The Fund’s investment strategy aims to remain fully exposed to the Australian stock market, with cash exposure being maintained at a minimum, which may be, wherever practicable, equitised using index futures.

Benefits of investing in the iShares Australian Equity Index Fund

• Index tracking: The Fund is an index tracker and seeks to provide investors with similar returns, before fees, to those of its benchmark index.
  
• Diversification: In contrast to a direct investment in a single company or bond, the Fund provides, as far as practicable and possible, exposure to all of the securities or instruments within its benchmark index.
  
• Lower cost: As the Fund is passively managed and designed to track a particular index, the expenses of managing the Fund are generally lower compared to other forms of retail managed funds.
  

Risk level

High

The Fund is considered high risk. Generally, the risk level associated with the Fund is greater if the Fund is held for a period less than the minimum suggested timeframe.

Investor suitability

The Fund may be suitable for long-term investors seeking a broad exposure to Australian stocks.

Fund Strategy

The strategy uses a full-replication approach to match the performance of the benchmark. This approach aims to purchase every security in the relevant index. We take into consideration the short-term transaction costs associated with acquiring a particular stock. Each security is held in the portfolio at, or close to, its index weight. As a result, security-level tracking error and security-specific risk are minimised.

Our investment style is based on our belief that people, leveraged by technology, are central to the consistent achievement of our clients' investment goals.

We believe that a focus on total performance management is the best way to achieve superior investment results. Through total performance management, we aim to understand; measure; forecast; and manage the three dimensions of investment performance — return, risk and cost.

We believe that full replication is the most appropriate investment strategy to track the performance of the Index as risk relative to the Index is minimised. Portfolios automatically rebalance, which minimises turnover and trading costs.

Our full-replication approach normally aims to purchase every security in the Index, while considering transaction costs.

Capturing additional returns

To overcome the impact that transaction costs and cash drag can have on relative performance, we undertake value-added strategies such as:

• Cash-flow management: We use share price index (SPI) futures contracts where it is cheaper than trading in physical securities, to minimise market impact and to take a patient and, therefore, less-costly approach to trading.
  
• Managing Index changes: We use strategies to sell deleted stocks at higher prices than the final Index price and to buy incoming stocks at lower prices than which they are added to the Index.
  
• Anticipating Index changes: Through our knowledge of the Australian Securities Exchange's index rules, we try to anticipate future Index additions and deletions before they are announced.
  
• Enrolling in dividend-reinvestment plans: We enrol in dividend-reinvestment plans where we think it adds significant benefit to receive shares at discounts and to gain premiums relative to the Index.
  
• Taking part in initial public offerings and placements: Judging whether to take part in floats and placements is an important part of index management. We conduct thorough analysis on when new listings and issues may enter the Index and on the prices at which they may enter, before deciding to take controlled positions in floats or placements.    
  

How we invest your money

To achieve its investment objective the Fund invests substantially all of its assets in units of the iShares Wholesale Australian Equity Index Fund (Underlying Fund), another fund managed by us which has the same investment strategy as the Fund. The Underlying Fund invests in the Australian stocks that form the Index. Derivatives, such as futures, forwards and options can be used to manage risk and return. When derivative positions are established, they will always be backed by cash holdings and/or underlying assets. Derivative securities will not be used to gear the Underlying Fund.

The Fund and Underlying Fund may also hold a small allocation of cash (or cash equivalents that may include units in other BlackRock funds) for cash flow management purposes.

The Fund's investment strategy aims to remain fully exposed to the Australian stock market, with cash exposure being maintained at a minimum, which may be, wherever practicable, equitised using index futures.

While the constitution of the Fund allows the Responsible Entity to borrow, it is our intention that no borrowing arrangements will be entered into, other than temporary overdrafts, which may be used as a means of managing certain cash flows.