ISHARES TRUST, N-1A, 1999-12-16

ISHARES TRUST
N-1A, 1999-12-16

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<PAGE>

As filed with the U.S. Securities and Exchange Commission
on December 16, 1999

Securities Act File No. [ ]
Investment Company Act File No. 811-09729

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. ___ [ ]

Post-Effective Amendment No. ___ [ ]

and/or

REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]

Amendment No. [ ]
---

(Check appropriate box or boxes)

Approximate Date of Proposed Public Offering.......March 1, 2000

iShares Trust
..................................................
(Exact Name of Registrant as Specified in Charter)

Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
..................................................
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (415) 597-2000

The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
..................................................
(Name and Address of Agent for Service)
<PAGE>

CROSS-REFERENCE SHEET
FORM N-1A

PART A
Form N-1A Item Number Prospectus Captions

Item 1. Front and Back Cover Pages

Item 2. Overview

Item 3. Descriptions of iShares Funds

Item 4. Investment Strategies and Policies; Principal
Risk Considerations; Description of iShares
Funds

Item 5. Not Applicable

Item 6. Management

Item 7. Shareholder Information; Creations and
Redemptions

Item 8. Distribution Arrangements

Item 9. Not Applicable

PART B
Form N-1A Item Number Statement of Additional Information

Item 10. Cover Page; Table of Contents

Item 11. General Description of the Trust and Its
Series

Item 12. General Description of the Trust and Its
Funds; Investment Strategies and Risks;
Investment Limitations

Item 13. Management

Item 14. Not Applicable

Item 15. Management

<PAGE>

Item 16. Brokerage Transactions

Item 17. Additional Information Concerning the Trust

Item 18. Creation and Redemption of Creation Unit
Aggregations; Determination of Net Asset
Value; Dividends and Distributions

Item 19. Taxes

Item 20. Not Applicable

Item 21. Performance and Other Information

Item 22. Financial Statements

PART C

Form N-1A Item Exhibits Other Information
Number
<PAGE>

Item 23 Exh. No. Exhibit
----------- ------------------------------------------------

(a) Agreement and Declaration of Trust dated
December __, 1999*
(b) By-Laws*
(c) Not Applicable
(d) Investment Management Agreement Between
the Trust and Barclays Global Fund Advisors*
(e) Distribution Agreement Between the Trust and
SEI Investments Distribution Company*;
Form of Authorized Participant Agreement*;
Form of Sales and Investor Services
Agreement*
(f) Not Applicable
(g) Custodian Agreement Between Investors Bank
& Trust and the Trust*; Lending Agreement
Between Investors Bank & Trust and the
Trust*
(h) Transfer Agency and Services Agreement
between the Trust and Investors Bank &
Trust*; Form of License Agreement Between
Barclays Global Fund Advisors and Individual
Funds*
(i) Legal Opinion and Consent of Counsel*
(j) Consent of Independent Auditors*
(k) Not Applicable
(l) Subscription Agreement Between the Trust
and SEI Investments Distribution Company*;
Letter of Representations Between the Trust
and Depository Trust Company*
(m) Form of 12b-1 Plan and 12b-1 Agreement*
(n) Not Applicable

Item 24. Persons Controlled by or Under Common Control with Registrant

Item 25. Indemnification

Item 26. Business and other Connections of Investment Adviser

Item 27. Principal Underwriters

Item 28. Location of Accounts and Records

Item 29. Management Services
<PAGE>

Item 30. Undertakings

*To be filed by Amendment.
<PAGE>

iShares (SM)
iShares Trust

The iShares Trust is an "index fund," consisting of a number of separate
investment portfolios, called "Funds." Each Fund is based upon a particular
equity market index compiled by one of three index providers: Standard & Poor's
(a division of The McGraw-Hill Companies, Inc.), Dow Jones & Company and Frank
Russell Company.

<TABLE>
<CAPTION>
<S> <C> <C>
iShares S&P 500 Fund iShares Dow Jones Total Market Fund iShares Russell 3000 Fund

iShares S&P 100 Fund iShares Dow Jones U.S. Basic Materials iShares Russell 3000 Growth
Fund Fund

iShares S&P 500/BARRA Growth iShares Dow Jones U.S. Consumer iShares Russell 3000 Value Fund
Fund Cyclicals Sector Fund Fund

iShares S&P 500/BARRA Value Fund iShares Dow Jones U.S. Consumer iShares Russell 2000 Fund
Non-Cyclicals Sector Fund

iShares S&P MidCap 400 Fund iShares Dow Jones U.S. Energy Sector iShares Russell 2000 Growth Fund
Fund

iShares S&P MidCap iShares Dow Jones U.S. Financial Sector iShares Russell 2000 Value
400/BARRA Growth Fund Fund Fund

iShares S&P MidCap iShares Dow Jones U.S. Healthcare iShares Russell 1000 Fund
400/BARRA Value Fund Sector Fund

iShares S&P SmallCap 600 Fund iShares Dow Jones U.S. Industrial Sector iShares Russell 1000 Growth
Fund Fund

iShares S&P SmallCap iShares Dow Jones U.S. Technology iShares Russell 1000 Value
600/BARRA Growth Fund Sector Fund Fund

iShares S&P SmallCap iShares Dow Jones U.S.
600/BARRA Value Fund Telecommunications Sector Fund

iShares S&P Euro Plus Fund iShares Dow Jones U.S. Utilities Sector
Fund
iShares S&P/TSE 60 Fund
iShares Dow Jones U.S. Chemicals
Fund

iShares Dow Jones U.S. Financial
Services Fund

iShares Dow Jones Internet Fund

iShares Dow Jones U.S. Real Estate
Fund
</TABLE>

-1-
<PAGE>

Each Fund's investment objective is to provide investment results similar
to the total return performance of its underlying index. Each Fund is managed
by Barclays Global Fund Advisors. The shares of each Fund, called "iShares",
have been approved for listing on the American Stock Exchange LLC, called the
"AMEX," subject to notice of issuance. iShares will trade on the AMEX at market
prices throughout the trading day. Market prices for iShares may be different
from their net asset value. There is no assurance that an active trading market
will be maintained for iShares or that the market prices of iShares will be
close to their relevant net asset values.

Each Fund issues and redeems iShares on a continuous basis -- at net asset
value -- only in large specified numbers of iShares called "Creation Units",
usually in exchange for a basket of portfolio securities and an amount of cash.
As a practical matter, only large institutions purchase or redeem Creation Units
of iShares. Except when aggregated in Creation Units, iShares are not
redeemable securities.

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

PROSPECTUS
[MARCH 1, 2000]

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C>
OVERVIEW........................................................ 1
Principal Risk Factors Common to the Funds...................... 1
Details on Index Investing INVESTMENT STRATEGIES AND POLICIES.............................. 2
Replication Strategy............................................ 2
Representative Sampling Strategy................................ 2
Other Policies.................................................. 3
Details on the Risks of PRINCIPAL RISK CONSIDERATIONS................................... 3
Investment in iShares Not Insured or Guaranteed by any Government Agency.............. 3
Concentration and Fund Diversity................................ 3
iShare Trading Issues........................................... 4
Foreign Investments............................................. 4
Lending of Securities........................................... 4
Leverage........................................................ 5
Derivatives..................................................... 5
Year 2000 Risk.................................................. 5

Details on Each Particular Fund DESCRIPTIONS OF iSHARES FUNDS
iShares S&P 500 Fund............................................ 6
iShares S&P 100 Fund............................................ 8
iShares S&P 500/BARRA Growth Fund............................... 10
iShares S&P 500/BARRA Value Fund............................... 12
iShares S&P MidCap 400 Fund..................................... 14
iShares S&P MidCap 400/BARRA Growth Fund........................ 16
iShares S&P MidCap 400/BARRA Value Fund......................... 18
iShares S&P SmallCap 600 Fund................................... 20
iShares S&P SmallCap 600/BARRA Growth Fund...................... 22
iShares S&P SmallCap 600/BARRA Value Fund....................... 24
iShares S&P Euro Plus Fund...................................... 26
iShares S&P/TSE 60 Fund......................................... 28
iShares Dow Jones Total Market Fund............................. 30
iShares Dow Jones U.S. Basic Materials Sector Fund.............. 32
iShares Dow Jones U.S. Consumer Cyclicals Sector Fund........... 34
iShares Dow Jones U.S. Consumer Non-Cyclicals Sector Fund....... 36
iShares Dow Jones U.S. Energy Sector Fund....................... 38
iShares Dow Jones U.S. Financial Sector Fund.................... 40
iShare Dow Jones U.S. Healthcare Sector Fund.................... 42
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
iShares Dow Jones U.S. Industrials Sector Fund.................. 44
iShares Dow Jones U.S. Technology Sector Fund................... 46
iShares Dow Jones U.S. Telecommunications Sector Fund........... 48
iShares Dow Jones U.S. Utilities Sector Fund.................... 50
iShares Dow Jones U.S. Chemicals Fund........................... 52
iShares Dow Jones U.S. Financial Services Fund.................. 54
iShares Dow Jones Internet Fund................................. 56
iShares Dow Jones U.S. Real Estate Fund......................... 58
iShares Russell 3000 Fund....................................... 60
iShares Russell 3000 Growth Fund................................ 62
iShares Russell 3000 Value Fund................................. 64
iShares Russell 2000 Fund....................................... 66
iShares Russell 2000 Growth Fund................................ 68
iShares Russell 2000 Value Fund................................. 70
iShares Russell 1000 Fund....................................... 72
iShares Russell 1000 Growth Fund................................ 74
iShares Russell 1000 Value Fund................................. 76
Details on the management and MANAGEMENT
operations of the iShares Trust Investment Adviser.............................................. 78
Administrative Services......................................... 78
Details on buying and selling SHAREHOLDER INFORMATION
iShares Buying and Selling iShares...................................... 79
Book Entry...................................................... 79
iShare Prices................................................... 79
Determining Net Asset Value..................................... 80
Dividends and Distributions..................................... 80
Taxes........................................................... 80
CREATIONS AND REDEMPTIONS....................................... 81
Details on the Rule 12b-1 DISTRIBUTION ARRANGEMENTS....................................... 82
Distribution Plan Distributor..................................................... 82
Distribution Arrangements....................................... 82
INDEX PROVIDERS................................................. 83
</TABLE>

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<PAGE>

OVERVIEW

This Prospectus provides the information you need to make an informed
decision about investing in iShares. It contains important facts about the
iShares Trust as a whole and each particular Fund of the Trust. INVESTMENT
STRATEGIES AND POLICIES and PRINCIPAL RISK CONSIDERATIONS discuss the general
strategies and risks applicable to all of the Funds, while DESCRIPTION OF
iSHARES FUNDS provides important information about each particular Fund,
including a brief description of its underlying index, and specific risks
associated with a particular Fund.

Each Fund is an "index fund," which means that it seeks to achieve, as
closely as practicable, before fees and expenses, the total return of publicly-
traded equity securities of companies in a specified market index, each called
an "Underlying Index." All of the Funds seek to approximate the relevant
Underlying Index's total return, before fees and expenses, in falling as well as
rising markets. They do not seek to "beat" the markets they track and do not
seek temporary defensive positions when markets appear overvalued.

Principal Risk Factors Common to the Funds

You may choose among the Funds to invest in the broad market, particular
market segments or specific industry sectors, as measured by the particular
Underlying Index for a Fund. As with any investment, your investment could
lose money or the performance of a particular Fund could trail that of other
alternative investments. Risks of investing in the iShares of any Fund include:

. you can lose money;

. prices of the stocks in which a Fund invests may decline;

. no attempt is made to individually select stocks because each Fund's
portfolio is managed, to the extent feasible, either to replicate the
Underlying Index or to hold a representative sample of the securities in
the Underlying Index;

. active trading markets for iShares of one or more Funds may never develop
or be maintained; and

. investments in iShares are not bank deposits or obligations of Barclays
Global Fund Advisors (BGFA), or Barclays Global Investors, N.A., (BGI) or
any of their affiliates. iShares are not guaranteed or endorsed by the
Federal Deposit Insurance Corporation (FDIC) or any other government
agency.

-1-
<PAGE>

INVESTMENT STRATEGIES AND POLICIES

An index is a group of stocks selected to represent an entire market or
market segment. An index is a standard of market performance. An index fund
seeks to match the performance of the corresponding index. BGFA, the investment
adviser, makes no attempt to apply economic, financial or market analysis when
managing each Fund. BGFA selects securities for each Fund that help the Funds
achieve returns corresponding to index returns. Including a security among a
Fund's holdings implies no opinion as to its attractiveness as an investment.

Replication Strategy

One way an index fund seeks to match an Underlying Index's performance,
before fees and expenses, is by buying and selling all of the Underlying Index's
securities in the same proportions as they are reflected in the Underlying
Index. This process is called replication. Several of the Funds use the
Replication Strategy, although they reserve the right not to invest in every
security in the Underlying Index if BGFA believes it is not practical to do so
under the circumstances.

Representative Sampling Strategy

It may be difficult or impractical to hold all of the securities in
Underlying Index. In such cases the Funds invest in a representative sampling
of securities in the Underlying Index, selected by BGFA to have the same
investment profile as the Underlying Index. In addition, some of these Funds
may hold some securities that are not included in their Underlying Indexes if
BGFA decides it is appropriate in view of these Funds' investment objectives.

Each Fund follows either a Replication Strategy or a Representative
Sampling Strategy. The DESCRIPTION OF iSHARES FUNDS section indicates which
investment strategy a Fund intends to use.

In some cases, a Fund might not meet its diversification requirements if it
invests in the securities that make up a particular index in the proportions
that match their index weights. In such cases, a Fund may elect to invest in an
index that has been modified by the index provider to satisfy fund
diversification requirements. Alternatively, a Fund may elect to employ a
Representative Sampling Strategy to achieve its diversification objectives.

As of [date], the Funds intend to invest in the following indexes, which
have been modified by the index provider: Dow Jones U.S. Energy Sector Index;
Dow Jones U.S. Healthcare Sector Index; Dow Jones U.S. Industrial Sector Index;
Dow Jones U.S. Telecommunications Sector Index; and Dow Jones U.S. Chemicals
Index.

A Fund that uses a Representative Sampling Strategy is not expected to
track its Underlying Index with the same degree of accuracy as a Fund which uses
a Replication Strategy.

BGFA expects that, over time, the "expected tracking error" for a Fund
relative to the performance of its Underlying Index will be less than 5%. A
Fund's tracking error will generally

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<PAGE>

be greater if its Underlying Index has fewer rather than greater numbers of
stocks and the Fund uses a Representative Sampling Strategy rather than a
Replication Strategy.

Other Policies

A Fund will concentrate (i.e., hold more than 25% of its assets in the
stocks of a single industry or a group of industries) its investments in issuers
of one or more particular industries to the extent that its Underlying Index
concentrates in the stocks of such particular industry or industries.

Each Fund may invest its remaining assets in money market instruments,
other investment companies (including money market funds) and a variety of
derivative instruments or contracts.

Each Fund may lend securities it holds to a variety of financial
institutions who are interested in borrowing securities. These financial
institutions must pledge collateral to the Fund when they borrow securities and
the Fund may earn income from the pledged collateral which can be used to offset
Fund expenses.

Each Fund may borrow money up to a limit of 10% of the value of its assets,
but only for temporary or emergency purposes. Each Fund may pledge or otherwise
encumber its assets to secure these borrowings.

PRINCIPAL RISK CONSIDERATIONS

iShares have the following risks.

Not Insured or Guaranteed by any Government Agency

An investment in the Funds is not a bank deposit nor is it insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Concentration and Fund Diversity

A Fund that concentrates in a single industry or a group of industries may
be more adversely affected by the performance of the relevant stocks and be
subject to greater price volatility than a Fund holding a more diversified
portfolio of investments. Also, a Fund that concentrates in a single industry or
a group of industries may be more susceptible to any single economic, political
or regulatory occurrence than a Fund that has a more broadly diversified
portfolio of investments.

A Fund may be classified as diversified or non-diversified, which refers to
the number and percentages of securities that a fund holds. A non-diversified
fund has the ability to hold

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<PAGE>

fewer stocks than a diversified fund and, therefore, is subject to greater
fluctuations in value. To see if a Fund is classified as non-diversified or to
learn more about a particular concentration policy of a Fund, please see
DESCRIPTION OF iSHARES FUNDS.

iShares Trading Issues

Absence of Prior Active Market. Although iShares are expected to be
approved for listing on the American Stock Exchange (the "AMEX"), there can be
no assurance that an active trading market will develop for iShares or that one
will be maintained.

Lack of Market Liquidity. Trading in iShares on the AMEX may be halted
because of market conditions or for reasons that, in the view of the AMEX, make
trading in iShares inadvisable. In addition, trading in iShares is subject to
trading halts caused by extraordinary market volatility pursuant to AMEX
"circuit breaker" rules. There can be no assurance that the requirements of the
AMEX necessary to maintain the listing of the iShares of any Fund will continue
to be met or will remain unchanged.

Fluctuation of Net Asset Value. The net asset value of iShares will
fluctuate with changes in the market value of a Fund's securities holdings. The
market prices of iShares will fluctuate in accordance with changes in net asset
value and supply and demand on the AMEX and thus iShares may trade below, at or
above their net asset value. Price differences may be due to the fact that
supply and demand forces in the secondary trading market for iShares will be
closely related to, but not identical to, the same forces influencing the prices
of the stocks of the Underlying Indexes trading individually or in the aggregate
at any point in time. However, given that iShares can be created and redeemed in
Creation Units (unlike shares of many closed-end funds, which frequently trade
at appreciable discounts from, and sometimes at premiums to, their net asset
value), BGFA believes that large discounts or premiums to the net asset value of
iShares should not be sustained.

Foreign Investments

Each Fund may purchase publicly traded common stocks of foreign
corporations represented in the Underlying Indexes. Each Fund's investment in
common stock of foreign corporations represented in the Underlying Indexes may
also be in the form of American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs"). ADRs and GDRs are receipts, typically issued by a
bank or trust company, which evidence ownership of underlying securities issued
by a foreign corporation. Foreign investments may involve additional risks and
considerations. These risks include, for example, fluctuations in foreign
currency, as well as the political and economic risks of an issuer's country.
Securities of foreign companies may be more volatile than securities of U.S.
companies. Such consequences may adversely affect the value and/or increase the
volatility of securities held by a Fund.

Lending of Securities

Each Fund may lend its portfolio securities. Although each Fund will
receive collateral in connection with such loans, a Fund may still be exposed
to a risk of loss should a borrower default on its obligation to return the
borrowed securities, because the loaned securities may

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<PAGE>

have appreciated beyond the value of the collateral held by the Fund. In
addition, a Fund would bear the risk of loss of any cash collateral that it
invests.

Leverage

To the extent that a Fund borrows money, it may be leveraged. Leveraging
generally exaggerates the effect on net asset value of any increase or decrease
in the market value of a Fund's portfolio securities.

Derivatives

A derivative is a financial contract the value of which depends on, or is
derived from, the value of an underlying asset such as a security or an index.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus a
Fund's losses may be greater if it invests in derivatives than if it invests
only in conventional securities. Each Fund may invest in index futures
contracts and other derivatives, including combinations of stock index futures
contracts, options on futures contracts, stock index options, stock index swaps,
and forward currency exchange contracts.

Year 2000 Risk

Most of the services provided to the Trust depend on the smooth functioning
of computer systems. Any failure of these systems to recognize and adapt to
dates in the year 2000 could hamper the Trusts' operations and services. The
Trust's principal service providers are working on upgrades and changes to their
systems as necessary and expect their systems to be ready in time but there can
be no assurance of success. Moreover, since year 2000 issues can affect
virtually every organization, the companies or entities in which the Funds
invest or the value of their securities could also be negatively affected.

For a further discussion of risks of investing in iShares, please refer to
the Statement of Additional Information, which is incorporated by reference and
is available free of charge by calling [toll-free number].

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<PAGE>

Description of iShares Funds

iSHARES S&P 500 FUND/1/
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's 500 Index

Investment Objective/Approach

The S&P 500 Fund seeks to provide investment results that correspond
generally to the price and yield performance of the large capitalization sector
of the U.S. equity market, representing approximately 77% of the market
capitalization of all U.S. equity securities, as represented by the S&P 500
Index. The S&P 500 Index consists of 500 stocks picked according to the total
market value of their outstanding shares.

As of ______ 1999, the S&P 500 Index's three largest stocks were Microsoft,
General Electric Company and IBM (which comprised __ %, __ % and __ %
respectively, of its market capitalization) and its three largest industries
were technology, financial and consumer staples (which comprised ____%, ____%
and ____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

- ------------------------
/1/ Standard & Poor's and the Standard & Poor's Marks are servicemarks of
Standard & Poor's and have been licensed for use for certain purposes by the
Trust. The Funds 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.

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<PAGE>

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Management fees................................ _____ %
Distribution (Rule 12b-1) fees................. _____ %
Other expenses................................. _____ %
Total annual Fund operating expenses........... _____ %

Example of Expenses

This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. We are assuming an
initial investment of $10,000, 5% total return each year with no changes in
operating expenses and redemption at the end of each period. Although your
actual cost may be higher or lower, based on these assumptions, your costs would
be:

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

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<PAGE>

Description of iShares Funds

iSHARES S&P 100 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's 100 Index

Investment Objective/Approach

The S&P 100 Fund seeks to provide investment results that correspond
generally to the price and yield performance of the large capitalization growth
sector of the U.S. market, representing approximately 38% of the market
capitalization of all U.S. equity securities, as represented by the S&P 100
Index. The S&P 100 Index consists of stocks of some of the largest companies in
the U.S. equity market and, as is the case with the S&P 500 Index, size,
liquidity, and sector representation are primary determinants in choosing index
constituents. This index consists of 100 stocks.

As of ______ 1999, the S&P 100 Index's three largest stocks were Microsoft,
General Electric Company and IBM (which comprised __ %, __ % and __ %
respectively, of its market capitalization) and its three largest industries
were technology, financial and consumer staples (which comprised ____%, ____%
and ____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P 100 Index in weightings proportionate
to the index.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. As a result, growth stocks tend to be sensitive to changes in their
earnings and more volatile than other types of stock.

Performance Information

The Fund is newly organized and therefore has no performance history.

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<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

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<PAGE>

Description of iShares Funds

iSHARES S&P 500/BARRA GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's 500/BARRA Growth Index

Investment Objective/Approach

The S&P 500/BARRA Growth Fund seeks to provide investment results that
correspond generally to the price and yield performance of the large
capitalization growth sector of the US equity market, representing approximately
50% of the market capitalization of the S&P 500 Index, as represented by the S&P
500/BARRA Growth Index. The S&P 500/BARRA Growth Index consists of those
companies with the highest price-to-book ratios within the S&P 500 Index. This
index consists of 128 stocks.

As of ______ 1999, the S&P 500/BARRA Growth Index's three largest stocks
were Microsoft, General Electric Company and IBM (which comprised __%, __% and
__% respectively, of its market capitalization) and its three largest
industries were technology, health care and consumer staples (which comprised
____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P 500/BARRA Growth Index in weightings
proportionate to the index.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. Growth stocks tend to be sensitive to changes in their earnings and more
volatile than other types of stock.

Performance Information

The Fund is newly organized and therefore has no performance history.

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<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-11-
<PAGE>

Description of iShares Funds

iSHARES S&P 500/BARRA VALUE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's 500/BARRA Value Index

Investment Objective/Approach

S&P 500/BARRA Value Fund seeks to provide investment results that
correspond generally to the price and yield performance of the large
capitalization value sector of the U.S. equity market, representing
approximately 50% of the market capitalization of the S&P 500 Index, as
represented by the S&P 500/BARRA Value Index. The S&P 500/BARRA Value Index
consists of those companies with the lowest price-to-book ratios within the S&P
500 Index. This index consists of 372 stocks.

As of ______ 1999, the S&P 500/BARRA Value Index's three largest stocks
were Exxon Corporation, AT&T Corporation and Citigroup Inc. (which comprised __
%, __ % and __ % respectively, of its market capitalization) and its four
largest industries were financial, energy, consumer staples and consumer
cyclical (which comprised ____%, ____%, ____ and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P 500/BARRA Value Index in weightings
proportionate to the index.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.
. Value stocks tend to be inexpensive relative to their earnings and assets
compared to other types of stock. However, value stocks can continue to be
inexpensive for long periods of time and may not ever realize their full
value.

Performance Information

The Fund is newly organized and therefore has no performance history.

-12-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-13-
<PAGE>

Description of iShares Funds

iSHARES S&P MIDCAP 400 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's MidCap 400 Index

Investment Objective/Approach

The S&P MidCap 400 Fund seeks to provide investment results that correspond
generally to the price and yield performance of the mid-capitalization sector of
the U.S. equity market, representing approximately 6% of the market
capitalization of all U.S. equity securities, as represented by the S&P MidCap
400 Index. The S&P MidCap 400 Index selection criteria, except for the
criterion of size, are essentially the same as those used in the selection of
S&P 500 components. Companies are selected for liquidity and industry group
representation. This index consists of 400 stocks.

As of ______ 1999, the S&P MidCap 400 Index's three largest stocks were
Qualcomm Inc., Lienar Technology Corp. and Biogen, Inc. (which comprised __ %,
__ % and __ % respectively, of its market capitalization) and its three largest
industries were technology, consumer cyclicals and financial (which comprised
____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P MidCap 400 Index in weightings
proportionate to the index.
. Mid-capitalization stocks may offer potentially higher return for
investors, but are more vulnerable than larger capitalization stocks to
adverse business or economic developments.
. Mid-capitalization stocks have liquidity and trading patterns different
from that of larger capitalization stocks.
. Mid-capitalization stocks have market and performance cycles different from
that of larger capitalization stocks.

Performance Information

The Fund is newly organized and therefore has no performance history.

-14-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-15-
<PAGE>

Description of iShares Funds

iSHARES S&P MIDCAP 400/BARRA GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's MidCap 400/BARRA Growth Index

Investment Objective/Approach

The S&P MidCap 400/BARRA Growth Fund seeks to provide investment results
that correspond generally to the price and yield performance of those companies
with the highest price-to-book ratios within the S&P 400 Index, representing
approximately 50% of the market capitalization of that index, as represented by
the S&P MidCap 400/BARRA Growth Index. The S&P MidCap 400/BARRA Growth Index is
a capitalization-weighted index representing stocks from a broad range of
industries. This index consists of 141 stocks.

As of ______ 1999, the S&P MidCap 400/BARRA Growth Index's three largest
stocks were Qualcomm Inc., Linear Technology Corp and Biogen, Inc. (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industries were technology, consumer cyclical and health care
(which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P MidCap 400/BARRA Growth Index in
weightings proportionate to the index.
. Mid-capitalization stocks may offer potentially higher returns for
investors, but are more vulnerable than larger capitalization stocks to
adverse business or economic developments.
. Mid-capitalization stocks have liquidity and trading patterns different
from that of larger capitalization stocks.
. Mid-capitalization stocks have market and performance cycles different from
that of larger capitalization stocks.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, growth stocks may lack the dividend yield that
can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks

-16-
<PAGE>

. Growth stocks tend to be sensitive to changes in their earnings and more
volatile than other types of stock.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-17-
<PAGE>

Description of iShares Funds

iSHARES S&P MIDCAP 400/BARRA VALUE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's MidCap 400/BARRA Value Index

Investment Objective/Approach

The S&P MidCap 400/BARRA Value Fund seeks to provide investment results
that correspond generally to the price and yield performance of those companies
with the lowest price-to-book ratios within the S&P MidCap 400 Index,
representing approximately 50% of the market capitalization of that index, as
represented by the S&P MidCap 400/BARRA Value Index. The S&P MidCap 400/BARRA
Value Index is a capitalization-weighted index representing stocks from a broad
range of industries. This index consists of 259 stocks.

As of ______ 1999, the S&P MidCap 400/BARRA Value Index's three largest
stocks were Marshall & Ilsley Corporation, Intuit, Inc. and First Security Corp.
(Utah) (which comprised __ %, __ % and __ % respectively, of its market
capitalization) and its three largest industries were financial, utilities and
consumer cyclical (which comprised ____%, ____% and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P MidCap 400/BARRA Value Index in
weightings proportionate to the index.
. Mid-capitalization stocks may offer potentially higher returns for
investors, but are more vulnerable than large-capitalization stocks to
adverse business or economic developments.
. Mid-capitalization stocks have liquidity and trading patterns different
from that of larger capitalization stocks.
. Mid-capitalization stocks have market and performance cycles different from
that of larger capitalization stocks.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.

-18-
<PAGE>

. Value stocks tend to be inexpensive relative to their earnings and assets
compared to other types of stock. However, value stocks can continue to be
inexpensive for long periods of time and may not ever realize their full
value.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-19-
<PAGE>

Description of iShares Funds

iSHARES S&P SMALLCAP 600 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's SmallCap 600 Index

Investment Objective/Approach

The S&P SmallCap 600 Fund seeks to provide investment results that
correspond generally to the price and yield performance of publicly traded
securities in the small capitalization sector of the U.S. equity market,
representing approximately 2.5% of the market capitalization of the U.S. equity
market, as represented by the S&P SmallCap 600 Index.

To be included in the S&P SmallCap 600 Index, common stock must have been
traded for at least 6 months, have a price greater than $1 on any three or more
business days during a 12 month period, have an annualized turnover exceeding
20% of shares outstanding, not be owned over 50% by another entity, not be in
bankruptcy, and have a bid-asked spread of 5% or less. This index consists of
600 stocks.

As of ______ 1999, the S&P SmallCap 600 Index's three largest stocks were
Novellus Systems, FirstMerit Corp. and American Bankers Insurance (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industry segments were consumer cyclicals, technology and
financial (which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P SmallCap 600 Index in weightings
proportionate to the index.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.
. Small capitalization companies may be less financially secure than larger,
more established companies.
. Small capitalization companies may depend on a small number of key
personnel.

-20-
<PAGE>

. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-21-
<PAGE>

Description of iShares Funds

iSHARES S&P SMALLCAP 600/BARRA GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's SmallCap 600/BARRA Growth Index

Investment Objective/Approach

The S&P SmallCap 600/BARRA Growth Fund seeks to provide investment results
that correspond generally to the price and yield performance of those companies
with the highest price-to-book ratios within the S&P SmallCap 600 Index,
representing approximately 50% of the market capitalization of that index, as
represented by the S&P SmallCap 600/BARRA Growth Index. This index consists of
230 stocks.

As of ______ 1999, the S&P SmallCap 600/BARRA Growth Index's three largest
stocks were Novellus Systems, FirstMerit Corporation and Express Scripts 'A'
(which comprised__ %, __ % and __ % respectively, of its market capitalization)
and its three largest industries were technology, consumer cyclical and
financial (which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P SmallCap 600/BARRA Growth Index in
weightings proportionate to the index.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.
. Small capitalization companies may be less financially secure than larger,
more established companies.
. Small capitalization companies may depend on a small number of key
personnel.
. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.

-22-
<PAGE>

. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. Growth stocks tend to be sensitive to changes in their earnings and more
volatile than other types of stock.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-23-
<PAGE>

Description of iShares Funds

iSHARES S&P SMALLCAP 600/BARRA VALUE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's SmallCap 600/BARRA Value Index

Investment Objective/Approach

The S&P SmallCap 600/BARRA Value Fund seeks to provide investment results
that correspond generally to the price and yield performance of those companies
with the lowest price-to-book ratios within the S&P SmallCap 600 Index,
representing approximately 50% of the market capitalization of that index, as
represented by the S&P SmallCap 600/BARRA Value Index. This index consists of
370 stocks.

As of ______ 1999, the S&P SmallCap 600/BARRA Value Index's three largest
stocks were American Bankers Insurance, Radian Group Inc. and Devon Energy
(which comprised __ %, __ % and __ % respectively, of its market capitalization)
and its three largest industries were consumer Cyclical, financial and capital
goods (which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P SmallCap 600/BARRA Value Index in
weightings proportionate to the index.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.
. Small capitalization companies may be less financially secure than larger,
more established companies.
. Small capitalization companies may depend on a small number of key
personnel.
. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.

-24-
<PAGE>

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-25-
<PAGE>

Description of iShares Funds

iSHARES S&P EURO PLUS FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's Euro Plus Index

Investment Objective/Approach

The S&P Euro Plus Index Fund seeks to provide investment results that
correspond generally to the price and yield performance of equities in the
continental European region, as represented by the S&P Euro Plus Index. The S&P
Euro Plus Index is maintained by the S&P International Index Policy Committee.
It contains approximately 200 common stocks, chosen to represent a broad range
of industry segments.

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P Euro Plus Index in weightings
proportionate to the index.
. An investment in the S&P Euro Plus Index Fund involves risks not typically
associated with investing in a fund that invests in securities of U.S.
issuers;
. These risks are similar to those of investing in a broad-based portfolio of
equity securities traded on exchanges in the securities markets of the
component European countries and include:
- Less liquid and less efficient securities markets;
- Greater price volatility;
- Exchange rate fluctuations and exchange controls;
- Local currency changes in interest rates;
- Less publicly available information about issuers;
- The imposition of withholding or other taxes;
- The imposition of restrictions on the expatriation of funds or
other assets of the Fund;
- Higher transaction and custody costs and delays in attendant
settlement procedures;
- Difficulties in enforcing contractual obligations;
- Lesser levels of regulation of the securities markets;
- Different accounting, disclosure and reporting requirements;

-26-
<PAGE>

- More substantial government involvement in the economy;
- Higher rates of inflation;
- Greater social, economic and political uncertainty.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly.
The following table and example describe the fees and expenses that you may pay
if you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-27-
<PAGE>

Description of iShares Funds

iSHARES S&P/TSE 60 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Standard & Poor's/ TSE 60 Index

Investment Objective/Approach

The S&P/TSE 60 Index Fund seeks to provide investment results that
correspond generally to the price and yield performance of those Canadian equity
securities which comprise the S&P/TSE 60 Index. The S&P/TSE 60 Index is
maintained by the S&P Canadian Policy Committee, which is comprised of 7 members
representing both S&P and TSE. The committee is responsible for setting policy
and determining index composition. The index contains 60 common stocks,
selected from the TSE 300 universe.

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the S&P/TSE 60 Index in weightings
proportionate to the index.
. An investment in the S&P/TSE 60 Index Fund involves risks not typically
associated with investing in a fund that invests in the securities of U.S.
issuers.
. These risks are similar to those of investing in a broad-based portfolio of
equity securities traded on exchanges in the Canadian securities market and
may include:
- Less liquid and less efficient securities markets;
- Greater price volatility;
- Exchange rate fluctuations and exchange controls;
- Local currency changes in interest rates;
- Less publicly available information about issuers;
- The imposition of withholding or other taxes;
- The imposition of restrictions on the expatriation of funds or
other assets of the Fund;
- Higher transaction and custody costs and delays in attendant
settlement procedures;
- Difficulties in enforcing contractual obligations;
- Lesser levels of regulation of the securities markets;
- Different accounting, disclosure and reporting requirements;

-28-
<PAGE>

- More substantial government involvement in the economy;
- Higher rates of inflation;
- Greater social, economic and political uncertainty.

. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.

Performance Information

The Fund is newly organized and, therefore, has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-29-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. TOTAL MARKET FUND/2/
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones Total Market Index

Investment Objective/Approach

The Dow Jones Total Market Fund seeks to provide investment results that
correspond generally to the price and yield performance of the U.S. equity broad
market, as represented by the Dow Jones U.S. Total Market Index. The Dow
Jones U.S.

Total Market
Index includes all of the companies in the Dow Jones Large Cap Index, Dow Jones
Mid Cap Index and Dow Jones Small Cap Index and is structured to represent
approximately 95% of the market capitalization of all listed U.S. equity
securities. This index consists of approximately 2118 stocks.

As of ______ 1999, the Dow Jones U.S. Total Market Index's three largest
stocks were Microsoft Corporation, General Electric Company and IBM (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industries were technology, financial and consumer cyclical
(which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

The Fund will use the representative sampling strategy described on
page [2].

Principal Risk Factors

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

- -------------------
/2/ Dow Jones' and the Dow Jones Marks are servicemarks of Dow Jones & Company,
Inc. and have been licensed for use for certain purposes by the Trust. The
Funds are not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones
makes no representation regarding the advisability of investing in iShares.

-30-
<PAGE>

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-31-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Basic Materials Sector Index

Investment Objective/Approach

The Dow Jones U.S. Basic Materials Sector Fund seeks to provide investment
results that correspond generally to the price and yield performance of the
basic materials economic sector of the U.S. equity market, as represented by the
Dow Jones U.S. Basic Materials Sector Index. The Dow Jones U.S. Basic Materials
Sector Index includes companies in the Basic Materials sector of the Dow Jones
U.S. Total Market Index. This index consists of approximately 101 stocks.
Companies in this Fund are involved in the production of aluminum, chemicals,
commodities, chemicals specialty products, forest products, non-ferrous mining
products, paper products, precious metals and steel.

As of ______ 1999, the Dow Jones U.S. Basic Materials Sector Index's three
largest stocks were E.I. DuPont de Nemours, Dow Chemicals and Alcoa (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its four largest industry segments were chemicals, paper products and forest
products (which comprised ____%, ____%, ____ and ____, respectively, of its
market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Basic Materials Sector
Index in weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. Companies in this sector are significantly affected by the level of
volatility of commodity prices, the exchange value of the dollar, import
controls, and worldwide competition.
. At times, worldwide production of industrial materials has exceeded demand
as a result of over-building or economic downturns, leading to poor
investment returns or losses.
. Other risks include liability for environmental damage, depletion of
resources, and mandated expenditures for safety and pollution control.

-32-
<PAGE>

. The industrial sector may also be affected by economic cycles, technical
progress, labor relations, and government regulations.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of this Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-33-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Consumer Cyclical Sector Index

Investment Objective/Approach

The Dow Jones U.S. Consumer Cyclical Sector Fund seeks to provide
investment results that correspond generally to the price and yield performance
of the consumer cyclical economic sector of the U.S. equity market, as
represented by the Dow Jones U.S. Consumer Cyclical Sector Index. This index
consists of approximately 374 stocks. Companies in this Fund include advertising
companies, airlines, auto manufacturers, tire and rubber manufacturers, auto
parts suppliers, casinos, entertainment and leisure companies, toy
manufacturers, restaurant chains, home construction companies, consumer
electronics companies, lodging chains, broadcasters, publishers, broadline
retailers, specialty retailers, footwear and clothing/fabric manufacturers.

As of ______ 1999, the Dow Jones U.S. Consumer Cyclical Sector Index's
three largest stocks were Wal-Mart Stores Inc., Home Depot and Time Warner
(which comprised __ %, __ % and __ % respectively, of its market capitalization)
and its three largest industry segments were specialty retailers, entertainment
and leisure companies and broadline retailers (which comprised ____%, ____% and
____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

-34-
<PAGE>

. Changes in demographics and consumer tastes can also affect the demand for,
and success of, consumer products.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance History

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-35-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Consumer Non-Cyclical Sector Index

Investment Objective/Approach

The Dow Jones U.S. Consumer Non-Cyclical Sector Fund seeks to provide
investment results that correspond generally to the price and yield performance
of the consumer non-cyclical economic sector of the U.S. equity market, as
represented by the Dow Jones U.S. Non-Cyclical Sector Index. This index consists
of approximately 143 stocks. Companies in this Fund include distillers and
brewers, producers of soft drinks, consumer service companies, durable and non-
durable household product manufacturers, cosmetics companies, food retailers,
other food companies, tobacco and agricultural companies.

As of ______ 1999, the Dow Jones U.S. Non-Cyclical Sector Index's three
largest stocks were Coca Cola, America Online and Procter & Gamble Co. (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industry segments were consumer and household products and
services, beverages and food (which comprised ____%, ____% and ____%,
respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 6.]
[The Fund will use the representative sampling strategy described on page 6.]

Principal Risk Factors

-36-
<PAGE>

. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-37-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. ENERGY SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Energy Index

Investment Objective/Approach:

The Dow Jones U.S. Energy Sector Fund seeks to provide investment results
that correspond generally to the price and yield performance of the energy
sector of the U.S. equity market, as represented by the Dow Jones U.S. Energy
Sector Index. This index consists of approximately 96 stocks. Companies in this
Fund include coal producers, oil drillers, oil production manufacturers and
servicers, major oil companies, secondary oil companies and pipeline companies.

As of ______ 1999, the Dow Jones U.S. Energy Sector Index's three largest
stocks were Exxon, Mobil and Chevron (which comprised __ %, __ % and __ %
respectively, of its market capitalization) and its three largest industry
segments were major oil companies, oil production manufacturers and servicers
and secondary oil companies (which comprised ____%, ____% and ____%,
respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

-38-
<PAGE>

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-39-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. FINANCIAL SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Financial Sector Index

Investment Objective/Approach

The Dow Jones U.S. Financial Sector Fund seeks to provide investment
results that correspond generally to the price and yield performance of the
financial economic sector of the U.S. equity market, as represented by the Dow
Jones U.S. Financial Sector Index. This index consists of approximately 424
stocks. Companies in this Fund include major international banks, regional
banks, diversified financial companies, insurance companies, real estate
companies, savings and loan associations, and securities brokers.

As of ______ 1999, the Dow Jones U.S. Financial Sector Index's three
largest stocks were Citigroup, American International Group, Inc. and
BankAmerica (which comprised __ %, __ % and __ % respectively, of its market
capitalization) and its three largest industry segments were banks, financial
diversified and insurance (which comprised ____%, ____% and ____%, respectively,
of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Financial Sector Index in
weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. Financial companies are subject to extensive governmental regulation which
may limit both the amounts and types of loans and other financial
commitments they can make, and the interest rates and fees they can charge.
. Profitability in this sector is influenced by the availability and cost of
capital funds, and can fluctuate significantly when interest rates change.
. Credit losses resulting from financial difficulties of borrowers can
negatively impact this sector.
. Insurance companies may be subject to severe price competition.

-40-
<PAGE>

. Newly-enacted legislation is expected to result in increased inter-industry
consolidation in this sector.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance information.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-41-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. HEALTHCARE SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Healthcare Sector Index

Investment Objective/Approach

The Dow Jones U.S. Healthcare Sector Fund seeks to provide investment
results that correspond generally to the price and yield performance of the
healthcare sector of the U.S. equity market, as represented by the Dow Jones
U.S. Healthcare Sector Index. This index consists of approximately 184 stocks.
Companies in this Fund include health care providers, biotechnology companies
and manufacturers of medical supplies, advanced medical devices and
pharmaceuticals.

As of ______ 1999, the Dow Jones U.S. Healthcare Sector Index's three
largest stocks were Merck, Pfizer and Bristol Myers Squibb (which comprised
__ %, __ % and __ % respectively, of its market capitalization) and its three
largest industry segments were pharmaceuticals, medical supplies and
biotechnology (which comprised ____%, ____% and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Healthcare Sector Index in
weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. Companies in this sector are subject to forces and trends which may make it
difficult to raise prices and, in fact, may result in price discounting.
. The industries in the sector are regulated by the Food and Drug
Administration.
. The process of obtaining FDA approval is long and costly, and it is
becoming increasingly difficult to recoup these costs.
. Manufacturers of medical devices face unusual costs because they must
follow regulations regarding "Good Manufacturing Practices".
. The biotechnology industry is an emerging growth industry, and therefore
biotechnology companies are often thinly capitalized.

-42-
<PAGE>

. Companies in this sector are susceptible to product obsolescence.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

FEES AND EXPENSES

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-43-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. INDUSTRIAL SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Industrial Sector Index

Investment Objective/Approach

The Dow Jones U.S. Industrial Sector Fund seeks to provide investment
results that correspond generally to the price and yield performance of the
industrial sector of the U.S. equity market, as represented by the Dow Jones
U.S. Industrial Sector Index. This index consists of approximately 410 stocks.
Companies in this Fund include aerospace and defense companies, advanced
industrial companies, equipment manufacturers, air freight companies, building
materials manufacturers, packaging companies, manufacturers of electrical
components and equipment, heavy construction companies, manufacturers of heavy
machinery, industrial services companies, industrial companies, marine
transportation companies, railroads, shipbuilders, and trucking companies.

As of ______ 1999, the Dow Jones U.S. Industrial Sector Index's three
largest stocks were General Electric, Tyco International and Boeing (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industry segments were industrial diversified, industrial and
commercial services and industrial technology (which comprised ____%, ____% and
____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

-44-
<PAGE>

. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-45-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. TECHNOLOGY SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Technology Sector Index

Investment Objective/Approach

Dow Jones U.S. Technology Sector Fund seeks to provide investment results
that correspond generally to the price and yield performance of publicly traded
securities in the technology sector of the U.S. equity market, as represented by
the Dow Jones U.S. Technology Sector Index. This index consists of approximately
262 stocks. Companies in this Fund include companies that are involved in the
development and production of technology products, including computer hardware
and software, telecommunications equipment, microcomputer components, integrated
computer circuits and office equipment utilizing technology.

As of ______ 1999, the Dow Jones U.S. Technology Sector Index's three
largest stocks were Microsoft, IBM and Intel (which comprised __ %, __ % and __
% respectively, of its market capitalization) and its three largest industry
segments were semiconductors, computers and software (which comprised ____%,
____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

-46-

<PAGE>

. Technology companies may face dramatic and often unpredictable changes in
growth rates and competition for the services of qualified personnel.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-47-

<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Telecommunications Sector Index

Investment Objective/Approach:

The Dow Jones U.S. Telecommunications Sector Fund seeks to provide
investment results that correspond generally to the price and yield performance
of the telecommunications sector of the U.S. equity market, as represented by
the Dow Jones U.S. Telecommunications Sector Index. This index consists of
approximately 28 stocks. Companies in this Fund include fixed line
communications and wireless communications companies.

As of ______ 1999, the Dow Jones U.S. Telecommunications Sector Index's
three largest stocks were AT&T Corp., MCI Worldcom Inc. and SNC Communications
(which comprised __ %, __ % and __ % respectively, of its market capitalization)
and its two largest industry segments were fixed line communications and
wireless communications (which comprised ____% and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Telecommunications Sector
Index in weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. The domestic telecommunications industry is characterized by increasing
competition and regulation by the Federal Communications Commission and
various state regulatory authorities.
. Companies in this sector need to commit substantial capital to meet
increasing competition, particularly in the formulating new products and
services using new technology.
. Telecommunications companies are under intense competitive pressures and
the stock of such companies may be subject to significant price volatility.
. Telecommunications companies are subject to the additional risk that
technological innovations will make their products and services obsolete.

-48-
<PAGE>

. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-49-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. UTILITIES SECTOR FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Utilities Sector Index

Investment Objective/Approach

The Dow Jones U.S. Utilities Sector Fund seeks to provide investment
results that correspond generally to the price and yield performance of the
utilities sector of the U.S. equity market, as represented by the Dow Jones U.S.
Utilities Sector Index. This index consists of approximately 96 stocks.
Companies in this Fund include electric utilities, gas utilities and water
utilities.

As of ______ 1999, the Dow Jones U.S. Utilities Sector Index's three
largest stocks were Duke Energy, Southern and PG&E (which comprised __ %, __ %
and __ % respectively, of its market capitalization) and its three largest
industry segments were electric utilities, gas utilities and water utilities
(which comprised ____%, ____% and ___%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Utilities Sector Index in
weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. The rates that traditional regulated utility companies may charge their
customers generally are subject to review and limitation by governmental
regulatory commissions.
. The value of regulated utility debt securities (and, to a lesser extent,
equity securities) tends to have an inverse relationship to the movement of
interest rates.
. Certain utility companies have experienced full or partial deregulation in
recent years. These companies are frequently similar to industrial
companies in that they are subject to greater competition and have been
permitted by regulators to diversify outside of their original geographic
regions and their traditional lines of business. These opportunities may
permit certain utility companies to earn more than their traditional
regulated rates of return.

-50-
<PAGE>

Some companies, however, may be forced to defend their core business and
may be less profitable.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-51-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. CHEMICAL FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Chemical Index

Investment Objective/Approach

The Dow Jones U.S. Chemical Fund seeks to provide investment returns that
correspond generally to the price and yield performance of the chemicals
industry sector of the U.S. equity market, as represented by the Dow Jones U.S.
Chemical Index. This index consists of approximately 47 stocks.

As of ______ 1999, the Dow Jones U.S. Chemical Index's three largest stocks
were E.I. DuPont de Nemours, Dow Chemicals and Air Products & Chemicals (which
comprised __ %, __ % and __ % respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

Performance Information

The Fund is newly organized and therefore has no performance history.

-52-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-53-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. FINANCIAL SERVICES FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Financial Services Index

Investment Objective/Approach

The Dow Jones U.S. Financial Services Fund seeks to provide investment
results that correspond generally to the performance of the financial services
industry segment of the U.S. equity market, as represented by the Dow Jones U.S.
Financial Services Index. Companies in this Fund include banks, savings and loan
associations, specialty financial firms, and other financial services firms.
This index consists of approximately 257 stocks.

As of ______ 1999, the Dow Jones U.S. Financial Services Index's three
largest stocks were Citigroup, BankAmerica and Chase Manhattan (which comprised
__ %, __ % and __ % respectively, of its market capitalization) and its two
largest industries were banks and specialty financial firms (which comprised
____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Financial Services Index
in weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. The profitability of a financial institution depends to a great extent on
the credit quality of its loan portfolio, which is affected by the
institution's underwriting criteria, concentrations within its loan
portfolio, and general economic conditions.
. A financial institution's operating performance is also impacted by changes
in interest rates, availability and cost of funds, intensity of
competition, and degree of governmental regulation.
. Newly-enacted legislation is expected to result in increased inter-industry
consolidation in the financial sector.

-54-
<PAGE>

. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-55-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES INTERNET FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones Internet Index

Investment Objective/Approach

The Dow Jones Internet Fund seeks to provide investment results that
correspond generally to the price an yield performance of the internet industry
sector of the U.S. equity markets, as represented by the Dow Jones Internet
Index. This index consists of approximately 40 stocks. Companies in this Fund
include those involved in internet services and internet commerce.

As of ______ 1999, the Dow Jones Internet Index's three largest stocks were
CMGI Inc., Excite@Home Corp. and America Online Inc. (which comprised __ %, __ %
and __ % respectively, of its market capitalization) and its two largest
industry segments were internet services and internet commerce (which comprised
____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones Internet Index in weightings
proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. Companies in this sector spend heavily on research and development and
their products or services may not prove commercially successful or may
become obsolete quickly.
. The computer/Internet Sector may be subject to greater governmental
regulation than other sectors and changes in governmental policies and the
need for regulatory approvals may have a material adverse effect on this
sector.
. Companies in this sector may be subject to risks of developing
technologies, competitive pressures and other factors and are dependent
upon consumer and business acceptance as new technologies evolve.

-56-
<PAGE>

. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-57-
<PAGE>

Description of iShares Funds

iSHARES DOW JONES U.S. REAL ESTATE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Dow Jones U.S. Real Estate Index

Investment Objective/Approach

The Dow Jones U.S. Real Estate Fund seeks to provide investment results
that correspond generally to the price and yield performance of the real estate
industry sector of the U.S. equity market, as represented by the Dow Jones U.S.
Real Estate Index. This index consists of approximately 92 stocks.

As of ______ 1999, the Dow Jones U.S. Real Estate Index's three largest
stocks were Equity Office Properties, Starwood Hotels and Resorts Combined and
CFT (which comprised __ %, __ % and __ % respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Dow Jones U.S. Real Estate Index in
weightings proportionate to the index.
. The Fund is classified as "non-diversified." A non-diversified fund has the
ability to hold fewer stocks than a diversified fund. As a result, the Fund
is more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence.
. Investment in this sector is subject to many of the same risks associated
with the direct ownership of real estate.
. The underlying value of the securities in this sector may be adversely
affected by adverse changes in national, state or local economic climate
and real estate conditions (such as oversupply of or reduced demand for
space and changes in market rental rates), perceptions of prospective
tenants of the safety, convenience, and attractiveness of the properties,
the ability of the owner to provide adequate management, maintenance and
insurance, the ability to collect on a timely basis all rents from tenants,
tenant defaults, the costs of complying with the Americans with
Disabilities Act, increased competition from other properties, obsolescence
of property, changes in the availability, cost and terms of mortgage funds,
the impact of present and future environmental legislation and compliance
with environmental

-58-
<PAGE>

laws, the ongoing need for capital improvements, particularly for older
properties, changes in real estate taxes and other operating expenses,
regulatory and economic impediments to raising rents, adverse changes in
governmental rules and fiscal policies, dependency on management skills,
civil unrest, acts of God, including earthquakes and other natural
disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of
the issuer of the Fund.
. The stock market generally and/or other sectors of the stock market may
outperform this sector.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's' assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-59-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 3000 FUND/3/
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 3000 Index

Investment Objective/Approach

The Russell 3000 Fund seeks to provide investment results that correspond
generally to the price and yield performance of the U.S. equity broad market,
representing approximately 86% of the market capitalization of all U.S. equity
securities, as represented by the Russell 3000 Index. The Russell 3000 Index is
a capitalization-weighted index of the 3000 largest companies domiciled in the
U.S. and its territories. This index consists of approximately 2864 stocks.

As of ______ 1999, the Russell 3000 Index's three largest stocks were
General Electric Co., Microsoft Corporation and IBM (which comprised __ %, __ %
and __ %, respectively, of its market capitalization) and its three industries
were technology, financial services and consumer discretionary (which comprised
____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 3000 Index in weightings
proportionate to the index.
. The Russell 3000 Index is a broad market index, which includes large
capitalization, medium capitalization and small capitalization companies.
Thus, its performance may be different from that of a narrower index such
as a large capitalization index.

Performance Information

The Fund is newly organized and therefore has no performance history.

- -------------------
/3/ Frank Russell Company and the Frank Russell Marks are servicemarks of Frank
Russell Company and have been licensed for use for certain purposes by the
Trust. The Funds are not sponsored, endorsed, sold or promoted by Frank Russell
Company and Frank Russell Company makes no representation regarding the
advisability of investing in iShares.

-60-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-61-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 3000 GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 3000 Growth Index

Investment Objective/Approach

The Russell 3000 Growth Fund seeks to provide investment results that
correspond generally to the price and yield performance of the growth sector of
the U.S. equity broad market, representing approximately 50% of the total market
capitalization of the Russell 3000 Index, as represented by the Russell 3000
Growth Index. The Russell 3000 Growth Index measures the performance of those
Russell 1000 and Russell 2000 companies with higher price-to-book ratios and
higher forecasted growth. This index consists of approximately 1784 stocks.

As of ______ 1999, the Russell 3000 Growth Index's three largest stocks
were General Electric Co., Microsoft Corporation and Intel Corp.(which comprised
__ %, __ % and __ % respectively, of its market capitalization) and its three
largest industries were technology, consumer discretionary and health care
(which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 3000 Growth Index in weightings
proportionate to the index.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. As a result, growth stocks tend to be sensitive to changes in their
earnings and more volatile than other types of stock.
. The Russell 3000 Growth Index is a broad market index, which includes large
capitalization, medium capitalization and small capitalization companies.
Thus, its performance may be different from that of a narrower index such
as a large capitalization index.

Performance Information

The Fund is newly organized and therefore has no performance history.

-62-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-63-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 3000 VALUE FUNDS
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 3000 Value Fund

Investment Objective/Approach

The Russell 3000 Value Fund seeks to provide investment results that
correspond generally to the price and yield performance of the value sector of
the broad U.S. equity market, representing approximately 50% of the total market
capitalization of the Russell 3000 Index, as represented by the Russell 3000
Value Index. The Russell 3000 Value Index measures the performance of those
Russell 1000 and Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth. This index consists of approximately 1968 stocks.

As of ______ 1999, the Russell 3000 Value Index's three largest stocks were
IBM, Exxon Corp. and AT&T Corp. (which comprised __ %, __ % and __ %
respectively, of its market capitalization) and its three largest industries
were financial services, utilities and consumer discretionary (which comprised
____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 3000 Value Index in weightings
proportionate to the index.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.
. Value stocks tend to be inexpensive relative to their earnings and assets
compared to other types of stock. However, value stocks can continue to be
inexpensive for long periods of time and may not ever realize their full
value.
. The Russell 3000 Value Index is a broad market index, which includes large
capitalization, medium capitalization and small capitalization companies.
Thus, it performance may be different from that of a narrower index such as
a large capitalization index.

Performance Information

The Fund is newly organized and therefore has no performance history.

-64-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-65-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 2000 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 2000 Index

Investment Objective/Approach

The Russell 2000 Fund seeks to provide investment results that correspond
generally to the price and yield performance of publicly traded securities in
the small capitalization sector of the U.S. equity market, representing
approximately 6% of the market capitalization of all U.S. equity securities, as
represented by the Russell 2000 Index. The Russell 2000 Index is a
capitalization-weighted index of the 2000 smallest companies in the Russell 3000
Index, which represents approximately 11% of the total market capitalization of
the Russell 3000. This index consists of approximately 1885 stocks.

As of ______ 1999, the Russell 2000 Index's three largest stocks were
Cypress, Semiconductor and Radian Group Inc. (which comprised __ %, __ % and __
%, respectively, of its market capitalization) and its three largest industries
were financial services, consumer discretionary and technology (which comprised
____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 2000 Index in weightings
proportionate to the index.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.
. Small capitalization companies may be less financially secure than larger,
more established companies.
. Small capitalization companies may depend on a small number of key
personnel.
. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.

-66-
<PAGE>

Performance History

The Fund is newly organized and, therefore, has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-67-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 2000 GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 2000 Growth Index

Investment Objective/Approach

The Russell 2000 Growth Fund seeks to provide investment returns that
correspond generally to the price and yield performance of the small
capitalization growth sector of the U.S. equity market, representing 50% of the
total market capitalization of the Russell 2000 Index, as represented by the
Russell 2000 Growth Index. The Russell 2000 Growth Index measures the
performance of those Russell 2000 companies with higher price-to-book ratios and
higher forecasted growth. This index consists of approximately 1258 stocks.

As of ______ 1999, the Russell 2000 Growth Index's three largest stocks
were VerticalNet, Inc., Go2Net, Inc. and Metris Companies, Inc. (which comprised
__ %, __ % and __ % respectively, of its market capitalization) and its three
largest industries were technology, consumer discretionary and health care
(which comprised ____%, ____% and ____%, respectively, of its market
capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 2000 Growth Index in weightings
proportionate to the index.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. As a result, growth stocks tend to be sensitive to changes in their
earnings and more volatile than other types of stock.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.

-68-
<PAGE>

. Small capitalization companies may be less financially secure than larger,
more established companies.
. Small capitalization companies may depend on a small number of key
personnel.
. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-69-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 2000 VALUE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 2000 Value Index

Investment Objective/Approach:

The Russell 2000 Value Fund seeks to provide investment results that
correspond generally to the price and yield performance of the small
capitalization growth sector of the U.S. equity market, representing
approximately 50% of the Russell 2000 Index, as represented by the Russell 2000
Value Index. The Russell 2000 Value Index measures the performance of those
Russell 2000 companies with lower price-to-book ratios and lower forecasted
growth. This index consists of approximately 1239 stocks.

As of ______ 1999, the Russell 2000 Value Index's three largest stocks were
Radian Group, Inc., Mony Group, Inc. and Rayonier, Inc. (which comprised __%,
__% and __% respectively, of its market capitalization) and its three largest
industries were financial services, materials and processing and consumer
discretionary (which comprised ____%, ____% and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

[The Fund will use the replication strategy described on page 2.]
[The Fund will use the representative sampling strategy described on page 2.]

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 2000 Value Index in weightings
proportionate to the index.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.
. Value stocks tend to be inexpensive relative to their earnings and assets
compared to other types of stock. However, value stocks can continue to be
inexpensive for long periods of time and may not ever realize their full
value.
. The Fund invests entirely within the small capitalization sector of the
U.S. equity markets.
. The value of the stock can react differently to company, political, market
and economic developments than the market as a whole and other types of
stocks and can be more volatile than that of larger companies.
. Small capitalization companies may have limited product lines or markets.
. Small capitalization companies may be less financially secure than larger,
more established companies.

-70-
<PAGE>

. Small capitalization companies may depend on a small number of key
personnel.
. If a product fails, or if management changes, or there are other adverse
developments, the Fund's investment in small capitalization companies may
lose substantial value.

Performance Information

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-71-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 1000 FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 1000 Index

Investment Objective/Approach

The Russell 1000 Fund seeks to provide investment results that correspond
generally to the price and yield performance of the large capitalization sector
of the U.S. equity market, representing approximately 80% of the market
capitalization of all U.S. equity securities, as represented by the Russell 1000
Index. The Russell 1000 Index is a capitalization-weighted index of the 1000
largest companies in the Russell 3000 Index, and represents approximately 89% of
the total market capitalization of the Russell 3000 Index. This index consists
of approximately 983 stocks.

As of ______ 1999, the Russell 1000 Index's three largest stocks were
General Electric Co., Microsoft Corp. and IBM (which comprised __ %, __ % and
__ %, respectively, of its market capitalization) and its three largest
industries were technology, financial services and consumer discretionary (which
comprised ____%, ____% and ____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

Performance History

The Fund is newly organized and therefore has no performance history.

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

-72-
<PAGE>

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

-73-
<PAGE>

Description of iShares Funds

iSHARES RUSSELL 1000 GROWTH FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 1000 Growth Index

Investment Objective/Approach

The Russell 1000 Growth Fund seeks to provide investment returns that
correspond generally to the price and yield performance of the large
capitalization growth sector of the U.S. equity market, representing
approximately 50% of the total market capitalization of the Russell 1000 Index,
as represented by the Russell 1000 Growth Index. The Russell 1000 Growth Index
measures the performance of those Russell 1000 companies with higher price-to-
book ratios and higher forecasted growth. This index consists of approximately
526 stocks.

As of ______ 1999, the Russell 1000 Growth Index's three largest stocks
were General Electric Co., Microsoft Corporation and Intel Corp. (which
comprised __ %, __ % and __ % respectively, of its market capitalization) and
its three largest industries were technology, health care and consumer
discretionary (which comprised ____%, ____% and ____%, respectively, of its
market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 1000 Growth Index in weightings
proportionate to the index.
. While potentially offering greater or more rapid capital appreciation
potential than value stocks, investment in growth stocks may lack the
dividend yield that can cushion stock prices in market downturns.
. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks.
. As a result, growth stocks tend to be sensitive to changes in their
earnings and more volatile than other types of stock.

Performance Information

The Fund is newly organized and therefore has no performance history.

-74-
<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

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<PAGE>

Description of iShares Funds

iSHARES RUSSELL 1000 VALUE FUND
CUSIP: AMEX Trading Symbol:
UNDERLYING INDEX: Russell 1000 Value Index

Investment Objective/Approach

The Russell 1000 Value Fund seeks to provide investment results that
correspond generally to the price and yield performance of the large
capitalization value sector of the U.S. equity market, representing
approximately 50% of the total market capitalization of the Russell 1000 Index,
as represented by the Russell 1000 Value Index. The Russell 1000 Value Index
measures the performance of those Russell 1000 companies with lower price-to-
book ratios and lower forecasted growth. This index consists of approximately
729 stocks.

As of ______ 1999, the Russell 1000 Value Index's three largest stocks were
IBM, Exxon Corp. and AT&T (which comprised __ %, __ % and __ % respectively, of
its market capitalization) and its three largest industries were financial
services, utilities and consumer discretionary (which comprised ____%, ____% and
____%, respectively, of its market capitalization).

Principal Investment Strategy

The Fund will use the replication strategy described on page 2.

Principal Risk Factors

. The price of stocks may decline for various reasons, including economic
events or trends.
. The Fund makes no attempt to select individual stocks because the Fund
invests only in the stocks in the Russell 1000 Value Index in weightings
proportionate to the index.
. Value stocks can react differently to issuer, political, market and
economic developments than the market as a whole and other types of stock.
. Value stocks tend to be inexpensive relative to their earnings and assets
compared to other types of stock. However, value stocks can continue to
be inexpensive for long periods of time and may not ever realize their full
value.

Performance Information

The Fund is newly organized and therefore has no performance history.

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<PAGE>

Fees And Expenses

Fund investors pay various expenses, either directly or indirectly. The
following table and example describe the fees and expenses that you may pay if
you buy and hold iShares of the Fund.

Shareholder Transaction Fees (fees paid directly by you when you buy or sell
iShares of the Fund)

When buying or selling iShares of the Fund through a broker, you will incur
customary brokerage commissions and charges.

Annual Fund Operating Expenses (expenses that are paid indirectly by you when
deducted from the Fund's assets)

Annual Fund operating expenses are based on estimated expenses the Fund
expects to incur for the current fiscal year. Actual expenses may vary.

Example of Expenses

1 Year 3 Years
------ -------

The above examples are for illustration purposes only and are not a
representation of the Fund's actual expenses and returns, either past or future.

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<PAGE>

MANAGEMENT

Investment Adviser

BGFA provides investment guidance and policy direction for the Funds. BGFA
utilizes teams of portfolio managers, investment strategists, and other
investment specialists acting together to manage the assets of the Funds. This
team approach benefits the Funds' shareholders by bringing together many
disciplines and leveraging BGFA's extensive resources and reflects BGFA's
commitment to an objective and consistent investment management structure.

For its services to the Fund, BGFA will receive annual fees based on
rates of each Fund's average daily net assets. These annual rates vary in
amount from Fund to Fund and are shown for each Fund as "Management Fees" in the
table headed "Annual Fund Operating Expenses" contained in DESCRIPTION OF
iSHARES FUNDS.

BGFA is located at 45 Fremont Street, San Francisco, California 94105. It
is a wholly owned subsidiary of BGI, which in turn is an indirect subsidiary of
Barclays Bank PLC. BGI, together with its affiliates, is the world's largest
manager of institutional investment assets. As of December 31, 1999, BGI and its
affiliates, including BGFA, provided investment advisory services for assets in
excess of $[ ] billion. BGI, BGFA, Barclays Bank and their affiliates deal,
trade and invest for their own accounts in the types of securities in which the
Funds portfolios may also invest. BGFA does not use inside information in making
investment decisions on behalf of the Funds.

Administrator, Custodian and Transfer Agent

Investors' Bank & Trust Company ("IBT"), located at 200 Clarendon Street,
Boston, MA 02111, is the administrator, custodian, transfer agent, and dividend
disbursing agent for each Fund.

As compensation for its services, IBT is paid a monthly fee by each Fund
based on each Fund's average daily net assets. The amount is included as "Other
Expenses" in the table headed "Annual Fund Operating Expenses" contained in
DESCRIPTION OF iSHARES FUNDS.

SHAREHOLDER INFORMATION

Additional shareholder information, including how to buy and sell iShares
of any Fund, is available free of charge by calling toll-free 1-888-[ ].

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<PAGE>

Buying and Selling iShares

iShares trade on an auction market at the AMEX during the trading day and
can be bought and sold throughout the trading day like other shares of publicly-
traded stocks. There is no minimum investment, although generally iShares are
purchased in "round lots" of 100 iShares.

iShares trade under the ticker symbols listed in this Prospectus. iShares
prices are reported in dollars and fractions per iShare. Fractions are quoted
in 1/64s.

The AMEX is generally open Monday through Friday and is closed on weekends
and certain holidays. The holidays on which it is closed currently are: New
Year's Day, Martin Luther King, Jr.'s. Birthday, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Book Entry

iShares are held in book-entry form, which means no stock certificates are
issued. Depository Trust Company ("DTC"), or its nominee, is the record owner
for all outstanding iShares of each Fund and is recognized as the owner of all
iShares for all purposes.

Investors owning iShares are Beneficial Owners as shown on the records of
DTC or its Participants. DTC serves as the securities deposit for all iShares.
Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a Beneficial Owner of
iShares, you are not entitled to receive physical delivery of stock certificates
or to have iShares registered in your name, and you are not considered a
registered owner of iShares. Therefore, to exercise any right as an owner of
iShares, you must rely upon the procedures of DTC and its Participants. These
procedures are the same as those that apply to any other stocks that you hold in
book entry or "street-name" form.

iShare Prices

The trading prices on the AMEX of iShares may differ in varying degrees
from their daily net asset values and can be affected by market forces such as
supply and demand, economic conditions and other factors.

The AMEX intends to disseminate during each trading day the value of each
Underlying Index and an approximate value for each Fund on a per iShare basis.
This approximate value should not be viewed as a "real-time" update of the NAV
per iShare of any Fund, because it may not be calculated in the same manner as
the NAV, which is computed once a day. The Funds are not involved in, or
responsible for, the calculation or dissemination of such amount and make no
warranty as to its accuracy.

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<PAGE>

Determining Net Asset Value

IBT calculates each Fund's NAV in accordance with the standard formula for
valuing mutual fund shares at the close of regular trading (normally 4 p.m.
Eastern time) every day the New York Stock Exchange is open. The formula calls
for deducting all of a Fund's liabilities from the total value of its assets--
the market value of the securities it holds, plus cash reserves-- and dividing
the result by the number of shares outstanding. IBT values the securities at
their current market prices. If such prices are not readily available, IBT uses
estimates of the securities' fair value in accordance with guidelines approved
by the Board of Trustees.

Dividends and Distributions

Each Fund pays out dividends to investors and may pay them on a more
frequent basis. All the Funds distribute their capital gains, if any, to
investors annually.

Taxes

As with any investment, you should consider how your investment in iShares
will be taxed. The tax information in this prospectus is provided as general
information. You should consult you own tax professional about the tax
consequences of an investment in iShares.

Unless your investment in iShares is through a tax-exempt entity or tax-
deferred retirement account, such as a 401(k) plan, you need to be aware of the
possible tax consequences when:

. Each Fund makes distributions, and
. You sell iShares on the AMEX.

Taxes on Distributions. Each Fund will distribute annually any net investment
income, and any net realized long-term or short-term capital gains. Each Fund
may also pay a special distribution at the end of the calendar year to comply
with federal tax requirements. In general, your distributions are subject to
federal income tax for the year when they are paid. Dividends paid out of a
Fund's income and net short-term gains, if any, are taxable as ordinary income.
Distributions of net long-term capital gains, if any, in excess of net short-
term capital losses are taxable as long-term capital gains, regardless of how
long you have held the iShares.

Distributions in excess of a Fund's current and accumulated earnings and profits
are treated as a tax-free return of capital to the extent of your basis in
iShares, and as capital gain thereafter. A distribution may be taxable to you as
ordinary income or capital gain even though, from an investment standpoint, it
may constitute a return of capital.

Dividends and interest received by each Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States

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<PAGE>

may reduce or eliminate such taxes. Since more than 50% of the total assets of
each of the S&P Euro Plus Fund and the S&P/TSE 60 Fund at the end of their
respective taxable years will consist of foreign stock or securities, those
Funds will "pass through" to you any foreign income taxes (including withholding
taxes) paid by such Fund, if you owned iShares of that Fund and that Fund held
the security, on the dividend entitlement date and for at least fifteen
additional days immediately before and/or after. Subject to certain limitations,
the foreign income taxes passed through may qualify as a deduction in
calculating U.S. taxable income or as a credit in calculating U.S. federal
income tax. You will be notified of your portion of the foreign income taxes
paid to each country and the portion of dividends that represents income derived
from sources within each country.

If you are neither a lawful permanent resident nor a citizen of the United
States or if you are a foreign entity, each Fund's ordinary income dividends
(which include distributions of net short-term capital gains) will generally be
subject to a 30% U.S. withholding tax, unless a lower treaty rate applies.

By law, each Fund must withhold 31% of a shareholder's distributions and
proceeds if the shareholder has not provided a taxpayer identification number or
social security number.

Taxes When iShares are Sold on the AMEX. Currently, any capital gain or loss
realized upon a sale of iShares is generally treated as long-term capital gain
or loss if iShares have been held for more than one year and as short-term
capital gain or loss if iShares have been held for one year or less.

The foregoing discussion summarizes some of the consequences under current
federal tax law of an investment in a Fund. It is not a substitute for personal
tax advice. Consult your personal tax adviser about the potential tax
consequences of an investment in iShares under all applicable tax laws.

CREATIONS AND REDEMPTIONS

Although you will ordinarily buy or sell iShares in the secondary market by
trading on the AMEX, the iShares that you trade are generally "created" at their
NAV by market makers, large investors and institutions.

The Funds issue and redeem their iShares only in block-size "Creation
Units," the exact size of which varies by Fund, but which is generally at least
[50,000] iShares. Creating such units requires the deposit into the Fund of a
portfolio of stocks closely approximating the composition of the Underlying
Index or constituting a representative sample of the composition of the
Underlying Index of a particular Fund combined with a specified amount of cash.

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<PAGE>

Similarly, a "Creation Unit" block of iShares of a Fund can be redeemed,
principally in kind for a portfolio of stocks held by the Fund and a specified
amount of cash. Except when aggregated in Creation Units, iShares are not
redeemable.

You can create and redeem through a firm which is either a member of the
Continuous Net Settlement System of the National Securities Clearing Corporation
or a DTC Participant. Information about the fees and procedures regarding
Creation Units is included in the Statement of Additional Information.

DISTRIBUTION ARRANGEMENTS

Distributor

SEI Investments Distribution Company serves as the principal underwriter
and Distributor of Creation Units for each Fund. The Distributor does not
maintain a secondary market in iShares. The Distributor's principal address is 1
Freedom Valley Drive, Oaks, PA 19456.

Distribution Arrangements

The Trust has adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940 that allows some Funds to pay distribution fees for the sale, marketing
and distribution of iShares of that particular Fund. Because these fees are paid
out of that Fund's assets on an ongoing basis, over time these costs will
increase the costs of your investment in such a Fund and may cost you more than
paying other types of sales charges.

The fees are calculated and paid monthly at the rates set by the Board of
Trustees, provided that the rates may not exceed .25% of the average daily net
assets of the Fund. If applicable, these rates are shown for each Fund as
"Distribution (12b-1) Fees" in the table headed "Annual Fund Operating Expenses"
contained in DESCRIPTION OF iSHARES FUNDS.

The Distributor will receive a fee based on the daily net assets of a
participating Fund as compensation for its services, ranging from ___% to ___%
of 1%. In addition, the Distributor will be reimbursed for certain expenses it
actually incurs in connection with distribution. Brokers who have entered into
agreements with the Funds will be paid fees of up to .15 of 1% of the average
daily net asset value of iShares held at DTC for such brokers as payment for
distribution assistance such as shareholder support, and educational and
promotional services. In addition, BGFA, its affiliates and other third parties
will receive reimbursement for marketing, advertising and promotional expenses
actually incurred.

The Distributor has no role in determining the policies of any Fund or the
securities which are purchased or sold by any Fund.

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<PAGE>

INDEX PROVIDERS

Standard & Poor's (a division of The McGraw-Hill Companies, Inc.), Dow
Jones & Co. and the Frank Russell Company are the Index Providers for their
respective Underlying Indexes. None of the Index Providers is affiliated with
the iShares Trust, BGI, BGFA, the Administrator, Distributor or the AMEX.

Standard & Poor's, a division of The McGraw-Hill Companies, Inc., provides
financial, economic and investment information and analytical services to the
financial community. S&P calculates and maintains the S&P Global Index, which
includes the S&P Euro and Euro Plus for Continental Europe, the S&P/TSE 60 for
Canada, the S&P 500 for the U.S., the S&P/TOPIX 150 for Japan, the S&P Asia
Pacific 100, the Latin America 40 and the United Kingdom 150. S&P also publishes
the S&P MidCap 400, S&P SmallCap 600, S&P SuperComposite 1500 and S&P REIT
Composite for the U.S. and the S&P/TSE Canadian MidCap and S&P/TSE Canadian
SmallCap Indices. Company additions to and deletions from an S&P equity index do
not in any way reflect an opinion on the investment merits of the company.

Dow Jones Indexes is a part of Dow Jones & Company, which publishes The
Wall Street Journal and its international and interactive editions, Barron's and
SmartMoney magazines and other periodicals, the Dow Jones Newswires,
dowjones.com, and the Ottaway group of community newspapers. Dow Jones is co-
owner with Reuters group of Factiva, and with NBC of the CNBC television
operations in Europe and Asia. Dow Jones also provides news content to CNBC in
the U.S. The Dow Jones Indexes include the Dow Jones Industrial, Transportation
and Utility Averages, as well as the Dow Jones Global Indexes, the Dow Jones
STOXX Indexes, the Dow Jones REIT Indexes, the Dow Jones-AIG Commodity Index,
the Dow Jones Islamic Market Indexes, the Dow Jones Internet Indexes, the Dow
Jones Global Titans Index, the Dow Jones Extra Liquid Fund and the Dow Jones
Sustainability Group Indexes.

Frank Russell Company is an investment services firm. The Frank Russell
Company and Mellon Bank Corporation, parent holding company of Pittsburgh and
Boston-based Mellon Trust, operate a joint venture known as Russell/Mellon
Analytical Services. Russell/ Mellon Analytical Services provides the financial
community with financial information and analytical services. The Russell 1000,
2000, and 3000 Indexes, as well as mid-capitalization, value, and growth style
indexes, are part of a family of indexes.

BGFA has entered into a license agreement with each of the Index Providers
to use the Underlying Indexes. BGFA is sub-licensing rights in the Underlying
Indexes to the iShares Trust at no charge.

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<PAGE>

DISCLAIMERS

THE iSHARES TRUST IS NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY DOW
JONES. DOW JONES MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE
OWNERS OF iSHARES OR TO ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF
OWNING OR TRADING IN iSHARES. DOW JONES' ONLY RELATIONSHIP TO THE TRUST, BGI AND
BGFA IS THE LICENSING OF CERTAIN TRADEMARKS, TRADE NAMES, AND SERVICE MARKS OF
DOW JONES AND OF THE DOW JONES INDEXES, WHICH ARE DETERMINED, COMPOSED, AND
CALCULATED BY DOW JONES WITHOUT REGARD TO THE TRUST, BGI OR BGFA. DOW JONES HAS
NO OBLIGATION TO TAKE THE NEEDS OF BGFA, BGI OR THE OWNERS OF iSHARES INTO
CONSIDERATION IN DETERMINING, COMPOSING, OR CALCULATING THE DOW JONES INDEXES.
DOW JONES IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION
OF THE TIMING OF, PRICES, OR QUANTITIES OF iSHARES TO BE LISTED. DOW JONES HAS
NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION OF THE TRUST OR
THE MARKETING OR TRADING OF iSHARES.

DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DOW JONES INDEXES OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY BGI AND
BGFA, OWNERS OF iSHARES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW
JONES INDEXES OR ANY DATA INCLUDED THEREIN. DOW JONES 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 DOW JONES INDEXES OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE,
SPECIAL, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN
DOW JONES AND BGI AND BGFA.

THE iSHARES TRUST IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY FRANK
RUSSELL COMPANY ("FRC"). FRC MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, TO THE OWNERS OF THE iSHARES OR ANY MEMBER OF THE PUBLIC REGARDING THE
ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN iSHARES, PARTICULARLY OR
THE ABILITY OF THE RUSSELL INDEXES TO TRACK GENERAL STOCK MARKET PERFORMANCE.
FRANK RUSSELL COMPANY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS, AND
TRADE NAMES. THE RUSSELL INDEXES ON WHICH THE FUNDS ARE BASED ARE DETERMINED,
COMPOSED AND CALCULATED BY FRC WITHOUT REGARD TO BGI, BGFA OR THE FUND. FRC HAS
NO OBLIGATION TO TAKE THE NEEDS OF BGI, BGFA OR THE OWNERS OF iSHARES INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE RUSSELL INDEXES. FRC
IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION OF THE
PRICES AND AMOUNT OF iSHARES OR THE TIMING OF THE ISSUANCE OR SALE OF iSHARES.
FRC HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION OF THE
TRUST OR THE MARKETING OR TRADING OF iSHARES.

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<PAGE>

ALTHOUGH FRC OBTAINS INFORMATION FOR INCLUSION OR USE IN THE CALCULATION OF
THE RUSSELL INDEXES FROM SOURCES THAT FRC CONSIDERS RELIABLE, FRC DOES NOT
GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL INDEXES OR ANY
DATA INCLUDED THEREIN. FRC SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. FRC MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY BGI, BGFA OR OWNERS OF iSHARES, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE RUSSELL INDEXES OR ANY DATA INCLUDED THEREIN. FRC 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 FRC HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
DIRECT, 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.

THE iSHARES TRUST IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD
& POOR'S ("S&P"). S&P MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
TO THE OWNERS OF iSHARES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY
OF INVESTING IN SECURITIES GENERALLY OR IN iSHARES PARTICULARLY OR THE ABILITY
OF THE S&P INDEXES TO TRACK GENERAL STOCK MARKET PERFORMANCE. S&P'S ONLY
RELATIONSHIP TO BGI OR BGFA IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE
NAMES OF S&P AND OF THE S&P INDEXES WHICH ARE DETERMINED, COMPOSED AND
CALCULATED BY S&P WITHOUT REGARD TO BGI, BGFA OR THE TRUST. S&P HAS NO
OBLIGATION TO TAKE THE NEEDS OF BGI, BGFA OR THE OWNERS OF iSHARES INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE S&P INDEXES. S&P IS
NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE DETERMINATION OF THE PRICES
AND AMOUNT OF iSHARES OR THE TIMING OF THE ISSUANCE OR SALE OF iSHARES. S&P HAS
NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION OF THE TRUST,
MARKETING, OR TRADING OF THE iSHARES.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
INDEXES OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY BGI, BGFA OR OWNERS OF iSHARES, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEXES OR ANY DATA INCLUDED
THEREIN. S&P 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 S&P INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF
THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) RESULTING
FROM THE USE OF THE S&P INDEXES OR ANY DATA INCLUDED THEREIN, EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES.

iSHARES ARE NOT SPONSORED, ENDORSED OR PROMOTED BY THE AMEX. THE AMEX MAKES
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE iSHARES
OF ANY FUND OR ANY MEMBER OF THE PUBLIC REGARDING THE ABILITY OF A FUND TO TRACK
THE TOTAL RETURN PERFORMANCE OF THE VARIOUS UNDERLYING INDEXES OR THE ABILITY OF
THE UNDERLYING INDEXES IDENTIFIED HEREIN TO TRACK STOCK MARKET PERFORMANCE. THE
UNDERLYING INDEXES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED

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<PAGE>

AND CALCULATED BY STANDARD & POOR'S, DOW JONES & CO. AND THE FRANK RUSSELL
COMPANY WITHOUT REGARD TO THE iSHARES OF ANY FUNDS. THE AMEX IS NOT RESPONSIBLE
FOR, NOR HAS IT PARTICIPATED IN, THE DETERMINATION OF THE COMPILATION OR THE
CALCULATION OF ANY INDEX, NOR IN THE DETERMINATION OF THE TIMING OF, PRICES OF,
OR QUANTITIES OF THE iSHARES OF ANY FUND TO BE ISSUED, NOR IN THE DETERMINATION
OR CALCULATION OF THE EQUATION BY WHICH THE iSHARES ARE REDEEMABLE. THE AMEX HAS
NO OBLIGATION OR LIABILITY TO OWNERS OF THE iSHARES OF ANY FUND IN CONNECTION
WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE iSHARES OF ANY FUND.

THE AMEX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF ANY
INDEXES OR ANY DATA INCLUDED THEREIN. THE AMEX MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE iSHARES TRUST ON BEHALF OF ITS
FUNDS AS LICENSEE, LICENSEE'S CUSTOMERS AND COUNTER PARTIES, OWNERS OF THE
iSHARES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SUBJECT INDEXES OR
ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED AS DESCRIBED
HEREIN OR FOR ANY OTHER USE. THE AMEX MAKES NO EXPRESS OR IMPLIED WARRANTIES,
AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE AMEX 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.

BARCLAYS GLOBAL FUND ADVISORS DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE UNDERLYING INDEXES OR ANY DATA INCLUDED THEREIN AND BARCLAYS
GLOBAL FUND ADVISORS SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. BARCLAYS GLOBAL FUND ADVISORS MAKES NO WARRANTY, EXPRESS
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUNDS, OWNERS OF THE iSHARES OF
ANY FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE UNDERLYING INDEXES
OR ANY DATA INCLUDED THEREIN. BARCLAYS GLOBAL FUND ADVISORS 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 UNDERLYING INDEXES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL BARCLAYS GLOBAL FUND ADVISORS HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

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<PAGE>

[BACK COVER]

This Prospectus does not include all of the information with respect to the
iShares Trust and iShares contained in the Registration Statement filed with the
Securities and Exchange Commission (the "Commission") in Washington, D.C. under
the:

. Securities Act of 1933 (File No. 333- ) and
. Investment Company Act of 1940 (File No. 811-____)

The Statement of Additional Information provides detailed information about
the Funds, and is incorporated by reference into this Prospectus.

If you have questions about the Funds or iShares or you wish to obtain the
Statement of Additional Information free of charge, please:
Call: toll free: 1-800-
Write:
Visit: http://

To obtain copies from the Commission at prescribed rates, please:
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549
Call: 1-800-SEC-0330
Visit: http://www.sec.gov

No person is authorized to give any information or to make any
representations about any Fund and its iShares not contained in this Prospectus
and you should not rely on any other information. Read and keep the Prospectus
for future reference.

FOR MORE INFORMATION

FOR INVESTORS WHO WANT MORE INFORMATION ON THE iSHARES TRUST, THE FOLLOWING IS
AVAILABLE FREE UPON REQUEST:

Statement of Additional Information (SAI): Contains more detailed
information about the iShares Trust's policies, investment restrictions, risks
and business structure. This Prospectus incorporates the SAI by reference.

Copies of the document and answers to questions about iShares Trust may be
obtained without charge by contacting:

[Address]

Information about the iShares Trust (including the SAI) can be viewed and
copied at the Public Reference Room of the SEC in Washington, D.C. Copies of
this information may be obtained, upon payment of a duplicating fee, by writing
the Public Reference Room of the SEC, Washington, D.C., 20549-67009.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. Reports and other information about the
iShares Trust may be viewed on-screen or downloaded from the SEC's Internet site
at http://www.sec.gov.
------------------

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FOR MORE INFORMATION ON THE iSHARES TRUST, PLEASE CALL:

[Toll-free Number]
Monday through Friday
____ a.m. to ____ p.m. (EST)

or visit our Website at: http://
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Investment Company Act File No. 811-09102.
<PAGE>

Investment Company File No.________________

iSHARES TRUST

STATEMENT OF ADDITIONAL INFORMATION

Dated ____________, 2000

This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus dated ___________, 2000 (the "Prospectus")
for the iShares Trust (the "Trust"), as it may be revised from time to time.
Capitalized terms used herein that are not defined have the same meaning as in
the Prospectus, unless otherwise noted. A copy of the Prospectus may be
obtained without charge by writing to the Trust's Distributor, SEI Investments
Distribution Company, at Freedom Valley Drive, Oaks, PA 19456.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL DESCRIPTION OF THE TRUST AND ITS FUNDS.................................... 1

EXCHANGE LISTING AND TRADING...................................................... 2

INVESTMENT STRATEGIES AND RISKS................................................... 3
Loans of Portfolio Securities................................................... 3
Repurchase Agreements........................................................... 4
Reverse Repurchase Agreements................................................... 4
Currency Transactions........................................................... 5
Money Market Instruments........................................................ 5
Foreign Securities.............................................................. 5
Investment Companies, REITs..................................................... 6
Illiquid Securities............................................................. 6
Futures and Options............................................................. 6
Options on Futures Contracts.................................................... 7
Restrictions on the Use of Futures Contracts and Options on Futures Contracts... 7
Swap Agreements................................................................. 7
Future Developments............................................................. 8
General Considerations and Risks................................................ 8
Risks of Futures and Options Transactions....................................... 9
Risks of Swap Agreements........................................................ 10

CONSTRUCTION AND MAINTENANCE STANDARDS FOR THE UNDERLYING INDEXES................. 11
Index Dissemination............................................................. 11
The S&P Indexes Generally....................................................... 11
S&P 500 Index................................................................... 11
S&P 100 Index................................................................... 11
S&P 500/BARRA Growth Index...................................................... 12
S&P 500/BARRA Value Index....................................................... 12
S&P MidCap 400 Index............................................................ 13
S&P MidCap 400/BARRA Growth Index............................................... 13
S&P MidCap 400/BARRA Value Index................................................ 13
S&P SmallCap 600 Index.......................................................... 14
S&P SmallCap 600/BARRA Growth Index............................................. 14
S&P SmallCap 600/BARRA Value Index.............................................. 15
S&P Euro Plus Index............................................................. 15
S&P/TSE 60 Index................................................................ 15
The Dow Jones Indexes Generally................................................. 16
Dow Jones U.S. Total Market Index............................................... 16
Dow Jones U.S. Basic Materials Index............................................ 16
Dow Jones U.S. Consumer Cyclical Sector Index................................... 17
Dow Jones U.S. Consumer Non-Cyclical Sector Index............................... 18
</TABLE>

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<TABLE>
<S> <C>
Dow Jones U.S. Energy Sector Index.............................................. 18
Dow Jones U.S. Financial Sector Index........................................... 18
Dow Jones U.S. Healthcare Sector Index.......................................... 18
Dow Jones U.S. Industrial Sector Index.......................................... 19
Dow Jones U.S. Technology Sector Index.......................................... 19
Dow Jones U.S. Telecommunications Sector Index.................................. 20
Dow Jones U.S. Utilities Sector Index........................................... 20
Dow Jones U.S. Chemicals Index.................................................. 20
Dow Jones U.S. Financial Services Index......................................... 21
Dow Jones Internet Index........................................................ 21
Dow Jones U.S. Real Estate Index................................................ 22
The Russell Indexes Generally................................................... 22
Russell 3000 Index.............................................................. 22
Russell 3000 Growth Index....................................................... 23
Russell 3000 Value Index........................................................ 23
Russell 2000 Index.............................................................. 24
Russell 2000 Growth Index....................................................... 24
Russell 2000 Value Index........................................................ 24
Russell 1000 Index.............................................................. 25
Russell 1000 Growth Index....................................................... 25
Russell 1000 Value Index........................................................ 26

INVESTMENT LIMITATIONS............................................................ 26

CONTINUOUS OFFERING............................................................... 28

MANAGEMENT........................................................................ 28
Trustees and Officers........................................................... 29
Index Providers................................................................. 33
Remuneration of Trustees and Officers........................................... 29
Investment Adviser.............................................................. 29
Administrator, Custodian and Transfer Agent..................................... 30
Distributor..................................................................... 31

BROKERAGE TRANSACTIONS............................................................ 33

ADDITIONAL INFORMATION CONCERNING THE TRUST....................................... 34
Capital Stock................................................................... 34
Book Entry Only System.......................................................... 35
DTC Acts as Securities Depositary for the iShares............................... 35

CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS............................. 37
Creation........................................................................ 37
Fund Deposit.................................................................... 37
Procedures For Creation of Creation Unit Aggregations........................... 38
Placement of Creation Orders Using Clearing Process............................. 39
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
Placement of Creation Orders Outside Clearing Process........................... 40
Acceptance of Orders for Creation Unit Aggregations............................. 41
Creation Transaction Fee........................................................ 42
Redemption of iShares in Creation Units Aggregations............................ 42
Redemption Transaction Fee...................................................... 43
Placement of Redemption Orders Using Clearing Process........................... 43
Placement of Redemption Orders Outside Clearing Process......................... 43

TAXES............................................................................. 45
Federal Tax Treatment of Futures and Options Contracts.......................... 47

DETERMINATION OF NET ASSET VALUE.................................................. 48

DIVIDENDS AND DISTRIBUTIONS....................................................... 48
General Policies................................................................ 48
Dividend Reinvestment Service................................................... 48

PERFORMANCE AND OTHER INFORMATION................................................. 49

MISCELLANEOUS INFORMATION......................................................... 51
Counsel......................................................................... 51
Independent Auditors............................................................ 51

FINANCIAL STATEMENTS.............................................................. 51
</TABLE>

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<PAGE>

GENERAL DESCRIPTION OF THE TRUST AND ITS FUNDS

The Trust currently consists of 36 investment series (each, a "Fund" and
collectively the "Funds"). The Trust was organized as a Delaware business trust
on December 16, 1999 and is authorized to have multiple series. Each Fund in the
Trust is an open-end management investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The shares of each
Fund are referred to herein as "iShares". The Funds offered by the Trust are:

<TABLE>
<CAPTION>
<S> <C> <C>
iShares S&P 500 Fund iShares Dow Jones Total Market iShares Russell 3000 Fund
Fund

iShares S&P 100 Fund iShares Dow Jones U.S. Basic iShares Russell 3000 Growth
Materials Sector Fund Fund

iShares S&P 500/BARRA Growth iShares Dow Jones U.S. Consumer iShares Russell 3000 Value
Growth Fund Cyclicals Sector Fund Fund

iShares S&P 500/BARRA iShares Dow Jones U.S. Consumer iShares Russell 2000 Fund
Value Fund Non-Cyclicals Sector Fund

iShares S&P MidCap 400 iShares Dow Jones U.S. Energy Sector iShares Russell 2000 Growth
Fund Fund Fund

iShares S&P MidCap iShares Dow Jones U.S. Financial
400/BARRA Growth Fund Sector Fund

iShares S&P MidCap iShares Dow Jones U.S. Healthcare iShares Russell 2000 Value
Sector Fund Fund
iShares Russell 1000 Fund
400/BARRA Value Fund iShares Dow Jones U.S. Industrial
Sector Fund

iShares S&P SmallCap 600 iShares Dow Jones U.S. Technology iShares Russell 1000 Growth
Fund Sector Fund Fund

iShares S&P SmallCap iShares Dow Jones U.S. iShares Russell 1000 Value
600/BARRA Growth Fund Telecommunications Sector Fund Fund

iShares S&P SmallCap iShares Dow Jones U.S. Utilities
600/BARRA Value Fund Sector Fund

iShares S&P Euro Plus Fund iShares Dow Jones U.S. Chemicals
Fund

iShares S&P/TSE 60 Fund iShares Dow Jones U.S. Financial
Services Fund

iShares Dow Jones Internet Fund

iShares Dow Jones U.S. Real Estate Fund

</TABLE>

The investment objective of each Fund is to provide investment results
that, before expenses, correspond generally to the price and yield performance
of publicly traded equity securities of companies in a particular broad market,
market segment, market sector or group of industries, as represented by a
specified benchmark index (each an "Underlying Index"). Each Fund is managed by
Barclays Global Fund Advisors ("BGFA").

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<PAGE>

Each Fund offers and issues iShares at their net asset value only in
aggregations of a specified number of iShares (each, a "Creation Unit")
generally in exchange for a basket of equity securities included in its
Underlying Index ("Deposit Securities") together with the deposit of a specified
cash payment ("Cash Component"). iShares have been approved for listing and
secondary trading on the American Stock Exchange (the "AMEX"), subject to notice
of issuance. iShares will trade on the AMEX at market prices that may differ
from net asset value. iShares are redeemable only in Creation Unit aggregations,
and, generally, in exchange for portfolio securities and a specified cash
payment. The exact size of the Creation Unit for each Fund will vary but will
generally be at least [50,000] iShares.

The Trust reserves the right to offer a "cash" option for creations and
redemptions of iShares although it has no current intention of doing so.
iShares may be issued in advance of receipt of Deposit Securities subject to
various conditions including a requirement to maintain on deposit with the Trust
cash at least equal to 115% of the market value of the missing Deposit
Securities. See "CREATIONS AND REDEMPTIONS". In each instance of such cash
creations or redemptions, the Trust may impose transactions fees that will be
higher than the transaction fees associated with in-kind creations or
redemptions. In all cases, such fees will be limited in accordance with the
requirements of the Securities and Exchange Commission (the "SEC") applicable to
management investment companies offering redeemable securities.

EXCHANGE LISTING AND TRADING

A discussion of exchange listing and trading matters associated with an
investment in each Fund is contained in the Prospectus under the headings
"OVERVIEW" and "SHAREHOLDER INFORMATION". The discussion below supplements, and
should be read in conjunction with, such sections of the Prospectus.

There can be no assurance that the requirements of the AMEX necessary to
maintain the listing of iShares of any Fund will continue to be met. The AMEX
may, but is not required to, remove the iShares of a Fund from listing if (i)
following the initial 12 month period beginning upon the commencement of trading
of a Fund, there are fewer than 50 beneficial holders of the iShares of a Fund
for 30 or more consecutive trading days; (ii) the value of the Underlying Index
on which such Fund is based is no longer calculated or available; or (iii) such
other event shall occur or condition exist that, in the opinion of the AMEX,
makes further dealings on the AMEX inadvisable. The AMEX will also remove the
iShares of a Fund from listing and trading upon termination of such Fund.

As in the case of other stocks traded on the AMEX, broker's commissions on
transactions will be based on negotiated commission rates at customary levels.

It is believed desirable that the net asset value per iShare of each Fund
offered to the public be approximately [1/10] of the value of its respective
Underlying Index although this ratio will vary from Fund to Fund. To maintain
the appropriate ratio, stock splits or reverse stock splits may be effected from
time to time with respect to the iShares of one or more Funds. Such stock
splits or reverse stock splits will have no effect on the net assets of any
Fund.

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<PAGE>

See "CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS".

INVESTMENT STRATEGIES AND RISKS

Each Fund seeks to achieve its objective by investing in common stocks
included in the relevant Underlying Index. Each Fund operates as an index fund
and will not be actively managed; as such, adverse performance of a security
from a Fund's portfolio will ordinarily not result in the elimination of the
security from a Fund's portfolio.

Some Funds will engage in a Replication Strategy, by which they hold
substantially all of the securities of the Underlying Index in the same
proportion as they are reflected in the Underlying Index. Other Funds will
engage in a Representative Sampling Strategy, which is an attempt to replicate
the profile and return of the Underlying Index by holding a sample of the
securities in that index as selected by BGFA. In addition, some of these Funds
may hold some securities that are not included in their Underlying Indexes if
BGFA decides it is appropriate in view of these Funds' investment objectives. In
some cases, a Fund might not meet its diversification requirements if it invests
in the securities that make up an Underlying Index in the portions that match
the index weights. In such cases, a Fund may elect to invest in an index that
has been modified by the index provider to satisfy fund diversification
requirements. Alternatively, a Fund may elect to employ a Representative
Sampling Strategy to achieve its diversification objectives.

The Prospectus describes the strategy of each Fund. A Representative
Sampling Strategy is used for those indexes where BGFA believes that a
Replication Strategy is not the most effective means to track the Underlying
Index. The number of securities, liquidity of underlying securities,
restrictions on the ownership of securities, high transaction expenses and other
trading costs, and tax and other regulatory restrictions are among the factors
which BGFA considers. Although a Representative Sampling Strategy has proven an
effective means of approximating index performance in the past, it will not
usually enable a Fund to track the Underlying Index's performance with the
accuracy achieved by a Replication Strategy. Each Fund will be reviewed
regularly and adjusted, when necessary, to correlate with the relevant
Underlying Index.

Loans of Portfolio Securities. Each Fund may lend its investment securities to
approved borrowers. By lending its investment securities, each Fund may attempt
to offset its expenses through the receipt of interest on the loan. Any gain or
loss on the market price of the securities loaned that might occur during the
term of the loan would be for the account of the relevant Fund.

Approved borrowers are brokers, dealers, domestic and foreign banks, or
other financial institutions that meet credit or other requirements as
established by, and subject to, the review of the Trust's Board of Trustees (the
"Board" or the "Trustees"), so long as the terms, the structure and the
aggregate amount of such loans are not inconsistent with the 1940 Act and the
rules and regulations thereunder or interpretations of the SEC, which require
that (i) the borrowers pledge and maintain with the Fund collateral consisting
of cash, an irrevocable letter of credit issued by a bank, or securities issued
or guaranteed by the United States Government having a value at all times not
less than 100% of the value of the securities loaned (on a "mark-to-market"
basis); (ii)
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<PAGE>

the loan to be made subject to termination by a Fund at any time; and (iii)
a Fund receives reasonable interest on the loan. Securities lending procedures
approved by the Board will meet or exceed the requirements stated above and
promulgated under the 1940 Act. From time to time, each Fund may return a part
of the interest earned from the investment of collateral received from
securities loaned to the borrower and/or a third party that is unaffiliated with
the Fund and that is acting as a finder.

Repurchase Agreements. Each Fund may enter into repurchase agreements with banks
and securities dealers. Such transactions entail the purchase of securities with
a simultaneous commitment to resell the securities to the bank or the dealer at
an agreed-upon date and price, reflecting a market rate of interest unrelated to
the coupon rate or maturity of the purchased securities. Should a Fund enter
into a repurchase agreement, each such Fund would maintain custody of the
underlying securities prior to their repurchase; thus, the obligation of the
bank or the dealer to pay the repurchase price on the date agreed would be, in
effect, secured by such securities. If the value of such securities were less
than the repurchase price plus interest, the other party to the agreement would
be required to provide additional collateral so that at all times the collateral
is at least 100% of the repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose each Fund to possible loss because of
adverse market action, expenses or delays in connection with the disposition of
the underlying obligations. The financial institutions with which each Fund may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government Securities on the Federal Reserve Bank of New York's list of
reporting dealers, if such banks and non-bank dealers are deemed creditworthy by
BGFA. BGFA will continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain the value of the
securities subject to the agreement to equal at least 100% of the repurchase
price (including accrued interest). In addition, BGFA will require that the
value of this collateral, after transaction costs (including loss of interest)
reasonably expected to be incurred on a default, be equal to or greater than
100% of the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
BGFA will mark-to-market daily the value of the securities. Under the 1940 Act,
repurchase agreements are considered loans.

Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to
repurchase the securities at an agreed-upon price, date and interest payment and
have the characteristics of borrowing. The securities purchased with the funds
obtained from the agreement and securities collateralizing the agreement will
have maturity dates no later than the repayment date. Generally the effect of
such a transaction is that the Fund can recover all or most of the cash invested
in the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases it will be able to keep some of the interest
income associated with those securities. Such transactions are only
advantageous if the Fund has an opportunity to earn a greater rate of interest
on the cash derived from the transaction than the interest cost of obtaining the
same amount of cash. Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to be paid may not
always be available and each Fund intends to use the reverse repurchase
technique only when BGFA believes it will be advantageous to the Fund. The use
of reverse repurchase agreements may exaggerate any interim increase or

4
<PAGE>

decrease in the value of each Fund's assets. The custodian bank will maintain a
separate amount for each Fund with securities having a value equal to or greater
than such commitments.

Currency Transactions. No Fund expects to engage in currency transactions for
the purpose of hedging against declines in the value of the Fund's currency. A
Fund may enter into foreign currency forward and foreign currency futures
contracts to facilitate local securities settlements or to protect against
currency exposure in connection with its distributions to shareholders, but may
not enter into such contracts for speculative purposes.

A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency futures contract is a contract involving an obligation to
deliver or acquire the specified amount of a specific currency at, a specified
price and at a specified future time. Futures contacts may be settled on a net
cash payment basis rather than by the sale and delivery of the underlying
currency.

Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly volatile,
highly specialized and highly technical. Significant changes, including changes
in liquidity prices, can occur in such markets within very short periods of
time, often within minutes. Foreign exchange trading risks include, but are not
limited to, exchange rate risk, maturity gaps, interest rate risk, and potential
interference by foreign governments through regulation of local exchange
markets, foreign investment or particular transactions in foreign currency. If
BGFA utilizes foreign exchange transactions at an inappropriate time or judges
market conditions, trends or correlations incorrectly, foreign exchange
transactions may not serve their intended purpose of improving the correlation
of a Fund's return with the performance of the Underlying Index and may lower
the Fund's return. The Fund could experience losses if the values of its
currency forwards, options and futures positions were poorly correlated with its
other investments or if it could not close out its positions because of an
illiquid market. In addition, each Fund could incur transaction costs, including
trading commissions, in connection with certain of its foreign currency
transactions.

Money Market Instruments. Each Fund may invest a portion of its assets in
short-term corporate and government bonds and notes and money market
instruments. Money market instruments include U.S. Government Securities,
certificates of deposit, time deposits and bankers' acceptances of U. S. and
foreign banks and similar institutions, high grade commercial paper, and
repurchase agreements with respect to the foregoing types of instruments.
Certificates of deposit are short-term negotiable obligations of commercial
banks. Time deposits are non-negotiable deposits maintained in banking
institutions for specified periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers, usually in
connection with international transactions.

Foreign Securities. Each Fund may purchase publicly traded common stocks of
foreign corporations represented in the Underlying Indexes. Each Fund's
investment in common stock of foreign corporations represented in the Underlying
Indexes may also be in the form of

5
<PAGE>

American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs").
ADRs and GDRs are receipts, typically issued by a bank or trust company, which
evidence ownership of underlying securities issued by a foreign corporation.

Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, and potential restrictions of the
flow of international capital. Foreign companies may be subject to less
governmental regulation than U.S. companies. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.

Investment Companies, REITs. Each Fund may invest in the securities of other
investment companies (including, money market funds) and real estate investment
trusts to the extent allowed by law.

Illiquid Securities. Each Fund may invest up to an aggregate amount of 15% of
its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.

Futures and Options. Each Fund may enter into U.S. or foreign futures
contracts, options and options on futures contracts. These futures contracts and
options will be used to simulate full investment in the respective Underlying
Index, to facilitate trading or to reduce transaction costs. Each Fund will
only enter into futures contracts and options on futures contracts that are
traded on a U.S. or foreign exchange. No Fund will use futures or options for
speculative purposes.

A call option gives a holder the right to purchase a specific security at a
specified price ("exercise price") within a specified period of time. A put
option gives a holder the right to sell a specific security at a specified price
within a specified period of time. The initial purchaser of a call option pays
the "writer" a premium, which is paid at the time of purchase and is retained by
the writer whether or not such option is exercised. Each Fund may purchase put
options to hedge its portfolio against the risk of a decline in the market value
of securities held and may purchase call options to hedge against an increase in
the price of securities it is committed to purchase. Each Fund may write put
and call options along with a long position in options to increase its ability
to hedge against a change in the market value of the securities it holds or is
committed to purchase.

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific instrument or index at a
specified future time and at a specified price. Stock index contracts are based
on indexes that reflect the market value of common stock of the firms included
in the indexes. Each Fund may enter into futures contracts to purchase security
indexes when BGFA anticipates purchasing the underlying securities and believes
prices will rise before the purchase will be made. Assets committed to futures
contracts will be segregated by the custodian to the extent required by law.

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<PAGE>

Options on Futures Contracts. An option on a futures contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account,
which represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential for loss
related to the purchase of an option on a futures contract is limited to the
premium paid for the option plus transaction costs. Because the value of the
option is fixed at the point of sale, there are no daily cash payments by the
purchaser to reflect changes in the value of the underlying contract; however,
the value of the option changes daily and that change would be reflected in the
net asset value of each Fund. The potential for loss related to writing options
is unlimited.

Each Fund may purchase and write put and call options on futures contracts
that are traded on a U.S. or foreign exchange as a hedge against changes in
value of its portfolio securities, or in anticipation of the purchase of
securities, and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected.

Restrictions on the Use of Futures Contracts and Options on Futures Contracts.
In view of the above considerations, each Fund will comply with the following
restriction when purchasing or selling futures. Aggregate initial margin and
premiums required to establish positions other than those considered to be "bona
fide hedging" by the Commodity Futures Trading Commission (the "CFTC") will not
exceed 5% of each Fund's net asset value after taking into account unrealized
profits and unrealized losses on any such contracts it has entered into. Also,
each Fund will not purchase options to the extent that more than ____% of the
value of such Fund's total assets would be invested in premiums on open put
option positions.

Upon entering into a futures contract, a Fund will be required to deposit
with the broker an amount of cash or cash equivalents in the range of
approximately _____% to _____% of the contract amount (this amount is subject to
change by the exchange on which the contract is traded. This amount, known as
"initial margin," is in the nature of a performance bond or good faith deposit
on the contract and is returned to each Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker will be made daily
as the price of the index underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to expiration of a
futures contract, each Fund may elect to close the position by taking an
opposite position, which will operate to terminate the Fund's existing position
in the contract.

Swap Agreements. Swap Agreements are contracts between parties in which one
party agrees to make periodic payments to the other party based on the change in
market value or level of a specified rate, index or asset. In return, the other
party agrees to make periodic payments to the first party based on the return of
a different specified rate, index or asset. Swap agreements will

7
<PAGE>

usually be done on a net basis, the Fund receiving or paying, only the net
amount of the two payments. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of cash or high liquid securities having an aggregate
value at least equal to the accrued excess is maintained in an account at the
Trust's custodian bank.

Future Developments. The Board may, in the future, authorize each Fund to invest
in securities contracts and investments other than those listed in the Statement
of Additional Information and in the Prospectus, provided they are consistent
with each Fund's investment objective and do not violate any investment
restrictions or policies.

General Considerations and Risks. A discussion of the risks associated with an
investment in a Fund is contained in the Prospectus under the headings
"PRINCIPAL RISK CONSIDERATIONS" and "SHAREHOLDER INFORMATION." The discussion
below supplements, and should be read in conjunction with, these sections of the
Prospectus.

An investment in a Fund should be made with an understanding that the value
of a Fund's portfolio securities may fluctuate in accordance with changes in the
financial condition of the issuers of the portfolio securities, the value of
common stocks in general and other factors which affect the market.

An investment in a Fund should also be made with an understanding of the
risks inherent in an investment in equity securities, including the risk that
the financial condition of issuers may become impaired or that the general
condition of the stock market may deteriorate (either of which may cause a
decrease in the value of the portfolio securities and thus in the value of
iShares). Common stocks are susceptible to general stock market fluctuations
and to volatile increases and decreases in value as market confidence and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.

Holders of common stocks incur more risk than holders of preferred stocks
and debt obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors, or holders of debt obligations or preferred stocks.
Further, unlike debt securities which typically have a stated principal amount
payable at maturity (whose value, however, is subject to market fluctuations
prior thereto), or preferred stocks, which typically have a liquidation
preference and which may have stated optional or mandatory redemption
provisions, common stocks have neither a fixed principal amount nor a maturity.
Common stock values are subject to market fluctuations as long as the common
stock remains outstanding.

Although most of the securities in the Underlying Indexes are listed on a
national securities exchange, the principal trading market for some may be in
the over-the-counter market. The existence of a liquid trading market for
certain securities may depend on whether dealers will make a market in such
securities. There can be no assurance that a market will be

8
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made or maintained or that any such market will be or remain liquid. The price
at which securities may be sold and the value of a Fund's iShares will be
adversely affected if trading markets for a Fund's portfolio securities are
limited or absent, or if bid/ask spreads are wide.

Risks of Futures and Options Transactions. There are several risks accompanying
the utilization of futures contracts and options on futures contracts. First, a
position in futures contracts and options on futures contracts may be closed
only on the exchange on which the contract was made (or a linked exchange).
While each Fund plans to utilize futures contracts only if an active market
exists for such contracts, there is no guarantee that a liquid market will exist
for the contract at a specified time. Furthermore, because, by definition,
futures contracts project price levels in the future and not current levels of
valuation, market circumstances may result in a discrepancy between the price of
the stock index future and the movement in the underlying Index. In the event of
adverse price movements, a Fund would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if a Fund has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Fund may be required to deliver the instruments underlying future contracts it
has sold.

The risk of loss in trading futures contracts or uncovered call options in
some strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Funds do not plan to use futures and options
contracts in this way. The risk of a futures position may still
be large as traditionally measured due to the low margin deposits required. In
many cases, a relatively small price movement in a futures contract may result
in immediate and substantial loss or gain to the investor relative to the size
of a required margin deposit. The Funds, however, intend to utilize futures and
options contracts in a manner designed to limit their risk exposure to levels
comparable to direct investment in stocks.

Utilization of futures and options on futures by a Fund involves the risk
of imperfect or even negative correlation to the Underlying Index if the index
underlying the futures contract differs from the Underlying Index. There is
also the risk of loss by a Fund of margin deposits in the event of bankruptcy of
a broker with whom a Fund has an open position in the futures contract or
option. The purchase of put or call options will be based upon predictions by
BGFA as to anticipated trends, which predictions could prove to be incorrect.

Because the futures market imposes less burdensome margin requirements than
the securities market, an increased amount of participation by speculators in
the futures market could result in price fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount
that the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that

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limit. It is possible that futures contract prices could move to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting each Fund to
substantial losses. In the event of adverse price movements, each Fund would be
required to make daily cash payments of variation margin.

Although each Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time.

Risks of Swap Agreements. Swap agreements are subject to the risk that the
swap counterparty will default on its obligations. If such a default occurs, a
Fund will have contractual remedies pursuant to the agreements related to the
transaction, but such remedies may be subject to bankruptcy and insolvency laws
which could affect such Fund's rights as a creditor.

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CONSTRUCTION AND MAINTENANCE STANDARDS FOR THE UNDERLYING INDEXES

Index Dissemination. Similar to other stock index values published by the AMEX,
the value of each Underlying Index will be calculated continuously and
disseminated approximately every 15 seconds over the Consolidated Tape
Association's Network B. The major electronic financial data vendors are
expected to publish information on each Underlying Index for their subscribers.

Brief descriptions of the Underlying Indexes on which the Funds are based and
the equity markets in which the Funds are invested are provided below.

The S&P Indexes Generally.

S&P 500 Index
Number of Components: 500

Index Description. The Standard & Poor's 500 Index measures the performance of
the large capitalization sector of the U.S. equity market. It serves as the
underlying index for the S&P 500/BARRA Growth and Value Index series. It is a
capitalization-weighted index from a broad range of industries chosen for market
size, liquidity, and industry group representation. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price times the number of shares outstanding. These
are summed for all 500 stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The S&P 500 Index represents approximately 77% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

S&P 100 Index
Number of Components: 100

Index Description. The S&P 100 Index measures the performance of large cap,
blue-chip companies in the U.S. equity market. The index is a sub-set of the
S&P 500 Index. It is a capitalization weighted index from a broad range of
industries chosen for market size, liquidity, and sector representation. The
component stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price times the number

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of shares outstanding. These are summed for all 100 stocks and divided by a
predetermined base value. The base value of the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The S&P 100 Index represents
approximately 38% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

S&P 500/BARRA Growth Index
Number of Components: approximately 122

Index Description. The S&P 500/BARRA Growth Index measures the performance of
the large capitalization growth sector of the US equity market. It is a subset
of the S&P 500 Index and consists of those companies with the highest price-to-
book ratios within the S&P 500 Index representing approximately 50% of the
market capitalization of that index. It is a capitalization-weighted index
representing stocks from a broad range of industries. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price times the number of shares outstanding. The
base value for the S&P 500/BARRA Growth Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The S&P 500/BARRA Growth Index represents
approximately 38% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

S&P 500/BARRA Value Index
Number of Components: approximately 378

Index Description. The S&P 500/BARRA Value Index measures the large
capitalization value sector of the US equity market. It is a subset of the S&P
500 Index and consists of those companies with the lowest price-to-book ratios
within the S&P 500 Index representing approximately 50% of the market
capitalization of that index. It is a capitalization-weighted index
representing stocks from a broad range of industries. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price times the number of shares outstanding. The
base value for the S&P 500/BARRA Value Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The S&P 500/BARRA Value Index represents
approximately 38% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

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S&P MidCap 400 Index
Number of Components: 400

Index Description. The S&P 400 MidCap Index measures the performance of the mid
capitalization sector of the U.S. equity market. It serves as the underlying
index for the S&P 400/BARRA Growth and Value Index series. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
These are summed for all stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Index is a benchmark for performance measurement of the
medium-capitalization segment of the U.S. equity market. The S&P MidCap 400
Index represents approximately 6% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

S&P MidCap 400/BARRA Growth Index
Number of Components: approximately 143

Index Description. The S&P MidCap 400/BARRA Growth Index measures the
performance of the mid capitalization growth sector of the U.S. equity market.
It is a subset of the S&P 400 Index and consists of those companies with the
highest price-to-book ratios within the S&P 400 Index representing approximately
50% of the market capitalization of that index. It is a capitalization-weighted
index representing stocks from a broad range of industries. The component
stocks are weighted according to the total market value of their outstanding
shares. The impact of a component's price change is proportional to the issue's
total market value, which is the share price times the number of shares
outstanding. The base value for the S&P MidCap 400/BARRA Growth Index is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. The S&P
MidCap 400/BARRA Growth Index represents approximately 3.25% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

S&P MidCap 400/BARRA Value Index
Number of Components: approximately 257

Index Description. The S&P MidCap 400/BARRA Value Index measures the
performance of the mid-capitalization value sector of the U.S. equity market.
It is a subset of the S&P 400 Index and consists of those companies with the
lowest price-to-book ratios within the S&P 400 Index representing approximately
50% of the market capitalization of that index. It is a capitalization-weighted
index representing stocks from

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a broad range of industries. The component stocks are weighted according to the
total market value of their outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price times the number of shares outstanding. The base value for the S&P
MidCap 400/BARRA Value Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The S&P MidCap 400/BARRA Value Index represents approximately
3.25% of the market capitalization of listed U.S. equities. As of [date], the
ten largest companies in the Index are ______, ______, ______, ______, ______,
______, ______, ______, ______, and ______.

S&P SmallCap 600 Index
Number of Components: 600

Index Description. The S&P SmallCap 600 Index measures the performance of the
small capitalization sector of the U.S. equity market. It serves as the
underlying index for the S&P 600/BARRA Growth and Value Index series. It is a
capitalization-weighted index from a broad range of industries chosen for market
size, liquidity, and industry group representation. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price times the number of shares outstanding. These
are summed for all stocks and divided by a predetermined base value. The base
value for the Index is adjusted to reflect changes in capitalization resulting
from mergers, acquisitions, stock rights, substitutions and other capital
events. The S&P 600 Index represents approximately 2.5% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

S&P SmallCap 600/BARRA Growth Index
Number of Components: approximately 217

Index Description. The S&P SmallCap 600/BARRA Growth Index measures the
performance of the small capitalization growth sector of the U.S. equity market.
It is a subset of the S&P 600 Index and consists of those companies with the
highest price-to-book ratios within the S&P 600 Index representing approximately
50% of the market capitalization of that index. It is a capitalization-weighted
index representing stocks from a broad range of industries. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
The base value for the S&P SmallCap 600/BARRA Growth Index is adjusted to
reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The S&P SmallCap 600/BARRA
Growth Index represents approximately 1.5% of the market capitalization is
listed U.S. equities. As of [date], the ten largest companies in the Index are
______, ______, ______, ______, ______, ______, ______, ______, ______, and
______.

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S&P SmallCap 600/BARRA Value Index
Number of Components: approximately 383

Index Description. The S&P SmallCap 600/BARRA Value Index measures the
performance of the small capitalization value sector of the U.S. equity market.
It is a subset of the S&P 600 Index and consists of those companies with the
lowest price-to-book ratios within the S&P 600 Index representing approximately
50% of the market capitalization of that index. It is a capitalization-weighted
index representing stocks from a broad range of industries. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
The base value for the S&P MidCap 600/BARRA Value Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The S&P MidCap 600/BARRA Value Index
represents approximately 1.5% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

S&P Euro Plus Index
Number of Components: approximately 200

Index Description. The Standard & Poor's Euro Plus Index measures the
performance of equities in the continental European region, made up of fourteen
markets: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
the Netherlands, Norway, Portugal, Spain, Sweden and Switzerland. It serves as
the underlying index for the S&P Euro Index which measures the performance of
equities in the Eurobloc region, made of ten of the fourteen European markets.
The Euro Plus Index is a capitalization-weighted index from a broad range of
industries, each chosen for market size, liquidity, and industry group
representation. The market capitalization of index constituent companies is
adjusted to reflect only those shares, which are available to foreign investors.
The base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

S&P/TSE 60 Index
Number of Components: 60

Index Description. The S&P/TSE 60 Index measures the performance of equities in
the Canadian marketplace. It is a capitalization-weighted index from a broad
range of industries chosen for market size, liquidity, and industry group
representation. The market capitalization of index constituent companies is
adjusted to reflect only those

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shares available for investment by the general public. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are
summed for all stocks and divided by a predetermined base value. The base value
for the index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events. As
of [date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

The Dow Jones Indexes Generally.

Dow Jones U.S. Total Market Index
Number of Components: approximately 2118

Index Description. The Dow Jones Total Market Index measures the performance of
the U.S. equity broad market. It serves as the underlying index in the Dow
Jones U.S. Large Cap Index, Dow Jones U.S. Mid Cap Index , Dow Jones U.S. Small
Cap Index and the Dow Jones U.S. sector indexes. The Dow Jones U.S. Total
Market Index is a capitalization-weighted index, so the impact of a component's
price change is proportional to the issue's total market value, which is the
share price times the number of shares outstanding. These are summed for all
component stocks and divided by a predetermined base value. The base value for
the Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.
The Dow Jones U.S. Total Market Index represents 95% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

Dow Jones U.S. Basic Materials Sector Index
Number of Components: approximately 101

Index Description. The Dow Jones U.S. Basic Materials Sector Index measures the
performance of the basic materials economic sector of the U.S. equity market.
The index is a subset of the Dow Jones U.S. Total Market Index. The Dow Jones
U.S. Basic Materials Sector Index is capitalization-weighted and includes only
companies in the Basic Materials sector of the Dow Jones U.S. Total Market
Index. The component stocks are weighted according to the total market value of
their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions,

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stock rights, substitutions and other capital events. The Dow Jones U.S. Basic
Materials Sector Index represents approximately 2.5% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

Dow Jones U.S. Consumer Cyclical Sector Index
Number of Components: approximately 374

Index Description. The Dow Jones U.S. Consumer Cyclical Sector Index measures
the performance of the consumer Cyclical economic sector of the U.S. equity
market. The index is a subset of the Dow Jones U.S. Total Market Index. The
Dow Jones U.S. Consumer Cyclical Sector Index is capitalization-weighted and
includes only companies in the Consumer Cyclical sector of the Dow Jones U.S.
Total Market Index. The component stocks are weighted according to the total
market value of their outstanding shares. The impact of a component's price
change is proportional to the issue's total market value, which is the share
price times the number of shares outstanding. These are summed for all component
stocks and divided by a predetermined base value. The base value for the Index
is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. The Dow
Jones U.S. Consumer Cyclical Sector Index represents approximately 13% of the
market capitalization of listed U.S. equities. As of [date], the ten largest
companies in the Index are ______, ______, ______, ______, ______, ______,
______, ______, ______, and ______.

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Dow Jones U.S. Consumer Non-Cyclical Sector Index
Number of Components: approximately 143

Index Description. The Dow Jones U.S. Non-Cyclical Sector Index measures the
performance of the non-cyclical economic sector of the U.S. equity market. The
index is a subset of the Dow Jones U.S. Total Market Index. The Dow Jones U.S.
Non-Cyclical Sector Index is capitalization-weighted and includes only companies
in the Non-Cyclical sector of the Dow Jones U.S. Total Market Index. The
component stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price times the number of
shares outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Dow Jones U.S. Non-Cyclical Sector
Index represents approximately 9% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Energy Sector Index
Number of Components: approximately 96

Index Description. The Dow Jones U.S. Energy Sector Index measures the
performance of the energy economic sector of the U.S. equity market. The Dow
Jones U.S. Energy Sector Index is a subset of the Dow Jones U.S. Total Market
Index. The component stocks are weighted according to the total market value of
their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Dow Jones U.S. Energy
Sector Index represents approximately 5% of the market capitalization of listed
U.S. equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Financial Sector Index
Number of Components: approximately 424

Index Description. The Dow Jones U.S. Financial Sector Index measures the
performance of the Financial economic sector of the U.S. equity market. The
index is a subset of the Dow Jones U.S. Total Market Index. The Dow Jones U.S.
Financial Sector Index is capitalization-weighted and includes only companies in
the Financial sector of the Dow Jones U.S. Total Market Index. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are
summed for all component stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Dow Jones U.S. Financial Sector Index represents
approximately 16% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Healthcare Sector Index
Number of Components: approximately 184

Index Description. The Dow Jones U.S. Healthcare Sector Index measures the
performance of the Healthcare economic sector of the U.S. equity market. This
Dow Jones U.S. Healthcare Sector Index is a subset of the Dow Jones U.S. Total
Market Index. The Dow Jones U.S. Healthcare Sector Index is capitalization-
weighted and includes only companies in the Healthcare Sector of the Dow Jones
U.S. Total Market Index. The component stocks are weighted according to the
total market value of their outstanding shares. The impact of a component's
price change if proportional to the issue's total market value, which is the
share price times the number of shares

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outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Dow Jones U.S. Healthcare Sector
Index represents approximately 10% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Industrial Sector Index
Number of Components: approximately 410

Index Description. The Dow Jones U.S. Industrial Sector Index measures the
performance of the Industrial economic sector of the U.S. equity market. The
Dow Jones U.S. Industrial Index is a subset of the Dow Jones U.S. Total Market
Index. The Dow Jones U.S. Industrial Sector Index is capitalization-weighted
and includes only companies in the Industrial sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total value of
their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Dow Jones U.S. Industrial
Sector Index represents approximately 11% of the market capitalization of listed
U.S. equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Technology Sector Index
Number of Components: approximately 262

Index Description. The Dow Jones U.S. Technology Sector Index measures the
performance of the Technology economic sector of the U.S. equity market. The
Dow Jones U.S. Technology Sector Index is a subset of the Dow Jones U.S. Total
Market Index. The Dow Jones U.S. Technology Index is capitalization-weighted
and includes only companies in the Technology sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Dow Jones U.S. Technology
Sector Index represents approximately 19% of the market capitalization of listed
U.S. equities. As of [date], the ten largest companies in the

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Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

Dow Jones U.S. Telecommunications Sector Index
Number of Components: approximately 28

Index Description. The Dow Jones U.S. Telecommunications Sector Index measures
the performance of the Telecommunications economic sector of the U.S. equity
market. The Dow Jones U.S. Telecommunications Sector Index is a subset of the
Dow Jones U.S. Total Market Index. The Dow Jones U.S. Telecommunications Sector
Index is capitalization-weighted and includes only companies in the
Telecommunications sector of the Dow Jones U.S. Total Market Index. The
component stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price times the number of
shares outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Dow Jones U.S. Telecommunications
Sector Index represents approximately 7% of the market capitalization of listed
U.S. equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones U.S. Utilities Sector Index
Number of Components: approximately 96

Index Description. The Dow Jones U.S. Utilities Sector Index measures the
performance of the utilities economic sector of the U.S. equity market. The Dow
Jones U.S. Utilities Sector Index is a subset of the Dow Jones U.S. Total Market
Index. The Dow Jones U.S. Utilities Sector Index is capitalization-weighted and
includes only companies in the Utilities sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price times
the number of shares outstanding. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Dow Jones U.S. Utilities
Sector Index represents approximately 2.5% of the market capitalization of
listed U.S. equities. As of [date], the ten largest companies in the Index are
______, ______, ______, ______, ______, ______, ______, ______, ______, and
______.

Dow Jones U.S. Chemicals Index
Number of Components: approximately 47

Index Description. The Dow Jones U.S. Chemicals Index measures the performance
of the chemicals industry of the U.S. equity market. The index is a
subset of the Dow Jones U.S. Basic Materials Sector Index. The Dow Jones U.S.
Chemical Index is capitalization-weighted and includes only companies in the
chemicals sector of the Dow Jones U.S. Total Market Index. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
These are summed for all component stocks and divided by a predetermined base
value. The base value for the Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Dow Jones U.S. Chemicals Index represents
approximately 1.5% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

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Dow Jones U.S. Financial Services Index
Number of Components: approximately 257

Index Description. The Dow Jones U.S. Financial Services Index measures the
performance of the financial services industry segment of the U.S. equity
market. The index is a subset of the Dow Jones U.S. Financial Index. The Dow
Jones U.S. Financial Services Index is capitalization-weighted and includes only
companies in the Banks, Savings & Loans, Securities Brokerage and Financial
Services sectors of the Dow Jones U.S. Financial Index. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
These are summed for all component stocks and divided by a predetermined base
value. The base value for the Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Dow Jones U.S. Financial Services Index
represents approximately 12% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Dow Jones Internet Index
Number of Components: approximately 40

Index Description. The Dow Jones Internet Index measures the performance of the
Internet industry sector of the U.S. equity market. It includes only companies
that generate the majority of their revenues from the Internet and it is
comprised of two sub-groups, Internet Commerce and Internet Services. The Index
is modified capitalization-weighted, restricting a stock's weighting to 10% of
its respective sub-group. The impact of a component's price change is
proportional to the issue's total market value in the index, which is the share
price times the number of shares. These are summed for all component stocks and
divided by a predetermined base value. The base value for the Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Internet Index represents
approximately 1% of the market capitalization of listed U.S. equities. As of
[date], the ten

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<PAGE>

largest companies in the Index are ______, ______, ______, ______, ______,
______, ______, ______, ______, and ______.

Dow Jones U.S. Real Estate Index
Number of Components: approximately 92

Index Description. The Dow Jones U.S. Real Estate Index measures the
performance of the Real Estate industry sector of the U.S. equity market. The
Dow Jones U.S. Real Estate Index is a subset of the Dow Jones U.S. Financial
Index. The Dow Jones U.S. Real Estate Index is capitalization-weighted and
includes only companies in the Real Estate industry of the Dow Jones U.S.
Financial Index. The component stocks are weighted according to the total
market value of their outstanding shares. The impact of a component's price
change is proportional to the issue's total market value, which is the share
price times the number of shares outstanding. These are summed for all component
stocks and divided by a predetermined base value. The base value for the Index
is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. The Dow
Jones U.S. Real Estate Index represents approximately 1% of the market
capitalization of listed U.S. equities. As of [date], the ten largest companies
in the Index are ______, ______, ______, ______, ______, ______, ______, ______,
______, and ______.

The Russell Indexes Generally.

Russell 3000 Index
Number of Components: approximately 3000

Index Description. The Russell 3000 Index measures the performance of the U.S.
equity broad market. It serves as the underlying index for Russell 3000 Growth
and Value series and the Russell 1000 and Russell 2000 Indexes, as well as each
respective Growth and Value series. It is a capitalization-weighted index of
the 3000 largest companies domiciled in the US and its territories. The
Component companies are adjusted for available float - weighted according to the
market value of their available outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price times the number of shares outstanding. These are summed for all
component stocks and divided by a predetermined base value. The base value for
the Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.
The Russell 3000 Index represents approximately 86% of the market capitalization
of listed U.S. equities. As of

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<PAGE>

[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

Russell 3000 Growth Index
Number of Components: approximately 1863

Index Description. The Russell 3000 Growth Index measures the growth sector of
the U.S. equity broad market. It is a subset of the Russell 3000 Index. It is
capitalization-weighted index and consisting of those Russell 3000 companies
with higher price-to-book ratios and higher forecasted growth and represents
approximately 50% of the total market capitalization of the Russell 3000 Index.
The component companies are adjusted for available float - weighted according to
the market value of their available outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are
summed for all component stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Russell 3000 Growth Index represents approximately 43% of
the market capitalization of listed U.S. equities. As of [date], the ten largest
companies in the Index are ______, ______, ______, ______, ______, ______,
______, ______, ______, and ______.

Russell 3000 Value Index
Number of Components: approximately 2053

Index Description. The Russell 3000 Value Index measures the value sector of
the broad U.S. equity market. It is a subset of the Russell 3000 Index. It is
a capitalization-weighted index consisting of those Russell 3000 companies with
lower price-to-book ratios and lower forecasted growth and represents
approximately 50% of the total market capitalization of the Russell 3000 Index.
The component companies are adjusted for available float - weighted according to
the market value of their available outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are
summed for all component stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Russell 3000 Value Index represents approximately 43% of
the market capitalization of listed U.S. equities. As of [date], the ten largest
companies in the Index are ______, ______, ______, ______, ______, ______,
______, ______, ______, and ______.

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<PAGE>

Russell 2000 Index
Number of Components: approximately 2000

Index Description. The Russell 2000 Index measures the small capitalization
sector of the U.S. equity market. It is a subset of the Russell 3000 Index and
serves as the underlying index for the Russell 2000 Growth and Value index
series. It is a capitalization weighted index consisting of the 2000 smallest
companies in the Russell 3000 Index. The component companies are adjusted for
available float - weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price times the number of
shares outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Russell 2000 Index represents
approximately 6% of the market capitalization of listed U.S. equities. As of
[date], the ten largest companies in the Index are ______, ______, ______,
______, ______, ______, ______, ______, ______, and ______.

Russell 2000 Growth Index
Number of Components: approximately 1337

Index Description. The Russell 2000 Growth Index measures the small
capitalization growth sector of the U.S. equity market. It is a subset of the
Russell 2000 Index. It is a capitalization weighted index consisting of those
Russell 2000 companies with higher price-to-book ratios and higher forecasted
growth and represents approximately 50% of the total market capitalization of
the Russell 2000 Index. The component companies are adjusted for available
float - weighted according to the market value of their available outstanding
shares. The impact of a component's price change is proportional to the issue's
total market value, which is the share price times the number of shares
outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Russell 2000 Growth Index
represents approximately 3% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

Russell 2000 Value Index
Number of Components: approximately 1313

Index Description. The Russell 2000 Value Index measures the small cap value
sector of the U.S. equity market. It is a subset of the Russell 2000 Index. It
is a capitalization weighted index consisting of those Russell 2000 companies
with lower price-to-book rations and lower forecasted growth and represents
approximately 50% of the total market capitalization of the Russell 2000 Index.
The component companies are adjusted for available float - weighted according to
the market value of their available outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are

24
<PAGE>

summed for all component stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Russell 2000 Value Index represents approximately 3% of the
market capitalization of listed U.S. equities. As of [date], the ten largest
companies in the Index are ______, ______, ______, ______, ______, ______,
______, ______, ______, and ______.

Russell 1000 Index
Number of Components: approximately 1000

Index Description. The Russell 1000 Index measures the performance of the large
capitalization sector of the U.S. equity market. It is a subset of the Russell
3000 Index and serves as the underlying index for the Russell 1000 Growth and
Value Indexes, and the Russell Top 200 and MidCap series. It is a
capitalization weighted index consisting of the 1000 largest 1000 companies in
the Russell 3000. The component companies are adjusted for available float -
weighted according to the market value of their available outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares outstanding.
These are summed for all component stocks and divided by a predetermined base
value. The base value for the Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 1000 Index represents approximately 80%
of the market capitalization of listed U.S. equities. As of [date], the ten
largest companies in the Index are ______, ______, ______, ______, ______,
______, ______, ______, ______, and ______.

Russell 1000 Growth Index
Number of Components: approximately 526

Index Description. The Russell 1000 Growth Index measures the large
capitalization growth sector of the U.S. equity market. It is a subset of the
Russell 1000 Index. It is a capitalization-weighted index consisting of those
Russell 1000 companies with higher price-to-book ratios and higher forecasted
growth and represents approximately 50% of the total market capitalization of
the Russell 1000 Index. The component companies are adjusted for available
float - weighted according to the market value of their available outstanding
shares. The impact of a component's price change is proportional to the issue's
total market value, which is the share price times the number of shares
outstanding. These are summed for all component stocks and divided by a
predetermined base value. The base value for the Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Russell 1000 Growth Index
represents approximately 40% of the market capitalization of listed U.S.
equities. As of [date], the ten largest companies in the Index are ______,
______, ______, ______, ______, ______, ______, ______, ______, and ______.

25
<PAGE>

Russell 1000 Value Index
Number of Components: approximately 740

Index Description. The Russell 1000 Value Index measures the large cap value
sector of the U.S. equity market. It is a subset of the Russell 1000 Index. It
is a capitalization-weighted index consisting of those Russell 1000 companies
with lower price-to-book ratios and lower forecasted growth and represents
approximately 50% of the total market capitalization of the Russell 1000 Index.
The component companies are adjusted for available float - weighted according to
the market value of their available outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. These are
summed for all component stocks and divided by a predetermined base value. The
base value for the Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Russell 1000 Value Index represents approximately 40% of
the market capitalization of listed U.S. equities. As of [date], the ten largest
companies in the Index are ______, ______, ______, ______, ______, ______,
______, ______, ______, and ______.

INVESTMENT LIMITATIONS

Each Fund's investment objectives and the investment restrictions numbered
1 through 6 below have been adopted by the Board as fundamental policies. These
restrictions cannot be changed with respect to a Fund without the approval of
the holders of a majority of such Fund's outstanding voting securities. A vote
of a majority of the outstanding voting securities is defined in the 1940 Act as
the lesser of (a) 67% or more of the voting securities present at a fund
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (b) more than 50% of outstanding voting
securities.

No Fund will:

1. Concentrate (i.e. hold more than 25% of its assets in the stocks of a
single industry or a group of industries) its investments in issuers of one or
more particular industries except that a Fund will concentrate to the extent
that its Underlying Index concentrates in the stocks of such particular industry
or industries. For purposes of this limitation, securities of the U.S.
government (including its agencies and instrumentalities) and securities of
state or municipal governments and their political subdivisions are not
considered to be issued by members of any industry.

2. Borrow money, except that (i) each Fund may borrow from banks for temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests which might otherwise require the untimely disposition of securities,
and (ii) each Fund may, to the extent consistent with its investment policies,
enter into reverse repurchase agreements, forward roll transactions and similar
investment strategies and techniques.

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<PAGE>

To the extent that it engages in transactions described in (i) and (ii), each
Fund will be limited so that no more than 33 1/3% of the value of its total
assets (including the amount borrowed) valued at the time the borrowing is made,
is derived from such transactions.

3. Issue "senior securities" as defined in the 1940 Act and the rules,
regulations and orders thereunder, except as permitted under the 1940 Act and
the rules, regulations and orders thereunder.

4. Make loans. This restriction does not apply to: (i) the purchase of debt
obligations in which each Fund may invest consistent with its investment
objectives and policies; (ii) repurchase agreements; and (iii) loans of its
portfolio securities, to the fullest extent permitted under the 1940 Act.

5. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts, but this restriction shall not prevent each Fund from
trading in futures contracts and options on futures contracts (including options
on currencies to the extent consistent with each Fund's investment objective and
policies).

6. Engage in the business of underwriting securities issued by other persons,
except to the extent that each Fund may technically be deemed to be an
underwriter under the Securities Act of 1933, as amended (the "Securities Act"),
in disposing of portfolio securities.

In addition to the investment restrictions adopted as fundamental policies
as set forth above, each Fund will not, without Board approval, invest in the
securities of a company for the purpose of exercising management or control, or
in any event purchase and hold more than 10% of the securities of a single
issuer or purchase or otherwise acquire any illiquid security except as
permitted under the 1940 Act, which currently permits up to 15% of each Fund's
net assets to be invested in illiquid securities.

For purposes of the percentage limitation on each Fund's investments in
illiquid securities, with respect to each Fund, foreign equity securities,
though not registered under the Securities Act of 1933, are not deemed illiquid
if they are otherwise readily marketable. Such securities ordinarily are
considered to be "readily marketable" if they are traded on an exchange or other
organized market and are not legally restricted from sale by the Fund. BGFA
monitors the liquidity of restricted securities in each Fund's portfolio under
the supervision of the Board. In reaching liquidity decisions, BGFA considers,
the following factors:

1. the frequency of trades and quotes for the security;
2. the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;
3. dealer undertakings to make a market in the security; and
4. the nature of the security and the nature of the marketplace in which it
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).

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<PAGE>

If any percentage restriction described above is complied with at the time
of an investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such restriction.

CONTINUOUS OFFERING

The method by which Creation Unit Aggregations of iShares are created and
traded may raise certain issues under applicable securities laws. Because new
Creation Unit Aggregations of iShares are issued and sold by the Funds on an
ongoing basis, at any point a "distribution," as such term is used in the
Securities Act, may occur. Broker-dealers and other persons are cautioned that
some activities on their part may, depending on the circumstances, result in
their being deemed participants in a distribution in a manner which could render
them statutory underwriters and subject them to the prospectus delivery
requirement and liability provisions of the Securities Act.

For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent iShares, and sells such
iShares directly to customers, or if it chooses to couple the creation of a
supply of new iShares with an active selling effort involving solicitation of
secondary market demand for iShares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or its
client in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to a
categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not
"underwriters" but are effecting transactions in iShares, whether or not
participating in the distribution of iShares, are generally required to deliver
a prospectus. This is because the prospectus delivery exemption in Section 4(3)
of the Securities Act is not available in respect of such transactions as a
result of Section 24(d) of the 1940 Act. Firms that incur a prospectus-delivery
obligation with respect to iShares are reminded that, under the Securities Act
Rule 153, a prospectus-delivery obligation under Section 5(b)(2) of the
Securities Act owed to an exchange member in connection with a sale on the AMEX
is satisfied by the fact that the prospectus is available at the AMEX upon
request. The prospectus delivery mechanism provided in Rule 153 is only
available with respect to transactions on an exchange.

MANAGEMENT

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "MANAGEMENT."

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<PAGE>

Trustees and Officers. The Board has responsibility for the overall
management and operations of the Fund, including general supervision of the
duties performed by BGFA and other service providers. The Board currently
consists of ___ [ ] Trustees, one of whom is an "interested person" (as defined
in the 1940 Act) of the Trust and the Funds.

Principal Occupations
Name/Address/Age Position During the Past Five Years

[TO BE FILLED IN LATER]

Remuneration of Trustees and Officers. The Trust pays each Trustee an
annual fee of $[ ] plus a per meeting fee of $[ ]
for meetings of the Board attended by the Trustee. The Trust also reimburses
each Trustee for travel and other out-of-pocket expenses incurred by him/her in
connection with attending such meetings.

Assuming that four (4) meetings of the Board are held annually, it is
estimated that the compensation paid to each Trustee during the fiscal year
ended [ ], 1999 will be:

Name of Trustee Aggregate Compensation from the Trust
- --------------- -------------------------------------

[TO BE FILLED IN LATER]

The following table sets forth the total (estimated) remuneration of
Trustees and Officers of the Trust for the fiscal year ended [ ].

[TO BE FILLED IN LATER]

No Trustee or Officer is entitled to any pension or retirement benefits from the
Trust.

Investment Adviser. BGFA serves as investment adviser to each Fund pursuant to
an Investment Advisory Agreement between the Trust and BGFA. Under the
Investment

29
<PAGE>

Advisory Agreement, BGFA, subject to the supervision of the Board and in
conformity with the stated investment policies of each Fund, manages the
investment of each Fund's assets. BGFA is responsible for placing purchase and
sale orders and providing continuous supervision of the investment portfolio of
each Fund.

As compensation for its services under the Investment Advisory Agreement,
BGFA receives a fee which is accrued daily and paid monthly, based on a
percentage of each Fund's average daily net assets, at the varying annual rates
ranging from __% to __%. From time to time, BGFA may waive all or a portion of
its fee. Each Fund will also bear all other expenses of its operation.

The Investment Advisory Agreement with respect to each Fund continues in
effect for two years from its effective date, and thereafter is subject to
annual approval by (i) the Board or (ii) vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund, provided that in
either event such continuance also is approved by a majority of the Board who
are not interested persons (as defined in the 1940 Act) of the Fund, by a vote
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreement with respect to each Fund is terminable
without penalty, on 60 days notice, by the Board or by a vote of the holders of
a majority (as defined in the 1940 Act) of the applicable Fund's outstanding
voting securities. The Investment Advisory Agreement is also terminable upon 60
days notice by BGFA and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

Current interpretations of federal banking laws and regulations (i) would
prohibit Barclays Bank PLC, Barclays Global Investors (the "BGI"), and BGFA and
their affiliates from controlling, or underwriting the iShares, but (ii) would
not prohibit Barclays Bank PLC or BGFA generally from acting as an investment
adviser, administrator, transfer agent, or custodian to the Funds or from
purchasing iShares as agent for and upon the order of a customer.

BGFA believes that it may perform advisory and related services for the
Trust without violating applicable banking laws or regulations. However, the
legal requirements and interpretations about the permissible activities of banks
and their affiliates may change in the future. These changes could prevent BGFA
from continuing to perform services for the Trust. If this happens, the Board
would consider selecting other qualified firms. Any new investment advisory
agreement would be subject to shareholder approval.

If current restrictions on bank activities with mutual funds were relaxed,
BGFA, or its affiliates, would consider performing additional services for the
Trust. BGFA cannot predict whether these changes will be enacted, or the terms
under which BGFA, or its affiliates, might offer to provide additional services.

Administrator, Custodian and Transfer Agent. Investors Bank & Trust Co. ("IBT")
serves as Administrator, Custodian, Dividend Disbursing Agent and Transfer Agent
for the Funds. The assets of each Fund are held under bank custodianship in
compliance

30
<PAGE>

with the 1940 Act. Under its agreement with the Trust, IBT holds each Fund's
portfolio securities and keeps all necessary accounts and records and provides
the following other services: such administrative services as the Board
reasonably deems necessary for the proper administration of the Trust and each
Fund; supply and maintain office facilities (which may be in IBT's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and record keeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), internal auditing,
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting documentation for meetings
of the Board; provide monitoring reports and assistance regarding compliance
with the Trust's corporate governance documents, by-laws, investment objectives
and policies and with federal and state securities laws; arrange for appropriate
insurance coverage; and negotiate arrangements with, and supervise and
coordinate the activities of agents and others to supply services. As
compensation for its services, IBT receives a fee which is accrued daily and
paid monthly, based on each Fund's daily net assets.

Distributor. SEI Investments Distribution Company is the principal underwriter
and Distributor of iShares. Its principal address is 1 Freedom Valley Drive,
Oaks, PA. The Distributor has entered into a Distribution Agreement with the
Trust pursuant to which it distributes iShares of each Fund. The Distribution
Agreement will continue for two years from its effective date and is renewable
annually thereafter. iShares are continuously offered for sale by the Funds
through the Distributor only in Creation Unit Aggregations, as described in the
Prospectus and below under "CREATIONS AND REDEMPTIONS". iShares in less than
Creation Unit Aggregations are not distributed by the Distributor. The
Distributor will deliver the Prospectus and Statement of Additional Information
to persons purchasing Creation Unit Aggregations and will maintain records of
both orders placed with it and confirmations of acceptance furnished by it. The
Distributor is a broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD"). The Distributor has no role in determining the
investment policies of the Funds or which securities are to be purchased or sold
by the Funds.

The Board, consisting of Independent Trustees described below, has adopted
a distribution plan pursuant to Rule 12b-1 under the 1940 Act ("Plan") for the
following Funds only: iShares Dow Jones U.S. Basic Materials Sector Fund,
iShares Dow Jones U.S. Chemical Fund, iShares Dow Jones U.S. Consumer Cyclicals
Sector Fund, iShares Dow Jones U.S. Consumer Non-Cyclical Sector Fund, iShares
Dow Jones U.S. Energy Fund, iShares Dow Jones U.S. Financial Sector Fund,
iShares Dow Jones U.S. Financial Services Fund, iShares Dow Jones U.S.
Healthcare Sector Fund, iShares Dow Jones U.S. Industrial Sector Fund, iShares
Dow Jones Internet Fund, iShares Dow Jones U.S. Real Estate Fund, iShares Dow
Jones U.S. Technology Sector Fund, iShares Dow

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<PAGE>

Jones U.S. Telecommunications Sector Fund and iShares Dow Jones U.S. Utilities
Sector Fund. The terms of the Plan are described in the Prospectus.

Under the terms of the Plan, it remains in effect from year to year,
provided such continuance is approved annually by vote of the Board, including a
majority of the "Independent Trustees" (Trustees who are not interested persons
of the Fund (as defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Plans or any agreement related to the
Plan). The Plan may not be amended to increase materially the amount to be
spent for the services provided by the Distributor without approval by the
shareholders of the Fund to which the plan applies. All material amendments of
the Plan, also require Board approval (as described above). The Plan may be
terminated at any time, without penalty, by vote of a majority of the
Independent Trustees, or, by a vote of a majority of the outstanding voting
securities of such Fund (as such vote is defined in the 1940 Act). Pursuant to
the Distribution Agreement, the Distributor will provide the Board with
quarterly reports of any amounts expended under the Plan and the purpose for
which such expenditures were made.

The Distributor will receive a fee based on the daily net assets of
a Fund as compensation for its services ranging from _____% to _____% of 1.0%.
Pursuant to agreements entered into between the Distributor and such persons, a
Fund will also make payments under the Plan to certain broker-dealers or other
persons ("Investor Services Organizations") that enter into agreements with the
Distributor in the form approved by the Board to provide distribution assistance
and shareholder support, account maintenance and educational and promotional
services (which may include compensation and sales incentives to the registered
brokers or other sales personnel of the broker-dealer or other financial entity
that is a party to an investor services agreement) ("Investor Services
Agreements"). Each Investor Services Agreement will be a "related agreement"
under the Plan. No Investor Services Agreement will provide for annual fees of
more than 0.15% of a Fund's average daily net assets per annum attributable to
iShares subject to such agreement.

The fees paid by a participating Fund under the Plan will not exceed .25%
of a Fund's average net assets per annum. To the extent that the Plan fees
aggregate less than .25% per annum of the average daily net assets of a Fund,
the relevant Fund may also reimburse the Distributor, BGFA and its affiliates,
and other persons for certain costs actually incurred in connection with
advertising, marketing, promoting or distributing the Fund.

The continuation of the Distribution Agreement is subject to annual
approval of the Board, including the approval by a majority of the Independent
Trustees, as described above.

Each of the Distribution Agreement and the Investor Services Agreement for
each Fund will provide that it may be terminated at any time, without the
payment of any penalty, on at least 60 days' written notice to the other party
(i) by vote of a majority of the Independent Trustees or (ii) by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the relevant Fund. Each of the Distribution Agreement

32
<PAGE>

and the Investor Services Agreements will terminate automatically in the event
of its assignment (as defined in the 1940 Act).

The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of iShares. Such Soliciting Dealers may also be Participating Parties (as
defined below), DTC Participants (as defined below) and/or Investor Services
Organizations.

Index Providers. Each Fund will be based upon a particular equity market index
compiled by one of three index providers: Standard & Poor's, a division of the
McGraw-Hill Companies, Frank Russell Company and Dow Jones & Company, Inc., none
of which is affiliated with a Fund. Each Fund will be entitled to use the
Underlying Index pursuant to a sub-licensing agreement with BGFA, which in turn
has a licensing agreement with the relevant index provider. BGFA will provide
the sub-licenses without charge to any Fund.

BROKERAGE TRANSACTIONS

The policy of the Trust regarding purchases and sales of securities is that
primary consideration will be given to obtaining the most favorable prices and
efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trust's policy is
to pay commissions which are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
The Trust believes that a requirement always to seek the lowest possible
commission cost could impede effective portfolio management and preclude the
Funds and BGFA from obtaining a high quality of brokerage and research services.
In seeking to determine the reasonableness of brokerage commissions paid in any
transaction, BGFA relies upon its experience and knowledge regarding commissions
generally charged by various brokers and on its judgement in evaluating the
brokerage and research services received from the broker effecting the
transaction. Such determinations are necessarily subjective and imprecise and,
as in most cases, an exact dollar value for those services is not ascertainable.

In seeking to implement the Trust's policies, BGFA effects transactions
with those brokers and dealers that BGFA believes provide the most favorable
prices and are capable of providing efficient executions. If BGFA believes such
price and execution are obtainable from more than one broker or dealer, it may
give consideration to placing portfolio transactions with those brokers and
dealers who also furnish research and other services to the Trust or BGFA. Such
services may include, but are not limited to, information as to the availability
of securities for purchase or sale, statistical information pertaining to
corporate actions affecting stocks, including, but not limited to, stocks within
the Underlying Index for any Fund.

It is expected that the Trust may execute brokerage or other agency
transactions through affiliates of BGFA which are registered broker-dealers, for
commissions, in

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conformity with the 1940 Act, the Exchange Act and rules promulgated by the SEC.
Under these provisions, affiliates of BGFA are permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the affiliate and the Trust expressly
permitting the affiliate of BGFA to receive and retain such compensation. These
rules further require that the commissions paid by the Trust for exchange
transactions not exceed "usual and customary" brokerage commissions. The rules
define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." In addition, the Trust
may direct commission business to one or more designated broker-dealers in
connection with such broker/dealer's provision of services to the Trust or
payment of certain Trust expenses (e.g., custody, pricing and professional
fees). The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid and will review these procedures periodically.

The Trust will not deal with affiliates in principal transactions unless
permitted by the applicable rule or regulation or exemptive order.

BGFA assumes general supervision over placing orders on behalf of the Funds
for the purchase or sale of portfolio securities. If purchases or sales of
portfolio securities of the Funds and one or more other investment companies or
clients supervised by BGFA are considered at or about the same time,
transactions in such securities are allocated among the several investment
companies and clients in a manner deemed equitable to all by BGFA. In some
cases, this procedure could have a detrimental effect on the price or volume or
the security so far as the Funds are concerned. However in other cases, it is
possible that the ability to participate in volume transactions and to negotiate
lower brokerage commissions will be beneficial to the Funds. The primary
consideration is prompt execution of orders at the most favorable net price.

Portfolio turnover may vary from year to year, as well as within a year.
High turnover rates are likely to result in comparatively greater brokerage
expenses. The portfolio turnover rate for each Fund is expected to be under 50%.
The overall reasonableness of brokerage commissions is evaluated by BGFA based
upon its knowledge of available information as to the general level of
commissions paid by the other institutional investors for comparable services.

ADDITIONAL INFORMATION CONCERNING THE TRUST

Capital Stock. The Trust was established as a Delaware business trust on
December 16, 1999. The Trust currently is comprised of 36 Funds. Each Fund
issues shares of beneficial interest, par value [$0.001] per Share. The Board
may designate additional Funds.

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<PAGE>

Each iShare issued by a Fund has a pro rata interest in the assets of the
corresponding Fund. iShares have no preemptive, exchange, subscription or
conversion rights and are freely transferable. Each iShare is entitled to
participate equally in dividends and distributions declared by the Board with
respect to the relevant Fund, and in the net distributable assets of such Fund
on liquidation.

Each iShare has one vote with respect to matters upon which a shareholder
vote is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder. iShares of all Funds vote together as a single class
except that if the matter being voted on affects only a particular Fund, and, if
a matter affects a particular Fund differently from other Funds, that Fund will
vote separately on such matter. Under Delaware law, the Trust is not required
to hold an annual meeting of shareholders unless required to do so under the
1940 Act. The policy of the Trust is not to hold an annual meeting of
shareholders unless required to do so under the 1940 Act. All iShares
(regardless of the Fund) have noncumulative voting rights for the Board. Under
Delaware law, Trustees of the Trust may be removed by vote of the shareholders.

Following the creation of the initial Creation Unit Aggregation(s) of
iShares of a Fund and immediately prior to the commencement of trading in such
Fund's iShares, a holder of iShares may be a "control person" of the Fund. A
Fund cannot predict the length of time that one or more shareholders may remain
a control person of the Fund.

The Trust does not have information concerning the beneficial ownership of
iShares held by any Depository Trust Company ("DTC") Participants (as defined
below).

Shareholder inquiries may be made by writing to the Trust, c/o the
Distributor, SEI Investments Distribution Company, at 1 Freedom Valley Drive,
Oaks, PA 19456.

Absent an applicable exemption or other relief from the SEC or its staff,
officers and Trustees of the Fund and beneficial owners of 10% of the iShares of
a Fund ("Insiders") may be subject to the insider reporting, short-swing profit
and short sale provisions in Section 16 of the Exchange Act and the SEC's rules
thereunder. Insiders should consult with their own legal counsel concerning
their obligations under Section 16 of the Exchange Act.

Book Entry Only System. The following information supplements and should be
read in conjunction with the section in the Prospectus entitled "SHAREHOLDER
INFORMATION".

DTC Acts as Securities Depositary for the iShares. iShares of each Fund are
represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC. Except in the limited circumstance
provided below, certificates will not be issued for iShares.

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<PAGE>

DTC, a limited-purpose trust company, was created to hold securities of its
participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange ("NYSE"),
the AMEX and the NASD. Access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly (the "Indirect Participants").

Beneficial ownership of iShares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in iShares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of iShares.

Conveyance of all notices, statements and other communications to
Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement
between the Trust and DTC, DTC is required to make available to the Trust upon
request and for a fee to be charged to the Trust a listing of the iShares of
each Fund held by each DTC Participant. The Trust shall inquire of each such
DTC Participant as to the number of Beneficial Owners holding iShares, directly
or indirectly, through such DTC Participant. The Trust shall provide each such
DTC Participant with copies of such notice, statement or other communication, in
such form, number and at such place as such DTC Participant may reasonably
request, in order that such notice, statement or communication may be
transmitted by such DTC Participant, directly or indirectly, to such Beneficial
Owners. In addition, the Trust shall pay to each such DTC Participants a fair
and reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all iShares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in iShares of
each Fund as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of iShares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with

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<PAGE>

securities held for the accounts of customers in bearer form or registered in a
"street name," and will be the responsibility of such DTC Participants.

The Trust has no responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such iShares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests, or for
any other aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.

DTC may determine to discontinue providing its service with respect to
iShares at any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership of
iShares, unless the Trust makes other arrangements with respect thereto
satisfactory to the AMEX.

CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS

Creation. The Trust issues and sells iShares of each Fund only in Creation Unit
Aggregations on a continuous basis through the Distributor, without a sales
load, at their net asset value next determined after receipt, on any Business
Day (as defined below), of an order in proper form.

A "Business Day" with respect to each Fund is any day on which the NYSE is
open for business. As of the date of the Prospectus, the NYSE observes the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Washington's
Birthday, Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

Fund Deposit. The consideration for purchase of Creation Unit Aggregation of a
Fund generally consists of the in-kind deposit of a designated portfolio of
equity securities-- the "Deposit Securities" -- per each Creation Unit
Aggregation constituting a substantial replication, or a portfolio sampling
representation, of the stocks involved in the relevant Fund's Underlying Index
("Fund Securities") and an amount of cash -- the "Cash Component" -- computed as
described below. Together, the Deposit Securities and the Cash Component
constitute the "Fund Deposit," which represents the minimum initial and
subsequent investment amount for a Creation Unit Aggregation of any Fund.

The Cash Component is an amount equal to the Balancing Amount (as defined
below). The Balancing Amount serves the function of compensating for any
differences between the net asset value per Creation Unit Aggregation and the
Deposit Amount. The "Balancing Amount" is an amount equal to the difference
between the net asset value of the iShares (per Creation Unit Aggregation) and
the "Deposit Amount" -- an amount

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<PAGE>

equal to the market value of the Deposit Securities. If the Balancing Amount is
a positive number (i.e., the net asset value per Creation Unit Aggregation
exceeds the Deposit Amount), the Cash Component will be provided by the Trust.
If the Balancing Amount is a negative number (i.e., the net asset value per
Creation Unit Aggregation is less than the Deposit Amount), the creator will
receive cash in an amount equal to the differential.

BGFA, through the National Securities Clearing Corporation ("NSCC")
(discussed below), makes available on each Business Day, immediately prior to
the opening of business on the AMEX (currently 9:30 a.m., New York time), the
list of the names and the required number of shares of each Deposit Security to
be included in the current Fund Deposit (based on information at the end of the
previous Business Day) for each Fund. Such Fund Deposit is applicable, subject
to any adjustments as described below, in order to effect creations of Creation
Unit Aggregations of a given Fund until such time as the next-announced
composition of the Deposit Securities is made available.

The identity and number of shares of the Deposit Securities required for a
Fund Deposit for each Fund changes as rebalancing adjustments and corporate
action events are reflected from time to time by BGFA with a view to the
investment objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
Component Stocks of the relevant Underlying Index. In addition, the Trust
reserves the right to permit or require the substitution of an amount of cash -
i.e., a "cash in lieu" amount -- to be added to the Cash Component to replace
any Deposit Security which may not be available in sufficient quantity for
delivery or which may not be eligible for transfer through the Clearing Process,
or which may not be eligible for transfer through the systems of DTC and hence
not eligible for transfer through the Clearing Process (discussed below) will be
at the expense of the Fund and will affect the value of all iShares; but BGFA,
subject to the approval of the Board, may adjust the "Transaction Fee" within
the parameters described below to protect ongoing shareholders. The adjustments
described above will reflect changes known to BGFA on the date of announcement
to be in effect by the time of delivery of the Fund Deposit, in the composition
of the Underlying Index being tracked by the relevant Fund or resulting from
certain corporate actions.

Procedures For Creation of Creation Unit Aggregations. To be eligible to place
orders with the Distributor and to create a Creation Unit Aggregation of a Fund,
an entity must be (i) a "Participating Party", i.e., a broker-dealer or other
participant in the clearing process through the Continuous Net Settlement System
of the NSCC (the "Clearing Process"), a clearing agency that is registered with
the SEC; or (ii) a DTC Participant (see "BOOK ENTRY ONLY SYSTEM"), and, in each
case, must have executed an agreement with the Fund, the Distributor, the
Custodian and the Transfer Agent with respect to creations and redemptions of
Creation Unit Aggregations ("Participant Agreement") (discussed below). A
Participating Party and DTC Participant are collectively referred to as an
"Authorized Participant". Investors should contact the Distributor for the names
of Authorized Participants that have signed a Participant Agreement. All
iShares of a Fund, however created, will be entered on the records of DTC in the
name of Cede & Co. for the account of a DTC Participant.

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<PAGE>

All orders to create iShares must be placed for one or more Creation Unit
Aggregations (the amount of iShares required for a creation Unit will vary by
Fund but will usually be no less than [50,000].) All orders to create Creation
Unit Aggregations, whether through the Clearing Process (through a Participating
Party) or outside the Clearing Process (through a DTC Participant), must be
received by the Distributor no later than the closing time of the regular
trading session on the NYSE ("Closing Time") (ordinarily 4:00 p.m., New York
time) in each case on the date such order is placed in order for creation of
Creation Unit Aggregations to be effected based on the net asset value of
iShares of each Fund as next determined on such date after receipt of the order
in proper form. The date on which an order to create Creation Unit Aggregations
(or an order to redeem Creation Unit Aggregations as discussed below) is placed
is referred to as the "Transmittal Date". Orders must be transmitted by an
Authorized Participant by telephone or other transmission method acceptable to
the Distributor pursuant to procedures set forth in the Participant Agreement,
as described below (see "Placement of Creation Orders Using Clearing Process"
and "Placement of Creation Orders Outside Clearing Process"). Severe economic
or market disruptions or changes, or telephone or other communication failure
may impede the ability to reach the Distributor or an Authorized Participant.

Orders to create Creation Unit Aggregations shall be placed with an
Authorized Participant, as applicable, in the form required by such Authorized
Participant. In addition, the Authorized Participant may request the investor
to make certain representations or enter into agreements with respect to the
order, e.g., to provide for payments of cash, when required. Investors should
be aware that their particular broker may not have executed a Participant
Agreement and that, therefore, orders to create Creation Unit Aggregations of a
Fund have to be placed by the investor's broker through an Authorized
Participant that has executed a Participant Agreement. At any given time, there
may be only a limited number of broker-dealers that have executed a Participant
Agreement. Those placing orders for Creation Unit Aggregations through the
Clearing Process should afford sufficient time to permit proper submission of
the order to the Distributor prior to the Closing Time on the Transmittal Date.

Orders for creation that are effected outside the Clearing Process are
likely to require transmittal by the DTC Participant earlier on the Transmittal
Date than orders effected using the Clearing Process. Those persons placing
orders outside the Clearing Process should ascertain the deadlines applicable to
DTC and the Federal Reserve Bank wire system by contacting the operations
department of the broker or depository institution effectuating such transfer of
Deposit Securities and Cash Component.

Placement of Creation Orders Using Clearing Process. The Clearing Process is
the process of creating or redeeming Creation Unit Aggregations through the
Continuous Net Settlement System of the NSCC. Fund Deposits made through the
Clearing Process must be delivered through a Participating Party that has
executed a Participant Agreement. The Participant Agreement authorizes the
Distributor to transmit through the Transfer Agent to NSCC, on behalf of the
Participating Party, such trade instructions as are

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<PAGE>

necessary to effect the Participating Party's creation order. Pursuant to such
trade instructions to NSCC, the Participating Party agrees to deliver the
requisite Deposit Securities and the Cash Component to the Trust, together with
such additional information as may be required by the Distributor. An order to
create Creation Unit Aggregations through the Clearing Process is deemed
received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than the Closing Time on such Transmittal
Date and (ii) all other procedures set forth in the Participant Agreement are
properly followed.

Placement of Creation Orders Outside Clearing Process. Fund Deposits made
outside the Clearing Process must be delivered through a DTC Participant that
has executed a Participant Agreement with the Trust, the Distributor and the
Transfer Agent. A DTC Participant who wishes to place an order creating
Creation Unit Aggregations to be effected outside the Clearing Process need not
be a Participating Party, but such orders must state that the DTC Participant is
not using the Clearing Process and that the creation of Creation Unit
Aggregations will instead be effected through a transfer of securities and cash
directly through DTC. The Fund Deposit transfer must be ordered by the DTC
Participant on the Transmittal Date in a timely fashion so as to ensure the
delivery of the requisite number of Deposit Securities through DTC to the
account of the Fund by no later than 11:00 a.m., New York time, of the next
Business Day immediately following the Transmittal Date. All questions as to
the number of Deposit Securities to be delivered, and the validity, form and
eligibility (including time of receipt) for the deposit of any tendered
securities, will be determined by the Fund, whose determination shall be final
and binding. The amount of cash equal to the Cash Component must be transferred
directly to the Custodian in a timely manner so as to be received by the
Custodian no later than 2:00 p.m., New York time, on the next Business Day
immediately following such Transmittal Date. An order to create Creation Unit
Aggregations outside the Clearing Process is deemed received by the Distributor
on the Transmittal Date if (i) such order is received by the Distributor not
later than the Closing Time on such Transmittal Date; and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
However, if the Custodian does not receive both the required Deposit Securities
and the Cash Component by 11:00 a.m. and 2:00 p.m., respectively, on the next
Business Day immediately following the Transmittal Date, such order will be
canceled. Upon written notice to the Distributor, such canceled order may be
resubmitted the following Business Day using a Fund Deposit as newly constituted
to reflect the then current net asset value of the Fund. The delivery of
Creation Unit Aggregations so created will occur no later than the third (3rd )
Business Day following the day on which the purchase order is deemed received by
the Distributor.

Creation Unit Aggregations may be created in advance of receipt by the
Trust of all or a portion of the applicable Deposit Securities as described
below. In these circumstances, the initial deposit will have a value greater
than the net asset value of the iShares on the date the order is placed in
proper form since, in addition to available Deposit Securities, cash must be
deposited in an amount equal to the sum of (i) the Cash Component, plus (ii)
115% of the market value of the undelivered Deposit Securities (the "Additional
Cash Deposit"). The order shall be deemed to be received on the Business

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<PAGE>

Day on which the order is placed provided that the order is placed in proper
form prior to 4:00 p.m., New York time, on such date and federal funds in the
appropriate amount are deposited with the Custodian by 11:00 a.m., New York
time, the following Business Day. If the order is not placed in proper form by
4:00 p.m. or federal funds in the appropriate amount are not received by 11:00
a.m. the next Business Day, then the order may be deemed to be rejected and the
investor shall be liable to the Fund for losses, if any, resulting therefrom. An
additional amount of cash shall be required to be deposited with the Trust,
pending delivery of the missing Deposit Securities to the extent necessary to
maintain the Additional Cash Deposit with the Trust in an amount at least equal
to 115% of the daily marked to market value of the missing Deposit Securities.
To the extent that missing Deposit Securities are not received by 1:00 p.m., New
York time, on the third Business Day following the day on which the purchase
order is deemed received by the Distributor or in the event a marked-to-market
payment is not made within one Business Day following notification by the
Distributor that such a payment is required, the Trust may use the cash on
deposit to purchase the missing Deposit Securities. Authorized Participants will
be liable to the Trust for the costs incurred by the Trust in connection with
any such purchases. These costs will be deemed to include the amount by which
the actual purchase price of the Deposit Securities exceeds the market value of
such Deposit Securities on the day the purchase order was deemed received by the
Distributor plus the brokerage and related transaction costs associated with
such purchases. The Trust will return any unused portion of the Additional Cash
Deposit once all of the missing Deposit Securities have been properly received
by the Custodian or purchased by the Trust and deposited into the Trust. In
addition, a transaction fee of [$4,000] will be charged in all cases. The
delivery of Creation Unit Aggregations so created will occur no later than the
third Business Day following the day on which the purchase order is deemed
received by the Distributor.

Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the
absolute right to reject a creation order transmitted to it by the Distributor
in respect of any Fund if (i) the order is not in proper form; (ii) the
investor(s), upon obtaining the iShares ordered, would own 80% or more of the
currently outstanding Shares of any Fund; (iii) the Deposit Securities delivered
are not as disseminated through the facilities of the AMEX for that date by the
Custodian, as described above; (iv) acceptance of the Deposit Securities would
have certain adverse tax consequences to the Fund; (v) acceptance of the Fund
Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the
Fund Deposit would otherwise, in the discretion of the Trust or BGFA, have an
adverse effect on the Trust or the rights of beneficial owners; or (vii) in the
event that circumstances outside the control of the Trust, the Transfer Agent,
the Custodian, the Distributor and BGFA make it for all practical purposes
impossible to process creation orders. Examples of such circumstances include
acts of God; public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting the
Trust, BGFA, the Distributor, DTC, NSCC or any other participant in the creation
process, and similar extraordinary events. The Distributor shall notify a
prospective creator of a Creation Unit and/or the Authorized Participant acting
on behalf of the
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<PAGE>

creator of a Creation Unit Aggregation of its rejection of the order of such
person. The Trust, the Transfer Agent, the Custodian and the Distributor are
under no duty, however, to give notification of any defects or irregularities in
the delivery of Fund Deposits nor shall either of them incur any liability for
the failure to give any such notification.

All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility, and acceptance for deposit of
any securities to be delivered shall be determined by the Trust, and the Trust
's determination shall be final and binding.

Creation Transaction Fee. A purchase transaction fee payable to the Trust is
imposed to compensate the Trust for the transfer and other transaction costs of
a Fund associated with the issuance of Creation Units of iShares. Purchasers of
Creation Units of iShares for cash are required to pay an additional variable
charge to compensate the relevant Fund for brokerage and market impact expenses.
Where the Trust permits an in-kind purchaser to substitute cash in lieu of
depositing a portion of the Deposit Securities, the purchaser will be assessed
the additional variable charge for cash purchases on the "cash in lieu" portion
of its investment. Purchasers of iShares in Creation Units are responsible for
the costs of transferring the securities constituting the Deposit Securities to
the account of the Trust. Investors are also responsible for payment of the
costs of transferring the Deposit Securities to the Trust.

Redemption of iShares in Creation Units Aggregations. Shares may be redeemed
only in Creation Unit Aggregations at their net asset value next determined
after receipt of a redemption request in proper form by the Fund through the
Distributor and only on a Business Day. A FUND WILL NOT REDEEM iSHARES IN
AMOUNTS LESS THAN CREATION UNIT AGGREGATIONS. Beneficial Owners must accumulate
enough iShares in the secondary market to constitute a Creation Unit Aggregation
in order to have such iShares redeemed by the Trust. There can be no assurance,
however, that there will be sufficient liquidity in the public trading market at
any time to permit assembly of a Creation Unit Aggregation. Investors should
expect to incur brokerage and other costs in connection with assembling a
sufficient number of Shares to constitute a redeemable Creation Unit
Aggregation.

With respect to each Fund, BGFA, through the NSCC, makes available
immediately prior to the opening of business on the AMEX (currently 9:30 am, New
York time) on each Business Day, the identity of the Fund Securities that will
be applicable (subject to possible amendment or correction) to redemption
requests received in proper form (as defined below) on that day. Fund
Securities received on redemption may not be identical to Deposit Securities
which are applicable to creations of Creation Unit Aggregations.

Unless cash redemptions are available or specified for a Fund, the
redemption proceeds for a Creation Unit Aggregation generally consist of Fund
Securities -- as announced by BGFA on the Business Day of the request for
redemption received in proper form -- plus cash in an amount equal to the
difference between the net asset value

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<PAGE>

of the iShares being redeemed, as next determined after a receipt of a request
in proper form, and the value of the Fund Securities (the "Cash Redemption
Amount"), less a redemption transaction fee of $[ ]. In the event that the
Fund Securities have a value greater then the net asset value of the iShares, a
compensating cash payment equal to the difference is required to be made by or
through an Authorized Participant by the redeeming shareholder.

Redemption Transaction Fee. A redemption transaction fee payable to the Trust
is imposed to offset transfer and other transaction costs that may be incurred
by the relevant Fund. The redemption transaction fee for redemptions in kind
and for cash and the additional variable charge for cash redemptions (when cash
redemptions are available or specified) will vary but will generally be in the
range of $[ ]. Investors will also bear the costs of transferring the
Fund Securities from the Trust to their account or on their order. Investors
who use the services of a broker or other such intermediary may be charged a fee
for such services.

Placement of Redemption Orders Using Clearing Process. Orders to redeem
Creation Unit Aggregations through the Clearing Process must be delivered
through a Participating Party that has executed the Participant Agreement. An
order to redeem Creation Unit Aggregations using the Clearing Process is deemed
received on the Transmittal Date if (i) such order is received by the
Distributor not later than 4:00 p.m., New York time, on such Transmittal Date;
and (ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the net asset value of
the Fund as next determined. An order to redeem Creation Unit Aggregations
using the Clearing Process made in proper form but received by the Trust after
4:00 p.m., New York time, will be deemed received on the next Business Day
immediately following the Transmittal Date and will be effected at the net asset
value next determined on such Business Day. The requisite Fund Securities and
the Cash Redemption Amount will be transferred by the third NSCC Business Day
following the date on which such request for redemption is deemed received.

Placement of Redemption Orders Outside Clearing Process. Orders to redeem
Creation Unit Aggregations of Fund outside the Clearing Process must be
delivered through a DTC Participant that has executed the Participant Agreement.
A DTC Participant who wishes to place an order for redemption of Creation Unit
Aggregations of Fund to be effected outside the Clearing Process need not be a
Participating Party, but such orders must state that the DTC Participant is not
using the Clearing Process and that redemption of Creation Unit Aggregations
will instead be effected through transfer of iShares directly through DTC. An
order to redeem Creation Unit Aggregations of a Fund outside the Clearing
Process is deemed received by the Distributor on the Transmittal Date if (i)
such order is received by the Transfer Agent not later than 4:00 p.m., New York
time, on such Transmittal Date; (ii) such order is accompanied or proceeded by
the requisite number of iShares of the Fund specified in such order, which
delivery must be made through DTC to the Custodian no later than 11:00 a.m., New
York time, on the next Business Day following such Transmittal Date (the "DTC
Cut-Off-Time"); and (iii) all other procedures set forth in the Participant
Agreement are properly followed.

43
<PAGE>

After the Distributor has deemed an order for redemption outside the
Clearing Process received, the Distributor will initiate procedures to transfer
the requisite Fund Securities which are expected to be delivered within three
Business Days and the Cash Redemption Amount to the Authorized Participant on
behalf of the redeeming Beneficial Owner by the third Business Day following the
Transmittal Date on which such redemption order is deemed received by the
Distributor.

The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered upon redemption will be made by the Custodian according
to the procedures set forth under "DETERMINATION OF NET ASSET VALUE" computed on
the Business Day on which a redemption order is deemed received by the
Distributor. Therefore, if a redemption order in proper form is submitted to
the Distributor by a DTC Participant not later than Closing Time on the
Transmittal Date, and the requisite number of iShares of the relevant Fund are
delivered to the Custodian prior to the DTC Cut-Off-Time, then the value of the
Fund Securities and the Cash Redemption Amount to be delivered will be
determined by the Custodian on such Transmittal Date. If, however, a redemption
order is submitted to the Distributor by a DTC Participant not later than the
Closing Time on the Transmittal Date but either (i) the requisite number of
iShares of the relevant Fund are not delivered by the DTC Cut-Off-Time, as
described above, on the next Business Day following the Transmittal Date or (ii)
the redemption order is not submitted in proper form, then the redemption order
will not be deemed received as of the Transmittal Date. In such case, the value
of the Fund Securities and the Cash Redemption Amount to be delivered will be
computed on the Business Day that such order is deemed received by the
Distributor, i.e., the Business Day on which the iShares of the relevant Fund
are delivered through DTC to the Custodian by the DTC Cut-Off-Time on such
Business Day pursuant to a properly submitted redemption order.

If it is not possible to effect deliveries of the Fund Securities, the
Trust may in its discretion exercise its option to redeem such iShares in cash,
and the redeeming Beneficial Owner will be required to receive its redemption
proceeds in cash. In addition, an investor may request a redemption in cash
which the Fund may, in its sole discretion, permit. In either case, the
investor will receive a cash payment equal to the net asset value of its iShares
based on the net asset value of iShares of the relevant Fund next determined
after the redemption request is received in proper form (minus a redemption
transaction fee and additional charge for requested cash redemptions specified
above, to offset the Trust's brokerage and other transaction costs associated
with the disposition of Fund Securities). A Fund may also, in its sole
discretion, upon request of a shareholder, provide such redeemer a portfolio of
securities which differs from the exact composition of the Fund Securities but
does not differ in net asset value.

Redemptions of iShares for Fund Securities will be subject to compliance
with applicable federal and state securities laws and each Fund (whether or not
it otherwise permits cash redemptions) reserves the right to redeem Creation
Unit Aggregations for cash to the extent that the Trust could not lawfully
deliver specific Fund Securities upon redemptions or could not do so without
first registering the Fund Securities under such

44
<PAGE>

laws. An Authorized Participant or an investor for which it is acting subject to
a legal restriction with respect to a particular stock included in the Fund
Securities applicable to the redemption of a Creation Unit Aggregation may be
paid an equivalent amount of cash. The Authorized Participant may request the
redeeming Beneficial Owner of the iShares to complete an order form or to enter
into agreements with respect to such matters as compensating cash payment.

The right of redemption may be suspended or the date of payment postponed
with respect to any Fund (i) for any period during which the NYSE is closed
(other than customary weekend and holiday closings); (ii) for any period during
which trading on the NYSE is suspended or restricted; (iii) for any period
during which an emergency exists as a result of which disposal of the iShares of
the Fund or determination of the Fund's net asset value is not reasonably
practicable; or (iv) in such other circumstances as is permitted by the SEC.

TAXES

The following information also supplements and should be read in
conjunction with the section in the Prospectus entitled "TAXES".

The Trust on behalf of each Fund has the right to reject an order for a
purchase of iShares if the purchaser (or group of purchasers) would, upon
obtaining the iShares so ordered, own 80% or more of the outstanding iShares of
a given Fund and if, pursuant to section 351 of the Internal Revenue Code (the
"Code"), that Fund would have a basis in the securities different from the
market value of such securities on the date of deposit. The Trust also has the
right to require information necessary to determine beneficial share ownership
for purposes of the 80% determination.

Each Fund intends to qualify for and to elect treatment as a separate
Regulated Investment Company ("RIC") under Subchapter M of the Code. To qualify
for treatment as a RIC, a company must annually distribute at least 90 percent
of its net investment company taxable income (which includes dividends, interest
and net short-term capital gains) and meet several other requirements. Among
such other requirements are the following: (1) at least 90 percent of the
company's annual gross income must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (2) at the close of each
quarter of the company's taxable year, (a) at least 50 percent of the market
value of the company's total assets must be represented by cash and cash items,
U.S. government securities, securities of other regulated investment companies
and other securities, with such other securities limited for purposes of this
calculation in respect of any one issuer to an amount not greater than 5% of the
value of the company's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25 percent of the value of its
total assets may be invested in the securities of any one issuer or of two or
more issuers that are controlled by the company (within the meaning of Section

45
<PAGE>

851(b)(3)(B) of the Code) and that are engaged in the same or similar trades or
businesses or related trades or businesses (other than U.S. government
securities or the securities of other regulated investment companies).

Each Fund, but in particular the iShares Euro Plus Fund and the iShares
S&P/TSE 60 Fund, may be subject to foreign income taxes withheld at source.
Such a Fund will elect to "pass through" to its investors the amount of foreign
income taxes paid by the Fund provided that the investor held the iShares of the
Fund, and the Fund held the security, on the dividend settlement date and for at
least fourteen additional days immediately before and/or thereafter, with the
result that each investor will (i) include in gross income, even though not
actually received, the investor's pro rata share of the Fund's foreign income
taxes, and (ii) either deduct (in calculating U.S. taxable income) or credit (in
calculating U.S. federal income tax) the investor's pro rata share of the Fund's
foreign income taxes. A foreign tax credit may not exceed the investor's U.S.
federal income tax otherwise payable with respect to the investor's foreign
source income. For this purpose, each shareholder must treat as foreign source
gross income (i) his proportionate share of foreign taxes paid by the Fund and
(ii) the portion of any dividend paid by the Fund which represents income
derived from foreign sources; the Fund's gain from the sale of securities will
generally be treated as U.S. source income. This foreign tax credit limitation
is applied separately to separate categories of income; dividends from the Fund
will be treated as "passive" or "financial services" income for this purpose.
The effect of this limitation may be to prevent investors from claiming as a
credit the full amount of their pro rata share of the Fund's foreign income
taxes.

If any Fund owns shares in certain foreign investment entities, referred to
as "passive foreign investment companies," the Fund will be subject to one of
the following special tax regimes: (i) the Fund is liable for U.S. federal
income tax, and an additional charge in the nature of interest, on a portion of
any "excess distribution" from such foreign entity or any gain from the
disposition of such shares, even if the entire distribution or gain is paid out
by the Fund as a dividend to its shareholders; (ii) if the Fund were able and
elected to treat a passive foreign investment company as a "qualified electing
fund," the Fund would be required each year to include in income, and distribute
to shareholders in accordance with the distribution requirements set forth
above, the Fund's pro rata share of the ordinary earnings and net capital gains
of the passive foreign investment company, whether or not such earnings or gains
are distributed to the Fund or (iii) the Fund is entitled to mark-to-market
annually the shares of the passive foreign investment company, and is required
to distribute to shareholders any such mark-to-market gains in accordance with
the distribution requirements set forth above.

A Fund will be subject to a 4 percent excise tax on certain undistributed
income if it does not distribute to its shareholders in each calendar year at
least 98 percent of its ordinary income for the calendar year plus 98 percent of
its capital gain net income for the twelve months ended October 31 of such year.
Each Fund intends to declare and distribute dividends and distributions in the
amounts and at the times necessary to avoid the application of this 4 percent
excise tax.

46
<PAGE>

An investor in a Fund that is a foreign corporation or an individual who is
a nonresident alien for U.S. tax purposes will be subject to significant adverse
U.S. tax consequences. For example, dividends paid out of a Fund's investment
company taxable income will generally be subject to U.S. federal withholding tax
at a rate of 30% (or lower treaty rate if the foreign investor is eligible for
the benefits of an income tax treaty). Foreign investors are urged to consult
their own tax advisors regarding the U.S. tax treatment, in their particular
circumstances, of ownership of shares in a Fund.

The foregoing discussion is a summary only and is not intended as a
substitute for careful tax planning. Purchasers of iShares should consult their
own tax advisors as to the tax consequences of investing in such shares,
including under state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Internal Revenue Code,
regulations, judicial authority and administrative interpretations in effect on
the date hereof. Changes in applicable authority could materially affect the
conclusions discussed above, and such changes often occur.

Federal Tax Treatment of Futures and Options Contracts. Each Fund is required,
for federal income tax purposes, to mark-to-market and recognize as income for
each taxable year its net unrealized gains and losses on certain futures
contracts as of the end of the year as well as those actually realized during
the year. Gain or loss from futures and options contracts on broad-based
indexes required to be marked-to-market will be 60% long-term and 40% short-term
capital gain or loss. Application of this rule may alter the timing and
character of distributions to shareholders. A Fund may be required to defer the
recognition of losses on futures contracts, option contracts and swaps to the
extent of any unrecognized gains on offsetting positions held by the Fund.

In order for a Fund to continue to qualify for federal income tax treatment
as a RIC, at least 90% of its gross income for a taxable year must be derived
from qualifying income, i.e., dividends, interest, income derived from loans of
securities, gains from the sale of securities or of foreign currencies or other
income derived with respect to the Fund's business of investing in securities.
It is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered gain from the sale of securities and
therefore will be qualifying income for purposes of the 90% requirement.

Each Fund distributes to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized gains
at the end of the Fund' fiscal year) on futures or options transactions. Such
distributions are combined with distributions of capital gains realized on the
Fund's other investments and shareholders are advised on the nature of the
distributions.

The foregoing is only a summary of certain material tax consequences
affecting each Fund and shareholders. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in each Fund.

47
<PAGE>

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "DETERMINING NET ASSET VALUE".

Net asset value per iShare of each Fund is computed by dividing the value
of the net assets of such Fund (i.e., the value of its total assets less total
liabilities) by the total number of iShares of such Fund outstanding, rounded to
the nearest cent. Expenses and fees, including the management, administration
and distribution fees, are accrued daily and taken into account for purposes of
determining net asset value. The net asset value of per iShare for each Fund is
calculated by the Custodian and determined as of the close of the regular
trading session on the NYSE (ordinarily 4:00 p.m., New York time) on each day
that such exchange is open.

In computing a Fund's net asset value, the Fund's securities holdings are
valued based on their last quoted current price. Price information on listed
securities is taken from the exchange where the security is primarily traded.
Securities regularly traded in an over-the-counter market are valued at the
latest quoted bid price in such market. Other portfolio securities and assets
for which market quotations are not readily available are valued based on fair
value as determined in good faith by BGFA in accordance with procedures adopted
by the Board.

DIVIDENDS AND DISTRIBUTIONS

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "SHAREHOLDER INFORMATION".

General Policies. Dividends from net investment income, if any, are declared and
paid quarterly by each Fund. Distributions of net realized securities gains, if
any, generally are declared and paid once a year, but the Trust may make
distributions on a more frequent basis for certain Funds (i) to improve index
tracking or to comply with the distribution requirements of the Code; (ii) to
distribute their entire annual taxable income, plus any net capital gains; and
(iii) to avoid imposition of the excise tax imposed by Section 4982 of the Code,
in all events in a manner consistent with the provisions of the 1940 Act. The
Trust reserves the right to declare special dividends if, in its reasonable
discretion, such action is necessary or advisable to preserve the status of each
Fund as a RIC or to avoid imposition of income or excise taxes on undistributed
income.

Dividends and other distributions on iShares are distributed, as described
below, on a pro rata basis to Beneficial Owners of such iShares. Dividend
payments are made through DTC Participants and Indirect Participants to
Beneficial Owners then of record with proceeds received from the Funds.

Dividend Reinvestment Service. Broker-dealers may make available the DTC book-
entry Dividend Reinvestment Service for use by Beneficial Owners of Funds
through DTC
48
<PAGE>

Participants for reinvestment of their dividend distributions. If this service
is available and used, dividend distributions of both income and realized gains
will be automatically reinvested in additional whole iShares purchased in the
secondary market of the same Fund.

PERFORMANCE AND OTHER INFORMATION

The performance of the Funds may be quoted in advertisements, sales
literature or reports to shareholders in terms of average annual total return
and cumulative total return.

Quotations of average annual total return are expressed in terms of the
average annual rate of return of a hypothetical investment in a Fund over
periods of 1, 5 and 10 years (or the life of a Fund, if shorter). Such total
return figures will reflect the deduction of a proportional share of such Fund's
expenses on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.

Total return is calculated according to the following formula: P(1 + T)/n/
= ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10
year period).

Quotations of a cumulative total return will be calculated for any
specified period by assuming a hypothetical investment in a Fund on the date of
the commencement of the period and will assume that all dividends and
distributions are reinvested on ex date. However, currently there is no
dividend reinvestment option available to shareholders of iShares and such
calculation is provided for informational purposes only. The net increase or
decrease in the value of the investment over the period will be divided by its
beginning value to arrive at cumulative total return. Total return calculated in
this manner will differ from the calculation of average annual total return in
that it is not expressed in terms of an average rate of return.

Quotations of cumulative total return or average annual total return
reflect only the performance of a hypothetical investment in a Fund during the
particular time period on which the calculations are based. Such quotations for
a Fund will vary based on changes in market conditions and the level of such
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.

The cumulative and average total returns do not take into account federal
or state income taxes which may be payable; total returns would, of course, be
lower if such charges were taken into account.

A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner.
Because there are different methods for calculating performance, investors
should consider the effects

49
<PAGE>

of the methods used to calculate performance when comparing performance of a
Fund with performance quoted with respect to other investment companies or types
of investments.

Because some or all of certain Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part of such a Fund's investment performance.
Historical information on the value of the dollar versus foreign currencies may
be used from time to time in advertisements. Such historical information is not
indicative of future fluctuations in the value of the U.S. dollar against these
currencies. In addition, marketing materials may cite country and economic
statistics and historical stock market performance information for any of the
countries in which a Fund invests, including, but not limited to, the following:
population growth, gross domestic product, inflation rate, average stock market
price-earnings ratios and the total value of stock markets. Sources for such
statistics may include official publications of various foreign governments and
exchanges.

From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of open-end and
closed-end investment companies with similar investment goals, as tracked by
independent organizations such as Investment Company Data, Inc., Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc.,
Value Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.

In addition, in connection with the communication of its performance to
current or prospective shareholders, a Fund also may compare those figures to
the performance of certain unmanaged indices which may assume the reinvestment
of dividends or interest but generally do not reflect deductions for
administrative and management costs. Examples of such indices include, but are
not limited to the following:

. Dow Jones Industrial Average
. Consumer Price Index
. Standard & Poor's 500 Composite Stock Price Index (S&P 500)
. NASDAQ OTC Composite Index
. NASDAQ Industrials Index
. International Finance Corporation's (Global) Composite and (Investable)
Composite Indices
. Morgan Stanley Capital International Indices
. NASDAQ Composite Index
. Wilshire 5000 Stock Index
[other]

50
<PAGE>

MISCELLANEOUS INFORMATION

Counsel. Carter, Ledyard & Milburn, New York, New York, and Morgan, Lewis &
Bockius, LLP, Washington, D.C., are counsel to the Trust. Morgan, Lewis &
Bockius, LLP passed upon the validity of the shares of each Fund.

Independent Auditors. _____________________serves as the independent auditors
of the Trust.

FINANCIAL STATEMENTS

[TO BE FILLED IN LATER]

51
<PAGE>

PART C

OTHER INFORMATION

Item 23. EXHIBITS
- -------- --------
<TABLE>
<CAPTION>

Exhibit
Number Description
<S> <C>
(a) Agreement and Declaration of Trust dated December 16, 1999 - to be filed
(b) By-Laws - to be filed
(c) Not applicable
(d) Investment Management Agreement between the Trust and Barclays
Global Fund Advisors - to be filed
(e.1) Distribution Agreement between the Trust and SEI Investments
Distribution Company- to be filed
(e.2) Form of Authorized Participant Agreement - to be filed
(e.3) Form of Sales and Investor Services Agreement - to be filed
(f) Not applicable
(g.1) Custodian Agreement between Investors Bank & Trust and the Trust - to be
filed
(g.2) Lending Agreement between Investors Bank & Trust and the Trust - to be
filed
(h.1) Transfer Agency and Services Agreement between the Trust and
Investors Bank & Trust - to be filed
(h.2) Form of License Agreement between Barclays Global Fund Advisors and
Individual Funds - to be filed
(i) Legal Opinion and Consent of Counsel - to be filed
(j) Consent of Independent Auditors - to be filed
(k) Not Applicable
(1.1) Subscription Agreement between the Trust and SEI Investments
Distribution Company
(1.2) Letter of Representations the Trust and Depository Trust Company -
to be filed
(m) Form of 12b-1 Plan and 12b-1 Agreement - to be filed
(n) Not applicable
</TABLE>

-87-
<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- -------- -------------------------------------------------------------

None

Item 25. INDEMNIFICATION
- -------- ---------------

The Fund is organized as a Delaware business trust and is operated pursuant to
an Agreement and Declaration of Trust, (the "Declaration of Trust"), that
permits the Fund to indemnify its trustees and officers under certain
circumstances. Such indemnification, however, is subject to the limitations
imposed by the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended. The Declaration of Trust of the Fund provides that
officers and trustees of the Trust shall be indemnified by the Trust against
liabilities and expenses incurred or paid in connection with any claim, action,
suit, or proceedings against them by reason of the fact that they each serve as
an officer or trustee of the Trust or as an officer or trustee of another entity
at the request of the entity. This indemnification is subject to the following
conditions:

(a) no trustee or officer of the Trust is indemnified against any liability to
the Trust or its security holders which was the result of any willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office;

(b) officers and trustees of the Trust are indemnified only for actions taken
in good faith which the officers and trustees believed were in or not
opposed to the best interests of the Trust; and

The Declaration of Trust of the Fund provides that if indemnification is not
ordered by a court, indemnification may be authorized upon determination by
shareholders, or by a majority vote of a quorum of the trustees who were not
parties to the proceedings or, if this quorum is not obtainable, if directed by
a quorum of disinterested trustees, or by independent legal counsel in a written
opinion, that the persons to be indemnified have met the applicable standard.

Item 26. (a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- ------------ ----------------------------------------------------

The Trust is advised by Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of Barclays Global Investors, N.A. ("BGI"), 45 Fremont Street, San
Francisco, California 94105 . BGFA's business is that of a registered investment
adviser to certain open-end, management investment companies and various other
institutional investors.

The directors and officers of BGFA consist primarily of persons who during the
past two years have been active in the investment management business. Each of
the directors and executive officers of BGFA will also have substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two

-88-
<PAGE>

fiscal years engaged in any other business, profession, vocation or employment
of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During the last Two Fiscal Years
- ----------------- -------------------------------------------------------
<S> <C>
Patricia Dunn Director of BGFA and Chairman and Director of
Director BGI 45 Fremont Street, San Francisco, CA 94105

Garrett F. Bouton Chairman of the Board of Directors of BGFA and
Chairman Chief Operating Officer and Director of BGI
45 Fremont Street, San Francisco, CA 94105

Lawrence G. Tint Director of BGFA and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105

Geoffrey Fletcher Chief Financial Officer of BGFA and BGI
45 Fremont Street
San Francisco, CA 94105
</TABLE>

Item 27. PRINCIPAL UNDERWRITERS.
- -------- -----------------------

(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.

The Fund's distributor, SEI Investments Distribution Company (the
"Distributor"), acts as distributor for:

<TABLE>
<CAPTION>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds/R/ June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
</TABLE>

-89-
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Parkstone Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 13, 1999
</TABLE>

The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution, clearing
and settlement of securities transactions ("MarketLink").

(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in
the answer to Item 21 of Part B. Unless otherwise noted, the business
address of each director or officer is Oaks, PA 19456.

<TABLE>
<CAPTION>
Positions and Offices
Name Position and Office with Underwriter with Registrant
- ---- ------------------------------------ ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of --
Directors
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President & General Counsel --
</TABLE>

-90-
<PAGE>

<TABLE>
<CAPTION>
Positions and Offices
Name Position and Office with Underwriter with Registrant
- ---- ------------------------------------ ---------------------
<S> <C> <C>
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Richard A. Deak Vice President & Assistant Secretary --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Asistant Secretary --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Mark Nagle Vice President --
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Secretary --
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President --
Lynda J. Striegel Vice President & Assistant Secretary --
Lori L. White Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
</TABLE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS.
- -------- ---------------------------------

(a) The Fund maintains accounts, books and other documents required by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder
(collectively, "Records") at the offices of Investors Bank & Trust, 89
South Street, Boston, Massachusetts 02111.

(b) BGFA maintains all Records relating to its services as advisor at 45
Fremont Street, San Francisco, California, 94105.

-91-
<PAGE>

(c) SEI Investments Distributor Company maintains all Records relating to its
services as distributor at One Freedom Valley Drive, Oaks, Pennsylvania
19456.

(d) IBT maintains all Records relating to its services as transfer agent and
custodian at 89 South Street, Boston, Massachusetts 02111.

Item 29. MANAGEMENT SERVICES.
- -------- --------------------

Not applicable.

Item 30. UNDERTAKINGS.
- -------- -------------

(a) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Fund pursuant to foregoing provisions, or otherwise, the
Fund has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for Fund expenses incurred or
paid by a director, officer or controlling person of the Fund in the
successful defense of any action, suit or proceeding is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Fund will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

-92-
<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
New York and the State of New York on the day of December 16, 1999.

iShares Trust
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(Name of Trust)

By: /s/ Nathan Most
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Nathan Most
President

Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacity on the dates
indicated.

By: President, Trustee December 16, 1988
---------------- and Chief Financial
Nathan Most Officer