AN iSHARES ETF UPDATE ON THE RUSSIA-UKRAINE CRISIS

OVERVIEW

Russia invaded Ukraine on February 24, 2022. On March 10, 2022, BlackRock first published a list of actions taken in response and began providing updates specific to two Irish-domiciled iShares ETFs which held impacted securities. Since then, this information has been updated periodically to reflect key developments related to index changes and the status of the Russian marketplace.

BlackRock stands with the Ukrainian people and condemns the brutal aggression of the Russian government. As our CEO Larry Fink stated in March 2022, this is a horrific humanitarian tragedy.

ACTIONS WE HAVE TAKEN

Shareholders of iShares MSCI Russia ADR/GDR UCITS ETF and iShares MSCI Eastern Europe Capped UCITS ETF can find a summary of the events and the main actions we have taken to date regarding these two ETFs below:

  • February 28 2022: BlackRock suspended the purchase of Russian securities in our active and index funds.
  • March 02 2022 and March 03 2022: Valuations, subscriptions and redemptions were suspended for iShares MSCI Eastern Europe Capped UCITS ETF and iShares MSCI Russia ADR/GDR UCITS ETF respectively. BlackRock also voluntarily waived the total expense ratios (TERs) that BlackRock is entitled to be paid by the ETFs.
  • March 04 2022: European exchanges began to suspend trading in the iShares MSCI Russia ADR/GDR UCITS ETF and the iShares MSCI Eastern Europe Capped UCITS ETF.
  • March 07 2022: All major index providers began the removal of Russian securities from their indexes.
  • March 10 2022: Shareholder letters informed investors in iShares MSCI Russia ADR/GDR UCITS ETF and iShares MSCI Eastern Europe Capped UCITS ETF of the suspension of valuations, subscriptions and redemptions on the primary market.
  • May 20 2022: Shareholder letters informed investors of the decisions to terminate iShares MSCI Russia ADR/GDR UCITS ETF and iShares MSCI Eastern Europe Capped UCITS ETF , including detail about the rationale for termination, the related process, timing and costs.
  • June 16 2022: Supplemental shareholder letters informed investors of changes to the closure process for iShares MSCI Russia ADR/GDR UCITS ETF and iShares MSCI Eastern Europe Capped UCITS ETF, such that the shares of the funds were not cancelled at the start of the termination process but instead have been retained on the funds’ shareholder registers. This should be helpful to investors in evidencing their entitlement to potential future payments and in helping intermediaries to maintain records of beneficial owners for longer.
  • June 23 2022: RNS announcement informing shareholders of the initial payments received upon termination of iShares MSCI Russia ADR/GDR UCITS ETF and iShares MSCI Eastern Europe Capped UCITS ETF.
  • June 27 2022: Existing liquidation proceeds were distributed to shareholders.
  • August 2023: Conditions have allowed the sale of a limited number of securities held by iShares MSCI Russia ADR/GDR UCITS ETF. Proceeds from these disposals were distributed (USD 1.619438 per share) to investors who held fund shares on 20 June 2022 (the Termination Start Date).  As and if market conditions and legal and regulatory restrictions allow, BlackRock will seek to implement an orderly disposal of further Russian securities in line with our fiduciary duties and respective fund investment objectives and policies in order to return any residual net proceeds to investors.
  • November 2023: Conditions have allowed for the further sale of a limited number of securities held by iShares MSCI Russia ADR/GDR UCITS ETF. Proceeds from these disposals were distributed to investors at a rate of USD 1.3955 per share on 17 November 2023 or shortly thereafter.
  • January 2024: Both iShares MSCI Eastern Europe Capped UCITS ETF and iShares MSCI Russia ADR/GDR UCITS ETF were able to sell more securities, allowing for further distributions of related proceeds: USD 0.1537 per share and USD 1.1959 respectively.

 

OUR CONTINUING APPROACH

BlackRock continues to consult with market participants to help our funds to exit their positions in Russian securities whenever and wherever regulatory and market conditions allow.

At this time, Russian securities that cannot be divested continue to be held in these and/or other ETFs with Russian exposure.

As and when non-local investors are allowed to trade and settle in the Russian stock market and in compliance with applicable law and regulations, including relevant sanctions laws, and under appropriate market conditions, BlackRock will seek to implement an orderly and managed disposal of such Russian securities in line with our fiduciary duties and respective fund investment objectives and policies.

Where certain Russian securities are not the subject or target of sanctions, or the respective sanctions regimes have issued legal authorisation to divest within a prescribed timeframe, BlackRock continues to assess whether it can transfer or divest those securities, including depositary receipts, when it is legally permissible and in the best interests of investors.

For any potential disposal, BlackRock will assess market conditions based on multiple factors including, but not limited to, legal restrictions, liquidity, spreads, international investor access, volume and volatility.

SHAREHOLDER FAQs

BlackRock notified shareholders on 20 May 2022 that the following iShares UCITS ETFs with Russian exposures would be terminated.

  • iShares MSCI Eastern Europe Capped UCITS ETF | IEER
  • iShares MSCI Russia ADR/GDR UCITS ETF | CSRU

Both of these funds had already been suspended from trading in early March 2022. A further notification was made by the Boards of Directors on 16 June 2022 informing investors about the termination of the fund with 20 June 2022 as the "Termination Start Date".

Due to Russia’s invasion of Ukraine, normal market trading conditions have remained materially impaired and a significant portion of Russian securities are not tradeable for investors outside Russia. Additionally, all major index providers have removed Russian securities from their indexes. As a result, IEER and CSRU have been put into termination in the interests of shareholders. 

No; there are no elections or actions required of shareholders. BlackRock will endeavour to dispose of the funds’ remaining assets and return the proceeds (if any) to shareholders that were on the register (maintained by each fund’s registrar) when the closure was announced without any additional information or action required from or by investors.

As disclosed in the prospectuses of the funds, BlackRock may, in good faith and based on available information, determine an asset’s fair value using a variety of methodologies. This process is carried out according to formal pricing policies.

Given the continued market closure for non-local investors and current illiquidity of Russian securities held by non-local investors, BlackRock Pricing Committees are applying fair valuation approaches for those securities. It is important to note, however, that given the nature of those investments, determinations as to their fair value may not represent the actual amount that will be realised upon their eventual disposal.

Shares in CSRU and/or IEER on 20 June 2022 (the Termination Start Date) entitled owners to a pro rata share of cash and readily realisable (that is, non-Russian) assets held by either fund, net of expenses and estimated anticipated transaction-related expenses (including any duties and charges and costs of conversion of the depositary receipts). These proceeds were distributed to shareholders on 27 June 2022.

Conditions in August 2023 allowed the sale of a limited number of securities held by iShares MSCI Russia ADR/GDR UCITS ETF.  Proceeds from these disposals were distributed to investors who held fund shares on 20 June 2022 (the Termination Start Date). 

The remaining Russian securities in these funds will be liquidated at some point in the future, should this become possible, practicable and appropriate, in order to return any residual net proceeds to investors.

Given that the return of liquidation proceeds to shareholders may take place over a prolonged period, shares will be retained on the shareholder register of the two funds until later in the termination process. This should be helpful to investors in evidencing their entitlement to potential future payments (if there are any) and may help intermediaries maintain their records of the beneficial owners of the shares of the funds for longer.

Shareholders were informed of the closure of the funds on 20 May 2022 and the funds have been in termination since 20 June 2022. The product pages on ishares.com have consequently been removed as the funds are no longer tradeable.

For IEER, net realisable proceeds from the non-Russian holdings have already been returned to investors; the Russian securities will remain in the fund until such time as it is possible, practicable and appropriate (in the investment manager’s view) to liquidate each position.

For CSRU, net realisable proceeds were also returned to investors in June 2022. Conditions have since allowed the sale of a limited number of further securities held by the fund.  Proceeds from these disposals have been distributed to investors who held fund shares on 20 June 2022 (the Termination Start Date). The remaining Russian securities will continue to be held by the fund until such time as it is possible, practicable and appropriate (in the investment manager’s view) to liquidate each position.

The funds are in the process of termination and shares in them can no longer be traded or redeemed.

Shareholders have been informed that it may take a substantial amount of time before they receive proceeds (if any) from the disposal of Russian securities.

Restrictions on trading of Russian securities by non-local investors as well as global sanctions on Russian entities will delay liquidation of that portion of IEER’s and CSRU’s holdings.

Due to political and market uncertainties and the fact that it is not possible to predict the optimal time for selling the Russian securities or whether certain securities can be sold at all, there is no guarantee that optimal value, or any value at all, can be achieved from the Russian securities. An assessment will be made based on information available to the investment manager at the relevant time.

Shareholders will be sent their share of net proceeds (if there are any) from the sale of any remaining assets, as and when such assets can be sold.

BlackRock has discretion in facilitating the disposal of the Russian securities, which will be assessed based on multiple factors including, but not limited to, legal restrictions, liquidity, spreads, international investor access, volume and volatility.

We do not calculate or publish official daily NAVs for these two ETFs since the funds are in termination. The NAVs as of the last day of trading can be downloaded below.

Investment vehicles in jurisdictions classified by Russia as “unfriendly”, e, g. Irish domiciled funds, will have any dividends paid into restricted RUB (Type S) cash accounts. Currently, these accounts are not accessible to non-local investors.

Shareholders should not expect to receive dividends from this fund as the fund is in termination.

Please see below.

NAV AND HOLDINGS DATA

LAST ANNUAL REPORTS WITH THESE FUNDS

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