CLASS R(3)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 9.23%
2000 0.46%
2001 -1.92%
2002 -8.57%
2003 15.45%
2004 7.23%
2005 4.94%
2006 9.89%
2007 3.92%
2008 -17.23%
The best calendar quarter return during the years shown above was 9.13% in the
2nd quarter of 2003; the worst was -9.00% in the 4th quarter of 2008.
LIFEPATH 2020 PORTFOLIO - CLASS R(4)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 13.87%
2000 -3.99%
2001 -7.43%
2002 -13.01%
2003 20.37%
2004 9.01%
2005 6.28%
2006 12.77%
2007 3.06%
2008 -25.57%
The best calendar quarter return during the years shown above was 11.29% in the
2nd quarter of 2003; the worst was -14.22% in the 4th quarter of 2008.
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(3)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
(4)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
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7
LIFEPATH 2030 PORTFOLIO - CLASS R(5)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 16.60%
2000 -5.90%
2001 -10.54%
2002 -16.04%
2003 23.48%
2004 10.51%
2005 7.37%
2006 14.83%
2007 2.38%
2008 -31.19%
The best calendar quarter return during the years shown above was 13.38% in the
2nd quarter of 2003; the worst was -17.93% in the 4th quarter of 2008.
LIFEPATH 2040 PORTFOLIO - CLASS R(6)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 21.13%
2000 -9.96%
2001 -13.64%
2002 -18.58%
2003 27.66%
2004 11.08%
2005 8.01%
2006 16.64%
2007 1.78%
2008 -35.56%
The best calendar quarter return during the years shown above was 16.29% in the
4th quarter of 1999; the worst was -20.88% in the 4th quarter of 2008.
LIFEPATH 2050 PORTFOLIO - CLASS R
The LifePath 2050 Portfolio commenced operations on June 30, 2008. Because the
LifePath 2050 Portfolio does not have a full year of operations, it does not
disclose its performance history in this Prospectus.
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(5)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
(6)The performance information for the periods from January 1, 1999 through
April 30, 2001 (the date the Class R Shares commenced operations) shows
the performance of the Class I Shares of the LifePath Portfolios adjusted
to reflect the fees and expenses of the Class R Shares. Performance from
April 30, 2001 through December 31, 2008 reflects the actual performance
of Class R Shares.
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8 BARCLAYS GLOBAL INVESTORS FUNDS
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 2008
CLASS R SHARES(1)
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(2)
------------ --------- ---------- -------------
LIFEPATH RETIREMENT
PORTFOLIO
Return Before Taxes -15.24% 1.13% 2.55% 4.49%
Return After Taxes on -16.08% -0.09% 1.21% 2.93%
Distributions(3)
Return After Taxes on -9.68% 0.49% 1.60% 3.02%
Distributions and Sale
of Fund Shares(3)
LifePath Retirement -14.53% 2.42% 3.91% 5.83%
Portfolio Custom
Benchmark(4)(5)
LIFEPATH 2010 PORTFOLIO
Return Before Taxes -17.23% 1.24% 1.91% 5.47%
Return After Taxes on -18.11% 0.15% 0.67% 4.02%
Distributions(3)
Return After Taxes on -10.82% 0.72% 1.23% 4.02%
Distributions and Sale
of Fund Shares(3)
LifePath 2010 Portfolio -16.51% 2.52% 3.39% 6.54%
Custom Benchmark(4)(5)
LIFEPATH 2020 PORTFOLIO
Return Before Taxes -25.57% 0.04% 0.61% 5.46%
Return After Taxes on -26.01% -0.62% -0.25% 4.33%
Distributions(3)
Return After Taxes on -16.21% -0.08% 0.31% 4.22%
Distributions and Sale
of Fund Shares(3)
LifePath 2020 Portfolio -25.39% 1.13% 2.01% 6.25%
Custom Benchmark(4)(5)
LIFEPATH 2030 PORTFOLIO
Return Before Taxes -31.19% -0.82% -0.23% 5.54%
Return After Taxes on -31.46% -1.63% -1.23% 4.38%
Distributions(3)
Return After Taxes on -19.89% -0.67% -0.28% 4.44%
Distributions and Sale
of Fund Shares(3)
LifePath 2030 Portfolio -31.34% 0.12% 1.03% 5.99%
Custom Benchmark(4)(5)
LIFEPATH 2040 PORTFOLIO
Return Before Taxes -35.56% -1.70% -1.06% 5.58%
Return After Taxes on -35.73% -2.04% -1.74% 4.67%
Distributions(3)
Return After Taxes on -22.76% -1.34% -0.86% 4.62%
Distributions and Sale
of Fund Shares(3)
LifePath 2040 Portfolio -36.01% -0.80% 0.14% 5.90%
Custom Benchmark(4)(5)
LIFEPATH 2050 PORTFOLIO
Return Before Taxes N/A N/A N/A -32.28%
Return After Taxes on N/A N/A N/A -32.34%
Distributions(3)
Return After Taxes on N/A N/A N/A -20.90%
Distributions and Sale
of Fund Shares(3)
LifePath 2050 Portfolio N/A N/A N/A -32.47%
Custom Benchmark(4)(5)
S&P 1500 Index(5) -36.72% -1.89% -0.76% N/A
Barclays Capital U.S. 5.24% 4.65% 5.63% N/A
Aggregate Bond
Index(5)(6)
MSCI All Country World -45.98% 2.62% 2.26% N/A
Index ex US IMI
Index(5)
MSCI All Country World -45.53% 2.56% 1.90% N/A
Index ex USA(5)
Citigroup 3-Month 1.81% 3.10% 3.30% N/A
Treasury Bill Index(5)
Barclays Capital U.S.
Treasury Inflation
Protected Securities
(TIPS) Index
(Series-L)(5)(6) -2.35% 4.07% 6.79% N/A
FTSE EPRA/NAREIT Global -47.72% 1.96% N/A N/A
Real Estate Index(5)
Cohen & Steers Realty -40.93% 1.17% N/A N/A
Majors Index(5)
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9
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(1) Performance shown for the periods prior to April 30, 2001 (the date
the Class R Shares commenced operations) reflects the performance of
the Class I Shares adjusted to reflect the fees and expenses of the
Class R Shares. Performance from April 30, 2001 reflects the actual
performance of Class R Shares. Effective May 1, 2005, Class R Shares
are sold without any sales charges. Effective March 15, 2004, the
returns for each LifePath Portfolio reflect its Master Portfolio's
investment in Underlying Funds. For all periods prior to March 15,
2004, the returns for each LifePath Portfolio reflect the direct
investment by its Master Portfolio in a portfolio of securities and
also reflect investment in accordance with a model that included
"tactical," or short-term, shifts in allocation between stocks and
bonds. In addition, as of December 31, 2003, BGFA made certain changes
to its asset allocation strategies for the LifePath Portfolios,
including a change to the frequency with which the LifePath Portfolios'
respective holdings were rebalanced among asset classes from monthly to
quarterly.
(2) The inception date of the Class R Shares of the LifePath Retirement
Portfolio, LifePath 2010 Portfolio, LifePath 2020 Portfolio, LifePath
2030 Portfolio and LifePath 2040 Portfolio is April 30, 2001. The
inception date of the Class R Shares of the LifePath 2050 Portfolio is
June 30, 2008. The returns for the Class R Shares of the LifePath 2050
Portfolio are not annualized. The inception date of the LifePath
Retirement Portfolio Custom Benchmark, LifePath 2010 Portfolio Custom
Benchmark, LifePath 2020 Portfolio Custom Benchmark, LifePath 2030
Portfolio Custom Benchmark and LifePath 2040 Portfolio Custom Benchmark
is March 1, 1994. The inception date of the LifePath 2050 Portfolio
Custom Benchmark is June 30, 2008.
(3) After tax returns in the table above are calculated using the
historical highest individual federal marginal income tax rates and do
not reflect the impact of state, local or foreign taxes. Actual
after-tax returns depend on an investor's tax situation and may differ
from those shown, and after-tax returns shown are not relevant to
tax-exempt investors or investors who hold shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts
("IRAs"). A LifePath Portfolio's returns after taxes on distributions
and sale of LifePath Portfolio shares are calculated assuming that an
investor has sufficient capital gains of the same character from other
investments to offset any capital losses from the sale of LifePath
Portfolio shares. As a result, a LifePath Portfolio's returns after
taxes on distributions and sale of LifePath Portfolio shares may exceed
the LifePath Portfolio's returns before taxes and/or returns after
taxes on distributions.
(4) The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath
Portfolio's asset classes according to their weightings as of the most
recent quarter end. The weightings of the various indexes that are
included in the LifePath Portfolios' custom benchmarks are adjusted
quarterly to reflect the LifePath Portfolios' changing asset
allocations over time. As of December 31, 2008, the following indexes
are used to calculate the LifePath Portfolios' custom benchmarks: S&P
500 Index, S&P 400 Index, S&P 600 Index, Barclays Capital U.S.
Aggregate Bond Index, Citigroup 3-Month Treasury Bill Index, Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), MSCI All Country World Index ex US IMI Index and FTSE
EPRA/NAREIT Global Real Estate Index. The MSCI All Country World Index
ex US IMI Index replaced the MSCI All Country World Index ex USA Index
on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index replaced
the Cohen & Steers Realty Majors Index on July 1, 2008.
(5) Reflects no deductions for fees, expenses or taxes.
(6) Effective November 3, 2008, the names of the noted indexes changed
from the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S.
Treasury TIPS Index to the Barclays Capital U.S. Aggregate Bond Index
and Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L), respectively. Changes to these indexes are
discussed further on page 21.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses table on the
immediately following page. In the absence of such waivers and/or
reimbursements, the applicable LifePath Portfolio's total return would be
lower.
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10 BARCLAYS GLOBAL INVESTORS FUNDS
Fees and Expenses
The table below describes the fees and expenses that you may pay if you buy and
hold Class R Shares of a LifePath Portfolio. The expenses are deducted from
each LifePath Portfolio's assets, which means you pay them indirectly. This
table does not reflect charges that may be imposed in connection with an
account in which you hold the shares. A broker-dealer or financial institution
maintaining the account in which you hold shares may charge a separate account,
service or transaction fee on the purchase or sale of Class R Shares that would
be in addition to the fees and expenses shown here.
The total annual operating expense ratios in the table and the example on the
next page reflect the expenses of the Class R Shares of each LifePath Portfolio
and its corresponding Master Portfolio and also reflect a weighted average of
the total operating expense ratios of the Underlying Funds in which each Master
Portfolio invests:
ANNUAL CLASS OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
(Expenses that are Deducted from Class Assets)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
Management fees(1) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Distribution (12b-1) fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other expenses 0.51% 0.51% 0.50% 0.51% 0.51% 0.51%
(Administration fees;
Independent
Expenses(2))
Acquired fund fees and 0.34% 0.34% 0.35% 0.35% 0.35% 0.42%
expenses (Underlying
Funds)(3)
Total annual class 1.45% 1.45% 1.45% 1.46% 1.46% 1.53%
operating
expenses(1)(2)(3)
Less fee waivers and/or 0.35% 0.35% 0.35% 0.36% 0.36% 0.43%
expense
reimbursements(1)(2)
Net expenses(1)(2)(4) 1.10% 1.10% 1.10% 1.10% 1.10% 1.10%
- -------
(1) BGFA, the investment adviser to the Master Portfolios, has
contractually agreed to waive its management fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, charged to the Underlying Funds through April 30, 2011
(the "contractual waiver").
(2) "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master
Portfolios, counsel to the Independent Trustees of the LifePath
Portfolios and the Master Portfolios and the independent registered
public accounting firm that provides audit and non-audit services in
connection with the LifePath Portfolios and the Master Portfolios that
are allocated to the Class R Shares of the LifePath Portfolios.
Barclays Global Investors, N.A. ("BGI") and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to,
the Class R Shares of the LifePath Portfolios and the Master Portfolios
for Independent Expenses through April 30, 2011. After giving effect to
such contractual arrangements, Independent Expenses will be 0.00%. For
the LifePath 2050 Portfolio, other expenses are based on estimated
amounts for 2009.
(3) Acquired fund fees and expenses (Underlying Funds) reflect each
LifePath Portfolio's PRO RATA share of the fees and expenses incurred
by investing in the Underlying Funds. For the LifePath 2050 Portfolio,
these fees and expenses are based on estimated amounts for 2009.
(4) The LifePath Portfolios' service providers may voluntarily waive
certain of their fees or reimburse certain expenses, as they determine,
from time to time; this table does not reflect such waivers or
reimbursements.
- --------------------------------------------------------------------------------
11
EXAMPLE
The example below is intended to help you compare the cost of investing in
Class R Shares of the LifePath Portfolios with the cost of investing in other
mutual funds. The example illustrates the cost you would have incurred on an
initial $10,000 investment in Class R Shares of each LifePath Portfolio over
the time periods shown. It assumes your investment earns an annual return of 5%
over the periods, that total operating expenses remain the same and that the
contractual fee waivers and reimbursements by BGFA and BGI are in effect for
two years.
THE LIFEPATH PORTFOLIOS DO NOT CHARGE A SALES LOAD OR OTHER FEE UPON
REDEMPTION. This means that your cost for each period would be the same whether
or not you sell your shares at the end of a period. Your actual costs may be
higher or lower than this hypothetical example:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- ------------- ---------
LifePath Retirement $112 $388 $724 $1,673
Portfolio
LifePath 2010 Portfolio $112 $388 $724 $1,673
LifePath 2020 Portfolio $112 $388 $724 $1,673
LifePath 2030 Portfolio $112 $389 $727 $1,683
LifePath 2040 Portfolio $112 $389 $727 $1,683
LifePath 2050 Portfolio $112 $397 N/A N/A
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12 BARCLAYS GLOBAL INVESTORS FUNDS
A Further Discussion of Principal Investment Strategies
INTRODUCTION
Each LifePath Portfolio pursues a common strategy of allocating and
reallocating its assets among the Underlying Funds. The LifePath Portfolios
with longer time horizons invest a greater portion of their assets in
Underlying Funds that invest in equity securities, which provide a greater
potential to achieve higher returns over the long-term but have a greater risk
of short-term loss. In addition to investing in Underlying Funds, each LifePath
Portfolio may borrow, lend its portfolio securities to brokers, dealers and
financial institutions, and may invest the collateral in certain short-term
instruments either directly or through one or more joint accounts or money
market funds, as described in greater detail in the LifePath Portfolios'
combined Statement of Additional Information ("SAI").
The LifePath Portfolios with shorter time horizons invest a greater portion of
their assets in Underlying Funds that invest in bonds and money market
instruments, which typically offer reduced risk and price volatility, but
forego some potential returns. Accordingly, under normal circumstances, the
LifePath Portfolios with shorter time horizons have lower expected returns than
the LifePath Portfolios with longer time horizons. As each LifePath Portfolio
approaches its designated time horizon, it systematically seeks to reduce the
level of risk by allocating assets more conservatively among the Underlying
Funds. This systematic shift toward more conservative investments is designed
to reduce the risk of significant reductions in the value of an investment in a
LifePath Portfolio as it approaches its time horizon.
For example, the LifePath Retirement Portfolio has entered its "retirement
phase" and seeks to maximize returns consistent with the risk that an average
investor in retirement may be willing to accept. This does not mean, however,
that it invests exclusively, or primarily, in Underlying Funds that are money
market funds. Rather, because BGFA believes that most investors are still
willing to take some risks in pursuing returns even while drawing on their
investments, a portion of the LifePath Retirement Portfolio's assets will
continue to be allocated to Underlying Funds that are equity and bond funds, in
addition to Underlying Funds that are money market funds.
In determining the allocation of assets to the Underlying Funds, BGFA uses a
proprietary investment model that analyzes securities market data, including
risk, asset class correlations, and expected returns, to provide portfolio
allocations among the asset classes represented by the Underlying Funds. The
allocations are periodically monitored and rebalanced in an effort to maximize
expected return for a given level of risk. In managing the LifePath Portfolios,
BGFA focuses on long-term targets and objectives. The progression over time of
a LifePath Portfolio's asset allocation to more conservative asset classes is a
relatively steady process resulting in only gradual changes to the asset
allocation from quarter to quarter. The Underlying Funds invest in a mix of
equity securities, bonds and money market instruments. Certain Underlying Funds
invest in real estate investment trusts ("REITs"), foreign securities, emerging
markets, below investment-grade bonds and derivatives, which are subject to
additional risks, as described in the "Further Discussion of Principal Risk
Factors" section of this Prospectus. The investment model adjusts each LifePath
Portfolio's risk level by gradually making it more conservative as the year in
the LifePath Portfolio's name approaches, except for the LifePath Retirement
Portfolio, which is already in its most conservative phase.
THE UNDERLYING FUNDS
Two of the Underlying Funds - the Active Stock Master Portfolio and the
CoreAlpha Bond Master Portfolio (collectively, the "Underlying Master
Portfolios") - are diversified portfolios of Master Investment Portfolio
("MIP"). The Active Stock Master Portfolio seeks to provide long-term
appreciation of capital. BGFA invests the Active Stock Master Portfolio's
assets using a proprietary quantitative model that is designed to select stocks
based on an analysis of a wide range of company-specific factors. The CoreAlpha
Bond Master Portfolio seeks to provide a combination of income and capital
growth. BGFA invests the CoreAlpha Bond Master Portfolio's assets pursuant to a
systematic method that relies on
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13
proprietary quantitative models to allocate assets among various bond sectors
by evaluating each sector's relative value and risk-adjusted return.
The remaining Underlying Funds, other than the Barclays Global Investors Funds
("BGIF") Institutional Money Market Fund (the "Underlying Money Market Fund")
are exchange-traded funds ("ETFs") that are part of the iShares family of funds
("Underlying iShares Funds"). Each of the Underlying iShares Funds seeks
investment results that correspond generally to the performance, before fees
and expenses, of its underlying index. As a result, adverse performance of a
particular security in an Underlying iShares Fund's portfolio will ordinarily
not result in the elimination of the security from the Underlying iShares
Fund's portfolio. Each Underlying iShares Fund offers and issues iShares at
their net asset value per share only to certain institutional investors in
aggregations of a specified number of iShares, generally in exchange for a
basket of securities included in its underlying index, together with the
deposit of a specified cash payment. The iShares for these Underlying iShares
Funds are listed and traded on national securities exchanges and also may be
listed on certain non-U.S. exchanges. BGFA purchases iShares on behalf of the
Master Portfolios in the secondary market.
The relative weightings for each Master Portfolio in the various Underlying
Funds will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time.
Each Master Portfolio currently expects to invest in some or all of the
Underlying Funds described below:
ACTIVE STOCK MASTER PORTFOLIO
Seeks to provide long-term appreciation of capital. The Active Stock Master
Portfolio invests, under normal circumstances, at least 80% of its assets in
common stocks. The Active Stock Master Portfolio invests primarily in equity
securities of U.S. companies with market capitalizations similar to the range
of market capitalizations represented in the Standard & Poor's S&P 500 Index.
BGFA invests the Active Stock Master Portfolio's assets using a proprietary
quantitative model that is designed to select stocks based on an analysis of a
wide range of company-specific factors, such as relative values based on
earnings and cash flows; earnings quality as measured by the company's
financial condition and earnings reports; sentiment as expressed through
management and market participant behavior; and industry classification. BGFA
considers risk parameters in deciding upon the Active Stock Master Portfolio's
aggregate holdings, and factors trading costs into its stock selection process.
COREALPHA BOND MASTER PORTFOLIO
Seeks to provide a combination of income and capital growth. BGFA invests the
CoreAlpha Bond Master Portfolio's assets pursuant to a systematic method that
relies on proprietary quantitative models to allocate assets among various bond
sectors by evaluating each sector's relative value and risk-adjusted return.
BGFA's models also allocate assets among bonds of different maturities based on
yield characteristics and expectations. Specific investment selection decisions
are made on the basis of evaluations of relative value, credit quality and
other factors. The CoreAlpha Bond Master Portfolio invests, under normal
circumstances, at least 80% of its assets in bonds. For the purposes of this
strategy, "bonds" include the following: obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including U.S. agency mortgage pass-through securities;
commercial mortgage-backed securities; debt obligations of U.S. corporations;
dollar-denominated debt obligations of foreign issuers; municipal securities;
and asset-backed securities. The CoreAlpha Bond Master Portfolio invests a
substantial portion of its assets in U.S.-registered, dollar-denominated bonds.
The CoreAlpha Bond Master Portfolio may invest in bonds of any maturity or
duration.
BGIF INSTITUTIONAL MONEY MARKET FUND
Seeks a high level of income consistent with liquidity and the preservation of
capital. The BGIF Institutional Money Market Fund invests in high-quality,
short-term money market instruments that include fixed-rate, floating-rate and
variable-rate debt securities. The BGIF Institutional Money Market Fund also
may invest in high-quality, short-term U.S.
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14 BARCLAYS GLOBAL INVESTORS FUNDS
and foreign government debt, including the debt of agencies and
instrumentalities, such as the Federal National Mortgage Association ("Fannie
Mae"), U.S. and foreign bank obligations, corporate obligations, repurchase
agreements and asset-backed securities.
UNDERLYING ISHARES FUNDS
In managing each of the Underlying iShares Funds, BGFA uses a representative
sampling index strategy. Representative sampling is an indexing strategy that
involves investing in a representative sample of securities that 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 applicable
underlying index. Underlying iShares Funds that use representative sampling may
or may not hold all of the securities in the relevant underlying index.
ISHARES S&P 500 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P 500 Index. The S&P 500 Index
measures the performance of the large-capitalization sector of the U.S. equity
market. The component stocks are weighted according to the float-adjusted
market value of their outstanding shares.
ISHARES S&P MIDCAP 400 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P MidCap 400 Index. The S&P
MidCap 400 Index measures the performance of the mid-capitalization sector of
the U.S. equity market. The stocks in the S&P MidCap 400 Index have a market
capitalization between $1.5 billion and $5.5 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P SMALLCAP 600 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P SmallCap 600 Index. The S&P
SmallCap 600 Index measures the performance of the small-capitalization sector
of the U.S. equity market. The stocks in the S&P SmallCap 600 Index have a
market capitalization between $300 million and $2 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P NATIONAL MUNICIPAL BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the municipal bond sector of the U.S.
as defined by the S&P National Municipal Bond Index. The S&P National Municipal
Bond Index measures the performance of the investment-grade segment of the U.S.
municipal bond market. As of March 31, 2009, there were 523 issues in the S&P
National Municipal Bond Index.
ISHARES S&P NORTH AMERICAN NATURAL RESOURCES SECTOR INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P North American Natural
Resources Sector Index(TM). The S&P North American Natural Resources Sector
Index(TM) measures the performance of U.S.-traded stocks of natural
resource-related companies in the U.S. and Canada, and includes companies in
the following categories: producers of oil, gas and consumable fuels, energy
equipment and services, metals and mining, manufacturers of paper and forest
products, and producers of construction materials, containers and packaging.
ISHARES RUSSELL MIDCAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell Midcap(Reg. TM) Index.
The Russell Midcap(Reg. TM) Index measures the performance of the
mid-capitalization sector of the
- --------------------------------------------------------------------------------
15
U.S. equity market. The Russell Midcap(Reg. TM) Index is a float-adjusted,
capitalization-weighted index of the 800 smallest issuers in the Russell
1000(Reg. TM) Index.
ISHARES RUSSELL 2000 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell 2000(Reg. TM) Index. The
Russell 2000(Reg. TM) Index measures the performance of the small
capitalization sector of the U.S. equity market. The Russell 2000(Reg. TM)
Index is a float-adjusted, capitalization-weighted index of equity securities
issued by the approximately 2,000 smallest issuers in the Russell 3000(Reg. TM)
Index.
ISHARES COHEN & STEERS REALTY MAJORS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Cohen & Steers Realty Majors
Index (the "Cohen & Steers Index"). The Cohen & Steers Index consists of
selected U.S. REITs. The objective of the Cohen & Steers Index is to represent
relatively large and liquid REITs that may benefit from future consolidation
and securitization of the U.S. real estate industry. REITs are selected for
inclusion in the Cohen & Steers Index based on a rigorous review of several
factors, including management, portfolio quality, and sector and geographic
diversification. The REITs selected for inclusion in the Cohen & Steers Index
must meet minimum market capitalization and liquidity requirements. The Cohen &
Steers Index is weighted according to the total market value of each REIT's
outstanding shares and is adjusted quarterly so that no REIT represents more
than 8% of the Cohen & Steers Index.
ISHARES FTSE EPRA/NAREIT DEVELOPED REAL ESTATE EX-U.S. INDEX FUND(1)
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE EPRA/NAREIT Developed Real
Estate ex-U.S. Index. The FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
measures the stock performance of companies engaged in the ownership and
development of the Canadian, European, Middle East and Asian real estate
markets. As of March 31, 2009, the FTSE EPRA/NAREIT Developed Real Estate
ex-U.S. Index was comprised of stocks of companies in the following countries:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom.
ISHARES MSCI CANADA INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Canada Index developed by
MSCI, Inc. ("MSCI"). The MSCI Canada Index consists of stocks traded primarily
on the Toronto Stock Exchange.
ISHARES MSCI EAFE INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE(Reg. TM) Index. The
MSCI EAFE(Reg. TM) Index has been developed by MSCI as an equity benchmark for
its international stock performance. The MSCI EAFE Index includes stocks from
Europe, Australasia and the Far East.
- -------
(1)Effective March 23, 2009, the name of the fund changed from the iShares
FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund to the iShares FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund to reflect changes in
the name of the fund's corresponding underlying index from FTSE
EPRA/NAREIT Global Real Estate ex-U.S. Index to FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index.
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16 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES MSCI EAFE SMALL CAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE Small Cap Index. The
MSCI EAFE Small Cap Index targets 40% of the eligible small-capitalization
universe in each industry group of each country represented by the MSCI
EAFE(Reg. TM) Index. The MSCI EAFE(Reg. TM) Index includes securities from
Europe, Australasia and the Far East. MSCI defines the small-capitalization
universe as all listed securities that have a market capitalization between
$200 million and $1,500 million (which may fluctuate depending on the overall
level of the equity markets). In addition to this capitalization range, MSCI
uses a specialized framework of foreign inclusion factors to adjust the market
capitalization of securities for free float available to foreign investors.
ISHARES MSCI EMERGING MARKETS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Emerging Markets Index. The
MSCI Emerging Markets Index is designed to measure equity market performance in
the global emerging markets. As of March 31, 2009, the MSCI Emerging Markets
Index consisted of the following 25 emerging market country indexes: Argentina,
Brazil, Chile, China, Columbia, the Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand and
Turkey. Emerging market country indexes may be added to or deleted from the
MSCI Emerging Markets Index from time to time. The iShares MSCI Emerging
Markets Index Fund, in order to improve its portfolio liquidity and its ability
to track the MSCI Emerging Markets Index, may invest up to 10% of its assets in
shares of other iShares funds that invest in securities in the MSCI Emerging
Markets Index. BGFA will not charge advisory fees on that portion of the
iShares MSCI Emerging Markets Index Fund's assets invested in shares of other
iShares funds.
ISHARES BARCLAYS 1-3 YEAR CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. 1-3 Year
Credit Bond Index. The Barclays Capital U.S. 1-3 Year Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are U.S.
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than three years.
ISHARES BARCLAYS 1-3 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 1-3 Year Treasury Bond
Index. The Barclays Capital U.S. 1-3 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to one year and less than three years.
ISHARES BARCLAYS 3-7 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 3-7 Year Treasury
Bond Index. The Barclays Capital U.S. 3-7 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to three years and less than seven years.
ISHARES BARCLAYS 7-10 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury
Bond Index. The Barclays Capital U.S. 7-10 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to seven years and less than ten
years.
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17
ISHARES BARCLAYS 10-20 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 10-20 Year Treasury
Bond Index. The Barclays Capital U.S. 10-20 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to ten years and less than 20
years.
ISHARES BARCLAYS 20+ YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 20+ Year Treasury Bond
Index. The Barclays Capital U.S. 20+ Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of 20 or more years.
ISHARES BARCLAYS AGGREGATE BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the total U.S. investment-grade bond
market as defined by the Barclays Capital U.S. Aggregate Bond Index (the
"Barclays Capital Index"). The Barclays Capital Index measures the performance
of the U.S. investment-grade bond market, which includes investment-grade U.S.
Treasury bonds, government-related bonds, investment-grade corporate bonds,
mortgage pass-through securities, commercial mortgage-backed securities and
asset-backed securities that are publicly offered for sale in the United
States. The securities in the Barclays Capital Index must have $250 million or
more of outstanding face value and must have at least one year remaining to
maturity. In addition, the securities must be denominated in U.S. dollars and
must be fixed-rate and non-convertible. Certain types of securities, such as
state and local government series bonds, structured notes with embedded swaps
or other special features, private placements, floating-rate securities and
Eurobonds are excluded from the Barclays Capital Index. The Barclays Capital
Index is market capitalization weighted and the securities in the Barclays
Capital Index are updated on the last calendar day of each month.
ISHARES BARCLAYS CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade credit sector of
the United States bond market as defined by the Barclays Capital U.S. Credit
Bond Index. The Barclays Capital U.S. Credit Bond Index measures the
performance of investment-grade corporate debt and sovereign, supranational,
local authority and non-U.S. agency bonds that are dollar-denominated and have
a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Government/Credit Bond Index. The Barclays Capital U.S.
Government/Credit Bond Index measures the performance of dollar-denominated
U.S. Treasuries, government-related (I.E., U.S. and foreign agencies,
sovereign, supranational and local authority debt), and investment-grade credit
securities that have a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS INTERMEDIATE CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. Intermediate
Credit Bond Index. The Barclays Capital U.S. Intermediate Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than ten years.
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18 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES BARCLAYS INTERMEDIATE GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Intermediate Government/Credit Bond Index. The Barclays
Capital U.S. Intermediate Government/Credit Bond Index measures the performance
of dollar-denominated U.S. Treasuries, government-related (I.E., U.S. and
foreign agencies, sovereign, supranational and local authority debt), and
investment-grade credit securities that have a remaining maturity of greater
than or equal to one year and less than ten years.
ISHARES BARCLAYS MBS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade agency
mortgage-backed securities sector of the U.S. as defined by the Barclays
Capital U.S. MBS Index. The Barclays Capital U.S. MBS Index measures the
performance of investment-grade mortgage-backed pass-through securities of the
Government National Mortgage Association, Fannie Mae and the Federal Home Loan
Mortgage Corporation.
ISHARES BARCLAYS SHORT TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. Short Treasury Bond
Index. The Barclays Capital U.S. Short Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of between one and 12 months.
ISHARES BARCLAYS TIPS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the inflation-protected sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. Treasury Inflation
Protected Securities (TIPS) Index (Series-L). The Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L) measures the
performance of the inflation-protected public obligations of the U.S. Treasury,
commonly known as "TIPS."
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* Effective December 8, 2008, the names of the funds changed from the iShares
Lehman 1-3 Year Credit Bond Fund, iShares Lehman 1-3 Year Treasury Bond
Fund, iShares Lehman 3-7 Year Treasury Bond Fund, iShares Lehman 7-10 Year
Treasury Bond Fund, iShares Lehman 10-20 Year Treasury Bond Fund, iShares
Lehman 20+ Year Treasury Bond Fund, iShares Lehman Aggregate Bond Fund,
iShares Lehman Credit Bond Fund, iShares Lehman Government/Credit Bond
Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman
Intermediate Government/Credit Bond Fund, iShares Lehman MBS Bond Fund,
iShares Lehman Short Treasury Bond Fund and iShares Lehman TIPS Bond Fund
to the iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3
Year Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund,
iShares Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year
Treasury Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares
Barclays Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares
Barclays Government/Credit Bond Fund, iShares Barclays Intermediate Credit
Bond Fund, iShares Barclays Intermediate Government/Credit Bond Fund,
iShares Barclays MBS Bond Fund, iShares Barclays Short Treasury Bond Fund
and iShares Barclays TIPS Bond Fund, respectively, to reflect changes in
the names of the funds' corresponding underlying indexes from Lehman
Brothers 1-3 Year U.S. Credit Index, Lehman Brothers 1-3 Year U.S.
Treasury Index, Lehman Brothers 3-7 Year U.S. Treasury Index, Lehman
Brothers 7-10 Year U.S. Treasury Index, Lehman Brothers 10-20 Year U.S.
Treasury Index, Lehman Brothers 20+ Year U.S. Treasury Index, Lehman
Brothers U.S. Aggregate Index, Lehman Brothers U.S. Credit Index, Lehman
Brothers U.S. Government/Credit Index, Lehman Brothers Intermediate U.S.
Credit Index, Lehman Brothers Intermediate U.S. Government/
Credit Index, Lehman Brothers U.S. MBS Index, Lehman Brothers Short U.S.
Treasury Index and Lehman Brothers U.S. Treasury TIPS Index to Barclays
Capital U.S. 1-3 Year Credit Bond Index, Barclays Capital U.S. 1-3 Year
Treasury Bond Index, Barclays Capital U.S. 3-7 Year Treasury Bond Index,
Barclays Capital U.S. 7-10 Year Treasury Bond Index, Barclays Capital U.S.
10-20 Year Treasury Bond Index, Barclays Capital U.S. 20+ Year Treasury
Bond Index, Barclays Capital U.S. Aggregate Bond Index, Barclays Capital
U.S. Credit Bond Index, Barclays Capital U.S. Government/Credit Bond Index,
Barclays Capital U.S. Intermediate Credit Bond Index, Barclays Capital U.S.
Intermediate Government/Credit Bond Index, Barclays Capital U.S. MBS Index,
Barclays Capital U.S. Short Treasury Bond Index and Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L),
respectively.
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19
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the JPMorgan EMBI Global Core Index.
The JPMorgan EMBI Global Core Index is a broad, diverse U.S. dollar-denominated
emerging markets debt benchmark which tracks the total return of actively
traded external debt instruments in emerging market countries.
ISHARES IBOXX $ HIGH YIELD CORPORATE BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. dollar high yield corporate
bond market as defined by the iBoxx(Reg. TM) $ Liquid High Yield Index. The
iBoxx(Reg. TM) $ Liquid High Yield Index is a rules-based index consisting of
the most liquid U.S. dollar-denominated, high yield corporate bonds for sale in
the United States, as determined by the International Index Company Limited
("IIC"). The iBoxx(Reg. TM) $ Liquid High Yield Index is designed to provide a
balanced representation of the U.S. dollar-denominated high yield corporate
bond market through some of the most liquid high yield corporate bonds
available. The number of issues in the iBoxx(Reg. TM) $ Liquid High Yield Index
is typically 50, although this may change from time to time.
The following table lists the Underlying Funds and the asset allocation for
each Master Portfolio as of March 31, 2009. BGFA allocates each Master
Portfolio's assets among the Underlying Funds based on the Master Portfolio's
investment objective and policies. The asset allocation for each Master
Portfolio will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time:
UNDERLYING FUNDS
(as of March 31, 2009)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
CAPITAL GROWTH
Master Investment 19.08% 20.63% 31.27% 38.76% 44.87% 45.73%
Portfolio-Active Stock
Master
Portfolio
iShares S&P MidCap 400 4.67% 4.87% 5.90% 6.79% 7.46% 10.81%
Index Fund
iShares S&P SmallCap 600 2.34% 2.42% 2.87% 3.26% 3.65% 5.34%
Index Fund
iShares MSCI EAFE Index 7.70% 8.36% 12.41% 15.12% 17.39% 20.34%
Fund
iShares Cohen & Steers 0.49% 0.58% 1.38% 1.94% 2.39% 1.76%
Realty Majors Index
Fund
iShares FTSE EPRA/NAREIT 1.01% 1.31% 2.77% 3.76% 4.65% 3.72%
Developed Real
Estate ex-U.S. Index
Fund
iShares MSCI Emerging 2.32% 2.55% 3.71% 4.56% 5.26% 6.01%
Markets Index Fund
iShares MSCI Canada 0.77% 0.85% 1.25% 1.57% 1.87% 2.10%
Index Fund
iShares MSCI EAFE Small 0.85% 0.93% 1.38% 1.76% 1.94% 2.27%
Cap Index Fund
CAPITAL GROWTH AND INCOME
Master Investment 51.29% 48.48% 31.36% 19.06% 8.95% 0.89%
Portfolio-CoreAlpha
Bond
Master Portfolio
iShares Barclays TIPS 9.11% 8.80% 5.40% 3.14% 1.21% N/A
Bond Fund
INCOME
BGIF Institutional Money 0.37% 0.22% 0.30% 0.28% 0.36% 1.03%
Market Fund SL Agency
Shares
- -------
Note: The allocation percentages may not add to, or may appear to exceed, 100%
due to rounding.
"Standard & Poor's(Reg. TM)," "S&P(Reg. TM)," "S&P 500(Reg. TM)," "Standard &
Poor's 500," "S&P 500 Index(TM)," "S&P MidCap 400 Index(TM)," "S&P SmallCap 600
Index(TM)," "S&P National Municipal Bond Index," and "the S&P North American
Natural Resources Sector Index(TM)" are trademarks of Standard & Poor's (a
division of The McGraw-Hill Companies, Inc.) licensed for use for certain
purposes by BGI. The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index
Fund, iShares S&P SmallCap 600 Index Fund, iShares S&P National Municipal Bond
Fund and iShares S&P North American Natural Resources
- --------------------------------------------------------------------------------
20 BARCLAYS GLOBAL INVESTORS FUNDS
Sector Index Fund that are based on S&P Indexes are not sponsored, endorsed,
sold or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in iShares.
"iBoxx(Reg. TM) $ Liquid High Yield Index" is a trademark of IIC licensed for
use for certain purposes by BGI. The iShares iBoxx $ High Yield Corporate Bond
Fund is not sponsored, endorsed, sold or promoted by IIC, and IIC makes no
representation regarding the advisability of investing in iShares.
"FTSE," "EPRA," "NAREIT" and "FTSE EPRA/NAREIT Developed Real Estate ex-U.S.
Index" are marks that have been licensed for use for certain purposes by BGI.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by FTSE, the London Stock Exchange plc,
Euronext N.V., the Financial Times Limited, EPRA or NAREIT (together the "FTSE
Licensor Parties") and the FTSE Licensor Parties make no representation
regarding the advisability of investing in iShares.
"JPMorgan" and "JPMorgan EMBI Global Core Index" are trademarks of JPMorgan
Chase & Co.(Copyright) ("JPMorgan") licensed for use for certain purposes by
BGI. The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored,
endorsed, sold or promoted by JPMorgan, and JPMorgan makes no representation
regarding the advisability of investing in iShares.
"Cohen & Steers" and "Cohen & Steers Realty Majors Index" are trademarks of
Cohen & Steers Capital Management, Inc. ("Cohen & Steers") licensed for use for
certain purposes by BGI. The iShares Cohen & Steers Realty Majors Index Fund is
not sponsored, endorsed, sold or promoted by Cohen & Steers, and Cohen & Steers
makes no representation regarding the advisability of investing in iShares.
"Barclays Capital," "Barclays Capital U.S. 1-3 Year Credit Bond Index,"
"Barclays Capital U.S. 1-3 Year Treasury Bond Index," "Barclays Capital U.S.
3-7 Year Treasury Bond Index," "Barclays Capital U.S. 7-10 Year Treasury Bond
Index," "Barclays Capital U.S. 10-20 Year Treasury Bond Index," "Barclays
Capital U.S. 20+ Year Treasury Bond Index," "Barclays Capital U.S. Aggregate
Bond Index," "Barclays Capital U.S. Credit Bond Index," "Barclays Capital U.S.
Government/Credit Bond Index," "Barclays Capital U.S. Intermediate Credit Bond
Index," "Barclays Capital U.S. Intermediate Government/Credit Bond Index,"
"Barclays Capital U.S. MBS Index," "Barclays Capital U.S. Short Treasury Bond
Index," and the "Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L)" (collectively referred to as the "iShares Bond Fund
Indexes") are trademarks of Barclays Capital Inc. ("Barclays Capital") and have
been licensed for use for certain purposes by BGI. The iShares Barclays 1-3
Year Credit Bond Fund, iShares Barclays 1-3 Year Treasury Bond Fund, iShares
Barclays 3-7 Year Treasury Bond Fund, iShares Barclays 7-10 Year Treasury Bond
Fund, iShares Barclays 10-20 Year Treasury Bond Fund, iShares Barclays 20+ Year
Treasury Bond Fund, iShares Barclays Aggregate Bond Fund, iShares Barclays
Credit Bond Fund, iShares Barclays Government/Credit Bond Fund, iShares
Barclays Intermediate Credit Bond Fund, iShares Barclays Intermediate
Government/Credit Bond Fund, iShares Barclays MBS Bond Fund, iShares Barclays
Short Treasury Bond Fund and the iShares Barclays TIPS Bond Fund are not
sponsored or endorsed by Barclays Capital, and Barclays Capital does not make
any representations or warranties, expressed or implied, regarding the
advisability of investing in iShares. The iShares Bond Fund Indexes are
maintained by Barclays Capital, which is an affiliate of, and a separate legal
entity from, BGI and BGFA. Neither BGI nor BGFA has or will have a role in
maintaining the iShares Bond Fund Indexes.
"MSCI Canada Index/SM/," "MSCI EAFE(Reg. TM) Index" and "MSCI Emerging Markets
Index/SM/" are servicemarks and "MSCI EAFE Small Cap Index" is a trademark of
MSCI, and such marks have been licensed for use for certain purposes by BGI.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund are not
sponsored, endorsed, sold or promoted by MSCI, and MSCI makes no representation
regarding the advisability of investing in iShares.
- --------------------------------------------------------------------------------
21
A Further Discussion of Principal Risk Factors
In addition to the principal risks of investing described in the "Summary of
Principal Risk Factors" section of this Prospectus, the LifePath Portfolios
have the following risks:
GENERAL
The net asset value of each LifePath Portfolio's shares ("NAV") is neither
insured nor guaranteed, is not fixed and will fluctuate.
GENERAL RISKS APPLICABLE TO THE LIFEPATH PORTFOLIOS
EQUITY SECURITIES MARKET RISKS
The risks of investing in the equity securities market include both short-term
and prolonged price declines. The value of an equity security may decline in
value due to factors affecting equity securities markets generally or
particular industries represented in the markets. Equity securities may
underperform fixed-income investments and securities market indexes that track
other markets, segments and sectors. Equity securities of mid- to small-cap
companies tend to present greater risks than equity securities of large-cap
companies because they are generally more volatile and can be less liquid.
BOND INVESTMENT RISKS
The risks of fixed-income investing include short-term and prolonged price
declines because of a rise in interest rates, issuer quality considerations and
other economic considerations; however, such price declines in the bond market
have historically been less severe than stock declines.
CREDIT RISK
Credit risk is the risk that issuers or guarantors of debt instruments or the
counterparty to a derivatives contract, repurchase agreement or loan of
portfolio securities is unable or unwilling to make timely interest and/or
principal payments or to otherwise honor its obligations. There is the chance
that any of an Underlying Fund's holdings will have their credit ratings
downgraded or will default (fail to make scheduled interest or principal
payments), potentially reducing an Underlying Fund's income level and share
price. Debt instruments are subject to varying degrees of credit risk, which
may be reflected in credit ratings. Securities issued by the U.S. government
have limited credit risk. However, securities issued by U.S. government
agencies (such as U.S. agency mortgage pass-through securities) are not
necessarily backed by the full faith and credit of the U.S. government.
INTEREST RATE RISK
Interest rate risk is the risk that bond prices will decline over short or even
long periods due to rising market interest rates. All bonds, including those
issued by the U.S. government and its agencies, are subject to interest rate
risk. Their prices tend to move in the opposite direction from market interest
rate movements. When interest rates go up, bond prices tend to fall; when rates
fall, prices tend to rise. Bonds with longer maturities are affected more by
interest rate movements than bonds with shorter maturities, bonds with interest
rate reset provisions, notes or money market instruments. If prices throughout
the economy were to decline over time, resulting in "deflation," the principal
and income of inflation-protected bonds held by an Underlying Fund would likely
decline in price, which would result in losses for the Underlying Fund.
Mortgage-backed securities represent interests in or instruments backed by a
pool of loans secured by mortgages and asset-backed securities represent
interests in or instruments backed by a pool of loans secured by other assets.
Mortgage-backed securities and asset-backed securities are also subject to
prepayment risk and extension risk. Prepayment risk is the risk that during
periods of falling interest rates, an issuer of mortgages and other securities
may be able to repay principal prior to the security's maturity, causing the
Underlying Fund to have to
- --------------------------------------------------------------------------------
22 BARCLAYS GLOBAL INVESTORS FUNDS
reinvest in securities with a lower yield. Extension risk is the risk that when
interest rates rise, certain mortgage-backed securities will be paid off
substantially more slowly than originally anticipated and the value of those
securities may fall sharply. Both prepayment risk and extension risk may result
in a decline to the Underlying Funds' income.
HIGH YIELD SECURITIES RISK
High yield securities risk is the risk that securities that are rated below
investment-grade (commonly referred to as "junk bonds," include those bonds
rated lower than "BBB-" by S&P, a division of The McGraw-Hill Companies, Inc.
and Fitch Rating Service Inc. or "Baa3" by Moody's(Reg. TM) Investor's
Services, Inc.) or are unrated but judged by an Underlying Fund to be of
comparable quality, at the time of purchase, may be more volatile than
higher-rated securities of similar maturity.
High yield securities may also be subject to greater levels of credit or
default risk than higher-rated securities. The value of high yield securities
can be adversely affected by overall economic conditions, such as an economic
downturn or a period of rising interest rates, and high yield securities may be
less liquid and more difficult to sell at an advantageous time or price or to
value than higher-rated securities.
NON-U.S. SECURITIES RISKS
Investments in the securities of non-U.S. issuers are subject to all the risks
of investing in the market of such issuers, including market fluctuations
caused by factors such as economic and political developments, changes in
interest rates and abrupt changes in stock prices. As a result of Underlying
Funds' investing in non-U.S. securities, the Fund may be subject to the risks
listed below. These risks may decrease the value of your investment:
[] Lower levels of liquidity and market efficiency;
[] Greater securities price volatility;
[] Exchange rate fluctuations and exchange controls;
[] Less availability of public information about issuers;
[] Imposition of withholding or other taxes;
[] Imposition of restrictions on the expatriation of funds or other assets of
the Underlying Fund;
[] Higher transaction and custody costs and delays in settlement procedures;
[] Difficulties in enforcing contractual obligations;
[] Substantial government involvement in the economy;
[] Higher rates of inflation;
[] Greater social, economic and political uncertainty, the risk of
nationalization or expropriation of assets and risk of war;
[] Lower levels of regulation of the securities markets;
[] Different accounting, disclosure and reporting requirements; and
[] Legal principles relating to corporate governance, director's fiduciary
duties and liabilities and stockholder's rights in markets in which the
Underlying Funds invest may differ and/or may not be as extensive or
protective as those that apply in the United States.
Investments in non-U.S. securities may be made by an Underlying Fund directly
or through investments in American Depositary Receipts ("ADRs") and other
similar investments. ADRs are receipts for shares of non-U.S. stocks held on
deposit in U.S. banks or banks of major European countries. The receipts trade
on the U.S. or local European stock markets as would normal stocks, entitling
their owners to the dividends and capital gains earned by the real shares
stored in bank vaults. ADRs reduce some of the risks of foreign investing
because a large, liquid market generally exists
- --------------------------------------------------------------------------------
23
and U.S. trading and settlement practices reduce currency, custodial and other
operational risks. Similar investments (European and Global Depositary
Receipts) are receipts for stock deposited in non-U.S. bank and trust
companies, trade across foreign and domestic markets, and can involve different
or greater risks than ADRs.
EMERGING MARKETS RISK
Some foreign markets are considered to be emerging markets. Investment in these
emerging markets is subject to a greater risk of loss than investments in a
developed market. This is due to, among other things, greater market
volatility, lower trading volume, political and economic instability, greater
risk of market shut down and more governmental limitations on foreign
investment policy than those typically found in a developed market.
MODEL RISK
Although the quantitative model used to manage the Master Portfolios' assets
has been developed and refined over many years, neither the Master Portfolios
nor BGFA can offer any assurance that the recommended allocation will either
maximize returns or minimize risks, nor can the Master Portfolios or BGFA offer
assurance that a recommended allocation will be the appropriate allocation in
all circumstances for every investor with a particular time horizon.
REAL ESTATE INVESTMENT RISK
Investment in equity securities in the real estate sector is subject to many of
the same risks associated with the direct ownership of real estate, such as
adverse changes in national, state or local real estate conditions (resulting
from, for example, oversupply of or reduced demand for space and changes in
market rental rates); obsolescence of properties; changes in the availability,
cost and terms of mortgage funds; and the impact of tax, environmental, and
other laws.
DERIVATIVES
Derivatives include, among other instruments, futures contracts, options on
futures contracts, other types of options that may be exchange-traded or traded
over-the-counter, indexed and inverse floating-rate securities, and swap
agreements. Derivatives are financial instruments whose values are derived, at
least in part, from the prices of other securities or specified assets, indexes
or rates. Some derivatives may be more sensitive than direct securities to
changes in interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
PASSIVE INVESTMENT RISK
Because BGFA does not select individual companies in the underlying indexes for
the Underlying iShares Funds, those Underlying iShares Funds may hold stocks in
companies that present risks that an investment adviser researching individual
stocks might seek to avoid.
SECURITY SELECTION RISK
For each of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio,
BGFA bases security selection on its analysis of securities and therefore each
of these Master Portfolios is subject to the risk that poor security selection
will result in underperformance of the Master Portfolio in comparison with
other investment vehicles with similar investment objectives and strategies.
SECURITIES LENDING RISK
The LifePath Portfolios may also lend portfolio securities to borrowers that
provide collateral at least equal to the current market value of the securities
loaned, plus accrued interest or dividends. BGI acts as securities lending
agent for, and is compensated by, the LifePath Portfolios. Securities lending
collateral is generally reinvested in a joint account or money market funds,
including those advised by BGFA. Risks related to securities lending include
operational, credit, legal, counterparty and market risk, as well as investment
risks related to the collateral and risk of loss if the collateral is
liquidated.
- --------------------------------------------------------------------------------
24 BARCLAYS GLOBAL INVESTORS FUNDS
CONCENTRATION RISK
To the extent that an underlying index of an Underlying iShares Fund is
concentrated in the securities of companies, a particular market industry,
group of industries, sector or asset class countries, regions or groups of
countries, that Underlying iShares Fund may be adversely affected by the
performance of those securities, may be subject to increased price volatility
and may be more susceptible to adverse economic, market, political or
regulatory occurrences affecting that market, industry, group of industries,
sector or asset class country, region or group of countries.
MARKET TRADING RISKS
The Underlying iShares Funds are subject to certain additional risks due to
their shares being listed and traded on securities exchanges. There can be no
assurance that an active trading market for these particular ETFs will develop
or be maintained. Trading in ETFs may be halted because of market conditions or
for reasons that, in the view of the listing exchange, make trading in ETFs
inadvisable. In addition, trading in ETFs is subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules. There can
be no assurance that the requirements necessary to maintain the listing of ETFs
will continue to be met or will remain unchanged. An ETF may trade at, above or
below its NAV. The NAV of an ETF will fluctuate with changes in the market
value of its holdings. The trading price of an ETF will generally fluctuate in
accordance with changes in its NAV, as well as market supply and demand.
TRACKING ERROR RISK
Imperfect correlation between an Underlying iShares Fund's securities and those
in its underlying index, rounding of prices, changes to the underlying index
and regulatory requirements, may cause "tracking error," which is measured as
the divergence of the Underlying iShares Fund's performance from that of its
underlying index. Tracking error also may result because an Underlying iShares
Fund incurs fees and expenses while its underlying index does not incur the
same expenses.
FOR A DESCRIPTION OF THE LIFEPATH PORTFOLIOS' POLICIES AND PROCEDURES WITH
RESPECT TO DISCLOSURE OF THEIR MASTER PORTFOLIOS' PORTFOLIO HOLDINGS, AND A
FURTHER DISCUSSION OF THE LIFEPATH PORTFOLIOS' INVESTMENTS AND RISKS, PLEASE
REFER TO THE LIFEPATH PORTFOLIOS' SAI.
- --------------------------------------------------------------------------------
25
Management of the LifePath Portfolios
INVESTMENT ADVISER
Each LifePath Portfolio is a feeder fund that invests all of its assets in a
Master Portfolio that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. The Master Portfolios, in
turn, invest in a combination of the Underlying Funds. BGFA, a registered
investment adviser, serves as investment adviser to each Master Portfolio, and
also serves as investment adviser to each Underlying Fund, with the exception
of the Underlying Money Market Fund, which invests in a Master Portfolio
advised by BGFA. BGFA manages the investing of the Master Portfolios' assets
and provides the Master Portfolios with investment guidance and policy
direction in connection with daily portfolio management, subject to the
supervision of the Master Portfolios' Board of Trustees. For its services to
the Master Portfolios, BGFA is entitled to receive an annual advisory fee of
0.35% of each Master Portfolio's average daily net assets.
For its services to the Underlying Funds, BGFA receives fees that differ from
the fees described for the LifePath Portfolios in this Prospectus. BGFA
provides investment advisory services for the Underlying Funds that differ from
the investment advisory services it provides for the Master Portfolios. For
those services, BGFA receives investment advisory fees from the Underlying
Funds. In addition, BGI provides administration services to certain of the
Underlying Funds and, for those services, may receive administration fees from
those Underlying Funds. BGFA has contractually agreed to waive its management
fees at the Master Portfolio level in an amount equal to advisory and
administration fees, if any, paid by the Underlying Funds to BGFA and BGI,
respectively, through April 30, 2011.
BGFA is located at 400 Howard Street, San Francisco, CA 94105. It is a
wholly-owned subsidiary of BGI, which in turn is a majority-owned subsidiary of
Barclays Bank PLC. As of February 28, 2009, BGI and its affiliates, including
BGFA, provided investment advisory services for assets in excess of $1.36
trillion. BGI, BGFA, Barclays Global Investors Services, Barclays Bank PLC and
their affiliates deal, trade and invest for their own accounts in the types of
securities in which the Master Portfolios invest.
A discussion regarding the basis for the Master Portfolios' Board of Trustees'
approval of the investment advisory agreements with BGFA is available in each
LifePath Portfolio's semi-annual report for the six-month period ending June
30.
PORTFOLIO MANAGERS
Dagmar Nikles, Leslie Gambon and Dale Hogan (the "Portfolio Managers") are
primarily responsible for the day-to-day management of the Master Portfolios
and act collaboratively on all aspects concerning the Master Portfolios. Each
Portfolio Manager is responsible for various functions related to portfolio
management, including, but not limited to, investing cash inflows, coordinating
with members of their team to focus on certain asset classes, implementing
investment strategy, researching and reviewing investment strategy, and
overseeing members of his or her portfolio management team with more limited
responsibilities.
Ms. Nikles is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since June 2005. Ms. Nikles has been a member of the asset
allocation portfolio management team since July 2003. From September 2002 to
June 2003, Ms. Nikles was pursuing her Financial Risk Manager certification.
Ms. Gambon is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since May 2007. Ms. Gambon has been a member of the asset allocation
portfolio management team since April 2007. Prior to becoming a member of the
asset allocation portfolio
- --------------------------------------------------------------------------------
26 BARCLAYS GLOBAL INVESTORS FUNDS
management team, Ms. Gambon was an Active Equity Product Manager with BGI from
2001 to 2004 and in October 2004 became Head of Defined Contribution Portfolio
Management at BGI.
Mr. Hogan is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since October 2008. Mr. Hogan has been a member of the asset
allocation portfolio management team since May 2007. Prior to becoming a
Portfolio Manager, Mr. Hogan was a derivatives trader with Credit Suisse from
2004 to 2006. From April 2002 through April 2004, Mr. Hogan was a currency
trader at BGI.
The LifePath Portfolios' SAI provides additional information about the
Portfolio Managers' compensation, other accounts managed by the Portfolio
Managers, and the Portfolio Managers' ownership of shares in the LifePath
Portfolios that invest in the Master Portfolios for which they are Portfolio
Managers.
ADMINISTRATIVE SERVICES
BGI provides the following services, among others, as the LifePath Portfolios'
administrator:
[] Supervise the LifePath Portfolios' administrative operations;
[] Provide or cause to be provided management reporting and treasury
administration services;
[] Financial reporting;
[] Legal, blue sky and tax services;
[] Preparation of proxy statements and shareholder reports; and
[] Engaging and supervising shareholder servicing agents (the "Shareholder
Servicing Agents") on behalf of the LifePath Portfolios.
BGI is entitled to receive fees for these services at the annual rate of 0.50%
of the average daily net assets of the Class R Shares of each LifePath
Portfolio. In addition to performing these services, BGI has agreed to bear all
costs of operating the LifePath Portfolios, other than brokerage expenses,
advisory fees, distribution fees, certain fees and expenses related to the
LifePath Portfolios' Independent Trustees and their counsel, auditing fees,
litigation expenses, taxes or other extraordinary expenses.
The Shareholder Servicing Agents service individual and omnibus LifePath
Portfolio accounts pursuant to agreements with the LifePath Portfolios and/or
BGI. In addition to serving as agents of the LifePath Portfolios for purposes
of accepting orders for purchases and redemptions of LifePath Portfolio shares,
Shareholder Servicing Agents may provide administrative support and account
services such as processing purchases and redemptions of shares on behalf of
individual and omnibus LifePath Portfolio accounts, answering shareholder
inquiries, keeping records, transmitting reports and communications from the
LifePath Portfolios, and providing reports on the status of individual and
omnibus accounts. Shareholder Servicing Agents may provide these services, in
whole or in part, by operating electronic transaction systems or websites
through which shareholders may obtain information or engage in purchase or
redemption transactions of LifePath Portfolio shares. By operating these
systems or providing other services described above, the Shareholder Servicing
Agents make the LifePath Portfolios available to their clients.
BGI pays shareholder servicing fees to certain Shareholder Servicing Agents in
amounts not exceeding the maximum fee rates approved by the LifePath
Portfolios' Board of Trustees for those services that the Shareholder Servicing
Agents perform for their clients that would otherwise be performed by BGI or
the LifePath Portfolios' other service providers. In addition, BGFA and/or BGI
pay additional amounts to certain Shareholder Servicing Agents for more
services or to other intermediaries that perform services in connection with a
LifePath Portfolio's shares. These amounts, which may be significant, are paid
by BGFA and/or BGI from their own resources, which generally come directly or
indirectly from fees paid by funds advised by BGFA or administered by BGI. The
LifePath Portfolios' distributor may also pay certain Shareholder Servicing
Agents or intermediaries for such services from its own resources, which
generally come directly or indirectly from fees paid by BGI.
- --------------------------------------------------------------------------------
27
A Shareholder Servicing Agent may make decisions about which investment options
it will service and make available to its clients based on the payments the
Shareholder Servicing Agent may be eligible to receive for its services.
Therefore, payments to a Shareholder Servicing Agent may create potential
conflicts of interest between the Shareholder Servicing Agent and its clients
where the Shareholder Servicing Agent determines which investment options it
will make available to those clients. Additional information regarding the
LifePath Portfolios' shareholder servicing arrangements can be found in the
LifePath Portfolios' SAI, which is available upon request.
DISTRIBUTION PLAN
The LifePath Portfolios have adopted a Distribution Plan applicable to Class R
Shares pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Class R is the only class that has a Distribution Plan. This plan is
used to pay for distribution-related services, including ongoing compensation
to selling agents. The Rule 12b-1 fees are paid out of Class R's assets. Over
time, these fees will increase the cost of your investment in Class R Shares
and may cost you more than paying other types of sales arrangements. The Rule
12b-1 fees are paid at an annual rate of 0.25% of the average daily net assets
of the Class R Shares of the relevant LifePath Portfolios.
Shareholder Information
WHO IS ELIGIBLE TO INVEST
To be eligible to purchase LifePath Portfolio Class R Shares, you must:
[] Invest through an employer-sponsored or individual retirement savings plan;
[] Invest the proceeds rolled over from such retirement savings plan into an
IRA; or
[] Maintain an account with State Street Bank and Trust Company ("State
Street"), the LifePath Portfolios' custodian, transfer agent and dividend
disbursing agent, or with one of the LifePath Portfolios' Shareholder
Servicing Agents.
The LifePath Portfolios offer other classes of shares (Class I Shares and Class
S Shares) with different features and expense levels, which you may be eligible
to buy. Please see the LifePath Portfolios' Class I Shares and Class S Shares
prospectuses for more information.
In order to invest, a completed account application form must be submitted to,
and processed by, your Shareholder Servicing Agent or State Street and an
account number assigned. You may be asked to provide information to verify your
identity when opening an account.
Your Shareholder Servicing Agent may charge you a fee and may offer additional
account services. Additionally, your Shareholder Servicing Agent may have
procedures for placing orders for Class R Shares that differ from those of the
LifePath Portfolios, such as different investment minimums or earlier trading
deadlines. Please contact your Shareholder Servicing Agent directly for more
information and details.
HOW TO BUY SHARES
[] PLAN PARTICIPANT. Invest through payroll deductions or make a direct
contribution by rolling over an amount from another 401(k) plan or from a
rollover IRA (make arrangements through your employer). If you are investing
through a Shareholder Servicing Agent, your Shareholder Servicing Agent is
responsible for properly transmitting your purchase order to State Street and
may impose an earlier deadline than the LifePath Portfolios, as described
below.
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28 BARCLAYS GLOBAL INVESTORS FUNDS
[] TAX-DEFERRED INVESTOR. Invest through a Shareholder Servicing Agent as
provided in your benefit plan documents. Your Shareholder Servicing Agent, plan
sponsor or administrator is responsible for properly transmitting your purchase
order to State Street and may impose an earlier deadline for purchase and
redemption orders than the LifePath Portfolios, as described below.
[] QUALIFIED BUYER. Invest through an account set up with State Street or your
Shareholder Servicing Agent. Your Shareholder Servicing Agent is responsible
for properly transmitting your purchase order to State Street and may impose
an earlier deadline than the LifePath Portfolios, as described below.
You may buy LifePath Portfolio shares without paying a sales charge. Your
purchase order must be received in proper form, as determined by State Street
or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time) (or if regular trading on the NYSE closes early, at such closing
time) on any day the LifePath Portfolios are open (a "Business Day") to
purchase shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day. The LifePath
Portfolios are generally open Monday through Friday and are generally closed on
weekends and any day on which the NYSE is closed.
Each LifePath Portfolio reserves the right to suspend or discontinue the offer
and sale of its shares and reject or cancel any purchase order for any reason.
Purchases generally must be made in U.S. dollars. You may be charged for any
costs incurred in connection with a purchase order that has been placed but for
which the LifePath Portfolio has not received full payment.
HOW TO SELL SHARES
[] PLAN PARTICIPANT AND TAX-DEFERRED INVESTOR. Contact your plan sponsor,
administrator or Shareholder Servicing Agent. Your Shareholder Servicing Agent
is responsible for properly transmitting your sale order to State Street.
[] QUALIFIED BUYER. Contact your Shareholder Servicing Agent. Your Shareholder
Servicing Agent is responsible for properly transmitting your sale order to
State Street.
You may sell LifePath Portfolio shares without paying a sales charge. Your
order to sell shares must be received in proper form, as determined by State
Street or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the NYSE (generally 4:00 p.m. Eastern Time) (or if regular
trading on the NYSE closes early, at such closing time) on any Business Day to
sell shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day.
The LifePath Portfolios generally remit the proceeds from a sale the next
Business Day after receiving a properly executed order to sell and no longer
than seven days after the sale. Each LifePath Portfolio reserves the right to
suspend your right of redemption and to delay delivery of your redemption
proceeds up to seven days, as permitted under applicable law. Each LifePath
Portfolio further reserves the right to automatically redeem your shares and
close your account for any reason, subject to applicable law, and send you the
proceeds, which would reflect the NAV on the day the LifePath Portfolio
automatically redeems your shares. For example, a LifePath Portfolio may
automatically redeem your shares to reimburse the LifePath Portfolio for any
losses sustained by reason of your failure to make full payment for shares
purchased or to collect any charge relating to a transaction effected for your
benefit that is applicable to the LifePath Portfolio's shares as provided from
time to time in this Prospectus.
In addition, each LifePath Portfolio reserves the right to send your redemption
proceeds in the form of securities from its Master Portfolio.
Upon redemption, the identity of the holder of the account to which the
proceeds are being sent may need to be verified.
- --------------------------------------------------------------------------------
29
CALCULATING THE LIFEPATH PORTFOLIOS' SHARE PRICE
Each LifePath Portfolio's share price (also known as a LifePath Portfolio's
NAV) is calculated by dividing the value of the net assets of the LifePath
Portfolio (I.E., the value of its total assets less total liabilities) by the
total number of outstanding shares of the LifePath Portfolio, generally rounded
to the nearest cent.
Each LifePath Portfolio's NAV is calculated at the close of regular trading on
the NYSE (generally, 4:00 p.m. Eastern Time) on any Business Day. If regular
trading on the NYSE closes early, the time for calculating each LifePath
Portfolio's NAV and the deadline for share transactions will be accelerated to
the earlier closing time. The NAV of each LifePath Portfolio is calculated
based on the net asset value of the Master Portfolio in which the LifePath
Portfolio invests. The LifePath Portfolios' SAI includes a description of the
methods for valuing the Master Portfolios' investments, including a description
of the circumstances in which the Master Portfolios' investments would be
valued using fair value pricing and the effects of using fair value pricing.
LIFEPATH PORTFOLIO DISTRIBUTIONS
The LifePath Portfolios distribute their net investment income to shareholders
quarterly. The LifePath Portfolios distribute their net realized capital gains,
if any, to shareholders at least annually. Distributions payable to you will be
automatically reinvested in additional Class R Shares of your LifePath
Portfolio, unless you have elected to receive distribution payments in cash.
FREQUENT TRADING IN LIFEPATH PORTFOLIO SHARES
Frequent purchases and redemptions of mutual fund shares ("frequent trading")
may have a detrimental effect on a fund and its shareholders. Depending on
various factors, such as the size of the fund's investment portfolio and the
amount of assets maintained in cash, frequent trading may harm the performance
of the fund by interfering with the implementation of its investment strategies
and/or increasing transaction costs and taxes, and/or may dilute the value of
fund shares held by long-term investors. Frequent trading may include activity
that appears to attempt to take advantage of a potential arbitrage opportunity
presented by a lag between a change in the value of a fund's investment
portfolio securities after the close of the primary markets for those portfolio
securities and the reflection of that change in the fund's net asset value
("market timing").
Each LifePath Portfolio invests only in interests of its Master Portfolio, and
the Boards of Trustees of the Master Portfolios and the LifePath Portfolios
have each considered the issues of frequent trading and market timing.
The Master Portfolios' Board of Trustees has adopted a policy of not monitoring
for possible market timing activity because the Master Portfolios' holdings are
valued as of the same time that the net asset value of the Master Portfolios is
calculated (generally 4:00 p.m. Eastern Time), which eliminates the potential
arbitrage opportunity presented by a lag between a change in the value of the
Master Portfolios' holdings and the reflection of that change in the Master
Portfolios' respective net asset values. The Master Portfolios' Board of
Trustees has not adopted a policy of monitoring for other forms of frequent
trading because daily flows into and out of the Master Portfolios are
aggregated, and the process of aggregation is expected to reduce the potential
for frequent trading to disrupt the implementation of the Master Portfolios'
investment strategies.
The LifePath Portfolios' Board of Trustees has not adopted a policy of
monitoring for market timing or other frequent trading activity in the LifePath
Portfolios in light of the nature of the LifePath Portfolios' investment in
Master Portfolios, the policies of the Master Portfolios, as described in the
preceding paragraphs, and the historical nature of flows into and out of the
LifePath Portfolios.
BGI's ability to monitor trades that are placed by participants in plans that
are shareholders in the LifePath Portfolios or other shareholders in the
LifePath Portfolios that trade through omnibus accounts maintained by
intermediaries will be severely limited to the extent BGI does not receive
transaction information showing individual investment decisions. Upon request
by the LifePath Portfolios, intermediaries are required to provide certain
transaction information that may enable the LifePath Portfolios to identify
trading activity that is potentially harmful to the LifePath Portfolios. The
- --------------------------------------------------------------------------------
30 BARCLAYS GLOBAL INVESTORS FUNDS
LifePath Portfolios may, but do not have the obligation to, respond to any
potentially harmful trading activity that is identified. In the event any
potentially harmful trading activity is identified, responses may include the
imposition of trading restrictions, the rejection of purchases, or such other
steps the LifePath Portfolios determine are appropriate. Intermediaries'
ability to impose restrictions on the trading practices of their clients may,
however, be affected by legal or technological limitations.
TAXES
The following discussion regarding U.S. federal income taxes is based upon laws
in effect as of the date of this Prospectus and summarizes only some of the
important U.S. federal income tax considerations affecting the LifePath
Portfolios and their U.S. shareholders. This discussion is not intended as a
substitute for careful tax planning. Please see the SAI for additional U.S.
federal income tax information.
Distributions from your LifePath Portfolio's net investment income and net
realized capital gains are taxable, whether you choose to receive them in cash
or automatically reinvest them in additional LifePath Portfolio shares. The
amount of taxes you owe will vary depending on your tax status and on your tax
rate and the amount and character of the LifePath Portfolio's distributions to
you. Normally, distributions are taxable to you when paid. However, when
distributions are declared in the last three months of a year and paid in
January of the next year, they are taxable as if paid on December 31 of the
prior year.
Distributions from the LifePath Portfolios generally are taxable as follows:
DISTRIBUTION TYPE TAX STATUS
- ------------------------- --------------------------------
Qualified dividend
income ................ Qualified dividend income(1)(2)
Other income............. Ordinary income(2)
Short-term capital gain . Ordinary income
Long-term capital gain... Long-term capital gain(3)
- -------
(1) If you are an individual, your distributions attributable to the
LifePath Portfolio's qualified dividend income generally are taxable to
you at a maximum 15% U.S. federal income tax rate, as long as you meet
certain holding period and other requirements. Qualified dividend
income is, in general, dividend income received from taxable U.S. and
certain foreign corporations. Absent further legislation, the reduced
rates of tax for qualified dividend income will expire after December
31, 2010.
(2) A portion of distributions paid to corporate shareholders of the
LifePath Portfolios may qualify for the dividends-received deduction
available to corporations.
(3) An individual's net long-term capital gain currently is subject to a
reduced maximum 15% U.S. federal income tax rate. Absent further
legislation, this reduced 15% maximum tax rate on long-term capital
gain is scheduled to expire after December 31, 2010.
In addition, if you sell your LifePath Portfolio shares you generally will have
a taxable capital gain or loss in an amount equal to the difference between the
net amount of sale proceeds that you receive and your tax basis for the shares
that you sell. In certain circumstances, a loss on the sale may be disallowed:
TRANSACTION TAX STATUS
- --------------------------- --------------------------------
You sell shares owned
for more than one year .. Long-term capital gain or loss
You sell shares owned
for one year or less .... Short-term capital gain or loss
If you buy a LifePath Portfolio's shares shortly before it makes a
distribution, you will, in effect, receive part of your purchase back in the
form of a taxable distribution. Similarly, if you buy shares of a LifePath
Portfolio that holds appreciated securities, you will, in effect, receive part
of your purchase back in a taxable distribution if and when the LifePath
Portfolio sells the appreciated securities and distributes the realized gain on
the sale. The LifePath Portfolios have built up, or have the potential to build
up, high levels of unrealized appreciation in their investments.
- --------------------------------------------------------------------------------
31
After the end of each year, the LifePath Portfolios will send to you a notice
that tells you how much you have received in distributions during the year and
their U.S. federal income tax status. You could also be subject to foreign,
state and local taxes on such distributions.
In certain circumstances, you may be subject to back-up withholding taxes on
distributions to you from the LifePath Portfolios if you fail to provide the
LifePath Portfolios with your correct social security number or other taxpayer
identification number, or to make required certifications, or if you have been
notified by the Internal Revenue Service that you are subject to back-up
withholding.
TAX CONSIDERATIONS FOR TAX-EXEMPT OR FOREIGN INVESTORS OR THOSE HOLDING
LIFEPATH PORTFOLIO SHARES THROUGH A TAX-DEFERRED ACCOUNT, SUCH AS A 401(K) PLAN
OR IRA, WILL BE DIFFERENT. FOR EXAMPLE, SHAREHOLDERS THAT ARE EXEMPT FROM U.S.
FEDERAL INCOME TAX, SUCH AS RETIREMENT PLANS THAT ARE QUALIFIED UNDER SECTION
401 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, GENERALLY ARE NOT SUBJECT
TO U.S. FEDERAL INCOME TAX ON LIFEPATH PORTFOLIO DIVIDENDS OR DISTRIBUTIONS OR
ON SALES OF LIFEPATH PORTFOLIO SHARES. BECAUSE EACH INVESTOR'S TAX
CIRCUMSTANCES ARE UNIQUE AND BECAUSE TAX LAWS ARE SUBJECT TO CHANGE, YOU SHOULD
CONSULT YOUR TAX ADVISOR ABOUT YOUR INVESTMENT.
MASTER/FEEDER MUTUAL FUND STRUCTURE
The LifePath Portfolios do not have their own investment adviser. Instead, each
LifePath Portfolio invests all of its assets in a separate mutual fund, called
a Master Portfolio, that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. BGFA serves as investment
adviser to each Master Portfolio. The Master Portfolios may accept investments
from other feeder funds. Certain actions involving other feeder funds, such as
a substantial withdrawal, could affect the Master Portfolios and, therefore,
the LifePath Portfolios.
FEEDER FUND EXPENSES
Feeder funds, including the LifePath Portfolios, bear their respective Master
Portfolio's expenses in proportion to the amount of assets each invests in the
Master Portfolio. Each feeder fund can set its own transaction minimums,
fund-specific expenses and conditions.
FEEDER FUND RIGHTS
Under the master/feeder structure, the LifePath Portfolios' Board of Trustees
retains the right to withdraw a LifePath Portfolio's assets from its Master
Portfolio if it believes doing so is in the best interests of the LifePath
Portfolio's shareholders. If the Board of Trustees decides to withdraw a
LifePath Portfolio's assets, it would then consider whether the LifePath
Portfolio should hire its own investment adviser, invest in another master
portfolio or take other action.
FUND OF FUNDS
The Master Portfolios do not invest directly in a portfolio of securities.
Instead, they invest in the Underlying Money Market Fund and other Underlying
Funds that are also advised by BGFA. Each Master Portfolio charges for its own
direct expenses, in addition to bearing a PRO RATA share of the expenses
charged by the Underlying Funds in which it invests.
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32 BARCLAYS GLOBAL INVESTORS FUNDS
Financial Highlights
The financial tables in this section are intended to help investors understand
the financial performance of the Class R Shares of each LifePath Portfolio for
the past five years or, if shorter, the period of the LifePath Portfolio's
operations. Certain information reflects financial results for a single Class R
Share of each LifePath Portfolio. The total returns in the tables represent the
rate of return that an investor would have earned (or lost) on an investment in
Class R Shares of a given LifePath Portfolio, assuming reinvestment of all
distributions. The information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the LifePath Portfolios' financial statements, is
included in the LifePath Portfolios' annual report. You may obtain copies of
the annual report, at no cost, by calling 1-877-BGI-1544 (1-877-244-1544)
(toll-free) Monday through Friday from 8:30 a.m. to 6:30 p.m. Eastern Time.
LIFEPATH RETIREMENT PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
--------------- --------------- --------------- --------------- --------------
NET ASSET VALUE, $ 10.70 $ 10.87 $ 10.56 $10.55 $10.44
------- ------- ------- ------ ------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.32 0.36 0.35 0.28 0.18
Net realized and (1.92) 0.09 0.53 0.14 0.45
------- ------- ------- ------ ------
unrealized gain (loss)
TOTAL FROM INVESTMENT (1.60) 0.45 0.88 0.42 0.63
------- ------- ------- ------ ------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.29) (0.35) (0.36) (0.31) (0.22)
Net realized gain (0.04) (0.27) (0.21) (0.10) (0.30)
------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS (0.33) (0.62) (0.57) (0.41) (0.52)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF $ 8.77 $ 10.70 $ 10.87 $10.56 $10.55
======= ======= ======= ====== ======
YEAR
TOTAL RETURN (15.24)% 4.17% 8.52% 4.05% 6.07%
======= ======= ======= ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $25,030 $22,185 $13,460 $9,567 $6,064
(000s)
Ratio of expenses to
average net
assets(a) 1.01% 1.02% 1.03% 1.06% 1.07%
Ratio of expenses to
average net assets
prior to expense 1.36% 1.37% 1.38% 1.40% 1.35%
reductions
Ratio of net investment
income to
average net assets(a) 3.11% 3.06% 3.18% 2.51% 1.69%
Portfolio turnover 11% 6% 10% 11% 138%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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33
LIFEPATH 2010 PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
--------------- --------------- --------------- --------------- --------------
NET ASSET VALUE, $ 12.97 $ 13.31 $ 12.74 $ 12.57 $ 12.13
------- ------- ------- ------- -------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35 0.39 0.38 0.29 0.18
Net realized and (2.54) 0.14 0.86 0.32 0.68
------- ------- ------- ------- -------
unrealized gain (loss)
TOTAL FROM INVESTMENT (2.19) 0.53 1.24 0.61 0.86
------- ------- ------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.32) (0.39) (0.38) (0.31) (0.21)
Net realized gain (0.15) (0.48) (0.29) (0.13) (0.21)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.47) (0.87) (0.67) (0.44) (0.42)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF $ 10.31 $ 12.97 $ 13.31 $ 12.74 $ 12.57
======= ======= ======= ======= =======
YEAR
TOTAL RETURN (17.23)% 3.92% 9.89% 4.94% 7.23%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $91,056 $90,393 $52,548 $31,306 $16,957
(000s)
Ratio of expenses to
average net
assets(a) 1.01% 1.01% 1.02% 1.05% 1.06%
Ratio of expenses to
average net assets
prior to expense 1.35% 1.35% 1.36% 1.39% 1.34%
reductions
Ratio of net investment
income to
average net assets(a) 2.98% 2.88% 2.87% 2.23% 1.56%
Portfolio turnover 12% 7% 12% 12% 130%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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34 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2020 PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
--------------- --------------- --------------- --------------- --------------
NET ASSET VALUE, $ 16.24 $ 16.77 $ 15.22 $ 14.60 $ 13.59
-------- -------- -------- ------- -------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.37 0.38 0.37 0.27 0.19
Net realized and (4.45) 0.13 1.56 0.64 1.03
-------- -------- -------- ------- -------
unrealized gain (loss)
TOTAL FROM INVESTMENT (4.08) 0.51 1.93 0.91 1.22
-------- -------- -------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.29) (0.39) (0.38) (0.29) (0.21)
Net realized gain (0.12) (0.65) - - -
-------- -------- -------- ------- -------
TOTAL DISTRIBUTIONS (0.41) (1.04) (0.38) (0.29) (0.21)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF $ 11.75 $ 16.24 $ 16.77 $ 15.22 $ 14.60
======== ======== ======== ======= =======
YEAR
TOTAL RETURN (25.57)% 3.06% 12.77% 6.28% 9.01%
======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $179,389 $180,740 $118,364 $57,525 $28,692
(000s)
Ratio of expenses to
average net
assets(a) 0.98% 0.99% 1.00% 1.03% 1.04%
Ratio of expenses to
average net assets
prior to expense 1.32% 1.33% 1.33% 1.37% 1.32%
reductions
Ratio of net investment
income to
average net assets(a) 2.51% 2.26% 2.31% 1.82% 1.33%
Portfolio turnover 13% 7% 16% 17% 140%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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35
LIFEPATH 2030 PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
--------------- --------------- --------------- --------------- --------------
NET ASSET VALUE, $ 15.90 $ 16.62 $ 15.15 $ 14.65 $ 13.94
-------- -------- ------- ------- -------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.29 0.31 0.28 0.22 0.15
Net realized and (5.17) 0.09 1.95 0.85 1.30
-------- -------- ------- ------- -------
unrealized gain (loss)
TOTAL FROM INVESTMENT (4.88) 0.40 2.23 1.07 1.45
-------- -------- ------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.23) (0.31) (0.32) (0.23) (0.16)
Net realized gain (0.08) (0.81) (0.44) (0.34) (0.58)
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.31) (1.12) (0.76) (0.57) (0.74)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF $ 10.71 $ 15.90 $ 16.62 $ 15.15 $ 14.65
======== ======== ======= ======= =======
YEAR
TOTAL RETURN (31.19)% 2.38% 14.83% 7.37% 10.51%
======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $133,199 $135,684 $77,890 $39,134 $19,163
(000s)
Ratio of expenses to
average net
assets(a) 0.97% 0.98% 0.99% 1.01% 1.04%
Ratio of expenses to
average net assets
prior to expense 1.31% 1.32% 1.33% 1.35% 1.32%
reductions
Ratio of net investment
income to
average net assets(a) 2.13% 1.85% 1.84% 1.52% 1.24%
Portfolio turnover 13% 7% 22% 24% 138%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
- --------------------------------------------------------------------------------
36 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2040 PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 2008 DEC. 31, 2007 DEC. 31, 2006 DEC. 31, 2005 DEC. 31, 2004
--------------- --------------- --------------- --------------- --------------
NET ASSET VALUE, $ 19.46 $ 20.06 $ 17.47 $ 16.37 $ 14.89
-------- -------- ------- ------- -------
BEGINNING OF YEAR
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.29 0.30 0.25 0.19 0.16
Net realized and (7.13) 0.06 2.64 1.11 1.48
-------- -------- ------- ------- -------
unrealized gain (loss)
TOTAL FROM INVESTMENT (6.84) 0.36 2.89 1.30 1.64
-------- -------- ------- ------- -------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.22) (0.31) (0.30) (0.20) (0.16)
Net realized gain (0.08) (0.65) - - -
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.30) (0.96) (0.30) (0.20) (0.16)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF $ 12.32 $ 19.46 $ 20.06 $ 17.47 $ 16.37
======== ======== ======= ======= =======
YEAR
TOTAL RETURN (35.56)% 1.78% 16.64% 8.01% 11.08%
======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $ 96,873 $110,528 $65,203 $34,710 $23,126
(000s)
Ratio of expenses to
average net
assets(a) 0.94% 0.97% 0.98% 1.01% 1.03%
Ratio of expenses to
average net assets
prior to expense 1.29% 1.31% 1.32% 1.34% 1.31%
reductions
Ratio of net investment
income to
average net assets(a) 1.80% 1.49% 1.46% 1.20% 1.06%
Portfolio turnover 14% 8% 29% 38% 147%
rate(b)
- -------
(a) These ratios include net expenses charged to the corresponding Master
Portfolio.
(b) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
- --------------------------------------------------------------------------------
37
LIFEPATH 2050 PORTFOLIO - CLASS R SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
JUN. 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 20.00
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.14
Net realized and (6.59)
----------
unrealized loss
TOTAL FROM INVESTMENT (6.45)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.06)
Net realized gain (0.00)(b)
Return of capital (0.02)
----------
TOTAL DISTRIBUTIONS (0.08)
----------
NET ASSET VALUE, END OF $ 13.47
==========
PERIOD
TOTAL RETURN (32.28)%(c)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 34
period (000s)
Ratio of expenses to 0.91%
average net
assets(d)(e)
Ratio of expenses to 13.04%
average net assets prior
to expense
reductions(e)
Ratio of net investment 1.68%
income to average net
assets(d)(e)
Portfolio turnover 0%(g)
rate(f)
- -------
(a) Commencement of operations.
(b) Rounds to less than $0.01.
(c) Not annualized.
(d) These ratios include net expenses charged to the corresponding Master
Portfolio.
(e) Annualized for periods of less than one year.
(f) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
(g) Rounds to less than 1%.
- --------------------------------------------------------------------------------
38 BARCLAYS GLOBAL INVESTORS FUNDS
Disclaimers
The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index Fund, iShares S&P
Small Cap 600 Index Fund, iShares S&P National Municipal Bond Fund and the
iShares S&P North America Natural Resources Sector Index Fund are not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the owners of
shares of the iShares Trust (as used in these Disclaimers, the "Trust") or to
any member of the public regarding the advisability of investing in securities
generally or in shares of the Trust (as used in these Disclaimers, "shares") or
the ability of the Standard & Poor's Indexes to track general stock
performance. Standard & Poor's only relationship to the Trust, BGI or BGFA is
the licensing of certain trademarks, trade names and service marks of Standard
& Poor's and of the Standard & Poor's Indexes, which are determined, composed,
and calculated by Standard & Poor's without regard to the Trust, BGI or BGFA.
Standard & Poor's has no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the Standard & Poor's Indexes. Standard & Poor's is not responsible for and has
not participated in the determination of the prices and amount of shares, or
the timing of the issuance or sale of such shares or in the determination or
calculation of the equation by which shares are to be converted into cash.
Standard & Poor's has no obligation or liability in connection with the
administration of the Trust, or the marketing or trading of shares. Standard &
Poor's does not guarantee the accuracy or the completeness of the Standard &
Poor's Indexes or any data included therein and Standard & Poor's shall have no
liability for any errors, omissions, or interruptions therein. Standard &
Poor's makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares, or any other person or entity from the use of the
Standard & Poor's Indexes or any data included therein. Standard & Poor's makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Standard & Poor's Indexes or any data included therein. Without limiting any of
the foregoing, in no event shall Standard & Poor's have any liability for any
special, punitive, indirect, or consequential damages (including lost profits)
resulting from the use of the Standard & Poor's Indexes or any data included
therein, even if notified of the possibility of such damages. There are no
third party beneficiaries of any agreements between Standard & Poor's and BGI
and BGFA.
The iShares Russell Midcap Index Fund and the iShares Russell 2000 Index Fund
(the "iShares Russell Funds") are not sponsored, endorsed, sold or promoted by
Russell Investment Group. Russell Investment Group makes no representation or
warranty, express or implied, to the owners of shares or to any member of the
public regarding the advisability of investing in securities generally or in
shares or the ability of the Russell Indexes to track general stock market
performance. Russell Investment Group's only relationship to the Trust, BGI or
BGFA is the licensing of certain trademarks, service marks, and trade names of
Russell Investment Group's and of the Russell Indexes, which are determined,
composed, and calculated by Russell Investment Group without regard to the
iShares Russell Funds, BGI or BGFA. Russell Investment Group has no obligation
to take the needs of BGI, BGFA or the owners of shares into consideration in
determining, composing or calculating the Russell Indexes. Russell Investment
Group is not responsible for and has not participated in the determination of
the prices and amount of shares, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. Russell Investment Group has no obligation or
liability in connection with the administration of the Trust, or the marketing
or trading of shares. Russell Investment Group does not guarantee the accuracy
or the completeness of the Russell Indexes or any data included therein and
Russell Investment Group shall have no liability for any errors, omissions, or
interruptions therein. Russell Investment Group makes no warranty, express or
implied, as to results to be obtained by BGI, BGFA, owners of shares, or any
other person or entity from the use of the Russell Indexes or any data included
therein. Russell Investment Group makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Russell Indexes or any data
included therein. Without limiting any of the foregoing, in no event shall
Russell Investment Group have any liability for any special, punitive,
indirect, or consequential damages (including lost profits) resulting from the
use of the Russell Indexes or any data included therein, even if notified of
the possibility of such damages. There are no third party beneficiaries of any
agreements between Russell Investment Group and BGI and BGFA.
- --------------------------------------------------------------------------------
39
The iShares Cohen & Steers Realty Majors Index Fund is not sponsored, endorsed,
sold or promoted by Cohen & Steers. Cohen & Steers makes no representation or
warranty, express or implied, to the owners of shares or any member of the
public regarding the advisability of investing in securities generally or in
the iShares Cohen & Steers Realty Majors Index Fund particularly or the ability
of the Cohen & Steers Realty Majors Index to track general stock market
performance. Cohen & Steers' only relationship to the Trust, BGI and BGFA is
the licensing of certain trademarks and trade names of Cohen & Steers and of
the Cohen & Steers Realty Majors Index, which is determined, composed and
calculated by Cohen & Steers without regard to the Trust, BGI, BGFA or the
iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers has no
obligation to take the needs of BGI, BGFA or the owners of shares into
consideration in determining, composing or calculating the Cohen & Steers
Realty Majors Index. Cohen & Steers is not responsible for and has not
participated in the determination of the prices and amount of the iShares Cohen
& Steers Realty Majors Index Fund or the timing of the issuance or sale of the
iShares Cohen & Steers Realty Majors Index Fund or in the determination or
calculation of the equation by which shares of the iShares Cohen & Steers
Realty Majors Index Fund are to be converted into cash. Cohen & Steers has no
obligation or liability in connection with the administration, marketing, or
trading of the iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers
does not guarantee the accuracy or the completeness of the Cohen & Steers
Realty Majors Index or any data included therein and Cohen & Steers shall have
no liability for any errors, omissions, or interruptions therein. Cohen &
Steers makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares of the iShares Cohen & Steers Realty Majors Index
Fund, or any other person or entity from the use of the Cohen & Steers Realty
Majors Index or any data included therein. Cohen & Steers makes no express or
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Cohen & Steers
Realty Majors Index or any data included therein. Without limiting any of the
foregoing, in no event shall Cohen & Steers have any liability for any special,
punitive, indirect, or consequential damages (including lost profits) resulting
from the use of the Cohen & Steers Realty Majors Index or any data included
therein, even if notified of the possibility of such damages.
The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored, endorsed,
sold or promoted by JPMorgan. JPMorgan makes no representation or warranty,
express or implied, to the owners of the iShares JPMorgan USD Emerging Markets
Bond Fund or any member of the public regarding the advisability of investing
in securities generally or in the iShares JPMorgan USD Emerging Markets Bond
Fund particularly or the ability of the JPMorgan EMBI Global Core Index to
track general bond market performance. JPMorgan's only relationship to the
Trust, BGI, or BGFA is the licensing of the JPMorgan EMBI Global Core Index
which is determined, composed and calculated by JPMorgan without regard to the
Trust, BGI, or BGFA or the iShares JPMorgan USD Emerging Markets Bond Fund.
JPMorgan has no obligation to take the needs of Trust, BGI, or BGFA or the
owners of the iShares JPMorgan USD Emerging Markets Bond Fund into
consideration in determining, composing or calculating the JPMorgan EMBI Global
Core Index. JPMorgan is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the iShares
JPMorgan USD Emerging Markets Bond Fund to be issued or in the determination or
calculation of the equation by which the iShares JPMorgan USD Emerging Markets
Bond Fund is to be converted into cash. JPMorgan has no obligation or liability
in connection with the administration, marketing or trading of the iShares
JPMorgan USD Emerging Markets Bond Fund. The JPMorgan EMBI Global Core Index
and the iShares JPMorgan USD Emerging Markets Bond Fund are provided "as is"
with any and all faults. JPMorgan does not guarantee the availability,
sequence, timeliness, quality, accuracy and/or the completeness of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund and/or any data included therein, or otherwise obtained by the Trust, BGI,
BGFA, owners of the iShares JPMorgan USD Emerging Markets Bond Fund, or by any
other person or entity from any use of the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund. JPMorgan makes no
express or implied warranties, and hereby expressly disclaims all warranties of
merchantability of fitness for a particular purpose or use with respect to the
JPMorgan EMBI Global Core Index or any data included therein, or otherwise
obtained by the Trust, BGI, BGFA, owners of the iShares JPMorgan USD Emerging
Markets Bond Fund or by any other person or entity from any use of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund. There are no representations or warranties which extend beyond the
description on the face of this document, if any. All warranties and
representations of any kind with regard to the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund, are disclaimed
including any implied warranties of merchantability, quality, accuracy, fitness
for a particular purpose and/or against infringement and/or warranties as to
any results to be obtained by and/or from the use of the JPMorgan EMBI Global
Core Index and/or the
- --------------------------------------------------------------------------------
40 BARCLAYS GLOBAL INVESTORS FUNDS
iShares JPMorgan USD Emerging Markets Bond Fund. Without limiting any of the
foregoing, in no event shall JPMorgan have any liability for any special,
punitive, direct, indirect, or consequential damages, including lost profits,
even if notified of the possibility of such damages.
The iShares iBoxx $ High Yield Corporate Bond Fund is not sponsored, endorsed
or promoted by IIC. IIC makes no representation or warranty, express or
implied, to the owners of the iShares iBoxx $ High Yield Corporate Bond Fund or
any member of the public regarding the advisability of owning or trading in the
iShares iBoxx $ High Yield Corporate Bond Fund, investing in securities
generally, or the ability of the iBoxx $ Liquid High Yield Index to track the
appropriate bond market performance. IIC's only relationship to the Trust, BGI
or BGFA is the licensing of certain trademarks, servicemarks and trade names of
the iShares iBoxx $ High Yield Corporate Bond Fund, which is determined,
composed and calculated by IIC or its agents without regard to BGI, BGFA or the
owners of the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation to take the needs of BGI, BGFA, or the owners of the iShares iBoxx
$ High Yield Corporate Bond Fund into consideration in determining, composing
or calculating the iBoxx $ Liquid High Yield Index. IIC is not responsible for
and has not participated in the determination or timing of prices, or
quantities of shares to be listed or in the determination or calculation of the
redemption price per share, or the determination of the representative sampling
of bonds used by the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation or liability in connection with the administration, marketing or
trading of the iShares iBoxx $ High Yield Corporate Bond Fund or shares of the
Fund. IIC does not guarantee the accuracy and/or the completeness of the iBoxx
$ Liquid High Yield Index or any data included therein. IIC expressly disclaims
and shall have no liability for any errors, omissions or interruptions therein.
IIC makes no warranty, express or implied, as to the results to be obtained by
BGI and BGFA, the iShares iBoxx $ High Yield Corporate Bond Fund or owners of
the shares of the Fund, or any other person or entity, from the use of the
iBoxx $ Liquid High Yield Index or any data included therein. IIC makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
iBoxx $ Liquid High Yield Index or any data included therein. Without limiting
any of the foregoing, in no event shall IIC have any liability for any lost
profits or special, punitive, direct, indirect or consequential damages even if
notified thereof. There are no third party beneficiaries of any agreements or
arrangements between IIC and BGI and BGFA.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by the FTSE Licensor Parties. The FTSE
Licensor Parties make no representation or warranty, express or implied,
regarding the advisability of investing in securities generally or in the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund particularly or the
ability of the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index to track
general stock market performance. The FTSE Licensor Parties' only relationship
to the Trust, BGI and BGFA is the licensing of certain trademarks, trade names,
and service marks of FTSE Licensor Parties and of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index, which are determined, composed and
calculated by FTSE without regard to the Trust, BGI, and BGFA. The FTSE
Licensor Parties have no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index. The FTSE Licensor
Parties are not responsible for and have not participated in the determination
of the prices and amount of shares of the iShares FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index Fund, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. The FTSE Licensor Parties have no obligation or
liability in connection with the administration, marketing or trading of the
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund. The FTSE
Licensor Parties do not guarantee the accuracy or the completeness of the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index or any data included therein
and the FTSE Licensor Parties shall have no liability for any errors,
omissions, or interruptions therein. The FTSE Licensor Parties make no
warranty, express or implied, as to results to be obtained by BGI, BGFA, owners
of shares of the iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
Fund or any other person or entity from the use of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index or any data included therein. The FTSE
Licensor Parties make no express or implied warranties and expressly disclaim
all warranties of merchantability or fitness for a particular purpose or use
with respect to the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index or any
data included therein. Without limiting any of the foregoing, in no event shall
the FTSE Licensor Parties have any liability for any special, punitive,
indirect, or consequential damages (including lost profits), even if notified
of the possibility of such damages. There are no third party beneficiaries of
any agreements between FTSE and
- --------------------------------------------------------------------------------
41
BGI and BGFA. None of the FTSE Licensor Parties shall be liable (whether in
negligence or otherwise) to any person for any error in the Index and none of
the Licensor Parties shall be under any obligation to advise any person
therein.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund (the
"iShares MSCI Index Funds") are not sponsored, endorsed, sold or promoted by
MSCI or any affiliate of MSCI. Neither MSCI nor any other party makes any
representation or warranty, express or implied, to the owners of shares of the
iShares MSCI Index Funds or any member of the public regarding the advisability
of investing in securities generally or in the iShares MSCI Index Funds
particularly or the ability of the MSCI Indexes to track general stock market
performance. MSCI is the licensor of certain trademarks, service marks and
trade names of MSCI and of the MSCI Indexes, which are determined, composed and
calculated by MSCI without regard to BGI, BGFA or the iShares MSCI Index Funds.
MSCI has no obligation to take the needs of BGI, BGFA or the owners of shares
of the iShares MSCI Index Funds into consideration in determining, composing or
calculating the MSCI Indexes. MSCI is not responsible for and has not
participated in the determination of the timing of, prices at, or quantities of
the iShares MSCI Index Funds to be issued or in the determination or
calculation of the equation by which the iShares MSCI Index Funds are
redeemable for cash. Neither MSCI nor any other party has any obligation or
liability to owners of shares of the iShares MSCI Index Funds in connection
with the administration, marketing or trading of the iShares MSCI Index Funds.
Although MSCI shall obtain information for inclusion in or for use in the
calculation of the MSCI Indexes from sources which MSCI considers reliable,
neither MSCI nor any other party guarantees the accuracy and/or the
completeness of the MSCI Indexes or any data included therein. Neither MSCI nor
any other party makes any warranty, express or implied, as to results to be
obtained by BGI, BGFA, the owners of shares of the iShares MSCI Index Funds, or
any other person or entity from the use of the MSCI Indexes or any data
included hereunder or for any other use. Neither MSCI nor any other party makes
any express or implied warranties, and MSCI hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the MSCI Indexes or any data included therein. Without limiting any of the
foregoing, in no event shall MSCI or any other party have any liability for any
direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
No purchaser, seller or holder of the iShares MSCI Index Funds, or any other
person or entity, should use or refer to any MSCI trade name, trademark or
service mark to sponsor, endorse, market or promote iShares without first
contacting MSCI to determine whether MSCI's permission is required. Under no
circumstances may any person or entity claim any affiliation with MSCI without
the prior written permission of MSCI.
The iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3 Year
Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund, iShares
Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year Treasury
Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares Barclays
Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares Barclays
Government/Credit Bond Fund, iShares Barclays Intermediate Credit Bond Fund,
iShares Barclays Intermediate Government/Credit Bond Fund, iShares Barclays MBS
Bond Fund, iShares Barclays Short Treasury Bond Fund and the iShares Barclays
TIPS Bond Fund (collectively, the "Barclays Capital Funds") are not sponsored,
endorsed or promoted by Barclays Capital. Barclays Capital makes no
representation or warranty, express or implied, to the owners of shares of the
Barclays Capital Funds or any member of the public regarding the advisability
of owning or trading in the Barclays Capital Funds. The Barclays Capital Funds'
underlying indexes (the "Underlying Indexes") are determined, composed and
calculated by Barclays Capital without regard to the iShares Trust or the
owners of shares of the Barclays Capital Funds. Barclays Capital has no
obligation to take the needs of BGFA or the owners of shares of the Barclays
Capital Funds into consideration in determining, composing or calculating the
Underlying Indexes. Barclays Capital is not responsible for and has not
participated in the determination or the timing of prices, or quantities of
shares to be listed or in the determination or calculation of the equation by
which shares are to be converted into cash. Barclays Capital has no obligation
or liability in connection with the administration of iShares Trust or the
marketing or trading of shares of the Barclays Capital Funds. Barclays Capital
does not guarantee the accuracy and/or the completeness of the Underlying
Indexes or any data included therein. Barclays Capital shall have no liability
for any errors, omissions or interruptions therein. Barclays Capital makes no
warranty, express or implied, as to the results to be obtained by BGI and BGFA
or owners of shares of the Barclays Capital Funds, or any other person or
entity, from the use of the Underlying Indexes or any data included therein.
Barclays Capital makes no express or
- --------------------------------------------------------------------------------
42 BARCLAYS GLOBAL INVESTORS FUNDS
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Underlying
Indexes or any data included therein. Without limiting any of the foregoing, in
no event shall Barclays Capital have any liability for any lost profits or
special, punitive, direct, indirect, or consequential damages even if notified
thereof.
BGFA does not guarantee the accuracy or the completeness of any underlying
index or any data included therein and BGFA shall have no liability for any
errors, omissions, or interruptions therein.
BGFA makes no warranty, express or implied, as to results to be obtained by the
series of the Trust, to the owners of shares, or to any other person or entity,
from the use of any underlying index or any data included therein. BGFA makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to any
underlying index or any data included therein. Without limiting any of the
foregoing, in no event shall BGFA have any liability for any special, punitive,
direct, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.
- --------------------------------------------------------------------------------
43
- --------------------------------------------------------------------------------
Copies of the Prospectus, SAI, annual and semi-annual reports to shareholders
and other information are available, without charge, upon request by calling
the number below. For more detailed information about Barclays Global Investors
Funds and the LifePath Portfolios, you may request a copy of the SAI. The SAI
provides information about the LifePath Portfolios and is incorporated by
reference into this Prospectus. This means that the SAI, for legal purposes, is
a part of this Prospectus.
Additional information about the LifePath Portfolios' investments is available
in the LifePath Portfolios' annual or semi-annual reports to shareholders. In
the LifePath Portfolios' annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
LifePath Portfolios' performance during the last fiscal year.
If you have any questions about the LifePath Portfolios or you wish to obtain
the SAI or semi-annual or annual reports free of charge, please:
Call: 1-877-BGI-1544 (1-877-244-1544) (toll-free)
Monday through Friday
8:30 a.m. to 6:30 p.m. (Eastern Time)
E-mail: BGIFunds@barclaysglobal.com
Write: Barclays Global Investors Funds
c/o SEI Investments Distribution Co.
One Freedom Valley Drive, Oaks, PA 19456
The LifePath Portfolios do not have a website, but the LifePath Portfolios'
annual and semi-annual shareholder reports, prospectus and SAI are available
free of charge online at the SEC's website www.sec.gov.
Information about a LifePath Portfolio (including its SAI) can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C., and information
on the operation of the Public Reference Room may be obtained by calling the
SEC at 1-202-551-8090. Reports and other information about the LifePath
Portfolios are available on the EDGAR Database on the SEC's website at
www.sec.gov, and copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
ABOUT ANY LIFEPATH PORTFOLIO AND ITS SHARES NOT CONTAINED IN THIS PROSPECTUS
AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION. READ AND KEEP THE PROSPECTUS
FOR FUTURE REFERENCE.
Investment Company Act File No.: 811-07332
For more information call
1-877-BGI-1544 (1-877-244-1544) (toll-free)
[GRAPHIC APPEARS HERE]
BGF-PR-LPR0509
[GRAPHIC APPEARS HERE]
- --------------------------------------------------------------------------------
Prospectus
May 1, 2009
LIFEPATH(Reg. TM) PORTFOLIOS
CLASS S SHARES
LifePath(Reg. TM) Retirement
LifePath 2010(Reg. TM)
LifePath 2020(Reg. TM)
LifePath 2030(Reg. TM)
LifePath 2040(Reg. TM)
LifePath(Reg. TM) 2050
THE FIRST MUTUAL FUNDS DESIGNED TO OFFER INDIVIDUAL INVESTORS
COMPREHENSIVE ASSET ALLOCATION STRATEGIES THAT ADJUST OVER TIME.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
LifePath(Reg. TM) is a registered servicemark of Barclays Global Investors,
N.A. and the LifePath Products are covered by U.S. Patents 5,812,987 and
6,336,102.
[GRAPHIC APPEARS HERE]
Table of Contents
Overview ............................................................. 1
Investment Objectives ................................................ 3
Summary of Principal Investment Strategies ........................... 4
Summary of Principal Risk Factors .................................... 5
Investment Returns ................................................... 6
Fees and Expenses .................................................... 11
A Further Discussion of Principal Investment Strategies .............. 13
A Further Discussion of Principal Risk Factors ....................... 22
Management of the LifePath Portfolios ................................ 26
Shareholder Information .............................................. 27
Financial Highlights ................................................. 32
Disclaimers .......................................................... 38
- --------------------------------------------------------------------------------
i
Overview
INTRODUCTION
The LifePath Portfolios/1/ are designed to offer individual investors
comprehensive asset allocation strategies tailored to the time when they expect
to begin withdrawing assets. Asset allocation is the distribution of
investments among broad types of asset classes: equity securities, bonds and
money market instruments. Each LifePath Portfolio invests all of its assets in
a separate mutual fund, called a Master Portfolio, that has a substantially
identical investment objective as the LifePath Portfolio. To implement the
asset allocation strategy, each Master Portfolio, in turn, invests in a
combination of equity securities, bond and money market funds (the "Underlying
Funds") in proportions based on its own comprehensive investment strategy that
gradually becomes more conservative as the year in the LifePath Portfolio's
name approaches, except for the LifePath Retirement Portfolio, which is already
in its most conservative phase. Barclays Global Fund Advisors ("BGFA") is the
investment adviser to the Master Portfolios.
WHICH LIFEPATH PORTFOLIO TO CONSIDER
The first step in choosing which LifePath Portfolio to consider is answering a
key question: When will you need the money you are thinking of investing? Will
it be in ten years, when your kids are ready for college? Or 30 years, when you
retire?
The number in the name of most of the LifePath Portfolios is actually a year -
a "target year" when you might expect to begin withdrawing your money.
Selecting the LifePath Portfolio that may be most appropriate for your
investment may be as simple as matching your target year with the closest
LifePath Portfolio target year.
For example, let's say that you are investing for retirement purposes, and that
you expect to retire at age 60. If you are 45 years old, you have 15 years
before retirement. By adding 15 to the current year, you can define your
"target year." If you expect to retire in the year 2023, as in this example,
you may conclude that the LifePath 2020 Portfolio is the most appropriate
LifePath Portfolio for you.
- -------
(1)For simplicity's sake, all discussion of investment objective, strategies
and risks of a particular LifePath Portfolio refers also to the investment
objective, strategies and risks of the Master Portfolio, unless otherwise
indicated. A detailed description of the relationship of the LifePath
Portfolios to their Master Portfolios appears under the heading
"Shareholder Information - Master/Feeder Mutual Fund Structure" in this
Prospectus.
- --------------------------------------------------------------------------------
1
LIFEPATH(Reg. TM) PORTFOLIOS - HOW THEY WORK
[GRAPHIC APPEARS HERE]
NOTE: THE ABOVE CHART IS FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT REPRESENT
THE ACTUAL ALLOCATION PERCENTAGES OF THE LIFEPATH PORTFOLIOS.
The chart shows that over time, the investment mix of each LifePath Portfolio
gradually shifts from a greater concentration of higher-risk investments
(namely, equity securities funds) to a greater concentration of lower-risk
investments (namely, bond funds), thereby making the LifePath Portfolio
increasingly conservative.
In making your investment decision, you should keep in mind:
[] Each LifePath Portfolio's investment strategy derives from the risk
tolerance of average investors with a particular time horizon.
[] Each LifePath Portfolio's time horizon is based on the year in its name,
except for the LifePath Retirement Portfolio, which is designed for investors
who are currently withdrawing, or plan in the near future to begin
withdrawing, a substantial portion of their investment.
If you are willing to accept a greater risk of short-term loss in exchange for
the potential to achieve higher long-term returns, you may invest some or all
of your assets in a LifePath Portfolio with a longer time horizon. If you
desire a more conservative investment and are willing to forego some potential
returns, you may invest some or all of your assets in a LifePath Portfolio with
a shorter time horizon. The final choice is yours.
- --------------------------------------------------------------------------------
2 BARCLAYS GLOBAL INVESTORS FUNDS
Investment Objectives
Each LifePath Portfolio seeks to maximize return consistent with the
quantitatively measured risk that investors on average may be willing to accept
given their investment time horizon. An investor's time horizon marks the point
when the investor plans to start making net withdrawals from his or her
investments. As a general rule, investors with a longer time horizon have a
greater tolerance for risk than investors with a shorter time horizon.
Long-term investors are more likely to accept a greater risk of short-term loss
in exchange for the potential to achieve higher long-term returns. Each
LifePath Portfolio has its own time horizon, which affects the targeted risk
level of the LifePath Portfolio and, in turn, its asset allocation.
SPECIFICALLY:
[] LifePath Retirement Portfolio is managed for investors seeking income and
moderate long-term growth of capital.
[] LifePath 2010 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2010.
[] LifePath 2020 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2020.
[] LifePath 2030 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2030.
[] LifePath 2040 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2040.
[] LifePath 2050 Portfolio is managed for investors planning to retire (or
begin to withdraw substantial portions of their investment) approximately in
the year 2050.
Each LifePath Portfolio's investment objective may be changed by the LifePath
Portfolio's Board of Trustees without shareholder approval.
- --------------------------------------------------------------------------------
3
Summary of Principal Investment Strategies
Each LifePath Portfolio invests all of its assets in a corresponding Master
Portfolio which allocates and reallocates its assets among the Underlying
Funds. The Master Portfolios with longer time horizons invest a greater portion
of their assets in Underlying Funds that invest in equity securities, which
provide a greater opportunity for capital appreciation over the long-term but
have a greater risk of short-term loss. The Master Portfolios with shorter time
horizons invest a greater portion of their assets in Underlying Funds that
invest in bonds and money market instruments, which typically offer reduced
risk and price volatility but forego some potential returns. Accordingly, under
normal circumstances, the LifePath Portfolios with shorter time horizons have
lower expected returns than the LifePath Portfolios with longer time horizons.
[] LifePath Retirement Portfolio is designed for investors seeking current
income and moderate long-term growth of capital. As of March 31, 2009, the
LifePath Retirement Portfolio held approximately 38% of its assets in
Underlying Funds that invest primarily in equity securities, 62% of its assets
in Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
Because the LifePath Retirement Portfolio is in its most conservative phase,
its allocation generally does not become more conservative over time, although
its allocation may change to maintain the LifePath Retirement Portfolio's risk
profile.
[] LifePath 2010 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2010. As of March 31, 2009, the
LifePath 2010 Portfolio held approximately 40% of its assets in Underlying
Funds that invest primarily in equity securities, 60% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2020 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2020. As of March 31, 2009, LifePath
2020 Portfolio held approximately 61% of its assets in Underlying Funds that
invest primarily in equity securities, 39% of its assets in Underlying Funds
that invest primarily in bonds and the remainder of its assets in Underlying
Funds that invest primarily in money market instruments. As the stated time
horizon approaches, the allocation will become more conservative and have
lower expected returns.
[] LifePath 2030 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2030. As of March 31, 2009, the
LifePath 2030 Portfolio held approximately 76% of its assets in Underlying
Funds that invest primarily in equity securities, 24% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2040 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2040. As of March 31, 2009, the
LifePath 2040 Portfolio held approximately 89% of its assets in Underlying
Funds that invest primarily in equity securities, 11% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, the allocation will become more
conservative and have lower expected returns.
[] LifePath 2050 Portfolio is designed for investors expecting to retire or to
begin withdrawing assets around the year 2050. As of March 31, 2009, the
LifePath 2050 Portfolio held approximately 99% of its assets in Underlying
Funds that invest primarily in equity securities, 1% of its assets in
Underlying Funds that invest primarily in bonds and the remainder of its
assets in Underlying Funds that invest primarily in money market instruments.
As the stated time horizon approaches, that allocation will become more
conservative and have lower expected returns.
When a LifePath Portfolio reaches its stated time horizon and enters its most
conservative phase - E.G., the LifePath 2010 Portfolio - the allocation of its
assets is expected to be similar to that of the LifePath Retirement Portfolio.
Such LifePath Portfolio and the LifePath Retirement Portfolio may then continue
to operate as separate funds or, subject to approval by the LifePath
Portfolios' Board of Trustees, they may be merged into a single fund.
- --------------------------------------------------------------------------------
4 BARCLAYS GLOBAL INVESTORS FUNDS
Summary of Principal Risk Factors
As with any investment, your investment in the LifePath Portfolios could lose
money or the Portfolios' performance could trail that of other investments.
EACH LIFEPATH PORTFOLIO HAS A DIFFERENT LEVEL OF RISK.
The value of your investment is subject to equity securities market risk, which
means the price of the equity securities in which the Underlying Funds invest
may fluctuate or fall in response to economic events or trends.
The value of your investment is also subject to bond investment risks,
including interest rate risk, which means that the prices of bonds in which the
Underlying Funds invest may fall because of a rise in interest rates; credit
risk, which is the risk that the price of an individual bond may fall with the
decline in an issuer's real or apparent ability to meet its financial
obligations; extension risk, which is the risk that borrowers may extend the
prepayment of their mortgages or loans for longer periods than expected,
thereby affecting the security's average life and, potentially, its yield; and
prepayment risk, which is the risk that borrowers may prepay their mortgages or
loans faster than expected, thereby affecting the security's average life and,
potentially, its yield. The risk of default and price volatility of high yield
securities is greater than the risk usually associated with higher-rated
securities.
Investments in foreign securities by the Underlying Funds are subject to
certain special risks and considerations, including potentially less liquidity
and greater price volatility than investments in securities traded in the U.S.
markets. These risks are greater for investments in foreign securities issued
by companies or sovereign entities in emerging market countries.
The allocation of each LifePath Portfolio's assets is managed using a
quantitative model that has been developed based on a number of factors.
Neither the LifePath Portfolios nor BGFA can offer any assurance that the
recommended asset allocation will either maximize returns or minimize risk or
be the appropriate allocation in all circumstances for every investor with a
particular time horizon.
The value of your investment is also subject to passive investment risk,
security selection risk and concentration risk. Because BGFA does not select
individual companies in the underlying indexes for certain Underlying Funds,
those Underlying Funds may hold stocks in companies that present risks that an
adviser researching individual stocks might seek to avoid. This is known as
passive investment risk. In the case of the Underlying Funds where BGFA does
select securities based on its analysis, these funds are subject to the risk
that security selection will contribute to underperformance. Concentration risk
is the risk that an Underlying Fund that concentrates in a single industry or
group of industries may be more susceptible to any single economic, market,
political or regulatory occurrence in that industry or group of industries.
The value of your investment is subject to real estate investment risk, which
includes many of the same risks associated with the direct ownership of real
estate.
Investments in derivatives by certain Underlying Funds are subject to special
risks and considerations. Derivatives are financial instruments whose values
are derived, at least in part, from the prices of other securities or specified
assets, indexes or rates.
Certain Underlying Funds are also subject to market trading risks due to their
shares being listed and traded on securities exchanges (including potential
halts in trading or a fluctuation in trading price in accordance with changes
in net asset value), and tracking error risk, in that the return of an
Underlying Fund that seeks to track an index may deviate from the return of
such index.
- --------------------------------------------------------------------------------
5
The LifePath Portfolios must maintain cash balances to meet redemption
requests, which may lower overall portfolio performance.
An investment in a LifePath Portfolio is not a bank deposit and it is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Investment Returns
TOTAL RETURNS
The bar charts and table in this section provide some indication of the risks
of investing in the LifePath Portfolios by showing the changes in their
performance from year to year. The bar charts show the returns for Class S of
each LifePath Portfolio for each of the last ten calendar years./1/ The average
annual total return table compares the average annual total returns (before and
after taxes) of Class S of each LifePath Portfolio to those of a corresponding
index for various periods of time. Effective March 15, 2004, the returns for
each LifePath Portfolio reflect its Master Portfolio's investment in Underlying
Funds. For all periods prior to March 15, 2004, the returns for each LifePath
Portfolio reflect the direct investment by its Master Portfolio in a portfolio
of securities and also reflect investment in accordance with a model that
included "tactical," or short-term, shifts in allocation between stocks and
bonds. In addition, as of December 31, 2003, BGFA made certain changes to its
asset allocation strategies for the LifePath Portfolios, including a change to
the frequency with which the LifePath Portfolios' respective holdings were
rebalanced among asset classes from monthly to quarterly.
How the LifePath Portfolios performed in the past (before and after taxes) is
not necessarily an indication of how they will perform in the future.
LIFEPATH RETIREMENT PORTFOLIO - CLASS S(2)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 5.20%
2000 5.08%
2001 3.95%
2002 -2.35%
2003 12.30%
2004 6.70%
2005 4.67%
2006 9.15%
2007 4.85%
2008 -15.04%
The best calendar quarter return during the years shown above was 7.31% in the
2nd quarter of 2003; the worst was -7.85% in the 4th quarter of 2008.
- -------
(1)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
(2)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
- --------------------------------------------------------------------------------
6 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2010 PORTFOLIO - CLASS S(3)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 9.83%
2000 1.06%
2001 -0.40%
2002 -7.97%
2003 16.01%
2004 7.73%
2005 5.55%
2006 10.50%
2007 4.53%
2008 -17.01%
The best calendar quarter return during the years shown above was 9.23% in the
2nd quarter of 2003; the worst was -8.81% in the 4th quarter of 2008.
LIFEPATH 2020 PORTFOLIO - CLASS S(4)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 14.47%
2000 -3.39%
2001 -6.07%
2002 -12.24%
2003 20.96%
2004 9.62%
2005 6.89%
2006 13.36%
2007 3.69%
2008 -25.38%
The best calendar quarter return during the years shown above was 11.44% in the
2nd quarter of 2003; the worst was -14.10% in the 4th quarter of 2008.
- -------
(3)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
(4)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
- --------------------------------------------------------------------------------
7
LIFEPATH 2030 PORTFOLIO - CLASS S(5)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 17.20%
2000 -5.30%
2001 -9.59%
2002 -15.38%
2003 24.21%
2004 11.13%
2005 7.98%
2006 15.47%
2007 2.99%
2008 -31.06%
The best calendar quarter return during the years shown above was 13.54% in the
2nd quarter of 2003; the worst was -17.85% in the 4th quarter of 2008.
LIFEPATH 2040 PORTFOLIO - CLASS S(6)
YEAR-BY-YEAR RETURNS (YEARS ENDED DECEMBER 31)
[GRAPHIC APPEARS HERE]
1999 21.73%
2000 -9.36%
2001 -13.06%
2002 -18.38%
2003 27.99%
2004 11.78%
2005 8.59%
2006 17.32%
2007 2.38%
2008 -35.41%
The best calendar quarter return during the years shown above was 16.44% in the
4th quarter of 1999; the worst was -20.70% in the 4th quarter of 2008.
LIFEPATH 2050 PORTFOLIO - CLASS S
The LifePath 2050 Portfolio commenced operations on June 30, 2008. Because the
LifePath 2050 Portfolio does not have a full year of operations, it does not
disclose its performance history in this Prospectus.
- -------
(5)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
(6)The performance information for the periods from January 1, 1999 through
May 30, 2008 (the date the Class S Shares commenced operations) shows the
performance of the Class I Shares of the LifePath Portfolios adjusted to
reflect the fees and expenses of the Class S Shares. Performance from May
30, 2008 through December 31, 2008 reflects the actual performance of
Class S Shares.
- --------------------------------------------------------------------------------
8 BARCLAYS GLOBAL INVESTORS FUNDS
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 2008
CLASS S SHARES(1)
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(2)
------------ --------- ---------- -------------
LIFEPATH RETIREMENT
PORTFOLIO
Return Before Taxes -15.04% 1.61% 3.08% 4.89%
Return After Taxes on -15.93% 0.39% 1.65% 3.29%
Distributions(3)
Return After Taxes on -9.51% 1.77% 2.40% 3.71%
Distributions and Sale
of Fund Shares(3)
LifePath Retirement -14.53% 2.42% 3.91% 5.83%
Portfolio Custom
Benchmark(4)(5)
LIFEPATH 2010 PORTFOLIO
Return Before Taxes -17.01% 1.70% 2.46% 5.85%
Return After Taxes on -18.01% 0.54% 1.07% 4.31%
Distributions(3)
Return After Taxes on -10.62% 2.10% 2.03% 4.76%
Distributions and Sale
of Fund Shares(3)
LifePath 2010 Portfolio -16.51% 2.52% 3.39% 6.54%
Custom Benchmark(4)(5)
LIFEPATH 2020 PORTFOLIO
Return Before Taxes -25.38% 0.49% 1.16% 5.83%
Return After Taxes on -25.88% -0.22% 0.22% 4.65%
Distributions(3)
Return After Taxes on -16.04% 1.80% 1.41% 5.20%
Distributions and Sale
of Fund Shares(3)
LifePath 2020 Portfolio -25.39% 1.13% 2.01% 6.25%
Custom Benchmark(4)(5)
LIFEPATH 2030 PORTFOLIO
Return Before Taxes -31.06% -0.39% 0.28% 5.86%
Return After Taxes on -31.38% -1.25% -0.84% 4.62%
Distributions(3)
Return After Taxes on -19.78% 1.51% 0.86% 5.47%
Distributions and Sale
of Fund Shares(3)
LifePath 2030 Portfolio -31.34% 0.12% 1.03% 5.99%
Custom Benchmark(4)(5)
LIFEPATH 2040 PORTFOLIO
Return Before Taxes -35.41% -1.26% -0.66% 5.81%
Return After Taxes on -35.62% -1.63% -1.37% 4.89%
Distributions(3)
Return After Taxes on -22.63% 1.30% 0.41% 5.77%
Distributions and Sale
of Fund Shares(3)
LifePath 2040 Portfolio -36.01% -0.80% 0.14% 5.90%
Custom Benchmark(4)(5)
LIFEPATH 2050 PORTFOLIO
Return Before Taxes N/A N/A N/A -32.10%
Return After Taxes on N/A N/A N/A -32.21%
Distributions(3)
Return After Taxes on N/A N/A N/A -20.74%
Distributions and Sale
of Fund Shares(3)
LifePath 2050 Portfolio N/A N/A N/A -32.47%
Custom Benchmark(4)(5)
S&P 1500 Index(5) -36.72% -1.89% -0.76% N/A
Barclays Capital U.S. 5.24% 4.65% 5.63% N/A
Aggregate Bond
Index(5)(6)
MSCI All Country World -45.98% 2.62% 2.26% N/A
Index ex US IMI
Index(5)
MSCI All Country World -45.53% 2.56% 1.90% N/A
Index ex USA(5)
Citigroup 3-Month 1.81% 3.10% 3.30% N/A
Treasury Bill Index(5)
Barclays Capital U.S.
Treasury Inflation
Protected Securities
(TIPS) Index
(Series-L)(5)(6) -2.35% 4.07% 6.79% N/A
FTSE EPRA/NAREIT Global -47.72% 1.96% N/A N/A
Real Estate Index(5)
Cohen & Steers Realty -40.93% 1.17% N/A N/A
Majors Index(5)
- --------------------------------------------------------------------------------
9
- -------
(1) Performance shown for the periods prior to May 30, 2008 (the date the
Class S Shares commenced operations) reflects the performance of the
Class I Shares adjusted to reflect the fees and expenses of the Class S
Shares. Performance from May 30, 2008 reflects the actual performance
of Class S Shares. Effective March 15, 2004, the returns for each
LifePath Portfolio reflect its Master Portfolio's investment in
Underlying Funds. For all periods prior to March 15, 2004, the returns
for each LifePath Portfolio reflect the direct investment by its Master
Portfolio in a portfolio of securities and also reflect investment in
accordance with a model that included "tactical," or short-term, shifts
in allocation between stocks and bonds. In addition, as of December 31,
2003, BGFA made certain changes to its asset allocation strategies for
the LifePath Portfolios, including a change to the frequency with which
the LifePath Portfolios' respective holdings were rebalanced among
asset classes from monthly to quarterly.
(2) The inception date of the Class S Shares of the LifePath Retirement
Portfolio, LifePath 2010 Portfolio, LifePath 2020 Portfolio, LifePath
2030 Portfolio and LifePath 2040 Portfolio is May 30, 2008. The
inception date of the Class S Shares of the LifePath 2050 Portfolio is
June 30, 2008. The returns for the Class S Shares of the LifePath 2050
Portfolio are not annualized. The inception date of the LifePath
Retirement Portfolio Custom Benchmark, LifePath 2010 Portfolio Custom
Benchmark, LifePath 2020 Portfolio Custom Benchmark, LifePath 2030
Portfolio Custom Benchmark and LifePath 2040 Portfolio Custom Benchmark
is March 1, 1994. The inception date of the LifePath 2050 Portfolio
Custom Benchmark is June 30, 2008.
(3) After tax returns in the table above are calculated using the
historical highest individual federal marginal income tax rates and do
not reflect the impact of state, local or foreign taxes. Actual
after-tax returns depend on an investor's tax situation and may differ
from those shown, and after-tax returns shown are not relevant to
tax-exempt investors or investors who hold shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts
("IRAs"). A LifePath Portfolio's returns after taxes on distributions
and sale of LifePath Portfolio shares are calculated assuming that an
investor has sufficient capital gains of the same character from other
investments to offset any capital losses from the sale of LifePath
Portfolio shares. As a result, a LifePath Portfolio's returns after
taxes on distributions and sale of LifePath Portfolio shares may exceed
the LifePath Portfolio's returns before taxes and/or returns after
taxes on distributions.
(4) The LifePath Portfolios' custom benchmarks are hypothetical
representations of the performance of the respective LifePath
Portfolio's asset classes according to their weightings as of the most
recent quarter end. The weightings of the various indexes that are
included in the LifePath Portfolios' custom benchmarks are adjusted
quarterly to reflect the LifePath Portfolios' changing asset
allocations over time. As of December 31, 2008, the following indexes
are used to calculate the LifePath Portfolios' custom benchmarks: S&P
500 Index, S&P 400 Index, S&P 600 Index, Barclays Capital U.S.
Aggregate Bond Index, Citigroup 3-Month Treasury Bill Index, Barclays
Capital U.S. Treasury Inflation Protected Securities (TIPS) Index
(Series-L), MSCI All Country World Index ex US IMI Index and FTSE
EPRA/NAREIT Global Real Estate Index. The MSCI All Country World Index
ex US IMI Index replaced the MSCI All Country World Index ex USA Index
on July 1, 2008. The FTSE EPRA/NAREIT Global Real Estate Index replaced
the Cohen & Steers Realty Majors Index on July 1, 2008.
(5) Reflects no deductions for fees, expenses or taxes.
(6) Effective November 3, 2008, the names of the noted indexes changed
from the Lehman Brothers U.S. Aggregate Index and Lehman Brothers U.S.
Treasury TIPS Index to the Barclays Capital U.S. Aggregate Bond Index
and Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L), respectively. Changes to these indexes are
discussed further on page 21.
BGFA and BGI have in the past waived and may from time to time agree to waive
all or a portion of their fees or reimburse expenses to a Master Portfolio or
LifePath Portfolio. When they do so, the applicable LifePath Portfolio's
operating expenses are reduced so that the LifePath Portfolio's total return is
increased. These waivers and reimbursements may be discontinued at any time,
except as described in footnotes 1 and 2 to the Fees and Expenses table on the
immediately following page. In the absence of such waivers and/or
reimbursements, the applicable LifePath Portfolio's total return would be
lower.
- --------------------------------------------------------------------------------
10 BARCLAYS GLOBAL INVESTORS FUNDS
Fees and Expenses
The table below describes the fees and expenses that you may pay if you buy and
hold Class S Shares of a LifePath Portfolio. The expenses are deducted from
each LifePath Portfolio's assets, which means you pay them indirectly. This
table does not reflect charges that may be imposed in connection with an
account in which you hold the shares. A broker-dealer or financial institution
maintaining the account in which you hold shares may charge a separate account,
service or transaction fee on the purchase or sale of Class S Shares that would
be in addition to the fees and expenses shown here.
The total annual operating expense ratios in the table and the example on the
next page reflect the expenses of the Class S Shares of each LifePath Portfolio
and its corresponding Master Portfolio and also reflect a weighted average of
the total operating expense ratios of the Underlying Funds in which each Master
Portfolio invests:
ANNUAL CLASS OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
(Expenses that are Deducted from Class Assets)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
Management fees(1) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other expenses 0.17% 0.16% 0.16% 0.16% 0.16% 0.16%
(Administration fees;
Independent
Expenses(2))
Acquired fund fees and 0.34% 0.34% 0.35% 0.35% 0.35% 0.42%
expenses (Underlying
Funds)(3)
Total annual class 0.86% 0.85% 0.86% 0.86% 0.86% 0.93%
operating
expenses(1)(2)(3)
Less fee waivers and/or 0.36% 0.35% 0.36% 0.36% 0.36% 0.43%
expense
reimbursements(1)(2)
Net expenses(1)(2)(4) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
- -------
(1) BGFA, the investment adviser to the Master Portfolios, has
contractually agreed to waive its management fees at the Master
Portfolio level in an amount equal to advisory fees and administration
fees, if any, charged to the Underlying Funds through April 30, 2011
(the "contractual waiver").
(2) "Independent Expenses" consist of those fees and expenses of the
Independent Trustees of the LifePath Portfolios and the Master
Portfolios, counsel to the Independent Trustees of the LifePath
Portfolios and the Master Portfolios and the independent registered
public accounting firm that provides audit and non-audit services in
connection with the LifePath Portfolios and the Master Portfolios that
are allocated to the Class S Shares of the LifePath Portfolios.
Barclays Global Investors, N.A. ("BGI") and BGFA, as applicable, have
contractually agreed to reimburse, or provide offsetting credits to,
the Class S Shares of the LifePath Portfolios and the Master Portfolios
for Independent Expenses through April 30, 2011. After giving effect to
such contractual arrangements, Independent Expenses will be 0.00%. For
the LifePath 2050 Portfolio, other expenses are based on estimated
amounts for 2009.
(3) Acquired fund fees and expenses (Underlying Funds) reflect each
LifePath Portfolio's PRO RATA share of the fees and expenses incurred
by investing in the Underlying Funds. For the LifePath 2050 Portfolio,
these fees and expenses are based on estimated amounts for 2009.
(4) The LifePath Portfolios' service providers may voluntarily waive
certain of their fees or reimburse certain expenses, as they determine,
from time to time; this table does not reflect such waivers or
reimbursements.
- --------------------------------------------------------------------------------
11
EXAMPLE
The example below is intended to help you compare the cost of investing in
Class S Shares of the LifePath Portfolios with the cost of investing in other
mutual funds. The example illustrates the cost you would have incurred on an
initial $10,000 investment in Class S Shares of each LifePath Portfolio over
the time periods shown. It assumes your investment earns an annual return of 5%
over the periods, that total operating expenses remain the same and that the
contractual fee waivers and reimbursements by BGFA and BGI are in effect for
two years.
THE LIFEPATH PORTFOLIOS DO NOT CHARGE A SALES LOAD OR OTHER FEE UPON
REDEMPTION. This means that your cost for each period would be the same whether
or not you sell your shares at the end of a period. Your actual costs may be
higher or lower than this hypothetical example:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- ------------- -----------
LifePath Retirement $51 $200 $404 $992
Portfolio
LifePath 2010 Portfolio $51 $199 $401 $982
LifePath 2020 Portfolio $51 $200 $404 $992
LifePath 2030 Portfolio $51 $200 $404 $992
LifePath 2040 Portfolio $51 $200 $404 $992
LifePath 2050 Portfolio $51 $208 N/A N/A
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12 BARCLAYS GLOBAL INVESTORS FUNDS
A Further Discussion of Principal Investment Strategies
INTRODUCTION
Each LifePath Portfolio pursues a common strategy of allocating and
reallocating its assets among the Underlying Funds. The LifePath Portfolios
with longer time horizons invest a greater portion of their assets in
Underlying Funds that invest in equity securities, which provide a greater
potential to achieve higher returns over the long-term but have a greater risk
of short-term loss. In addition to investing in Underlying Funds, each LifePath
Portfolio may borrow, lend its portfolio securities to brokers, dealers and
financial institutions, and may invest the collateral in certain short-term
instruments either directly or through one or more joint accounts or money
market funds, as described in greater detail in the LifePath Portfolios'
combined Statement of Additional Information ("SAI").
The LifePath Portfolios with shorter time horizons invest a greater portion of
their assets in Underlying Funds that invest in bonds and money market
instruments, which typically offer reduced risk and price volatility, but
forego some potential returns. Accordingly, under normal circumstances, the
LifePath Portfolios with shorter time horizons have lower expected returns than
the LifePath Portfolios with longer time horizons. As each LifePath Portfolio
approaches its designated time horizon, it systematically seeks to reduce the
level of risk by allocating assets more conservatively among the Underlying
Funds. This systematic shift toward more conservative investments is designed
to reduce the risk of significant reductions in the value of an investment in a
LifePath Portfolio as it approaches its time horizon.
For example, the LifePath Retirement Portfolio has entered its "retirement
phase" and seeks to maximize returns consistent with the risk that an average
investor in retirement may be willing to accept. This does not mean, however,
that it invests exclusively, or primarily, in Underlying Funds that are money
market funds. Rather, because BGFA believes that most investors are still
willing to take some risks in pursuing returns even while drawing on their
investments, a portion of the LifePath Retirement Portfolio's assets will
continue to be allocated to Underlying Funds that are equity and bond funds, in
addition to Underlying Funds that are money market funds.
In determining the allocation of assets to the Underlying Funds, BGFA uses a
proprietary investment model that analyzes securities market data, including
risk, asset class correlations, and expected returns, to provide portfolio
allocations among the asset classes represented by the Underlying Funds. The
allocations are periodically monitored and rebalanced in an effort to maximize
expected return for a given level of risk. In managing the LifePath Portfolios,
BGFA focuses on long-term targets and objectives. The progression over time of
a LifePath Portfolio's asset allocation to more conservative asset classes is a
relatively steady process resulting in only gradual changes to the asset
allocation from quarter to quarter. The Underlying Funds invest in a mix of
equity securities, bonds and money market instruments. Certain Underlying Funds
invest in real estate investment trusts ("REITs"), foreign securities, emerging
markets, below investment-grade bonds and derivatives, which are subject to
additional risks, as described in the "Further Discussion of Principal Risk
Factors" section of this Prospectus. The investment model adjusts each LifePath
Portfolio's risk level by gradually making it more conservative as the year in
the LifePath Portfolio's name approaches, except for the LifePath Retirement
Portfolio, which is already in its most conservative phase.
THE UNDERLYING FUNDS
Two of the Underlying Funds - the Active Stock Master Portfolio and the
CoreAlpha Bond Master Portfolio (collectively, the "Underlying Master
Portfolios") - are diversified portfolios of Master Investment Portfolio
("MIP"). The Active Stock Master Portfolio seeks to provide long-term
appreciation of capital. BGFA invests the Active Stock Master Portfolio's
assets using a proprietary quantitative model that is designed to select stocks
based on an analysis of a wide range of company-specific factors. The CoreAlpha
Bond Master Portfolio seeks to provide a combination of income and capital
growth. BGFA invests the CoreAlpha Bond Master Portfolio's assets pursuant to a
systematic method that relies on
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13
proprietary quantitative models to allocate assets among various bond sectors
by evaluating each sector's relative value and risk-adjusted return.
The remaining Underlying Funds, other than the Barclays Global Investors Funds
("BGIF") Institutional Money Market Fund (the "Underlying Money Market Fund")
are exchange-traded funds ("ETFs") that are part of the iShares family of funds
("Underlying iShares Funds"). Each of the Underlying iShares Funds seeks
investment results that correspond generally to the performance, before fees
and expenses, of its underlying index. As a result, adverse performance of a
particular security in an Underlying iShares Fund's portfolio will ordinarily
not result in the elimination of the security from the Underlying iShares
Fund's portfolio. Each Underlying iShares Fund offers and issues iShares at
their net asset value per share only to certain institutional investors in
aggregations of a specified number of iShares, generally in exchange for a
basket of securities included in its underlying index, together with the
deposit of a specified cash payment. The iShares for these Underlying iShares
Funds are listed and traded on national securities exchanges and also may be
listed on certain non-U.S. exchanges. BGFA purchases iShares on behalf of the
Master Portfolios in the secondary market.
The relative weightings for each Master Portfolio in the various Underlying
Funds will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time.
Each Master Portfolio currently expects to invest in some or all of the
Underlying Funds described below:
ACTIVE STOCK MASTER PORTFOLIO
Seeks to provide long-term appreciation of capital. The Active Stock Master
Portfolio invests, under normal circumstances, at least 80% of its assets in
common stocks. The Active Stock Master Portfolio invests primarily in equity
securities of U.S. companies with market capitalizations similar to the range
of market capitalizations represented in the Standard & Poor's S&P 500 Index.
BGFA invests the Active Stock Master Portfolio's assets using a proprietary
quantitative model that is designed to select stocks based on an analysis of a
wide range of company-specific factors, such as relative values based on
earnings and cash flows; earnings quality as measured by the company's
financial condition and earnings reports; sentiment as expressed through
management and market participant behavior; and industry classification. BGFA
considers risk parameters in deciding upon the Active Stock Master Portfolio's
aggregate holdings, and factors trading costs into its stock selection process.
COREALPHA BOND MASTER PORTFOLIO
Seeks to provide a combination of income and capital growth. BGFA invests the
CoreAlpha Bond Master Portfolio's assets pursuant to a systematic method that
relies on proprietary quantitative models to allocate assets among various bond
sectors by evaluating each sector's relative value and risk-adjusted return.
BGFA's models also allocate assets among bonds of different maturities based on
yield characteristics and expectations. Specific investment selection decisions
are made on the basis of evaluations of relative value, credit quality and
other factors. The CoreAlpha Bond Master Portfolio invests, under normal
circumstances, at least 80% of its assets in bonds. For the purposes of this
strategy, "bonds" include the following: obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including U.S. agency mortgage pass-through securities;
commercial mortgage-backed securities; debt obligations of U.S. corporations;
dollar-denominated debt obligations of foreign issuers; municipal securities;
and asset-backed securities. The CoreAlpha Bond Master Portfolio invests a
substantial portion of its assets in U.S.-registered, dollar-denominated bonds.
The CoreAlpha Bond Master Portfolio may invest in bonds of any maturity or
duration.
BGIF INSTITUTIONAL MONEY MARKET FUND
Seeks a high level of income consistent with liquidity and the preservation of
capital. The BGIF Institutional Money Market Fund invests in high-quality,
short-term money market instruments that include fixed-rate, floating-rate and
variable-rate debt securities. The BGIF Institutional Money Market Fund also
may invest in high-quality, short-term U.S.
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14 BARCLAYS GLOBAL INVESTORS FUNDS
and foreign government debt, including the debt of agencies and
instrumentalities, such as the Federal National Mortgage Association ("Fannie
Mae"), U.S. and foreign bank obligations, corporate obligations, repurchase
agreements and asset-backed securities.
UNDERLYING ISHARES FUNDS
In managing each of the Underlying iShares Funds, BGFA uses a representative
sampling index strategy. Representative sampling is an indexing strategy that
involves investing in a representative sample of securities that 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 applicable
underlying index. Underlying iShares Funds that use representative sampling may
or may not hold all of the securities in the relevant underlying index.
ISHARES S&P 500 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P 500 Index. The S&P 500 Index
measures the performance of the large-capitalization sector of the U.S. equity
market. The component stocks are weighted according to the float-adjusted
market value of their outstanding shares.
ISHARES S&P MIDCAP 400 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P MidCap 400 Index. The S&P
MidCap 400 Index measures the performance of the mid-capitalization sector of
the U.S. equity market. The stocks in the S&P MidCap 400 Index have a market
capitalization between $1.5 billion and $5.5 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P SMALLCAP 600 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P SmallCap 600 Index. The S&P
SmallCap 600 Index measures the performance of the small-capitalization sector
of the U.S. equity market. The stocks in the S&P SmallCap 600 Index have a
market capitalization between $300 million and $2 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation.
ISHARES S&P NATIONAL MUNICIPAL BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the municipal bond sector of the U.S.
as defined by the S&P National Municipal Bond Index. The S&P National Municipal
Bond Index measures the performance of the investment-grade segment of the U.S.
municipal bond market. As of March 31, 2009, there were 523 issues in the S&P
National Municipal Bond Index.
ISHARES S&P NORTH AMERICAN NATURAL RESOURCES SECTOR INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the S&P North American Natural
Resources Sector Index(TM). The S&P North American Natural Resources Sector
Index(TM) measures the performance of U.S.-traded stocks of natural
resource-related companies in the U.S. and Canada, and includes companies in
the following categories: producers of oil, gas and consumable fuels, energy
equipment and services, metals and mining, manufacturers of paper and forest
products, and producers of construction materials, containers and packaging.
ISHARES RUSSELL MIDCAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell Midcap(Reg. TM) Index.
The Russell Midcap(Reg. TM) Index measures the performance of the
mid-capitalization sector of the
- --------------------------------------------------------------------------------
15
U.S. equity market. The Russell Midcap(Reg. TM) Index is a float-adjusted,
capitalization-weighted index of the 800 smallest issuers in the Russell
1000(Reg. TM) Index.
ISHARES RUSSELL 2000 INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Russell 2000(Reg. TM) Index. The
Russell 2000(Reg. TM) Index measures the performance of the small
capitalization sector of the U.S. equity market. The Russell 2000(Reg. TM)
Index is a float-adjusted, capitalization-weighted index of equity securities
issued by the approximately 2,000 smallest issuers in the Russell 3000(Reg. TM)
Index.
ISHARES COHEN & STEERS REALTY MAJORS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Cohen & Steers Realty Majors
Index (the "Cohen & Steers Index"). The Cohen & Steers Index consists of
selected U.S. REITs. The objective of the Cohen & Steers Index is to represent
relatively large and liquid REITs that may benefit from future consolidation
and securitization of the U.S. real estate industry. REITs are selected for
inclusion in the Cohen & Steers Index based on a rigorous review of several
factors, including management, portfolio quality, and sector and geographic
diversification. The REITs selected for inclusion in the Cohen & Steers Index
must meet minimum market capitalization and liquidity requirements. The Cohen &
Steers Index is weighted according to the total market value of each REIT's
outstanding shares and is adjusted quarterly so that no REIT represents more
than 8% of the Cohen & Steers Index.
ISHARES FTSE EPRA/NAREIT DEVELOPED REAL ESTATE EX-U.S. INDEX FUND(1)
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE EPRA/NAREIT Developed Real
Estate ex-U.S. Index. The FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
measures the stock performance of companies engaged in the ownership and
development of the Canadian, European, Middle East and Asian real estate
markets. As of March 31, 2009, the FTSE EPRA/NAREIT Developed Real Estate
ex-U.S. Index was comprised of stocks of companies in the following countries:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom.
ISHARES MSCI CANADA INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Canada Index developed by
MSCI, Inc. ("MSCI"). The MSCI Canada Index consists of stocks traded primarily
on the Toronto Stock Exchange.
ISHARES MSCI EAFE INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE(Reg. TM) Index. The
MSCI EAFE(Reg. TM) Index has been developed by MSCI as an equity benchmark for
its international stock performance. The MSCI EAFE Index includes stocks from
Europe, Australasia and the Far East.
- -------
(1)Effective March 23, 2009, the name of the fund changed from the iShares
FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund to the iShares FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund to reflect changes in
the name of the fund's corresponding underlying index from FTSE
EPRA/NAREIT Global Real Estate ex-U.S. Index to FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index.
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16 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES MSCI EAFE SMALL CAP INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI EAFE Small Cap Index. The
MSCI EAFE Small Cap Index targets 40% of the eligible small-capitalization
universe in each industry group of each country represented by the MSCI
EAFE(Reg. TM) Index. The MSCI EAFE(Reg. TM) Index includes securities from
Europe, Australasia and the Far East. MSCI defines the small-capitalization
universe as all listed securities that have a market capitalization between
$200 million and $1,500 million (which may fluctuate depending on the overall
level of the equity markets). In addition to this capitalization range, MSCI
uses a specialized framework of foreign inclusion factors to adjust the market
capitalization of securities for free float available to foreign investors.
ISHARES MSCI EMERGING MARKETS INDEX FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Emerging Markets Index. The
MSCI Emerging Markets Index is designed to measure equity market performance in
the global emerging markets. As of March 31, 2009, the MSCI Emerging Markets
Index consisted of the following 25 emerging market country indexes: Argentina,
Brazil, Chile, China, Columbia, the Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand and
Turkey. Emerging market country indexes may be added to or deleted from the
MSCI Emerging Markets Index from time to time. The iShares MSCI Emerging
Markets Index Fund, in order to improve its portfolio liquidity and its ability
to track the MSCI Emerging Markets Index, may invest up to 10% of its assets in
shares of other iShares funds that invest in securities in the MSCI Emerging
Markets Index. BGFA will not charge advisory fees on that portion of the
iShares MSCI Emerging Markets Index Fund's assets invested in shares of other
iShares funds.
ISHARES BARCLAYS 1-3 YEAR CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. 1-3 Year
Credit Bond Index. The Barclays Capital U.S. 1-3 Year Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are U.S.
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than three years.
ISHARES BARCLAYS 1-3 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 1-3 Year Treasury Bond
Index. The Barclays Capital U.S. 1-3 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to one year and less than three years.
ISHARES BARCLAYS 3-7 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 3-7 Year Treasury
Bond Index. The Barclays Capital U.S. 3-7 Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of greater than or equal to three years and less than seven years.
ISHARES BARCLAYS 7-10 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the intermediate-term sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury
Bond Index. The Barclays Capital U.S. 7-10 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to seven years and less than ten
years.
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17
ISHARES BARCLAYS 10-20 YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 10-20 Year Treasury
Bond Index. The Barclays Capital U.S. 10-20 Year Treasury Bond Index measures
the performance of public obligations of the U.S. Treasury that have a
remaining maturity of greater than or equal to ten years and less than 20
years.
ISHARES BARCLAYS 20+ YEAR TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the long-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. 20+ Year Treasury Bond
Index. The Barclays Capital U.S. 20+ Year Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of 20 or more years.
ISHARES BARCLAYS AGGREGATE BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the total U.S. investment-grade bond
market as defined by the Barclays Capital U.S. Aggregate Bond Index (the
"Barclays Capital Index"). The Barclays Capital Index measures the performance
of the U.S. investment-grade bond market, which includes investment-grade U.S.
Treasury bonds, government-related bonds, investment-grade corporate bonds,
mortgage pass-through securities, commercial mortgage-backed securities and
asset-backed securities that are publicly offered for sale in the United
States. The securities in the Barclays Capital Index must have $250 million or
more of outstanding face value and must have at least one year remaining to
maturity. In addition, the securities must be denominated in U.S. dollars and
must be fixed-rate and non-convertible. Certain types of securities, such as
state and local government series bonds, structured notes with embedded swaps
or other special features, private placements, floating-rate securities and
Eurobonds are excluded from the Barclays Capital Index. The Barclays Capital
Index is market capitalization weighted and the securities in the Barclays
Capital Index are updated on the last calendar day of each month.
ISHARES BARCLAYS CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade credit sector of
the United States bond market as defined by the Barclays Capital U.S. Credit
Bond Index. The Barclays Capital U.S. Credit Bond Index measures the
performance of investment-grade corporate debt and sovereign, supranational,
local authority and non-U.S. agency bonds that are dollar-denominated and have
a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Government/Credit Bond Index. The Barclays Capital U.S.
Government/Credit Bond Index measures the performance of dollar-denominated
U.S. Treasuries, government-related (I.E., U.S. and foreign agencies,
sovereign, supranational and local authority debt), and investment-grade credit
securities that have a remaining maturity of greater than or equal to one year.
ISHARES BARCLAYS INTERMEDIATE CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. investment-grade credit
sector of the bond market as defined by the Barclays Capital U.S. Intermediate
Credit Bond Index. The Barclays Capital U.S. Intermediate Credit Bond Index
measures the performance of investment-grade corporate debt and sovereign,
supranational, local authority and non-U.S. agency bonds that are
dollar-denominated and have a remaining maturity of greater than or equal to
one year and less than ten years.
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18 BARCLAYS GLOBAL INVESTORS FUNDS
ISHARES BARCLAYS INTERMEDIATE GOVERNMENT/CREDIT BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. government and
investment-grade corporate sectors of the bond market as defined by the
Barclays Capital U.S. Intermediate Government/Credit Bond Index. The Barclays
Capital U.S. Intermediate Government/Credit Bond Index measures the performance
of dollar-denominated U.S. Treasuries, government-related (I.E., U.S. and
foreign agencies, sovereign, supranational and local authority debt), and
investment-grade credit securities that have a remaining maturity of greater
than or equal to one year and less than ten years.
ISHARES BARCLAYS MBS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the investment-grade agency
mortgage-backed securities sector of the U.S. as defined by the Barclays
Capital U.S. MBS Index. The Barclays Capital U.S. MBS Index measures the
performance of investment-grade mortgage-backed pass-through securities of the
Government National Mortgage Association, Fannie Mae and the Federal Home Loan
Mortgage Corporation.
ISHARES BARCLAYS SHORT TREASURY BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the short-term sector of the U.S.
Treasury market as defined by the Barclays Capital U.S. Short Treasury Bond
Index. The Barclays Capital U.S. Short Treasury Bond Index measures the
performance of public obligations of the U.S. Treasury that have a remaining
maturity of between one and 12 months.
ISHARES BARCLAYS TIPS BOND FUND*
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the inflation-protected sector of the
U.S. Treasury market as defined by the Barclays Capital U.S. Treasury Inflation
Protected Securities (TIPS) Index (Series-L). The Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L) measures the
performance of the inflation-protected public obligations of the U.S. Treasury,
commonly known as "TIPS."
- -------
* Effective December 8, 2008, the names of the funds changed from the iShares
Lehman 1-3 Year Credit Bond Fund, iShares Lehman 1-3 Year Treasury Bond
Fund, iShares Lehman 3-7 Year Treasury Bond Fund, iShares Lehman 7-10 Year
Treasury Bond Fund, iShares Lehman 10-20 Year Treasury Bond Fund, iShares
Lehman 20+ Year Treasury Bond Fund, iShares Lehman Aggregate Bond Fund,
iShares Lehman Credit Bond Fund, iShares Lehman Government/Credit Bond
Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman
Intermediate Government/Credit Bond Fund, iShares Lehman MBS Bond Fund,
iShares Lehman Short Treasury Bond Fund and iShares Lehman TIPS Bond Fund
to the iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3
Year Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund,
iShares Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year
Treasury Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares
Barclays Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares
Barclays Government/Credit Bond Fund, iShares Barclays Intermediate Credit
Bond Fund, iShares Barclays Intermediate Government/Credit Bond Fund,
iShares Barclays MBS Bond Fund, iShares Barclays Short Treasury Bond Fund
and iShares Barclays TIPS Bond Fund, respectively, to reflect changes in
the names of the funds' corresponding underlying indexes from Lehman
Brothers 1-3 Year U.S. Credit Index, Lehman Brothers 1-3 Year U.S.
Treasury Index, Lehman Brothers 3-7 Year U.S. Treasury Index, Lehman
Brothers 7-10 Year U.S. Treasury Index, Lehman Brothers 10-20 Year U.S.
Treasury Index, Lehman Brothers 20+ Year U.S. Treasury Index, Lehman
Brothers U.S. Aggregate Index, Lehman Brothers U.S. Credit Index, Lehman
Brothers U.S. Government/Credit Index, Lehman Brothers Intermediate U.S.
Credit Index, Lehman Brothers Intermediate U.S. Government/
Credit Index, Lehman Brothers U.S. MBS Index, Lehman Brothers Short U.S.
Treasury Index and Lehman Brothers U.S. Treasury TIPS Index to Barclays
Capital U.S. 1-3 Year Credit Bond Index, Barclays Capital U.S. 1-3 Year
Treasury Bond Index, Barclays Capital U.S. 3-7 Year Treasury Bond Index,
Barclays Capital U.S. 7-10 Year Treasury Bond Index, Barclays Capital U.S.
10-20 Year Treasury Bond Index, Barclays Capital U.S. 20+ Year Treasury
Bond Index, Barclays Capital U.S. Aggregate Bond Index, Barclays Capital
U.S. Credit Bond Index, Barclays Capital U.S. Government/Credit Bond Index,
Barclays Capital U.S. Intermediate Credit Bond Index, Barclays Capital U.S.
Intermediate Government/Credit Bond Index, Barclays Capital U.S. MBS Index,
Barclays Capital U.S. Short Treasury Bond Index and Barclays Capital U.S.
Treasury Inflation Protected Securities (TIPS) Index (Series-L),
respectively.
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19
ISHARES JPMORGAN USD EMERGING MARKETS BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the JPMorgan EMBI Global Core Index.
The JPMorgan EMBI Global Core Index is a broad, diverse U.S. dollar-denominated
emerging markets debt benchmark which tracks the total return of actively
traded external debt instruments in emerging market countries.
ISHARES IBOXX $ HIGH YIELD CORPORATE BOND FUND
Seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the U.S. dollar high yield corporate
bond market as defined by the iBoxx(Reg. TM) $ Liquid High Yield Index. The
iBoxx(Reg. TM) $ Liquid High Yield Index is a rules-based index consisting of
the most liquid U.S. dollar-denominated, high yield corporate bonds for sale in
the United States, as determined by the International Index Company Limited
("IIC"). The iBoxx(Reg. TM) $ Liquid High Yield Index is designed to provide a
balanced representation of the U.S. dollar-denominated high yield corporate
bond market through some of the most liquid high yield corporate bonds
available. The number of issues in the iBoxx(Reg. TM) $ Liquid High Yield Index
is typically 50, although this may change from time to time.
The following table lists the Underlying Funds and the asset allocation for
each Master Portfolio as of March 31, 2009. BGFA allocates each Master
Portfolio's assets among the Underlying Funds based on the Master Portfolio's
investment objective and policies. The asset allocation for each Master
Portfolio will vary over time, and BGFA is not required to invest any Master
Portfolio's assets in each of the Underlying Funds or in any particular
percentage in any given Underlying Fund. BGFA may add, eliminate or replace
Underlying Funds at any time:
UNDERLYING FUNDS
(as of March 31, 2009)
LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH LIFEPATH
RETIREMENT 2010 2020 2030 2040 2050
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ----------- ----------
CAPITAL GROWTH
Master Investment 19.08% 20.63% 31.27% 38.76% 44.87% 45.73%
Portfolio-Active Stock
Master
Portfolio
iShares S&P MidCap 400 4.67% 4.87% 5.90% 6.79% 7.46% 10.81%
Index Fund
iShares S&P SmallCap 600 2.34% 2.42% 2.87% 3.26% 3.65% 5.34%
Index Fund
iShares MSCI EAFE Index 7.70% 8.36% 12.41% 15.12% 17.39% 20.34%
Fund
iShares Cohen & Steers 0.49% 0.58% 1.38% 1.94% 2.39% 1.76%
Realty Majors Index
Fund
iShares FTSE EPRA/NAREIT 1.01% 1.31% 2.77% 3.76% 4.65% 3.72%
Developed Real
Estate ex-U.S. Index
Fund
iShares MSCI Emerging 2.32% 2.55% 3.71% 4.56% 5.26% 6.01%
Markets Index Fund
iShares MSCI Canada 0.77% 0.85% 1.25% 1.57% 1.87% 2.10%
Index Fund
iShares MSCI EAFE Small 0.85% 0.93% 1.38% 1.76% 1.94% 2.27%
Cap Index Fund
CAPITAL GROWTH AND INCOME
Master Investment 51.29% 48.48% 31.36% 19.06% 8.95% 0.89%
Portfolio-CoreAlpha
Bond
Master Portfolio
iShares Barclays TIPS 9.11% 8.80% 5.40% 3.14% 1.21% N/A
Bond Fund
INCOME
BGIF Institutional Money 0.37% 0.22% 0.30% 0.28% 0.36% 1.03%
Market Fund SL Agency
Shares
- -------
Note: The allocation percentages may not add to, or may appear to exceed, 100%
due to rounding.
"Standard & Poor's(Reg. TM)," "S&P(Reg. TM)," "S&P 500(Reg. TM)," "Standard &
Poor's 500," "S&P 500 Index(TM)," "S&P MidCap 400 Index(TM)," "S&P SmallCap 600
Index(TM)," "S&P National Municipal Bond Index," and "the S&P North American
Natural Resources Sector Index(TM)" are trademarks of Standard & Poor's (a
division of The McGraw-Hill Companies, Inc.) licensed for use for certain
purposes by BGI. The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index
Fund, iShares S&P SmallCap 600 Index Fund, iShares S&P National Municipal Bond
Fund and iShares S&P North American Natural Resources
- --------------------------------------------------------------------------------
20 BARCLAYS GLOBAL INVESTORS FUNDS
Sector Index Fund that are based on S&P Indexes are not sponsored, endorsed,
sold or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in iShares.
"iBoxx(Reg. TM) $ Liquid High Yield Index" is a trademark of IIC licensed for
use for certain purposes by BGI. The iShares iBoxx $ High Yield Corporate Bond
Fund is not sponsored, endorsed, sold or promoted by IIC, and IIC makes no
representation regarding the advisability of investing in iShares.
"FTSE," "EPRA," "NAREIT" and "FTSE EPRA/NAREIT Developed Real Estate ex-U.S.
Index" are marks that have been licensed for use for certain purposes by BGI.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by FTSE, the London Stock Exchange plc,
Euronext N.V., the Financial Times Limited, EPRA or NAREIT (together the "FTSE
Licensor Parties") and the FTSE Licensor Parties make no representation
regarding the advisability of investing in iShares.
"JPMorgan" and "JPMorgan EMBI Global Core Index" are trademarks of JPMorgan
Chase & Co.(Copyright) ("JPMorgan") licensed for use for certain purposes by
BGI. The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored,
endorsed, sold or promoted by JPMorgan, and JPMorgan makes no representation
regarding the advisability of investing in iShares.
"Cohen & Steers" and "Cohen & Steers Realty Majors Index" are trademarks of
Cohen & Steers Capital Management, Inc. ("Cohen & Steers") licensed for use for
certain purposes by BGI. The iShares Cohen & Steers Realty Majors Index Fund is
not sponsored, endorsed, sold or promoted by Cohen & Steers, and Cohen & Steers
makes no representation regarding the advisability of investing in iShares.
"Barclays Capital," "Barclays Capital U.S. 1-3 Year Credit Bond Index,"
"Barclays Capital U.S. 1-3 Year Treasury Bond Index," "Barclays Capital U.S.
3-7 Year Treasury Bond Index," "Barclays Capital U.S. 7-10 Year Treasury Bond
Index," "Barclays Capital U.S. 10-20 Year Treasury Bond Index," "Barclays
Capital U.S. 20+ Year Treasury Bond Index," "Barclays Capital U.S. Aggregate
Bond Index," "Barclays Capital U.S. Credit Bond Index," "Barclays Capital U.S.
Government/Credit Bond Index," "Barclays Capital U.S. Intermediate Credit Bond
Index," "Barclays Capital U.S. Intermediate Government/Credit Bond Index,"
"Barclays Capital U.S. MBS Index," "Barclays Capital U.S. Short Treasury Bond
Index," and the "Barclays Capital U.S. Treasury Inflation Protected Securities
(TIPS) Index (Series-L)" (collectively referred to as the "iShares Bond Fund
Indexes") are trademarks of Barclays Capital Inc. ("Barclays Capital") and have
been licensed for use for certain purposes by BGI. The iShares Barclays 1-3
Year Credit Bond Fund, iShares Barclays 1-3 Year Treasury Bond Fund, iShares
Barclays 3-7 Year Treasury Bond Fund, iShares Barclays 7-10 Year Treasury Bond
Fund, iShares Barclays 10-20 Year Treasury Bond Fund, iShares Barclays 20+ Year
Treasury Bond Fund, iShares Barclays Aggregate Bond Fund, iShares Barclays
Credit Bond Fund, iShares Barclays Government/Credit Bond Fund, iShares
Barclays Intermediate Credit Bond Fund, iShares Barclays Intermediate
Government/Credit Bond Fund, iShares Barclays MBS Bond Fund, iShares Barclays
Short Treasury Bond Fund and the iShares Barclays TIPS Bond Fund are not
sponsored or endorsed by Barclays Capital, and Barclays Capital does not make
any representations or warranties, expressed or implied, regarding the
advisability of investing in iShares. The iShares Bond Fund Indexes are
maintained by Barclays Capital, which is an affiliate of, and a separate legal
entity from, BGI and BGFA. Neither BGI nor BGFA has or will have a role in
maintaining the iShares Bond Fund Indexes.
"MSCI Canada Index/SM/," "MSCI EAFE(Reg. TM) Index" and "MSCI Emerging Markets
Index/SM/" are servicemarks and "MSCI EAFE Small Cap Index" is a trademark of
MSCI, and such marks have been licensed for use for certain purposes by BGI.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund are not
sponsored, endorsed, sold or promoted by MSCI, and MSCI makes no representation
regarding the advisability of investing in iShares.
- --------------------------------------------------------------------------------
21
A Further Discussion of Principal Risk Factors
In addition to the principal risks of investing described in the "Summary of
Principal Risk Factors" section of this Prospectus, the LifePath Portfolios
have the following risks:
GENERAL
The net asset value of each LifePath Portfolio's shares ("NAV") is neither
insured nor guaranteed, is not fixed and will fluctuate.
GENERAL RISKS APPLICABLE TO THE LIFEPATH PORTFOLIOS
EQUITY SECURITIES MARKET RISKS
The risks of investing in the equity securities market include both short-term
and prolonged price declines. The value of an equity security may decline in
value due to factors affecting equity securities markets generally or
particular industries represented in the markets. Equity securities may
underperform fixed-income investments and securities market indexes that track
other markets, segments and sectors. Equity securities of mid- to small-cap
companies tend to present greater risks than equity securities of large-cap
companies because they are generally more volatile and can be less liquid.
BOND INVESTMENT RISKS
The risks of fixed-income investing include short-term and prolonged price
declines because of a rise in interest rates, issuer quality considerations and
other economic considerations; however, such price declines in the bond market
have historically been less severe than stock declines.
CREDIT RISK
Credit risk is the risk that issuers or guarantors of debt instruments or the
counterparty to a derivatives contract, repurchase agreement or loan of
portfolio securities is unable or unwilling to make timely interest and/or
principal payments or to otherwise honor its obligations. There is the chance
that any of an Underlying Fund's holdings will have their credit ratings
downgraded or will default (fail to make scheduled interest or principal
payments), potentially reducing an Underlying Fund's income level and share
price. Debt instruments are subject to varying degrees of credit risk, which
may be reflected in credit ratings. Securities issued by the U.S. government
have limited credit risk. However, securities issued by U.S. government
agencies (such as U.S. agency mortgage pass-through securities) are not
necessarily backed by the full faith and credit of the U.S. government.
INTEREST RATE RISK
Interest rate risk is the risk that bond prices will decline over short or even
long periods due to rising market interest rates. All bonds, including those
issued by the U.S. government and its agencies, are subject to interest rate
risk. Their prices tend to move in the opposite direction from market interest
rate movements. When interest rates go up, bond prices tend to fall; when rates
fall, prices tend to rise. Bonds with longer maturities are affected more by
interest rate movements than bonds with shorter maturities, bonds with interest
rate reset provisions, notes or money market instruments. If prices throughout
the economy were to decline over time, resulting in "deflation," the principal
and income of inflation-protected bonds held by an Underlying Fund would likely
decline in price, which would result in losses for the Underlying Fund.
Mortgage-backed securities represent interests in or instruments backed by a
pool of loans secured by mortgages and asset-backed securities represent
interests in or instruments backed by a pool of loans secured by other assets.
Mortgage-backed securities and asset-backed securities are also subject to
prepayment risk and extension risk. Prepayment risk is the risk that during
periods of falling interest rates, an issuer of mortgages and other securities
may be able to repay principal prior to the security's maturity, causing the
Underlying Fund to have to
- --------------------------------------------------------------------------------
22 BARCLAYS GLOBAL INVESTORS FUNDS
reinvest in securities with a lower yield. Extension risk is the risk that when
interest rates rise, certain mortgage-backed securities will be paid off
substantially more slowly than originally anticipated and the value of those
securities may fall sharply. Both prepayment risk and extension risk may result
in a decline to the Underlying Funds' income.
HIGH YIELD SECURITIES RISK
High yield securities risk is the risk that securities that are rated below
investment-grade (commonly referred to as "junk bonds," include those bonds
rated lower than "BBB-" by S&P, a division of The McGraw-Hill Companies, Inc.
and Fitch Rating Service Inc. or "Baa3" by Moody's(Reg. TM) Investor's
Services, Inc.) or are unrated but judged by an Underlying Fund to be of
comparable quality, at the time of purchase, may be more volatile than
higher-rated securities of similar maturity.
High yield securities may also be subject to greater levels of credit or
default risk than higher-rated securities. The value of high yield securities
can be adversely affected by overall economic conditions, such as an economic
downturn or a period of rising interest rates, and high yield securities may be
less liquid and more difficult to sell at an advantageous time or price or to
value than higher-rated securities.
NON-U.S. SECURITIES RISKS
Investments in the securities of non-U.S. issuers are subject to all the risks
of investing in the market of such issuers, including market fluctuations
caused by factors such as economic and political developments, changes in
interest rates and abrupt changes in stock prices. As a result of Underlying
Funds' investing in non-U.S. securities, the Fund may be subject to the risks
listed below. These risks may decrease the value of your investment:
[] Lower levels of liquidity and market efficiency;
[] Greater securities price volatility;
[] Exchange rate fluctuations and exchange controls;
[] Less availability of public information about issuers;
[] Imposition of withholding or other taxes;
[] Imposition of restrictions on the expatriation of funds or other assets of
the Underlying Fund;
[] Higher transaction and custody costs and delays in settlement procedures;
[] Difficulties in enforcing contractual obligations;
[] Substantial government involvement in the economy;
[] Higher rates of inflation;
[] Greater social, economic and political uncertainty, the risk of
nationalization or expropriation of assets and risk of war;
[] Lower levels of regulation of the securities markets;
[] Different accounting, disclosure and reporting requirements; and
[] Legal principles relating to corporate governance, director's fiduciary
duties and liabilities and stockholder's rights in markets in which the
Underlying Funds invest may differ and/or may not be as extensive or
protective as those that apply in the United States.
Investments in non-U.S. securities may be made by an Underlying Fund directly
or through investments in American Depositary Receipts ("ADRs") and other
similar investments. ADRs are receipts for shares of non-U.S. stocks held on
deposit in U.S. banks or banks of major European countries. The receipts trade
on the U.S. or local European stock markets as would normal stocks, entitling
their owners to the dividends and capital gains earned by the real shares
stored in bank vaults. ADRs reduce some of the risks of foreign investing
because a large, liquid market generally exists
- --------------------------------------------------------------------------------
23
and U.S. trading and settlement practices reduce currency, custodial and other
operational risks. Similar investments (European and Global Depositary
Receipts) are receipts for stock deposited in non-U.S. bank and trust
companies, trade across foreign and domestic markets, and can involve different
or greater risks than ADRs.
EMERGING MARKETS RISK
Some foreign markets are considered to be emerging markets. Investment in these
emerging markets is subject to a greater risk of loss than investments in a
developed market. This is due to, among other things, greater market
volatility, lower trading volume, political and economic instability, greater
risk of market shut down and more governmental limitations on foreign
investment policy than those typically found in a developed market.
MODEL RISK
Although the quantitative model used to manage the Master Portfolios' assets
has been developed and refined over many years, neither the Master Portfolios
nor BGFA can offer any assurance that the recommended allocation will either
maximize returns or minimize risks, nor can the Master Portfolios or BGFA offer
assurance that a recommended allocation will be the appropriate allocation in
all circumstances for every investor with a particular time horizon.
REAL ESTATE INVESTMENT RISK
Investment in equity securities in the real estate sector is subject to many of
the same risks associated with the direct ownership of real estate, such as
adverse changes in national, state or local real estate conditions (resulting
from, for example, oversupply of or reduced demand for space and changes in
market rental rates); obsolescence of properties; changes in the availability,
cost and terms of mortgage funds; and the impact of tax, environmental, and
other laws.
DERIVATIVES
Derivatives include, among other instruments, futures contracts, options on
futures contracts, other types of options that may be exchange-traded or traded
over-the-counter, indexed and inverse floating-rate securities, and swap
agreements. Derivatives are financial instruments whose values are derived, at
least in part, from the prices of other securities or specified assets, indexes
or rates. Some derivatives may be more sensitive than direct securities to
changes in interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their structure or
contract terms.
PASSIVE INVESTMENT RISK
Because BGFA does not select individual companies in the underlying indexes for
the Underlying iShares Funds, those Underlying iShares Funds may hold stocks in
companies that present risks that an investment adviser researching individual
stocks might seek to avoid.
SECURITY SELECTION RISK
For each of Active Stock Master Portfolio and CoreAlpha Bond Master Portfolio,
BGFA bases security selection on its analysis of securities and therefore each
of these Master Portfolios is subject to the risk that poor security selection
will result in underperformance of the Master Portfolio in comparison with
other investment vehicles with similar investment objectives and strategies.
SECURITIES LENDING RISK
The LifePath Portfolios may also lend portfolio securities to borrowers that
provide collateral at least equal to the current market value of the securities
loaned, plus accrued interest or dividends. BGI acts as securities lending
agent for, and is compensated by, the LifePath Portfolios. Securities lending
collateral is generally reinvested in a joint account or money market funds,
including those advised by BGFA. Risks related to securities lending include
operational, credit, legal, counterparty and market risk, as well as investment
risks related to the collateral and risk of loss if the collateral is
liquidated.
- --------------------------------------------------------------------------------
24 BARCLAYS GLOBAL INVESTORS FUNDS
CONCENTRATION RISK
To the extent that an underlying index of an Underlying iShares Fund is
concentrated in the securities of companies, a particular market industry,
group of industries, sector or asset class countries, regions or groups of
countries, that Underlying iShares Fund may be adversely affected by the
performance of those securities, may be subject to increased price volatility
and may be more susceptible to adverse economic, market, political or
regulatory occurrences affecting that market, industry, group of industries,
sector or asset class country, region or group of countries.
MARKET TRADING RISKS
The Underlying iShares Funds are subject to certain additional risks due to
their shares being listed and traded on securities exchanges. There can be no
assurance that an active trading market for these particular ETFs will develop
or be maintained. Trading in ETFs may be halted because of market conditions or
for reasons that, in the view of the listing exchange, make trading in ETFs
inadvisable. In addition, trading in ETFs is subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules. There can
be no assurance that the requirements necessary to maintain the listing of ETFs
will continue to be met or will remain unchanged. An ETF may trade at, above or
below its NAV. The NAV of an ETF will fluctuate with changes in the market
value of its holdings. The trading price of an ETF will generally fluctuate in
accordance with changes in its NAV, as well as market supply and demand.
TRACKING ERROR RISK
Imperfect correlation between an Underlying iShares Fund's securities and those
in its underlying index, rounding of prices, changes to the underlying index
and regulatory requirements, may cause "tracking error," which is measured as
the divergence of the Underlying iShares Fund's performance from that of its
underlying index. Tracking error also may result because an Underlying iShares
Fund incurs fees and expenses while its underlying index does not incur the
same expenses.
FOR A DESCRIPTION OF THE LIFEPATH PORTFOLIOS' POLICIES AND PROCEDURES WITH
RESPECT TO DISCLOSURE OF THEIR MASTER PORTFOLIOS' PORTFOLIO HOLDINGS, AND A
FURTHER DISCUSSION OF THE LIFEPATH PORTFOLIOS' INVESTMENTS AND RISKS, PLEASE
REFER TO THE LIFEPATH PORTFOLIOS' SAI.
- --------------------------------------------------------------------------------
25
Management of the LifePath Portfolios
INVESTMENT ADVISER
Each LifePath Portfolio is a feeder fund that invests all of its assets in a
Master Portfolio that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. The Master Portfolios, in
turn, invest in a combination of the Underlying Funds. BGFA, a registered
investment adviser, serves as investment adviser to each Master Portfolio, and
also serves as investment adviser to each Underlying Fund, with the exception
of the Underlying Money Market Fund, which invests in a Master Portfolio
advised by BGFA. BGFA manages the investing of the Master Portfolios' assets
and provides the Master Portfolios with investment guidance and policy
direction in connection with daily portfolio management, subject to the
supervision of the Master Portfolios' Board of Trustees. For its services to
the Master Portfolios, BGFA is entitled to receive an annual advisory fee of
0.35% of each Master Portfolio's average daily net assets.
For its services to the Underlying Funds, BGFA receives fees that differ from
the fees described for the LifePath Portfolios in this Prospectus. BGFA
provides investment advisory services for the Underlying Funds that differ from
the investment advisory services it provides for the Master Portfolios. For
those services, BGFA receives investment advisory fees from the Underlying
Funds. In addition, BGI provides administration services to certain of the
Underlying Funds and, for those services, may receive administration fees from
those Underlying Funds. BGFA has contractually agreed to waive its management
fees at the Master Portfolio level in an amount equal to advisory and
administration fees, if any, paid by the Underlying Funds to BGFA and BGI,
respectively, through April 30, 2011.
BGFA is located at 400 Howard Street, San Francisco, CA 94105. It is a
wholly-owned subsidiary of BGI, which in turn is a majority-owned subsidiary of
Barclays Bank PLC. As of February 28, 2009, BGI and its affiliates, including
BGFA, provided investment advisory services for assets in excess of $1.36
trillion. BGI, BGFA, Barclays Global Investors Services, Barclays Bank PLC and
their affiliates deal, trade and invest for their own accounts in the types of
securities in which the Master Portfolios invest.
A discussion regarding the basis for the Master Portfolios' Board of Trustees'
approval of the investment advisory agreements with BGFA is available in each
LifePath Portfolio's semi-annual report for the six-month period ending June
30.
PORTFOLIO MANAGERS
Dagmar Nikles, Leslie Gambon and Dale Hogan (the "Portfolio Managers") are
primarily responsible for the day-to-day management of the Master Portfolios
and act collaboratively on all aspects concerning the Master Portfolios. Each
Portfolio Manager is responsible for various functions related to portfolio
management, including, but not limited to, investing cash inflows, coordinating
with members of their team to focus on certain asset classes, implementing
investment strategy, researching and reviewing investment strategy, and
overseeing members of his or her portfolio management team with more limited
responsibilities.
Ms. Nikles is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since June 2005. Ms. Nikles has been a member of the asset
allocation portfolio management team since July 2003. From September 2002 to
June 2003, Ms. Nikles was pursuing her Financial Risk Manager certification.
Ms. Gambon is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since May 2007. Ms. Gambon has been a member of the asset allocation
portfolio management team since April 2007. Prior to becoming a member of the
asset allocation portfolio
- --------------------------------------------------------------------------------
26 BARCLAYS GLOBAL INVESTORS FUNDS
management team, Ms. Gambon was an Active Equity Product Manager with BGI from
2001 to 2004 and in October 2004 became Head of Defined Contribution Portfolio
Management at BGI.
Mr. Hogan is an employee of BGFA and BGI and has been one of the Portfolio
Managers primarily responsible for the day-to-day management of the Master
Portfolios since October 2008. Mr. Hogan has been a member of the asset
allocation portfolio management team since May 2007. Prior to becoming a
Portfolio Manager, Mr. Hogan was a derivatives trader with Credit Suisse from
2004 to 2006. From April 2002 through April 2004, Mr. Hogan was a currency
trader at BGI.
The LifePath Portfolios' SAI provides additional information about the
Portfolio Managers' compensation, other accounts managed by the Portfolio
Managers, and the Portfolio Managers' ownership of shares in the LifePath
Portfolios that invest in the Master Portfolios for which they are Portfolio
Managers.
ADMINISTRATIVE SERVICES
BGI provides the following services, among others, as the LifePath Portfolios'
administrator:
[] Supervise the LifePath Portfolios' administrative operations;
[] Provide or cause to be provided management reporting and treasury
administration services;
[] Financial reporting;
[] Legal, blue sky and tax services;
[] Preparation of proxy statements and shareholder reports; and
[] With respect to the other Classes of the LifePath Portfolios, engaging and
supervising shareholder servicing agents (the "Shareholder Servicing Agents")
on behalf of the LifePath Portfolios.
BGI is entitled to receive fees for these services at the annual rate of 0.15%
of the average daily net assets of the Class S Shares of each LifePath
Portfolio. In addition to performing these services, BGI has agreed to bear all
costs of operating the LifePath Portfolios, other than brokerage expenses,
advisory fees, distribution fees, certain fees and expenses related to the
LifePath Portfolios' Independent Trustees and their counsel, auditing fees,
litigation expenses, taxes or other extraordinary expenses.
Shareholder Information
WHO IS ELIGIBLE TO INVEST
To be eligible to purchase LifePath Portfolio Class S Shares, you must invest
through an employer-sponsored retirement savings plan.
The LifePath Portfolios offer other classes of shares (Class I Shares and Class
R Shares) with different features and expense levels, which you may be eligible
to buy. Please see the LifePath Portfolios' Class I Shares and Class R Shares
prospectuses for more information.
In order to invest, a completed account application form must be submitted to
and processed by your employer or your plan's recordkeeper.
Your purchase and holding of Class S Shares will be governed by the terms of
your employer's plan. Please consult with your employer for more information.
- --------------------------------------------------------------------------------
27
HOW TO BUY SHARES
[] PLAN PARTICIPANT. Invest through payroll deductions or make a direct
contribution by rolling over an amount from another 401(k) plan or from a
rollover IRA (make arrangements through your employer). If you are investing
through an IRA, your IRA trustee or custodian is responsible for properly
transmitting your purchase order to State Street Bank and Trust Company
("State Street"), the LifePath Portfolios' custodian, transfer agent and
dividend disbursing agent. Your plan or IRA may impose an earlier deadline for
purchase or redemption orders than the LifePath Portfolios, as described
below.
[] TAX-DEFERRED INVESTOR. Invest through a custodian as provided in your
benefit plan documents. Your custodian, plan sponsor or administrator is
responsible for properly transmitting your purchase order to State Street and
may impose an earlier deadline for purchase and redemption orders than the
LifePath Portfolios, as described below.
You may buy LifePath Portfolio shares without paying a sales charge. Your
purchase order must be received in proper form, as determined by State Street
or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time) (or if regular trading on the NYSE closes early, at such closing
time) on any day the LifePath Portfolios are open (a "Business Day") to
purchase shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day. The LifePath
Portfolios are generally open Monday through Friday and are generally closed on
weekends and any day on which the NYSE is closed.
Each LifePath Portfolio reserves the right to suspend or discontinue the offer
and sale of its shares and reject or cancel any purchase order for any reason.
Purchases generally must be made in U.S. dollars. You may be charged for any
costs incurred in connection with a purchase order that has been placed but for
which the LifePath Portfolio has not received full payment.
HOW TO SELL SHARES
[] PLAN PARTICIPANT AND TAX-DEFERRED INVESTOR. Contact your plan sponsor,
administrator or custodian, who is responsible for properly transmitting your
sale order to State Street.
You may sell LifePath Portfolio shares without paying a sales charge. Your
order to sell shares must be received in proper form, as determined by State
Street or an intermediary pursuant to an appropriate agreement, by the close of
regular trading on the NYSE (generally 4:00 p.m. Eastern Time) (or if regular
trading on the NYSE closes early, at such closing time) on any Business Day to
sell shares at that day's NAV. Orders received after the close of regular
trading on the NYSE will be executed on the next Business Day.
The LifePath Portfolios generally remit the proceeds from a sale the next
Business Day after receiving a properly executed order to sell and no longer
than seven days after the sale. Each LifePath Portfolio reserves the right to
suspend your right of redemption and to delay delivery of your redemption
proceeds up to seven days, as permitted under applicable law. Each LifePath
Portfolio further reserves the right to automatically redeem your shares and
close your account for any reason, subject to applicable law, and send you the
proceeds, which would reflect the NAV on the day the LifePath Portfolio
automatically redeems your shares. For example, a LifePath Portfolio may
automatically redeem your shares to reimburse the LifePath Portfolio for any
losses sustained by reason of your failure to make full payment for shares
purchased or to collect any charge relating to a transaction effected for your
benefit that is applicable to the LifePath Portfolio's shares as provided from
time to time in this Prospectus.
In addition, each LifePath Portfolio reserves the right to send your redemption
proceeds in the form of securities from its Master Portfolio.
Upon redemption, the identity of the holder of the account to which the
proceeds are being sent may need to be verified.
- --------------------------------------------------------------------------------
28 BARCLAYS GLOBAL INVESTORS FUNDS
CALCULATING THE LIFEPATH PORTFOLIOS' SHARE PRICE
Each LifePath Portfolio's share price (also known as a LifePath Portfolio's
NAV) is calculated by dividing the value of the net assets of the LifePath
Portfolio (I.E., the value of its total assets less total liabilities) by the
total number of outstanding shares of the LifePath Portfolio, generally rounded
to the nearest cent.
Each LifePath Portfolio's NAV is calculated at the close of regular trading on
the NYSE (generally, 4:00 p.m. Eastern Time) on any Business Day. If regular
trading on the NYSE closes early, the time for calculating each LifePath
Portfolio's NAV and the deadline for share transactions will be accelerated to
the earlier closing time. The NAV of each LifePath Portfolio is calculated
based on the net asset value of the Master Portfolio in which the LifePath
Portfolio invests. The LifePath Portfolios' SAI includes a description of the
methods for valuing the Master Portfolios' investments, including a description
of the circumstances in which the Master Portfolios' investments would be
valued using fair value pricing and the effects of using fair value pricing.
LIFEPATH PORTFOLIO DISTRIBUTIONS
The LifePath Portfolios distribute their net investment income to shareholders
quarterly. The LifePath Portfolios distribute their net realized capital gains,
if any, to shareholders at least annually. Distributions payable to you will be
automatically reinvested in additional Class S Shares of your LifePath
Portfolio, unless you have elected to receive distribution payments in cash.
FREQUENT TRADING IN LIFEPATH PORTFOLIO SHARES
Frequent purchases and redemptions of mutual fund shares ("frequent trading")
may have a detrimental effect on a fund and its shareholders. Depending on
various factors, such as the size of the fund's investment portfolio and the
amount of assets maintained in cash, frequent trading may harm the performance
of the fund by interfering with the implementation of its investment strategies
and/or increasing transaction costs and taxes, and/or may dilute the value of
fund shares held by long-term investors. Frequent trading may include activity
that appears to attempt to take advantage of a potential arbitrage opportunity
presented by a lag between a change in the value of a fund's investment
portfolio securities after the close of the primary markets for those portfolio
securities and the reflection of that change in the fund's net asset value
("market timing").
Each LifePath Portfolio invests only in interests of its Master Portfolio, and
the Boards of Trustees of the Master Portfolios and the LifePath Portfolios
have each considered the issues of frequent trading and market timing.
The Master Portfolios' Board of Trustees has adopted a policy of not monitoring
for possible market timing activity because the Master Portfolios' holdings are
valued as of the same time that the net asset value of the Master Portfolios is
calculated (generally 4:00 p.m. Eastern Time), which eliminates the potential
arbitrage opportunity presented by a lag between a change in the value of the
Master Portfolios' holdings and the reflection of that change in the Master
Portfolios' respective net asset values. The Master Portfolios' Board of
Trustees has not adopted a policy of monitoring for other forms of frequent
trading because daily flows into and out of the Master Portfolios are
aggregated, and the process of aggregation is expected to reduce the potential
for frequent trading to disrupt the implementation of the Master Portfolios'
investment strategies.
The LifePath Portfolios' Board of Trustees has not adopted a policy of
monitoring for market timing or other frequent trading activity in the LifePath
Portfolios in light of the nature of the LifePath Portfolios' investment in
Master Portfolios, the policies of the Master Portfolios, as described in the
preceding paragraphs, and the historical nature of flows into and out of the
LifePath Portfolios.
BGI's ability to monitor trades that are placed by participants in plans that
are shareholders in the LifePath Portfolios or other shareholders in the
LifePath Portfolios that trade through omnibus accounts maintained by
intermediaries will be severely limited to the extent BGI does not receive
transaction information showing individual investment decisions. Upon request
by the LifePath Portfolios, intermediaries are required to provide certain
transaction information that may enable the LifePath Portfolios to identify
trading activity that is potentially harmful to the LifePath Portfolios. The
- --------------------------------------------------------------------------------
29
LifePath Portfolios may, but do not have the obligation to, respond to any
potentially harmful trading activity that is identified. In the event any
potentially harmful trading activity is identified, responses may include the
imposition of trading restrictions, the rejection of purchases, or such other
steps the LifePath Portfolios determine are appropriate. Intermediaries'
ability to impose restrictions on the trading practices of their clients may,
however, be affected by legal or technological limitations.
TAXES
The following discussion regarding U.S. federal income taxes is based upon laws
in effect as of the date of this Prospectus and summarizes only some of the
important U.S. federal income tax considerations affecting the LifePath
Portfolios and their U.S. shareholders. This discussion is not intended as a
substitute for careful tax planning. Please see the SAI for additional U.S.
federal income tax information.
Shareholders that are exempt from U.S. federal income tax, such as retirement
plans that are qualified under Section 401 of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), generally are not subject to U.S. federal income
tax on fund dividends or distributions or on sales of LifePath Portfolio
shares. However, in the case of LifePath Portfolio shares held through a
non-qualified deferred compensation plan, fund dividends and distributions
received by the plan and sales of LifePath Portfolio shares by the plan
generally will be taxable to the employer sponsoring such plan in accordance
with U.S. federal income tax laws governing deferred compensation plans.
A plan participant whose retirement plan invests in LifePath Portfolio shares
generally is not taxed on LifePath Portfolio dividends or distributions
received by the plan or on sales of LifePath Portfolio shares by the plan for
U.S. federal income tax purposes. However, distributions to plan participants
from a retirement plan generally are taxable to plan participants as ordinary
income. Special rules may also apply to such distributions. Plan participants
should contact their own tax advisers for more information.
You must provide your correct social security number or other taxpayer
identification number to the LifePath Portfolio along with any certifications
required by the Internal Revenue Service when you open an account.
MASTER/FEEDER MUTUAL FUND STRUCTURE
The LifePath Portfolios do not have their own investment adviser. Instead, each
LifePath Portfolio invests all of its assets in a separate mutual fund, called
a Master Portfolio, that has a substantially identical investment objective,
strategies and policies as the LifePath Portfolio. BGFA serves as investment
adviser to each Master Portfolio. The Master Portfolios may accept investments
from other feeder funds. Certain actions involving other feeder funds, such as
a substantial withdrawal, could affect the Master Portfolios and, therefore,
the LifePath Portfolios.
FEEDER FUND EXPENSES
Feeder funds, including the LifePath Portfolios, bear their respective Master
Portfolio's expenses in proportion to the amount of assets each invests in the
Master Portfolio. Each feeder fund can set its own transaction minimums,
fund-specific expenses and conditions.
FEEDER FUND RIGHTS
Under the master/feeder structure, the LifePath Portfolios' Board of Trustees
retains the right to withdraw a LifePath Portfolio's assets from its Master
Portfolio if it believes doing so is in the best interests of the LifePath
Portfolio's shareholders. If the Board of Trustees decides to withdraw a
LifePath Portfolio's assets, it would then consider whether the LifePath
Portfolio should hire its own investment adviser, invest in another master
portfolio or take other action.
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30 BARCLAYS GLOBAL INVESTORS FUNDS
FUND OF FUNDS
The Master Portfolios do not invest directly in a portfolio of securities.
Instead, they invest in the Underlying Money Market Fund and other Underlying
Funds that are also advised by BGFA. Each Master Portfolio charges for its own
direct expenses, in addition to bearing a PRO RATA share of the expenses
charged by the Underlying Funds in which it invests.
- --------------------------------------------------------------------------------
31
Financial Highlights
The financial tables in this section are intended to help investors understand
the financial performance of the Class S Shares of each LifePath Portfolio
since inception. Certain information reflects financial results for a single
Class S Share of each LifePath Portfolio. The total returns in the tables
represent the rate of return that an investor would have earned (or lost) on an
investment in Class S Shares of a given LifePath Portfolio, assuming
reinvestment of all distributions. The information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the LifePath Portfolios'
financial statements, is included in the LifePath Portfolios' annual report.
You may obtain copies of the annual report, at no cost, by calling
1-877-BGI-1544 (1-877-244-1544) (toll-free) Monday through Friday from 8:30
a.m. to 6:30 p.m. Eastern Time.
LIFEPATH RETIREMENT PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
MAY 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 11.46
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.25
Net realized and (1.97)
----------
unrealized loss
TOTAL FROM INVESTMENT (1.72)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.26)
Net realized gain (0.04)
----------
TOTAL DISTRIBUTIONS (0.30)
----------
NET ASSET VALUE, END OF $ 9.44
==========
PERIOD
TOTAL RETURN (15.53)%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 35
period (000s)
Ratio of expenses to 0.44%
average net
assets(c)(d)
Ratio of expenses to 0.79%
average net assets prior
to expense
reductions(d)
Ratio of net investment 4.08%
income to average net
assets(c)(d)
Portfolio turnover 11%
rate(e)
- -------
(a) Commencement of operations.
(b) Not annualized.
(c) These ratios include net expenses charged to the corresponding Master
Portfolio.
(d) Annualized for periods of less than one year.
(e) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
- --------------------------------------------------------------------------------
32 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2010 PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
MAY 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 13.17
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.28
Net realized and (2.49)
----------
unrealized loss
TOTAL FROM INVESTMENT (2.21)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.31)
Net realized gain (0.15)
----------
TOTAL DISTRIBUTIONS (0.46)
----------
NET ASSET VALUE, END OF $ 10.50
==========
PERIOD
TOTAL RETURN (17.29)%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 73
period (000s)
Ratio of expenses to 0.43%
average net
assets(c)(d)
Ratio of expenses to 0.77%
average net assets prior
to expense
reductions(d)
Ratio of net investment 4.11%
income to average net
assets(c)(d)
Portfolio turnover 12%
rate(e)
- -------
(a) Commencement of operations.
(b) Not annualized.
(c) These ratios include net expenses charged to the corresponding Master
Portfolio.
(d) Annualized for periods of less than one year.
(e) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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33
LIFEPATH 2020 PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
MAY 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 16.90
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.30
Net realized and (4.48)
----------
unrealized loss
TOTAL FROM INVESTMENT (4.18)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.27)
Net realized gain (0.12)
----------
TOTAL DISTRIBUTIONS (0.39)
----------
NET ASSET VALUE, END OF $ 12.33
==========
PERIOD
TOTAL RETURN (25.28)%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 416
period (000s)
Ratio of expenses to 0.42%
average net
assets(c)(d)
Ratio of expenses to 0.76%
average net assets prior
to expense
reductions(d)
Ratio of net investment 4.27%
income to average net
assets(c)(d)
Portfolio turnover 13%
rate(e)
- -------
(a) Commencement of operations.
(b) Not annualized.
(c) These ratios include net expenses charged to the corresponding Master
Portfolio.
(d) Annualized for periods of less than one year.
(e) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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34 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2030 PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
MAY 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 16.07
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.25
Net realized and (5.09)
----------
unrealized loss
TOTAL FROM INVESTMENT (4.84)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.23)
Net realized gain (0.08)
----------
TOTAL DISTRIBUTIONS (0.31)
----------
NET ASSET VALUE, END OF $ 10.92
==========
PERIOD
TOTAL RETURN (30.65)%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 95
period (000s)
Ratio of expenses to 0.39%
average net
assets(c)(d)
Ratio of expenses to 0.73%
average net assets prior
to expense
reductions(d)
Ratio of net investment 3.44%
income to average net
assets(c)(d)
Portfolio turnover 13%
rate(e)
- -------
(a) Commencement of operations.
(b) Not annualized.
(c) These ratios include net expenses charged to the corresponding Master
Portfolio.
(d) Annualized for periods of less than one year.
(e) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
- --------------------------------------------------------------------------------
35
LIFEPATH 2040 PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
MAY 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 20.11
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.31
Net realized and (7.21)
----------
unrealized loss
TOTAL FROM INVESTMENT (6.90)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.26)
Net realized gain (0.08)
----------
TOTAL DISTRIBUTIONS (0.34)
----------
NET ASSET VALUE, END OF $ 12.87
==========
PERIOD
TOTAL RETURN (34.75)%(b)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 6
period (000s)
Ratio of expenses to 0.36%
average net
assets(c)(d)
Ratio of expenses to 0.69%
average net assets prior
to expense
reductions(d)
Ratio of net investment 3.31%
income to average net
assets(c)(d)
Portfolio turnover 14%
rate(e)
- -------
(a) Commencement of operations.
(b) Not annualized.
(c) These ratios include net expenses charged to the corresponding Master
Portfolio.
(d) Annualized for periods of less than one year.
(e) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
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36 BARCLAYS GLOBAL INVESTORS FUNDS
LIFEPATH 2050 PORTFOLIO - CLASS S SHARES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD FROM
JUN. 30, 2008(A)
TO DEC. 31, 2008
-------------------
NET ASSET VALUE, $ 20.00
----------
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.17
Net realized and (6.57)
----------
unrealized loss
TOTAL FROM INVESTMENT (6.40)
----------
OPERATIONS
LESS DISTRIBUTIONS FROM:
Net investment income (0.11)
Net realized gain (0.00)(b)
Return of capital (0.03)
----------
TOTAL DISTRIBUTIONS (0.14)
----------
NET ASSET VALUE, END OF $ 13.46
==========
PERIOD
TOTAL RETURN (32.10)%(c)
==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of $ 24
period (000s)
Ratio of expenses to 0.29%
average net
assets(d)(e)
Ratio of expenses to 12.41%
average net assets prior
to expense
reductions(e)
Ratio of net investment 3.94%
income to average net
assets(d)(e)
Portfolio turnover 0%(g)
rate(f)
- -------
(a) Commencement of operations.
(b) Rounds to less than $0.01.
(c) Not annualized.
(d) These ratios include net expenses charged to the corresponding Master
Portfolio.
(e) Annualized for periods of less than one year.
(f) Represents the portfolio turnover rate of the LifePath Portfolio's
corresponding Master Portfolio.
(g) Rounds to less than 1%.
- --------------------------------------------------------------------------------
37
Disclaimers
The iShares S&P 500 Index Fund, iShares S&P MidCap 400 Index Fund, iShares S&P
Small Cap 600 Index Fund, iShares S&P National Municipal Bond Fund and the
iShares S&P North America Natural Resources Sector Index Fund are not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the owners of
shares of the iShares Trust (as used in these Disclaimers, the "Trust") or to
any member of the public regarding the advisability of investing in securities
generally or in shares of the Trust (as used in these Disclaimers, "shares") or
the ability of the Standard & Poor's Indexes to track general stock
performance. Standard & Poor's only relationship to the Trust, BGI or BGFA is
the licensing of certain trademarks, trade names and service marks of Standard
& Poor's and of the Standard & Poor's Indexes, which are determined, composed,
and calculated by Standard & Poor's without regard to the Trust, BGI or BGFA.
Standard & Poor's has no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the Standard & Poor's Indexes. Standard & Poor's is not responsible for and has
not participated in the determination of the prices and amount of shares, or
the timing of the issuance or sale of such shares or in the determination or
calculation of the equation by which shares are to be converted into cash.
Standard & Poor's has no obligation or liability in connection with the
administration of the Trust, or the marketing or trading of shares. Standard &
Poor's does not guarantee the accuracy or the completeness of the Standard &
Poor's Indexes or any data included therein and Standard & Poor's shall have no
liability for any errors, omissions, or interruptions therein. Standard &
Poor's makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares, or any other person or entity from the use of the
Standard & Poor's Indexes or any data included therein. Standard & Poor's makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Standard & Poor's Indexes or any data included therein. Without limiting any of
the foregoing, in no event shall Standard & Poor's have any liability for any
special, punitive, indirect, or consequential damages (including lost profits)
resulting from the use of the Standard & Poor's Indexes or any data included
therein, even if notified of the possibility of such damages. There are no
third party beneficiaries of any agreements between Standard & Poor's and BGI
and BGFA.
The iShares Russell Midcap Index Fund and the iShares Russell 2000 Index Fund
(the "iShares Russell Funds") are not sponsored, endorsed, sold or promoted by
Russell Investment Group. Russell Investment Group makes no representation or
warranty, express or implied, to the owners of shares or to any member of the
public regarding the advisability of investing in securities generally or in
shares or the ability of the Russell Indexes to track general stock market
performance. Russell Investment Group's only relationship to the Trust, BGI or
BGFA is the licensing of certain trademarks, service marks, and trade names of
Russell Investment Group's and of the Russell Indexes, which are determined,
composed, and calculated by Russell Investment Group without regard to the
iShares Russell Funds, BGI or BGFA. Russell Investment Group has no obligation
to take the needs of BGI, BGFA or the owners of shares into consideration in
determining, composing or calculating the Russell Indexes. Russell Investment
Group is not responsible for and has not participated in the determination of
the prices and amount of shares, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. Russell Investment Group has no obligation or
liability in connection with the administration of the Trust, or the marketing
or trading of shares. Russell Investment Group does not guarantee the accuracy
or the completeness of the Russell Indexes or any data included therein and
Russell Investment Group shall have no liability for any errors, omissions, or
interruptions therein. Russell Investment Group makes no warranty, express or
implied, as to results to be obtained by BGI, BGFA, owners of shares, or any
other person or entity from the use of the Russell Indexes or any data included
therein. Russell Investment Group makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Russell Indexes or any data
included therein. Without limiting any of the foregoing, in no event shall
Russell Investment Group have any liability for any special, punitive,
indirect, or consequential damages (including lost profits) resulting from the
use of the Russell Indexes or any data included therein, even if notified of
the possibility of such damages. There are no third party beneficiaries of any
agreements between Russell Investment Group and BGI and BGFA.
- --------------------------------------------------------------------------------
38 BARCLAYS GLOBAL INVESTORS FUNDS
The iShares Cohen & Steers Realty Majors Index Fund is not sponsored, endorsed,
sold or promoted by Cohen & Steers. Cohen & Steers makes no representation or
warranty, express or implied, to the owners of shares or any member of the
public regarding the advisability of investing in securities generally or in
the iShares Cohen & Steers Realty Majors Index Fund particularly or the ability
of the Cohen & Steers Realty Majors Index to track general stock market
performance. Cohen & Steers' only relationship to the Trust, BGI and BGFA is
the licensing of certain trademarks and trade names of Cohen & Steers and of
the Cohen & Steers Realty Majors Index, which is determined, composed and
calculated by Cohen & Steers without regard to the Trust, BGI, BGFA or the
iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers has no
obligation to take the needs of BGI, BGFA or the owners of shares into
consideration in determining, composing or calculating the Cohen & Steers
Realty Majors Index. Cohen & Steers is not responsible for and has not
participated in the determination of the prices and amount of the iShares Cohen
& Steers Realty Majors Index Fund or the timing of the issuance or sale of the
iShares Cohen & Steers Realty Majors Index Fund or in the determination or
calculation of the equation by which shares of the iShares Cohen & Steers
Realty Majors Index Fund are to be converted into cash. Cohen & Steers has no
obligation or liability in connection with the administration, marketing, or
trading of the iShares Cohen & Steers Realty Majors Index Fund. Cohen & Steers
does not guarantee the accuracy or the completeness of the Cohen & Steers
Realty Majors Index or any data included therein and Cohen & Steers shall have
no liability for any errors, omissions, or interruptions therein. Cohen &
Steers makes no warranty, express or implied, as to results to be obtained by
BGI, BGFA, owners of shares of the iShares Cohen & Steers Realty Majors Index
Fund, or any other person or entity from the use of the Cohen & Steers Realty
Majors Index or any data included therein. Cohen & Steers makes no express or
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Cohen & Steers
Realty Majors Index or any data included therein. Without limiting any of the
foregoing, in no event shall Cohen & Steers have any liability for any special,
punitive, indirect, or consequential damages (including lost profits) resulting
from the use of the Cohen & Steers Realty Majors Index or any data included
therein, even if notified of the possibility of such damages.
The iShares JPMorgan USD Emerging Markets Bond Fund is not sponsored, endorsed,
sold or promoted by JPMorgan. JPMorgan makes no representation or warranty,
express or implied, to the owners of the iShares JPMorgan USD Emerging Markets
Bond Fund or any member of the public regarding the advisability of investing
in securities generally or in the iShares JPMorgan USD Emerging Markets Bond
Fund particularly or the ability of the JPMorgan EMBI Global Core Index to
track general bond market performance. JPMorgan's only relationship to the
Trust, BGI, or BGFA is the licensing of the JPMorgan EMBI Global Core Index
which is determined, composed and calculated by JPMorgan without regard to the
Trust, BGI, or BGFA or the iShares JPMorgan USD Emerging Markets Bond Fund.
JPMorgan has no obligation to take the needs of Trust, BGI, or BGFA or the
owners of the iShares JPMorgan USD Emerging Markets Bond Fund into
consideration in determining, composing or calculating the JPMorgan EMBI Global
Core Index. JPMorgan is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the iShares
JPMorgan USD Emerging Markets Bond Fund to be issued or in the determination or
calculation of the equation by which the iShares JPMorgan USD Emerging Markets
Bond Fund is to be converted into cash. JPMorgan has no obligation or liability
in connection with the administration, marketing or trading of the iShares
JPMorgan USD Emerging Markets Bond Fund. The JPMorgan EMBI Global Core Index
and the iShares JPMorgan USD Emerging Markets Bond Fund are provided "as is"
with any and all faults. JPMorgan does not guarantee the availability,
sequence, timeliness, quality, accuracy and/or the completeness of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund and/or any data included therein, or otherwise obtained by the Trust, BGI,
BGFA, owners of the iShares JPMorgan USD Emerging Markets Bond Fund, or by any
other person or entity from any use of the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund. JPMorgan makes no
express or implied warranties, and hereby expressly disclaims all warranties of
merchantability of fitness for a particular purpose or use with respect to the
JPMorgan EMBI Global Core Index or any data included therein, or otherwise
obtained by the Trust, BGI, BGFA, owners of the iShares JPMorgan USD Emerging
Markets Bond Fund or by any other person or entity from any use of the JPMorgan
EMBI Global Core Index and/or the iShares JPMorgan USD Emerging Markets Bond
Fund. There are no representations or warranties which extend beyond the
description on the face of this document, if any. All warranties and
representations of any kind with regard to the JPMorgan EMBI Global Core Index
and/or the iShares JPMorgan USD Emerging Markets Bond Fund, are disclaimed
including any implied warranties of merchantability, quality, accuracy, fitness
for a particular purpose and/or against infringement and/or warranties as to
any results to be obtained by and/or from the use of the JPMorgan EMBI Global
Core Index and/or the
- --------------------------------------------------------------------------------
39
iShares JPMorgan USD Emerging Markets Bond Fund. Without limiting any of the
foregoing, in no event shall JPMorgan have any liability for any special,
punitive, direct, indirect, or consequential damages, including lost profits,
even if notified of the possibility of such damages.
The iShares iBoxx $ High Yield Corporate Bond Fund is not sponsored, endorsed
or promoted by IIC. IIC makes no representation or warranty, express or
implied, to the owners of the iShares iBoxx $ High Yield Corporate Bond Fund or
any member of the public regarding the advisability of owning or trading in the
iShares iBoxx $ High Yield Corporate Bond Fund, investing in securities
generally, or the ability of the iBoxx $ Liquid High Yield Index to track the
appropriate bond market performance. IIC's only relationship to the Trust, BGI
or BGFA is the licensing of certain trademarks, servicemarks and trade names of
the iShares iBoxx $ High Yield Corporate Bond Fund, which is determined,
composed and calculated by IIC or its agents without regard to BGI, BGFA or the
owners of the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation to take the needs of BGI, BGFA, or the owners of the iShares iBoxx
$ High Yield Corporate Bond Fund into consideration in determining, composing
or calculating the iBoxx $ Liquid High Yield Index. IIC is not responsible for
and has not participated in the determination or timing of prices, or
quantities of shares to be listed or in the determination or calculation of the
redemption price per share, or the determination of the representative sampling
of bonds used by the iShares iBoxx $ High Yield Corporate Bond Fund. IIC has no
obligation or liability in connection with the administration, marketing or
trading of the iShares iBoxx $ High Yield Corporate Bond Fund or shares of the
Fund. IIC does not guarantee the accuracy and/or the completeness of the iBoxx
$ Liquid High Yield Index or any data included therein. IIC expressly disclaims
and shall have no liability for any errors, omissions or interruptions therein.
IIC makes no warranty, express or implied, as to the results to be obtained by
BGI and BGFA, the iShares iBoxx $ High Yield Corporate Bond Fund or owners of
the shares of the Fund, or any other person or entity, from the use of the
iBoxx $ Liquid High Yield Index or any data included therein. IIC makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
iBoxx $ Liquid High Yield Index or any data included therein. Without limiting
any of the foregoing, in no event shall IIC have any liability for any lost
profits or special, punitive, direct, indirect or consequential damages even if
notified thereof. There are no third party beneficiaries of any agreements or
arrangements between IIC and BGI and BGFA.
The iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund is not
sponsored, endorsed, sold or promoted by the FTSE Licensor Parties. The FTSE
Licensor Parties make no representation or warranty, express or implied,
regarding the advisability of investing in securities generally or in the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund particularly or the
ability of the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index to track
general stock market performance. The FTSE Licensor Parties' only relationship
to the Trust, BGI and BGFA is the licensing of certain trademarks, trade names,
and service marks of FTSE Licensor Parties and of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index, which are determined, composed and
calculated by FTSE without regard to the Trust, BGI, and BGFA. The FTSE
Licensor Parties have no obligation to take the needs of BGI, BGFA or the
owners of shares into consideration in determining, composing or calculating
the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index. The FTSE Licensor
Parties are not responsible for and have not participated in the determination
of the prices and amount of shares of the iShares FTSE EPRA/NAREIT Developed
Real Estate ex-U.S. Index Fund, or the timing of the issuance or sale of such
shares or in the determination or calculation of the equation by which shares
are to be converted into cash. The FTSE Licensor Parties have no obligation or
liability in connection with the administration, marketing or trading of the
iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index Fund. The FTSE
Licensor Parties do not guarantee the accuracy or the completeness of the FTSE
EPRA/NAREIT Developed Real Estate ex-U.S. Index or any data included therein
and the FTSE Licensor Parties shall have no liability for any errors,
omissions, or interruptions therein. The FTSE Licensor Parties make no
warranty, express or implied, as to results to be obtained by BGI, BGFA, owners
of shares of the iShares FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
Fund or any other person or entity from the use of the FTSE EPRA/NAREIT
Developed Real Estate ex-U.S. Index or any data included therein. The FTSE
Licensor Parties make no express or implied warranties and expressly disclaim
all warranties of merchantability or fitness for a particular purpose or use
with respect to the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index or any
data included therein. Without limiting any of the foregoing, in no event shall
the FTSE Licensor Parties have any liability for any special, punitive,
indirect, or consequential damages (including lost profits), even if notified
of the possibility of such damages. There are no third party beneficiaries of
any agreements between FTSE and
- --------------------------------------------------------------------------------
40 BARCLAYS GLOBAL INVESTORS FUNDS
BGI and BGFA. None of the FTSE Licensor Parties shall be liable (whether in
negligence or otherwise) to any person for any error in the Index and none of
the Licensor Parties shall be under any obligation to advise any person
therein.
The iShares MSCI Canada Index Fund, iShares MSCI EAFE Index Fund, iShares MSCI
EAFE Small Cap Index Fund and iShares MSCI Emerging Markets Index Fund (the
"iShares MSCI Index Funds") are not sponsored, endorsed, sold or promoted by
MSCI or any affiliate of MSCI. Neither MSCI nor any other party makes any
representation or warranty, express or implied, to the owners of shares of the
iShares MSCI Index Funds or any member of the public regarding the advisability
of investing in securities generally or in the iShares MSCI Index Funds
particularly or the ability of the MSCI Indexes to track general stock market
performance. MSCI is the licensor of certain trademarks, service marks and
trade names of MSCI and of the MSCI Indexes, which are determined, composed and
calculated by MSCI without regard to BGI, BGFA or the iShares MSCI Index Funds.
MSCI has no obligation to take the needs of BGI, BGFA or the owners of shares
of the iShares MSCI Index Funds into consideration in determining, composing or
calculating the MSCI Indexes. MSCI is not responsible for and has not
participated in the determination of the timing of, prices at, or quantities of
the iShares MSCI Index Funds to be issued or in the determination or
calculation of the equation by which the iShares MSCI Index Funds are
redeemable for cash. Neither MSCI nor any other party has any obligation or
liability to owners of shares of the iShares MSCI Index Funds in connection
with the administration, marketing or trading of the iShares MSCI Index Funds.
Although MSCI shall obtain information for inclusion in or for use in the
calculation of the MSCI Indexes from sources which MSCI considers reliable,
neither MSCI nor any other party guarantees the accuracy and/or the
completeness of the MSCI Indexes or any data included therein. Neither MSCI nor
any other party makes any warranty, express or implied, as to results to be
obtained by BGI, BGFA, the owners of shares of the iShares MSCI Index Funds, or
any other person or entity from the use of the MSCI Indexes or any data
included hereunder or for any other use. Neither MSCI nor any other party makes
any express or implied warranties, and MSCI hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the MSCI Indexes or any data included therein. Without limiting any of the
foregoing, in no event shall MSCI or any other party have any liability for any
direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
No purchaser, seller or holder of the iShares MSCI Index Funds, or any other
person or entity, should use or refer to any MSCI trade name, trademark or
service mark to sponsor, endorse, market or promote iShares without first
contacting MSCI to determine whether MSCI's permission is required. Under no
circumstances may any person or entity claim any affiliation with MSCI without
the prior written permission of MSCI.
The iShares Barclays 1-3 Year Credit Bond Fund, iShares Barclays 1-3 Year
Treasury Bond Fund, iShares Barclays 3-7 Year Treasury Bond Fund, iShares
Barclays 7-10 Year Treasury Bond Fund, iShares Barclays 10-20 Year Treasury
Bond Fund, iShares Barclays 20+ Year Treasury Bond Fund, iShares Barclays
Aggregate Bond Fund, iShares Barclays Credit Bond Fund, iShares Barclays
Government/Credit Bond Fund, iShares Barclays Intermediate Credit Bond Fund,
iShares Barclays Intermediate Government/Credit Bond Fund, iShares Barclays MBS
Bond Fund, iShares Barclays Short Treasury Bond Fund and the iShares Barclays
TIPS Bond Fund (collectively, the "Barclays Capital Funds") are not sponsored,
endorsed or promoted by Barclays Capital. Barclays Capital makes no
representation or warranty, express or implied, to the owners of shares of the
Barclays Capital Funds or any member of the public regarding the advisability
of owning or trading in the Barclays Capital Funds. The Barclays Capital Funds'
underlying indexes (the "Underlying Indexes") are determined, composed and
calculated by Barclays Capital without regard to the iShares Trust or the
owners of shares of the Barclays Capital Funds. Barclays Capital has no
obligation to take the needs of BGFA or the owners of shares of the Barclays
Capital Funds into consideration in determining, composing or calculating the
Underlying Indexes. Barclays Capital is not responsible for and has not
participated in the determination or the timing of prices, or quantities of
shares to be listed or in the determination or calculation of the equation by
which shares are to be converted into cash. Barclays Capital has no obligation
or liability in connection with the administration of iShares Trust or the
marketing or trading of shares of the Barclays Capital Funds. Barclays Capital
does not guarantee the accuracy and/or the completeness of the Underlying
Indexes or any data included therein. Barclays Capital shall have no liability
for any errors, omissions or interruptions therein. Barclays Capital makes no
warranty, express or implied, as to the results to be obtained by BGI and BGFA
or owners of shares of the Barclays Capital Funds, or any other person or
entity, from the use of the Underlying Indexes or any data included therein.
Barclays Capital makes no express or
- --------------------------------------------------------------------------------
41
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Underlying
Indexes or any data included therein. Without limiting any of the foregoing, in
no event shall Barclays Capital have any liability for any lost profits or
special, punitive, direct, indirect, or consequential damages even if notified
thereof.
BGFA does not guarantee the accuracy or the completeness of any underlying
index or any data included therein and BGFA shall have no liability for any
errors, omissions, or interruptions therein.
BGFA makes no warranty, express or implied, as to results to be obtained by the
series of the Trust, to the owners of shares, or to any other person or entity,
from the use of any underlying index or any data included therein. BGFA makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to any
underlying index or any data included therein. Without limiting any of the
foregoing, in no event shall BGFA have any liability for any special, punitive,
direct, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.^^
- --------------------------------------------------------------------------------
42 BARCLAYS GLOBAL INVESTORS FUNDS
- --------------------------------------------------------------------------------
Copies of the Prospectus, SAI, annual and semi-annual reports to shareholders
and other information are available, without charge, upon request by calling
the number below. For more detailed information about Barclays Global Investors
Funds and the LifePath Portfolios, you may request a copy of the SAI. The SAI
provides information about the LifePath Portfolios and is incorporated by
reference into this Prospectus. This means that the SAI, for legal purposes, is
a part of this Prospectus.
Additional information about the LifePath Portfolios' investments is available
in the LifePath Portfolios' annual or semi-annual reports to shareholders. In
the LifePath Portfolios' annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
LifePath Portfolios' performance during the last fiscal year.
If you have any questions about the LifePath Portfolios or you wish to obtain
the SAI or semi-annual or annual reports free of charge, please:
Call: 1-877-BGI-1544 (1-877-244-1544) (toll-free)
Monday through Friday
8:30 a.m. to 6:30 p.m. (Eastern Time)
E-mail: BGIFunds@barclaysglobal.com
Write: Barclays Global Investors Funds
c/o SEI Investments Distribution Co.
One Freedom Valley Drive, Oaks, PA 19456
The LifePath Portfolios do not have a website, but the LifePath Portfolios'
annual and semi-annual shareholder reports, prospectus and SAI are available
free of charge online at the SEC's website www.sec.gov.
Information about a LifePath Portfolio (including its SAI) can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C., and information
on the operation of the Public Reference Room may be obtained by calling the
SEC at 1-202-551-8090. Reports and other information about the LifePath
Portfolios are available on the EDGAR Database on the SEC's website at
www.sec.gov, and copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
ABOUT ANY LIFEPATH PORTFOLIO AND ITS SHARES NOT CONTAINED IN THIS PROSPECTUS
AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION. READ AND KEEP THE PROSPECTUS
FOR FUTURE REFERENCE.
Investment Company Act File No.: 811-07332
For more information call
1-877-BGI-1544 (1-877-244-1544) (toll-free)
[GRAPHIC APPEARS HERE]
BGF-PR-LPS0509
BARCLAYS GLOBAL INVESTORS FUNDS
Supplement, dated June 19, 2009,
to the Prospectuses, dated May 1, 2009,
for all classes of LifePath(R) 2050 Portfolio, LifePath 2040(R) Portfolio,
LifePath 2030(R) Portfolio, LifePath 2020(R) Portfolio, LifePath 2010(R)
Portfolio
and LifePath(R) Retirement Portfolio
The information in this section of the Supplement updates information in,
and should be read in conjunction with, each Prospectus.
Barclays Global Fund Advisors (the "Adviser") serves as the investment adviser
for each Master Portfolio, and Barclays Global Investors, N.A. ("BGI") serves
as the administrator for each Fund and each Master Portfolio in which the Funds
invest. On June 16, 2009, Barclays PLC, the ultimate parent company of BGI and
the Adviser, accepted a binding offer and entered into an agreement to sell its
interests in the Adviser, BGI and certain affiliated companies, to BlackRock,
Inc., (the "BlackRock Transaction"). The BlackRock Transaction is subject to
certain regulatory approvals, as well as other conditions to closing.
Under the Investment Company Act of 1940, as amended, completion of the
BlackRock Transaction will cause the automatic termination of each Master
Portfolio's current investment advisory agreement with the Adviser. In order
for the investment management of each Master Portfolio and Fund to continue
uninterrupted, the Board of Trustees of the Master Portfolios (the "Master
Portfolios' Board") will be asked to approve a new investment advisory
agreement for each Master Portfolio. If approved by the Master Portfolios'
Board, the new investment advisory agreements will be submitted for approval by
the investors in the Master Portfolios, including the Funds. Each Fund will in
turn call a meeting of its shareholders at which shareholders will vote to
instruct the Fund how to vote on the applicable Master Portfolio's new
investment advisory agreement.
If you have any additional questions, please call 1-877-BGI-1544
(1-877-244-1544) (toll-free).
The information in this section of the Supplement updates information in, and
should be read in conjunction with, the Prospectus for each of LifePath 2010
Portfolio and LifePath Retirement Portfolio.
On May 20, 2009, the Board of Trustees of the Barclays Global Investors Funds
approved an Agreement and Plan of Reorganization pursuant to which shareholders
of each class of shares of the LifePath 2010 Portfolio would become
shareholders of the corresponding class of shares of the LifePath Retirement
Portfolio, another series of the Barclays Global Investment Funds. The
reorganization is expected to close on or about November 20, 2009 (the "Closing
Date"), at which time the LifePath 2010 Portfolio will be approaching its
target date and the investment objective, policies, strategies and restrictions
of the LifePath 2010 Portfolio will have aligned with those of the LifePath
Retirement Portfolio. The closing of the reorganization is subject to certain
conditions. The reorganization does not require any action on the part of
shareholders and is expected to be free of any tax consequences to shareholders.
Prior to the reorganization, the LifePath 2010 Portfolio will continue to
operate as described in each Prospectus and will continue to accept investments
from new and existing shareholders. Further detail regarding the reorganization
will be distributed to shareholders in advance of the Closing Date.
If you have any additional questions, please call 1-877-BGI-1544
(1-877-244-1544) (toll-free).
BGF-A-LP1-0609
- --------------------------------------------------------------------------------
PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE
BARCLAYS GLOBAL INVESTORS FUNDS
Supplement, dated August 14, 2009,
to the Prospectuses and Statement of Additional Information ("SAI"), dated
May 1, 2009
for the Class I, R and S Shares of the LifePath Portfolios
of Barclays Global Investors Funds
The information in this Supplement updates information in the Prospectuses and
SAI, supersedes any
contrary information in the Prospectuses and SAI or any prior supplement,
and should be read in conjunction with the Prospectuses and SAI.
Effective August 14, 2009, all references (other than historical references) in
the Prospectuses and SAI to the names of the iShares S&P National Municipal
Bond Fund (the "Underlying Fund") and the S&P National Municipal Bond Index
(the "Underlying Index") are changed as follows:
Former Name New Name
- ----------- --------
Underlying Fund: iShares S&P National Municipal Bond iShares S&P National AMT-Free
Fund Municipal Bond Fund
Underlying Index: S&P National Municipal Bond Index S&P National AMT-Free Municipal Bond
Index
BGF-A-LP-0809
- --------------------------------------------------------------------------------
PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE
LIFEPATH RETIREMENT PORTFOLIO
(a series of Barclays Global Investors Funds)
STATEMENT OF ADDITIONAL INFORMATION
September 30, 2009
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the related Prospectus (also dated September 30, 2009),
which covers shares of LifePath Retirement Portfolio, to be issued in exchange
for shares of LifePath 2010 Portfolio. Please retain this Statement of
Additional Information for further reference.
The Prospectus is available to you free of charge (please call 1-877-BGI-1544
(1-877-244-1544) or email BGIFunds@barclaysglobal.com).
INTRODUCTION............................................................... 2
EXHIBITS................................................................... 2
ADDITIONAL INFORMATION ABOUT LIFEPATH RETIREMENT PORTFOLIO................. 2
FUND HISTORY............................................................ 2
DESCRIPTION OF THE FUND AND ITS INVESTMENT AND RISKS.................... 2
MANAGEMENT OF THE FUND.................................................. 2
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................... 3
INVESTMENT ADVISORY AND OTHER SERVICES.................................. 3
PORTFOLIO MANAGERS...................................................... 3
BROKERAGE ALLOCATION AND OTHER PRACTICES................................ 3
CAPITAL STOCK AND OTHER SECURITIES...................................... 3
PURCHASE, REDEMPTION AND PRICING OF SHARES.............................. 3
TAXATION OF THE FUND.................................................... 3
UNDERWRITERS............................................................ 3
CALCULATION OF PERFORMANCE DATA......................................... 4
FINANCIAL STATEMENTS.................................................... 4
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in the Prospectus, dated September 30, 2009 (the
"Prospectus"), relating to the proposed reorganization of LifePath 2010
Portfolio into LifePath Retirement Portfolio, each a series of Barclays Global
Investors Funds.
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference, unless
otherwise indicated. Shareholders will receive a copy of each document that is
incorporated by reference upon any request to receive a copy of this Statement
of Additional Information.
1. Statement of additional information of Barclays Global Investors Funds,
dated May 1, 2009 (the "SAI") (File No. 811-07332), as filed with the
Securities and Exchange Commission on April 29, 2009 in Post-Effective
Amendment No. 71 to Barclays Global Investors Funds' Registration Statement
on Form N-1A (Accession No. 0000897436-09-094019) ("PEA No. 71"), is
incorporated herein by reference.
2. Annual Report of Barclays Global Investors Funds for the fiscal year ended
December 31, 2008 (File No. 811-07332), as filed with the Securities and
Exchange Commission on February 27, 2009 (Accession No.
0000897436-09-000111), is incorporated herein by reference.
3. Semiannual Report of Barclays Global Investors Funds for the period ended
June 30, 2009 (the "Semiannual Report") (File No. 811-07332), as filed with
the Securities and Exchange Commission on September __, 2009 (Accession No
0000897436-09-______), is incorporated herein by reference.
ADDITIONAL INFORMATION ABOUT
LIFEPATH RETIREMENT PORTFOLIO
FUND HISTORY
For additional information about LifePath Retirement Portfolio generally,
see "History of the Trust" in the SAI.
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
For additional information about LifePath Retirement Portfolio's investment
objective, policies, risks and restrictions, see "Description of the LifePath
Portfolios and their Investments and Risks," "Investments and Risks of the
Master Portfolios," "Investments and Risks of the Underlying Funds" and
"Portfolio Holdings Information" in the SAI.
2
MANAGEMENT OF THE FUND
For additional information about LifePath Retirement Portfolio's Board of
Trustees and officers, see "Management" in the SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For additional information, see "Shareholder Information" in the Prospectus
and "Control Persons and Principal Holders of Securities" in the SAI.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information, see "Investment Adviser and Other Service
Providers" in the SAI./7/
PORTFOLIO MANAGERS
For additional information about LifePath Retirement Portfolio's portfolio
managers, see "Portfolio Managers" in the SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about the LifePath Retirement Portfolio's
brokerage allocation practices, see "Portfolio Transactions" in the SAI.
CAPITAL STOCK AND OTHER SECURITIES
For additional information about the voting rights and other
characteristics of shares of beneficial interest of LifePath Retirement
Portfolio, see "Capital Stock" in the SAI.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of shares
of LifePath Retirement Portfolio, see "Purchase, Redemption and Pricing of
Shares" in the SAI.
TAXATION OF THE FUND
For additional information about tax matters related to an investment in
LifePath Retirement Portfolio, see " Distributions and Taxes" in the SAI.
- ----------
/7/ See footnote 3.
3
UNDERWRITERS
For additional information about the LifePath Retirement Portfolio's
principal underwriter and distribution plans, see "Investment Adviser and Other
Service Providers" in the SAI and "Item 27 - Principal Underwriters" in Part C
of PEA No. 71.
CALCULATION OF PERFORMANCE DATA
See "Determination of Net Asset Value" in the SAI, the Annual Report and
the Semiannual Report.
FINANCIAL STATEMENTS
For additional information, see "Financial Statements" in the SAI, the
Annual Report and the Semiannual Report.
4
Master Investment Portfolio
LifePath Retirement Master Portfolio
Pro Forma
Schedule of Investments (Unaudited)
June 30, 2009
LifePath Retirement
LifePath 2010 LifePath Retirement Master Portfolio
Master Portfolio Master Portfolio Pro Forma Combined
------------------------ ------------------------ --------------------------
Security Shares Value Shares Value Shares Value
- ------------------------------- ---------- ------------ ---------- ------------ ---------- --------------
MASTER PORTFOLIOS - 71.30%
Active Stock Master Portfolio (a) $147,448,114 $ 51,561,492 $ 199,009,606
CoreAlpha Bond Master Portfolio (a) 373,933,770 143,175,223 517,108,993
------------ ------------ --------------
TOTAL MASTER PORTFOLIOS $521,381,884 $194,736,715 716,118,599
------------ ------------ --------------
EXCHANGE-TRADED FUNDS - 28.73%
iShares Barclays TIPS Bond Fund (a) (b) 621,475 63,160,504 233,012 23,681,010 854,487 86,841,514
iShares Cohen & Steers Realty
Majors Index Fund (a) (b) 125,472 4,509,464 35,534 1,277,092 161,006 5,786,556
iShares FTSE EPRA/NAREIT
Developed Real Estate ex-U.S.
Index Fund (a) (b) 358,883 8,997,197 107,197 2,687,429 466,080 11,684,626
iShares MSCI Canada Index Fund (a) (b) 277,059 5,934,604 97,248 2,083,052 374,307 8,017,656
iShares MSCI EAFE Index Fund (a) 1,143,428 52,380,437 396,224 18,151,021 1,539,652 70,531,458
iShares MSCI EAFE Small Cap
Index Fund (a) (b) 209,717 6,289,413 78,155 2,343,868 287,872 8,633,281
iShares MSCI Emerging Markets
Index Fund (a) (b) 535,129 17,247,207 193,654 6,241,468 728,783 23,488,675
iShares S&P MidCap 400 Index
Fund (a) (b) 622,084 35,950,234 228,474 13,203,513 850,558 49,153,747
iShares S&P SmallCap 600 Index
Fund (a) (b) 399,298 17,756,782 148,819 6,617,981 548,117 24,374,763
TOTAL EXCHANGE-TRADED FUNDS
(Cost: $231,125,403,
$81,947,201 and $313,072,604,
respectively) $212,225,842 $ 76,286,434 288,512,276
SHORT-TERM INVESTMENTS - 7.52%
MONEY MARKET FUNDS - 7.52%
Barclays Global Investors Funds
Institutional Money Market
Fund, SL Agency Shares
0.40%, (a) (c) (d) 42,773,907 42,773,907 21,912,608 21,912,608 64,686,515 64,686,515
Barclays Global Investors Funds
Prime Money Market Fund, SL
Agency Shares
0.32%, (a) (c) (d) 7,184,929 7,184,929 3,668,164 3,668,164 10,853,093 10,853,093
------------ ------------ --------------
49,958,836 25,580,772 75,539,608
------------ ------------ --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost: $49,958,836,
$25,580,772 and $75,539,608,
respectively) $ 49,958,836 $ 25,580,772 75,539,608
------------ ------------ --------------
TOTAL INVESTMENTS (Cost:
$281,084,239, $107,527,973
and $388,612,212,
respectively) - 107.55% 783,566,562 296,603,921 1,080,170,483
Other Assets, Less Liabilities
- (7.55)% (50,533,815) (25,269,702) (75,803,517)
------------ ------------ --------------
NET ASSETS - 100.00% $733,032,747 $271,334,219 $1,004,366,966
============ ============ ==============
(a) Affiliated issuer.
(b) All or a portion of this security represents a security on loan.
(c) The rate quoted is the annualized seven-day yield of the fund at period
end.
(d) All or a portion of this security represents an investment of securities
lending collateral.
The accompanying notes are an integral part of these financial statements.
5
Master Investment Portfolio
LifePath Retirement Master Portfolio
Pro Forma
Statement of Assets and Liabilities (Unaudited)
June 30, 2009
LifePath 2010 LifePath LifePath Retirement
Master Retirement Pro Forma Master Portfolio
Portfolio Master Portfolio Adjustments Pro Forma Combined
------------- ---------------- ----------- -------------------
ASSETS
Investments, at cost:
Affiliated issuers $281,084,239 $107,527,973 $-- $ 388,612,212
------------ ------------ --- --------------
Total cost of investments $281,084,239 $107,527,973 $-- $ 388,612,212
============ ============ === ==============
Investments, at fair value (including
securities on loan (a)) (Note 3):
Affiliated issuers $262,184,678 $101,867,206 $-- $ 364,051,884
Affiliated Master Portfolios 521,381,884 194,736,715 -- 716,118,559
------------ ------------ --- --------------
Total fair value of investments 783,566,562 296,603,921 -- 1,080,170,483
Receivables:
Investment securities sold 3,454,324 500,000 -- 3,954,324
Dividends and interest 8,466 3,677 -- 12,143
Contributions 1,200,000 51,215 -- 1,251,215
------------ ------------ --- --------------
Total Assets 788,229,352 297,158,813 -- 1,085,388,165
------------ ------------ --- --------------
LIABILITIES
Payables:
Investment securities purchased 3,347,383 616,471 -- 3,963,854
Collateral for securities on loan 48,374,925 24,697,136 -- 73,072,061
Investment advisory fees 11,844 3,829 -- 15,673
Withdrawals 3,454,325 500,000 -- 3,954,325
Accrued expenses
Professional fees 7,302 6,909 -- 14,211
Independent trustees' fees 826 249 -- 1,075
------------ ------------ --- --------------
Total Liabilities 55,196,605 25,824,594 -- 81,021,199
------------ ------------ --- --------------
NET ASSETS $733,032,747 $271,334,219 $-- $1,004,366,966
============ ============ === ==============
(a) Securities on loan with values of $47,166,324, $24,188,507 and $71,354,831,
respectively.
The accompanying notes are an integral part of these financial statements.
6
Master Investment Portfolio
LifePath Retirement Master Portfolio
Pro Forma
Statement of Operations (Unaudited)
For the Twelve Months Ended June 30, 2009
LifePath Retirement
LifePath 2010 LifePath Retirement Pro Forma Master Portfolio
Master Portfolio Master Portfolio Adjustments Pro Forma Combined
---------------- ------------------- ----------- -------------------
NET INVESTMENT INCOME
Dividends from affiliated issuers $ 7,030,056 $ 2,509,687 $ -- $ 9,539,743
Dividends allocated from Master Portfolios 3,669,659 1,207,239 -- 4,876,898
Interest from affiliated issuers 24,948 13,333 -- 38,281
Interest allocated from Master Portfolios 19,035,725 7,275,335 -- 26,311,060
Securities lending income from affiliated issuers 290,471 92,597 -- 383,068
Expenses allocated from Master Portfolios (a) (1,728,603) (638,052) -- (2,366,655)
------------- ------------ -------- -------------
Total investment income 28,322,256 10,460,139 -- 38,782,395
------------- ------------ -------- -------------
EXPENSES
Investment advisory fees 2,556,097 925,876 -- 3,481,973
Professional Fees 14,045 13,469 (13,469)(b) 14,045
Independent trustees' fees 7,829 2,731 10,560
------------- ------------ -------- -------------
Total expenses 2,577,971 942,076 (13,469) 3,506,578
Less expense reductions (2,431,957) (887,442) -- (3,319,399)
------------- ------------ -------- -------------
Net expenses 146,014 54,634 (13,469) 187,179
------------- ------------ -------- -------------
Net investment income 28,176,242 10,405,505 13,469 38,595,216
------------- ------------ -------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from sale of investments in
unaffiliated issuers 57,576 19,866 -- 77,442
Net realized loss from sale of investments in
affiliated issuers (33,215,583) (11,467,680) -- (44,683,263)
Net realized loss allocated from Master Portfolios (45,384,278) (16,023,952) -- (61,408,230)
Net change in unrealized appreciation (depreciation)
of investments (39,344,729) (11,840,910) -- (51,185,639)
Net change unrealized appreciation (depreciation)
allocated from Master Portfolios (2,261,877) 1,559,432 -- (702,445)
------------- ------------ -------- -------------
Net realized and unrealized loss (120,148,891) (37,753,244) -- (157,902,135)
------------- ------------ -------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (91,972,649) $(27,347,739) $ 13,469 $(119,306,919)
============= ============ ======== =============
(a) Net of fee reductions of $82,337, $27,849 and $110,186, respectively.
(b) Adjustment to eliminate duplicate professional fees.
The accompanying notes are an integral part of these financial statements.
7
Master Investment Portfolio
LifePath Retirement Master Portfolio
Pro Forma
Notes to Combining Financial Statements (Unaudited)
June 30, 2009
1) Description of the Fund
Master Investment Portfolio ("MIP") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end series management
investment company organized as a Delaware statutory trust.
These financial statements relate only to the LifePath Retirement and LifePath
2010 Master Portfolios, (each, a "Master Portfolio," collectively, the "Master
Portfolios"). Each of the LifePath Retirement and LifePath 2010 Master
Portfolios seeks to achieve its investment objective by investing in a
combination of equity securities, bond and money market funds (the "Underlying
Funds") in proportions suggested by its own comprehensive investment strategy.
The Underlying Funds are advised by Barclays Global Fund Advisors ("BGFA"), and
include the Active Stock and CoreAlpha Bond Master Portfolios, the Barclays
Global Investors Funds Institutional Money Market Fund and exchange-traded funds
in the iShares(R) family of funds.
Pursuant to MIP's organizational documents, the Master Portfolios' officers and
trustees are indemnified against certain liabilities that may arise out of the
performance of their duties to the Master Portfolios. Additionally, in the
normal course of business, the Master Portfolios enter into contracts with
service providers that contain general indemnification clauses. The Master
Portfolios' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Master Portfolios that have
not yet occurred.
2) Basis of Combination
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of the LifePath 2010 Master Portfolio, (the "Target
Fund") by LifePath Retirement Master Portfolio, (the "Acquiring Fund") as if
such acquisition had taken place as of June 30, 2009.
Under the terms of the Agreement and Plan of Reorganization (the "Agreement"),
the combination of the Target Fund and the Acquiring Fund will be accounted for
by the method of accounting for tax-free mergers of investment companies. The
acquisition would be accomplished by a transfer of the net assets of the Target
Fund in exchange for shares of the Acquiring Fund at net asset value. The
Acquiring Fund will assume all of the liabilities of the Target Fund. The
statement of assets and liabilities and the related statement of operations of
the Target Fund and the Acquiring Fund have been combined as of and for the
twelve months ended June 30, 2009. Following the acquisition, the Acquiring Fund
will be the accounting survivor. In accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"), the historical
cost of investment securities will be carried forward to the surviving fund and
the results of operations for precombination periods of the surviving fund will
not be restated.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements of the Acquiring Fund and the Target Fund included
in their respective semi-annual reports dated June 30, 2009.
The following notes refer to the accompanying pro forma financial statements as
if the
8
above-mentioned acquisition of the Target Fund by the Acquiring Fund had taken
place as of June 30, 2009.
3) Security Valuation
The securities and other assets of each Master Portfolio are valued pursuant to
the pricing policy and procedures approved by the Board of Trustees of MIP (the
"Board"). The Master Portfolios are subject to the provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
No. 157 ("FAS 157"), "Fair Value Measurements." This standard establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. Inputs may be based on independent
market data ("observable inputs") or they may be internally developed
("unobservable inputs"). The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy under FAS 157 are as
follows:
Level 1 - Inputs that reflect unadjusted quoted prices in active markets for
identical assets or liabilities that the Master Portfolio has the ability to
access at the measurement date (a "Level 1 Price");
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly or indirectly, including
quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not
considered to be active, inputs other than quoted prices that are observable for
the asset or liability, and inputs that are derived principally from or
corroborated by observable market data by correlation or other means (a "Level 2
Price");
Level 3 - Inputs that are unobservable for the asset or liability (a "Level 3
Price").
The availability of observable inputs can vary from security to security and is
affected by a wide variety of factors, including, for example, the type of
security, whether the security is new and not yet established in the
marketplace, the liquidity of markets, and other characteristics particular to
the security. Inputs may include price information, volatility statistics,
specific and broad credit data, liquidity statistics, and other factors. To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment. Accordingly, the degree of judgment exercised in determining fair
value is greatest for instruments categorized in Level 3 of the fair value
hierarchy.
The level of a value determined for a financial instrument within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement in its entirety. The categorization of a value determined
for a financial instrument within the hierarchy is based upon the pricing
transparency of the instrument and does not necessarily correspond to the Master
Portfolios' perceived risk of that instrument.
9
Investments whose values are based on quoted market prices in active markets,
and whose values are therefore classified as Level 1 Prices, include active
listed equities and certain U.S. government securities. The Master Portfolios do
not adjust the quoted price for such instruments, even in situations where the
Master Portfolios hold a large position and a sale could reasonably impact the
quoted price.
Investments that trade in markets that are not considered to be active, but
whose values are based on inputs such as quoted market prices, dealer quotations
or valuations provided by alternative pricing sources supported by observable
inputs are classified within Level 2. These generally include certain U.S.
government and sovereign obligations, most government agency securities,
investment-grade corporate bonds, certain mortgage products, less liquid listed
equities, and state, municipal and provincial obligations. As Level 2
investments include positions that are not traded in active markets and/or are
subject to transfer restrictions, valuations may be adjusted to reflect
illiquidity and/or non-transferability, which are generally based on available
market information.
Investments whose values are classified as Level 3 Prices have significant
unobservable inputs, as they may trade infrequently or not at all. Investments
whose values are classified as Level 3 Prices may include unlisted securities
related to corporate actions, securities whose trading have been suspended or
which have been de-listed from their primary trading exchange, less liquid
corporate debt securities (including distressed debt instruments),
collateralized debt obligations, and less liquid mortgage securities (backed by
either commercial or residential real estate). When observable prices are not
available for these securities, the Master Portfolios use one or more valuation
techniques (e.g., the market approach or the income approach) for which
sufficient and reliable data is available. Within Level 3 of the fair value
hierarchy, the use of the market approach generally consists of using comparable
market transactions, while the use of the income approach generally consists of
the net present value of estimated future cash flows, adjusted as appropriate
for liquidity, credit, market and/or other risk factors.
The inputs used by the Master Portfolios in estimating the value of Level 3
Prices may include the original transaction price, recent transactions in the
same or similar instruments, completed or pending third-party transactions in
the underlying investment or comparable issuers, and changes in financial ratios
or cash flows. Level 3 Prices may also be adjusted to reflect illiquidity and/or
non-transferability, with the amount of such discount estimated by the Master
Portfolios in the absence of market information. The fair value measurement of
Level 3 Prices does not include transaction costs that may have been capitalized
as part of the security's cost basis. Assumptions used by the Master Portfolios
due to the lack of observable inputs may significantly impact the resulting fair
value and therefore the Master Portfolios' results of operations.
Fair value pricing could result in a difference between the prices used to
calculate a Master Portfolio's net assets and the prices used by the Master
Portfolio's underlying index, which in turn, could result in a difference
between the Master Portfolio's performance and the performance of the Master
Portfolio's underlying index.
10
The following table summarizes the values of each of the Master Portfolios'
investments according to their fair value hierarchy as of June 30, 2009.
Master Portfolio Level 1 Level 2 Level 3 Total
- -------------------------------------- ------------ ------------ ------- --------------
LifePath Retirement
Master Portfolios $ -- $194,736,715 $-- $ 194,736,715
Exchange-Traded Funds 76,286,434 -- -- 76,286,434
Short-Term Investments 25,580,772 -- -- 25,580,772
------------ ------------ --- --------------
$101,867,206 $194,736,715 $-- $ 296,603,921
============ ============ === ==============
LifePath 2010
Master Portfolios $ -- $521,381,884 $-- $ 521,381,884
Exchange-Traded Funds 212,225,842 -- -- 212,225,842
Short-Term Investments 49,958,836 -- -- 49,958,836
------------ ------------ --- --------------
$262,184,678 $521,381,884 $-- $ 783,566,562
============ ============ === ==============
LifePath Retirement Pro Forma Combined
Master Portfolios $ -- $716,118,599 $-- $ 716,118,599
Exchange-Traded Funds 288,512,276 -- -- 288,512,276
Short-Term Investments 75,539,608 -- -- 75,539,608
------------ ------------ --- --------------
$364,051,884 $716,118,599 $-- $1,080,170,483
============ ============ === ==============
4) Unaudited Pro Forma Adjustments
LifePath 2010 Master Portfolio expenses were adjusted assuming LifePath
Retirement Master Portfolio's fee structure was in effect for the twelve months
ended June 30, 2009.
5) Use of Estimates
The following significant accounting policies are consistently followed by MIP
in the preparation of its financial statements in conformity with U.S. GAAP. The
preparation of financial statements in conformity with U.S. GAAP requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the 12 months ended June 30, 2009. Actual results
could differ from those estimates.
6) Federal Income Taxes
In general, MIP believes that each Master Portfolio has and will continue to be
operated in a manner so as to qualify it as a non-publicly traded partnership
for federal income tax purposes. Provided that each such Master Portfolio so
qualifies, it will not be subject to any federal income tax on its income and
gains (if any). However, each interestholder in such a Master Portfolio will be
taxed on its distributive share of the Master Portfolio's taxable income in
determining its
11
federal income tax liability. As a non-publicly traded partnership for federal
income tax purposes, each such Master Portfolio will be deemed to have "passed
through" to its interestholders any interest, dividends, gains or losses of the
Master Portfolio for such purposes. The determination of such share will be made
in accordance with the Internal Revenue Code of 1986, as amended (the "Code"),
and regulations promulgated thereunder.
It is intended that each Master Portfolio's assets, income and distributions
will be managed in such a way that an entity electing and qualifying as a
"regulated investment company" under the Code can continue to so qualify by
investing substantially all of its assets through the Master Portfolio, provided
that the regulated investment company meets other requirements for such
qualifications not within the control of the Master Portfolio (e.g.,
distributing at least 90% of the regulated investment company's "investment
company taxable income" annually).
As of June 30, 2009, the gross unrealized appreciation and gross unrealized
depreciation based on cost for federal income tax purposes for the Master
Portfolios were as follows:
Gross Gross
Unrealized Unrealized Net Unrealized
Master Portfolio Tax Cost Appreciation Depreciation Depreciation
- ------------------------------------------ ------------ ------------ ------------ --------------
LifePath Retirement (a) $111,352,238 $-- $ (9,485,032) $ (9,485,032)
LifePath 2010 (a) 290,284,402 -- (28,099,724) (28,099,724)
------------ --- ------------ ------------
LifePath Retirement Pro Forma Combined (a) $401,636,640 $-- $(37,584,756) $(37,584,756)
============ === ============ ============
(a) Tax cost information does not include investments in the underlying Master
Portfolios.
Management has reviewed the tax positions as of June 30, 2009, inclusive of the
prior three open tax return years and has determined that no provision for
income tax is required in the Master Portfolios' financial statements.
12
Barclays Global Investors Funds
LifePath Retirement Portfolio
Pro Forma
Statement of Assets and Liabilities (Unaudited)
June 30, 2009
LifePath LifePath Retirement
LifePath 2010 Retirement Pro Forma Portfolio
Portfolio Portfolio Adjustments Pro Forma Combined
------------- ------------ ------------ -------------------
ASSETS
Investments:
In corresponding Master Portfolio, at
fair value (Note 3) $361,676,980 $135,017,267 $ -- $496,694,247
Receivables:
Capital shares sold 409,353 225,690 -- 635,043
------------ ------------ ---------- ------------
Total Assets 362,086,333 135,242,957 -- 497,329,290
------------ ------------ ---------- ------------
LIABILITIES
Payables:
Capital shares redeemed 878,834 147,715 -- 1,026,549
Distribution shareholders 158,652 77,477 -- 236,129
Administration fees 141,910 51,346 -- 193,256
Distribution fees - Class R Shares 55,315 16,446 -- 71,761
Accrued expenses:
Professional fees 6,080 5,902 -- 11,982
Independent trustees' fees 392 89 -- 481
------------ ------------ ---------- ------------
Total Liabilities 1,241,183 298,975 -- 1,540,158
------------ ------------ ---------- ------------
NET ASSETS $360,845,150 $134,943,982 -- $495,789,132
============ ============ ========== ============
Net assets consist of:
Paid-in capital $410,226,749 $150,699,742 -- $560,926,491
Distributions in excess of net investment
income (541,673) (267,641) -- (809,314)
Accumulated net realized loss (41,743,913) (13,460,551) -- (55,204,464)
Net unrealized depreciation (7,096,013) (2,027,568) -- (9,123,581)
------------ ------------ ---------- ------------
NET ASSETS $360,845,150 $134,943,982 $ -- $495,789,132
============ ============ ========== ============
Class I Shares
Net Assets $272,234,759 $108,539,452 $ -- $380,774,221
============ ============ ========== ============
Shares outstanding (a) 25,108,982 11,158,953 2,879,504(b) 39,147,439
============ ============ ========== ============
Net asset value and offering price per
share $ 10.84 9.73 $ -- $ 9.73
============ ============ ========== ============
Class R Shares
Net Assets $ 88,533,196 $ 26,368,275 $ -- $114,901,471
============ ============ ========== ============
Shares outstanding (a) 8,315,896 2,914,706 1,465,693(b) 12,696,295
============ ============ ========== ============
Net asset value and offering price per
share $ 10.65 $ 9.05 $ -- $ 9.05
============ ============ ========== ============
Class S Shares
Net Assets $ 77,195 $ 36,255 $ -- $ 113,450
============ ============ ========== ============
Shares outstanding (a) 7,139 3,731 805(b) 11,675
============ ============ ========== ============
Net asset value and offering price per
share $ 10.81 9.72 -- $ 9.72
============ ============ ========== ============
- ----------
(a) No par value, unlimited number of shares authorized.
(b) Reflects share adjustments, net of retired shares of the LifePath 2010
Portfolio (Note 4).
The accompanying notes are an integral part of these financial statements.
13
Barclays Global Investors Funds
LifePath Retirement Portfolio
Pro Forma
Statement of Operations (Unaudited)
For the Twelve Months Ended June 30, 2009
LifePath LifePath Retirement
LifePath 2010 Retirement Pro Forma Portfolio
Portfolio Portfolio Adjustments Pro Forma Combined
------------- ------------ ------------ -------------------
NET INVESTMENT INCOME ALLOCATED FROM
CORRESPONDING MASTER PORTFOLIO
Dividends $ 5,114,950 $ 1,726,026 $ -- $ 6,840,976
Interest 9,260,189 3,421,567 -- 12,681,756
Expenses (a) (895,816) (320,797) 6,646(b) (1,209,967)
------------ ------------ -------- ------------
Net investment income allocated from
corresponding Master Portfolio 13,479,323 4,826,796 6,646 18,312,765
------------ ------------ -------- ------------
FUND EXPENSES
Administration fees 1,743,983 612,067 -- 2,356,050
Distribution fees - Class R Shares 232,384 66,182 -- 298,566
Professional fees 11,798 11,594 (11,594)(c) 11,798
Independent trustees' fees 3,804 1,232 5,036
------------ ------------ -------- ------------
Total fund expenses 1,991,969 691,075 (11,594) 2,671,450
Less expense reductions (15,602) (12,826) -- (28,428)
------------ ------------ -------- ------------
Net fund expenses 1,976,367 678,249 (11,594) 2,643,022
------------ ------------ -------- ------------
Net investment income 11,502,956 4,148,547 18,240 15,699,743
------------ ------------ -------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ALLOCATED FROM CORRESPONDING MASTER
PORTFOLIO
Net realized loss (37,775,363) (12,921,020) -- (50,696,383)
Net change in unrealized appreciation
(depreciation) (18,732,500) (3,433,120) -- (22,165,620)
------------ ------------ -------- ------------
Net realized and unrealized loss (56,507,863) (16,354,140) -- (72,862,003)
------------ ------------ -------- ------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(45,004,907) $(12,205,593) $ 18,240 $(57,192,260)
============ ============ ======== ============
- ----------
(a) Net of fee reductions of $1,162,716, $411,152 and $1,573,868, respectively.
(b) Adjustment to eliminate duplicate professional fees allocated from Master
Portfolio.
(c) Adjustment to eliminate duplicate professional fees.
The accompanying notes are an integral part of these financial statements.
14
Barclays Global Investors Funds
LifePath Retirement Portfolio
Pro Forma
Notes to Combining Financial Statements (Unaudited)
June 30, 2009
1) Description of the Fund
Barclays Global Investors Funds (the "Trust"), a Delaware statutory trust, is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company. The Trust, formerly
known as Barclays Global Investors Funds, Inc. was redomiciled from a Maryland
corporation to a Delaware statutory trust effective January 11, 2002.
These financial statements relate only to the LifePath Retirement and LifePath
2010 Portfolios, (each, a "LifePath Portfolio," collectively, the "LifePath
Portfolios").
The LifePath Portfolios offer three classes of shares: Class I, Class R and
Class S. All classes of shares have equal rights to assets and earnings, and
differ principally in administration and distribution fees.
Pursuant to the Trust's organizational documents, the LifePath Portfolios'
officers and trustees are indemnified against certain liabilities that may arise
out of the performance of their duties to the LifePath Portfolios. Additionally,
in the normal course of business, the LifePath Portfolios enter into contracts
with service providers that contain general indemnification clauses. The
LifePath Portfolios' maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against the LifePath
Portfolios that have not yet occurred.
2) Basis of Combination
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of the LifePath 2010 Portfolio, (the "Target Fund")
by the LifePath Retirement Portfolio, (the "Acquiring Fund") as if such
acquisition had taken place as of June 30, 2009.
Under the terms of the Agreement and Plan of Reorganization (the "Agreement"),
the combination of the Target Fund and the Acquiring Fund will be accounted for
by the method of accounting for tax-free mergers of investment companies. The
acquisition would be accomplished by a transfer of the net assets of the Target
Fund in exchange for shares of the Acquiring Fund at net asset value. The
Acquiring Fund will assume all of the liabilities of the Target Fund. The
statement of assets and liabilities and the related statement of operations of
the Target Fund and the Acquiring Fund have been combined as of and for the
twelve months ended June 30, 2009. Following the acquisition, the Acquiring Fund
will be the accounting survivor. In accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"), the historical
cost of investment securities will be carried forward to the surviving fund and
the results of operations for precombination periods of the surviving fund will
not be restated.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements of the Acquiring Fund and the Target Fund included
in their respective semi-annual reports dated June 30, 2009.
The following notes refer to the accompanying pro forma financial statements as
if the above-mentioned acquisition of the Target Fund by the Acquiring Fund had
taken place as of June 30, 2009.
15
3) Security Valuation
The LifePath Portfolios are subject to the provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards No. 157
("FAS 157"), "Fair Value Measurements." This standard establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels. Inputs may be based on independent market
data ("observable inputs") or they may be internally developed ("unobservable
inputs"). The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements). The three
levels of the fair value hierarchy under FAS 157 are as follows:
.. Level 1 - Inputs that reflect unadjusted quoted prices in active markets
for identical assets or liabilities that the LifePath Portfolio has the
ability to access at the measurement date;
.. Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly or indirectly,
including quoted prices for similar assets or liabilities in active
markets, quoted prices for identical or similar assets or liabilities in
markets that are not considered to be active, inputs other than quoted
prices that are observable for the asset or liability, and inputs that are
derived principally from or corroborated by observable market data by
correlation or other means;
.. Level 3 - Inputs that are unobservable for the asset or liability.
Each LifePath Portfolio invests all of its assets in a separate series (each, a
"Master Portfolio") of Master Investment Portfolio ("MIP"). Each Master
Portfolio has the same or substantially similar investment objective as its
corresponding LifePath Portfolio. The value of each LifePath Portfolio's
investment in its corresponding Master Portfolio reflects that LifePath
Portfolio's interest in the net assets of that Master Portfolio (49.76% and
49.34% for the LifePath Retirement and LifePath 2010 Portfolios, respectively,
as of June 30, 2009).
The determination of what constitutes an "observable" input may require
significant judgment by the LifePath Portfolios. As of June 30, 2009, each
LifePath Portfolio's investment in its corresponding Master Portfolio was
classified as Level 2. The level of a value determined for an investment within
the fair value hierarchy is based upon the pricing transparency of the
investment and does not necessarily correspond to the LifePath Portfolios'
perceived risk of an investment in their corresponding Master Portfolio, nor the
levels of the investments held within the Master Portfolios.
The LifePath Portfolios believe more relevant disclosure regarding fair value
measurements relate to the investment portfolios of the Master Portfolios, which
can be found in the MIP's Pro Forma Notes to Combining Financial Statements, and
are included elsewhere in this report.
The performance of each LifePath Portfolio is directly affected by the
performance of its corresponding Master Portfolio. The financial statements of
each Master Portfolio, including the
16
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the corresponding LifePath Portfolio's financial
statements.
4) Capital Shares
The unaudited pro forma net asset value per share assumes retirement of the
LifePath 2010 Portfolio shares of common stock in connection with the proposed
acquisition of the LifePath 2010 Portfolio by the LifePath Retirement Portfolio
as of June 30, 2009. The number of retired shares was calculated by dividing the
net asset value of each class of the LifePath 2010 Portfolio by the respective
class net asset value per share of the LifePath Retirement Portfolio.
Shares of Additional Shares Total Outstanding
Acquiring Fund Assumed Issued In Shares
Class of Shares Pre-Combination The Agreement Post-Combination
- --------------- --------------- ----------------- -----------------
Class I 11,158,953 27,988,486 39,147,439
Class R 2,914,706 9,781,589 12,696,295
Class S 3,731 7,944 11,675
5) Unaudited Pro Forma Adjustments
The unaudited pro forma financial statements reflect changes in fund shares as
if the Agreement had taken place on June 30, 2009. LifePath 2010 Portfolio
expenses were adjusted assuming LifePath Retirement Portfolio's fee structure
was in effect for the twelve months ended June 30, 2009.
6) Use of Estimates
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements in conformity with U.S.
GAAP. The preparation of financial statements in conformity with U.S. GAAP
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the twelve months ended June 30, 2009. Actual
results could differ from those estimates.
7) Federal Income Taxes
Each LifePath Portfolio is treated as a separate entity for federal income tax
purposes. It is the policy of each LifePath Portfolio to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined under Subchapter M of the Internal Revenue Code
of 1986, as amended, and to annually distribute substantially all of its
ordinary income and any net capital gains (taking into account any capital loss
carryforwards) sufficient to relieve it from all, or substantially all, federal
income and excise
17
taxes. Accordingly, no provision for federal income taxes was required for the
twelve months ended June 30, 2009.
The LifePath Portfolios had tax basis net capital carryforwards as of December
31, 2008, the tax year-end of the LifePath Portfolios, as follows:
Expiring
Portfolio 2016
- ------------------- --------
LifePath Retirement $880,743
LifePath 2010 19
Net capital loss carryforwards may be applied against any net realized taxable
gains in each succeeding year or until their respective expiration dates,
whichever occurs first.
Management has reviewed the tax positions as of June 30, 2009, inclusive of the
prior three open tax return years, and has determined that no provision for
income tax is required in the LifePath Portfolios' financial statements.
18
PART C
OTHER INFORMATION
BARCLAYS GLOBAL INVESTORS FUNDS
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 25 of PEA No. 71, which
information is incorporated herein by reference.
ITEM 16. EXHIBITS
(1)(a) Amended and Restated Agreement and Declaration of Trust, dated
November 17, 2006, is incorporated herein by reference to Barclays
Global Investors Funds' ("Registrant") Post-Effective Amendment No.
59, filed April 30, 2007 ("PEA No. 59").
(1)(b) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust, dated December 11, 2007, is incorporated
herein by reference to the Registrant's Post-Effective Amendment
No. 62, filed December 27, 2007 ("PEA No. 62").
(2) Amended and Restated By-Laws, dated November 17, 2006, are
incorporated herein by reference to PEA No. 59.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization filed herewith as
Exhibit A to the Prospectus included as Part A of this Registration
Statement.
(5) Article IV of the Amended and Restated By-Laws, dated November 17,
2006, is incorporated herein by reference to PEA No. 59.
(6)(a) Not applicable.
(7)(a) Distribution Agreement between Registrant and SEI Investments
Distribution Co. ("SEI") on behalf of the funds, dated March 31,
2003, is incorporated herein by reference to the Registrant's
Post-Effective Amendment No. 42, filed May 1, 2003.
(7)(b) Amended Schedule I, dated November 18, 2008, to the Distribution
Agreement between Registrant and SEI is incorporated herein by
reference to the Registrant's Post-Effective Amendment No. 67,
filed November 21, 2008 ("PEA No. 67").
(8) Not applicable.
(9)(a) Custody Agreement between Registrant and Investors Bank & Trust
Company ("IBT") on behalf of the funds, dated October 21, 1996, is
incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 22, filed July 30, 1999 ("PEA No. 22").
(9)(b) Amendment to Custody Agreement, effective September 1, 2004,
between Registrant and IBT/1/ is incorporated herein by reference
to the Registrant's Post-Effective Amendment No. 57, filed March 2,
2006 ("PEA No. 57").
(9)(c) Amendment to Custody Agreement, effective January 1, 2006, between
Registrant and IBT/1/ is incorporated herein by reference to PEA
No. 59.
(9)(d) Amended Schedule A, dated March 26, 2008, to Custody Agreement
between Registrant and IBT/1/ is incorporated herein by reference
to the Registrant's Post-Effective Amendment No. 66, filed April
28, 2008 ("PEA No. 66").
(10)(a) Distribution Plan, dated March 2, 2005, is incorporated herein by
reference to PEA No. 57.
(10)(b) Appendix A, dated March 26, 2008, to the Distribution Plan is
incorporated herein by reference to PEA No. 66.
(10)(c) Amended and Restated Rule 18f-3 Multi-Class Plan, dated November
18, 2008, is incorporated herein by reference to PEA No. 67.
(10)(d) Appendix A, dated November 18, 2008, to the Rule 18f-3 Multi-Class
Plan is incorporated herein by reference to PEA No. 67.
(11) Opinion of Counsel (legality of securities being registered), filed
herewith as Exhibit (11).
(12) Form of opinion as to tax matters and consent, filed herewith as
Exhibit (12).
(13)(a) Transfer Agency and Service Agreement between Registrant and IBT/1/
on behalf of the funds, dated February 27, 1998, is incorporated
herein by reference to PEA No. 22.
(13)(b) Amendment to Transfer Agency and Service Agreement, effective June
1, 2001, between Registrant and IBT/1/ is incorporated herein by
reference to PEA No. 57.
(13)(c) Amendment to Transfer Agency and Service Agreement, effective
September 1, 2004, between Registrant and IBT/1/ is incorporated
herein by reference to PEA No. 57.
(13)(d) Amendment to Transfer Agency and Service Agreement, dated July 8,
2005, between Registrant and IBT/1/ is incorporated herein by
reference to PEA No. 57.
(13)(e) Amendment to Transfer Agency and Service Agreement, effective
January 1, 2006, between Registrant and IBT/1/ is incorporated
herein by reference to PEA No. 59.
(13)(f) Appendix A, dated March 26, 2008, to Transfer Agency and Service
Agreement between Registrant and IBT/1/ is incorporated herein by
reference to PEA No. 66.
(13)(g)(i) Amended and Restated Administration Agreement between Registrant
and Barclays Global Investors, N.A. ("BGI"), dated May 1, 2006, is
incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 58, filed April 28, 2006 ("PEA No. 58").
(13)(g)(ii) Amended Appendices A and B, dated November 18, 2008, to the Amended
and Restated Administration Agreement between the Registrant and
BGI are incorporated herein by reference to PEA No. 67.
(13)(h) Master Administration Fee Waiver Agreement between Registrant and
BGI, dated September 1, 2006, is incorporated herein by reference
to PEA No. 59.
(13)(i) Schedule A, dated March 19, 2009, to Master Administration Fee
Waiver Agreement between Registrant and BGI is incorporated herein
by reference to PEA No. 71.
(13)(j) Sub-Administration Agreement among Registrant, BGI, and IBT/1/ on
behalf of the funds, dated October 21, 1996, is incorporated herein
by reference to Registrant's Post-Effective Amendment No. 14, filed
June 30, 1997.
(13)(k) Amendment to Sub-Administration Agreement, effective December 31,
2002, among Registrant, BGI and IBT/1/ is incorporated herein by
reference to PEA No. 57.
(13)(l) Amendment to Sub-Administration Agreement, effective September 1,
2004, among Registrant, BGI and IBT is incorporated herein by
reference to PEA No. 58.
(13)(m) Amendment to Sub-Administration Agreement, effective January 1,
2006, among Registrant, BGI and IBT is incorporated herein by
reference to PEA No. 59.
(13)(n) Amendment to Sub-Administration Agreement, effective January 1,
2007, among Registrant, BGI and IBT is incorporated herein by
reference to PEA No. 59.
(13)(o) Revised Master Fee Schedule, dated January 1, 2006, to each of the
Sub-Administration, Custody and Transfer Agency and Service
Agreements between Registrant and IBT is incorporated herein by
reference to PEA No. 59.
(13)(p) Service Agreement between Registrant and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") on behalf of the
funds, dated December 31, 1997, is incorporated herein by reference
to the Registrant's Post-Effective Amendment No. 15, filed June 30,
1998 ("PEA No. 15").
(13)(q) Financial Services Agreement between Registrant and Merrill Lynch
on behalf of the funds, dated December 31, 1997, is incorporated
herein by reference to PEA No. 15.
(13)(r) Securities Lending Agency Agreement, dated April 2, 2007, between
Registrant and BGI is incorporated herein by reference to PEA No.
59.
(13)(s) Schedule A, dated March 26, 2008, to Securities Lending Agency
Agreement between Registrant and BGI is incorporated herein by
reference to PEA No. 66.
(13)(t) Independent Expense Waiver Agreement among Registrant, Master
Investment Portfolio ("MIP"), BGI and Barclays Global Fund Advisors
("BGFA"), dated March 19, 2009, is incorporated by reference herein
to PEA No. 71.
(13)(u) Form of Bank Agency Agreement between Registrant and SEI is
incorporated herein by reference to PEA No. 59.
(13)(v) Schedule I, dated March 26, 2008, to the Form of Bank Agency
Agreement between Registrant and SEI is incorporated herein by
reference to PEA No. 66.
(13)(w) Form of Sub-Distribution Agreement between Registrant and SEI is
incorporated herein by reference to PEA No. 59.
(13)(x) Schedule I, dated March 26, 2008, to the Form of Sub-Distribution
Agreement between Registrant and SEI is incorporated herein by
reference to PEA No. 66.
(14) Consent of Independent Registered Public Accounting Firm filed
herewith as Exhibit (14).
(15) Not applicable.
(16)(a) Power of Attorney for BGIF dated May 20, 2009, filed herewith as
Exhibit (16)(a).
(16)(b) Power of Attorney for MIP dated May 20, 2009, filed herewith as
Exhibit (16)(b).
(17)(a) Joint Code of Ethics of Registrant and MIP, dated June 1, 2005, is
incorporated herein by reference to PEA No. 57.
(b) Code of Ethics of BGFA, dated June 1, 2005, is incorporated herein
by reference to PEA No. 57.
(c) Code of Ethics of SEI, dated January 2004, is incorporated herein
by reference to the Registrant's Post-Effective Amendment No. 56,
filed April 29, 2005.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of this
Registration Statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information called for by the
applicable registration form for the reoffering by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees that it shall file a final executed
version of the legal and consent opinion as to tax matters as an exhibit to a
subsequent post-effective amendment to its registration statement on Form N-1A
filed with the SEC after the consummation of the reorganization contemplated by
this Registration Statement on Form N-14.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-14 has been signed on behalf of the
Registrant, in the City of San Francisco and the State of California, on the
31st day of August, 2009.
BARCLAYS GLOBAL INVESTORS FUNDS
By: /s/ Jack Gee
------------------------------------
Jack Gee
Treasurer
(Chief Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------------------------------- ------------------------- ---------------
/s/ H. Michael Williams Trustee and President August 31, 2009
- --------------------------------- (Chief Executive Officer)
H. Michael Williams
* Trustee August 31, 2009
- ---------------------------------
Mary G.F. Bitterman
* Trustee August 31, 2009
- ---------------------------------
A. John Gambs
* Trustee August 31, 2009
- ---------------------------------
Hayne E. Leland
* Trustee August 31, 2009
- ---------------------------------
Jeffrey M. Lyons
* Trustee August 31, 2009
- ---------------------------------
Lee T. Kranefuss
* Trustee August 31, 2009
- ---------------------------------
Wendy Paskin-Jordan
* Trustee August 31, 2009
- ---------------------------------
Leo Soong
/s/ Jack Gee Treasurer August 31, 2009
- --------------------------------- (Chief Financial Officer)
Jack Gee
By: /s/ H. Michael Williams
-----------------------------
H. Michael Williams *
* As Attorney-in-Fact pursuant to the powers of attorney as filed herein.
SIGNATURES
This Registration Statement on Form N-14 of Barclays Global Investors Funds
(the "Registrant") contains certain disclosures regarding series of the Master
Investment Portfolio (the "Trust"). The Trust has, subject to the next sentence,
duly caused this Registration Statement of the Registrant to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco and the State of California, on the 31st day of August, 2009. This
Trust is executing this Registration Statement only in respect of the
disclosures contained herein specifically describing the Trust and hereby
disclaims any responsibility or liability as to any other disclosures in this
Registration Statement.
MASTER INVESTMENT PORTFOLIO
By: /s/ Jack Gee
------------------------------------
Jack Gee
Treasurer
(Chief Financial Officer)
This Registration Statement on Form N-14 has been signed below by the
following persons solely in the capacities and subject to the next sentence on
the dates indicated. Each of the following persons is signing this Registration
Statement only in respect of the disclosures contained herein specifically
describing the Trust and hereby disclaims any responsibility or liability as to
any other disclosures in this Registration Statement.
Signature Title Date
- --------------------------------- ------------------------- ---------------
/s/ H. Michael Williams Trustee and President August 31, 2009
- --------------------------------- (Chief Executive Officer)
H. Michael Williams
* Trustee August 31, 2009
- ---------------------------------
Mary G.F. Bitterman
* Trustee August 31, 2009
- ---------------------------------
A. John Gambs
* Trustee August 31, 2009
- ---------------------------------
Hayne E. Leland
* Trustee August 31, 2009
- ---------------------------------
Jeffrey M. Lyons
* Trustee August 31, 2009
- ---------------------------------
Lee T. Kranefuss
* Trustee August 31, 2009
- ---------------------------------
Wendy Paskin-Jordan
* Trustee August 31, 2009
- ---------------------------------
Leo Soong
/s/ Jack Gee Treasurer August 31, 2009
- --------------------------------- (Chief Financial Officer)
Jack Gee
By: /s/ H. Michael Williams
-----------------------------
H. Michael Williams *
* As Attorney-in-Fact pursuant to the powers of attorney as filed herein.
Exhibit Index
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
- ----------- ------------------------------------------------------------
(11) Opinion of Counsel (legality of securities being registered)
(12) Form of Opinion as to Tax Matters and Consent
(14) Consent of Independent Registered Public Accounting Firm
(16)(a) Power of Attorney for BGIF
(16)(b) Power of Attorney for MIP