<PAGE>
As filed with the Securities and Exchange Commission on July 27, 2000
File Nos. 333-92935 and 811-09729
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
(Check appropriate box or boxes)
iShares Trust
-------------
(Exact Name of Registrant as Specified in Charter)
c/o Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
-----------------
(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)
With Copies to:
W. JOHN MCGUIRE, ESQ. RICHARD MORRIS, ESQ.
MORGAN, LEWIS & BOCKIUS LLP BARCLAYS GLOBAL INVESTORS, N.A.
1800 M STREET, N.W. 45 FREMONT STREET
WASHINGTON, DC 20036 SAN FRANCISCO, CA 94105
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to [_] On (date) pursuant to
paragraph (b) paragraph (b)
[_] 60 days after filing pursuant to [_] On (date) pursuant to paragraph
paragraph (a)(1) (a)(1)
[X] 75 days after filing pursuant to [_] On (date) pursuant to paragraph
paragraph (a)(2) (a)(2) of Rule 485
If appropriate, check the following box:
[_] The post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
iShares(SM)
iShares Trust
The iShares Trust consists of over 37 separate investment portfolios called
"Funds." Each Fund seeks investment results that correspond generally to the
price and yield performance, before fees and expenses, of a particular equity
market index. Barclays Global Fund Advisors is the advisor to each Fund. This
Prospectus relates to the iShares S&P Global 100 Index Fund (the "Fund").
The shares of the Fund, called "iShares," are listed for trading on the New York
Stock Exchange, Inc. (the "NYSE"). iShares will trade on the NYSE at market
prices throughout the trading day. Market prices for iShares may be different
from their net asset value ("NAV"). Shares of the other funds of the iShares
Trust are also called iShares and are listed for trading on the American Stock
Exchange ("AMEX") or the Chicago Board of Options Exchange (the "CBOE"). Each
fund has its own CUSIP number and exchange trading symbol.
The Fund issues and redeems iShares at NAV only in large blocks of ______
iShares ("Creation Units") or multiples thereof. These Creation Unit
transactions are usually in exchange for a basket of stocks and an amount of
cash. As a practical matter, only institutions or large investors purchase or
redeem Creation Units.
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
October 4, 2000
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Details on Investing in iShares OVERVIEW.............................................................. 1
Introduction.......................................................... 1
Investment Objective.................................................. 1
Principal Investment Strategies....................................... 1
Representative Sampling............................................... 2
Correlation........................................................... 2
Industry Concentration Policy......................................... 2
Details on the Risks of Investing
in iShares Principal Risk Factors................................................ 3
Market Risk........................................................... 3
Asset Class Risk...................................................... 3
Passive Investments................................................... 3
Tracking Error Risk................................................... 3
Lack of Governmental Insurance or Guarantee........................... 3
Concentration......................................................... 4
Derivatives........................................................... 4
Market Trading Risks.................................................. 4
Absence of Prior Active Market................................... 4
Lack of Market Liquidity......................................... 4
iShares May Trade at Prices Other than NAV....................... 4
Details on the Fund DESCRIPTION OF THE FUND............................................... 5
Details on Management MANAGEMENT............................................................ 9
and Operations
Investment Advisor.................................................... 9
Administrator, Custodian, Transfer Agent and Securities
Lending Agent......................................................... 9
Details on Buying and Selling
iShares SHAREHOLDER INFORMATION............................................... 9
Buying and Selling iShares............................................ 9
Book Entry............................................................ 10
iShare Prices......................................................... 10
Determining NAV....................................................... 11
Dividends and Distributions........................................... 11
Taxes................................................................. 11
Taxes on Distributions................................................ 11
Taxes when iShares are Sold........................................... 12
Creations and Redemptions............................................. 12
Fund Transaction Fees................................................. 12
DISTRIBUTION.......................................................... 13
INDEX PROVIDER........................................................ 13
</TABLE>
i
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OVERVIEW
Introduction
This Prospectus provides the information you need to make an informed decision
about investing in iShares of the Fund. It contains important facts about the
iShares Trust as a whole and the Fund in particular.
An index is a group of stocks that an Index Provider selects as representative
of a market, market segment or specific industry sector. The Index Provider, in
this case Standard & Poor's, determines the relative weightings of the stocks in
the index and publishes information regarding the market value of the index.
The Fund is an "index fund" which seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
S&P Global 100 Index (the "Underlying Index"). Barclays Global Fund Advisors
("BGFA"), the advisor to the Fund, is a subsidiary of Barclays Global Investors,
N.A. ("BGI"). BGFA and its affiliates are not affiliated with the Index
Provider. Standard & Poor's, a division of The McGraw-Hill Companies, Inc.,
provides financial, economic and investment information and analytical services
to the financial community.
The Principal Investment Strategies and the Principal Risk Factors sections
discuss the principal strategies and risks applicable to the Fund, while the
Description of the Fund section provides important information about the Fund,
including a brief description of its Underlying Index and principal risks
specific to the Fund.
Investment Objective
The Fund seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the Underlying Index.
Principal Investment Strategies
BGFA uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
"beat" the markets it tracks and does not seek temporary defensive positions
when markets decline or appear overvalued. BGFA does not make any judgments
about the investment merit of a particular stock, nor does it attempt to apply
any economic, financial or market analysis.
Indexing may eliminate some of the risks of active management, such as poor
stock selection. Indexing may also help increase after-tax performance by
keeping portfolio turnover low in comparison to actively managed investment
companies.
The Fund will invest at least 90% of its total assets in the stocks of the
Underlying Index. The Fund may hold up to 10% of its total assets in stocks not
included in the Underlying Index. For
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example, BGFA may invest in stocks not included in the Underlying Index in order
to reflect various corporate actions (such as mergers) and other changes in the
Underlying Index (such as reconstitutions, additions and deletions). As long as
the Fund invests at least 90% of its total assets in the stocks of the
Underlying Index, it may also invest its other assets in futures contracts,
options on futures contracts, options, and swaps related to the Underlying
Index, as well as cash and cash equivalents.
Representative Sampling
The Fund uses Representative Sampling to track the Underlying Index. This means
that the Fund is invested in a representative sample of stocks in the Underlying
Index, which have a similar investment profile as the Underlying Index. Stocks
selected have aggregate investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics (such as
return variability, earnings valuation and yield) and liquidity measures similar
to those of the relevant Underlying Index. A fund that uses Representative
Sampling generally does not hold all of the stocks that are included in its
underlying index.
Correlation
An index is a theoretical financial calculation while the Fund is an actual
investment portfolio. The performance of the Fund and the Underlying Index will
vary somewhat due to transaction costs, market impact, corporate actions (such
as mergers and spin-offs) and timing variances.
BGFA expects that, over time, the correlation between the Fund's performance and
that of the Underlying Index, before fees and expenses, will be 95% or better. A
figure of 100% would indicate perfect correlation. Any correlation of less than
100% is called "tracking error".
Industry Concentration Policy
The Fund will not concentrate its investments (i.e. hold 25% or more of its
total assets in the stocks of a particular industry or group of industries),
except that the Fund will concentrate to approximately the same extent that the
Underlying Index concentrates in the stocks of such particular industry or group
of industries. For purposes of this limitation, securities of the U.S.
Government (including its agencies and instrumentalities), repurchase agreements
collateralized by U.S. Government securities, and securities of state or
municipal governments and their political subdivisions are not considered to be
issued by members of any industry.
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Principal Risk Factors
The Fund is subject to the principal risks described below. Additional risks
associated with the Fund are discussed under the Description of the Fund
section. Some or all of these risks may adversely affect the Fund's net asset
value NAV, trading price, yield, total return and/or its ability to meet its
objectives.
Market Risk
The Fund's NAV will react to securities markets movements. You could lose money
over short periods due to fluctuation in a Fund's NAV in response to market
movements, and over longer periods during market downturns.
Asset Class Risk
The returns from the types of securities in which the Fund invests may
underperform returns from the various general securities markets or different
asset classes. Different types of securities tend to go through cycles of out-
performance and under-performance in comparison to the general securities
markets.
Passive Investments
The Fund is not actively managed. The Fund may be affected by a general decline
in the U.S. or foreign market segments relating to the Underlying Index. The
Fund invests in the securities included in the Underlying Index regardless of
their investment merit. BGFA does not attempt to individually select stocks or
to take defensive positions in declining markets.
Tracking Error Risk
Factors such as the fees and expenses of the Fund, imperfect correlation between
the Fund's stocks and those in the Underlying Index, rounding of share prices,
changes to the Underlying Index and regulatory policies may affect BGFA's
ability to achieve close correlation with the Underlying Index. The Fund's
returns may therefore deviate from those of the Underlying Index.
Lack of Governmental Insurance or Guarantee
An investment in the Fund is not a bank deposit nor is it insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
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Concentration
If the Underlying Index concentrates in a particular industry or group of
industries, the Fund may be adversely affected by the performance of those
stocks and be subject to price volatility. In addition, if the Fund concentrates
in a single industry or group of industries, it may be more susceptible to any
single economic, market, political or regulatory occurrence.
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.
The Fund may invest in stock index future contracts and other derivatives.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus
the Fund's losses may be greater if it invests in derivatives than if it invests
only in conventional securities.
Market Trading Risks
Absence of Prior Active Market
Although the iShares described in this Prospectus are listed for trading on
the NYSE, there can be no assurance that an active trading market will
develop or be maintained.
Lack of Market Liquidity
Trading in iShares on the NYSE may be halted because of market conditions
or for reasons that, in the view of the NYSE, make trading in iShares
inadvisable. In addition, trading in iShares is subject to trading halts
caused by extraordinary market volatility pursuant to NYSE "circuit
breaker" rules. There can be no assurance that the requirements of the NYSE
necessary to maintain the listing of the iShares of the Fund will continue
to be met or will remain unchanged.
iShares May Trade at Prices Other than NAV
iShares may trade below, at, or above their NAV. The NAV of iShares will
fluctuate with changes in the market value of the Fund's holdings. The
trading prices of iShares will fluctuate in accordance with changes in the
Fund's NAV as well as market supply and demand on the NYSE. However, given
that iShares can be created and redeemed only in Creation Units at NAV
(unlike shares of many closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their NAVs), BGFA
believes that large discounts or premiums to the NAVs of iShares should not
be sustained.
Additional risks associated with investing in the Fund are discussed in the
Description of the Fund section.
4
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DESCRIPTION OF THE FUND
Cusip: _________
NYSE Trading Symbol: __________
Underlying Index: Standard & Poor's Global 100 Index/1/
-------------------------------------------------------
Investment Objective
The iShares S&P Global 100 Index Fund seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
S&P Global 100 Index (the "Underlying Index").
Principal Investment Strategy
The Underlying Index is designed to measure the performance of large trans-
national companies that are of major importance in the global markets. It is a
subset of the S&P Global 1200 Index and contains 100 common stocks, screened for
sector representation, liquidity and size. The market capitalization of
constituent companies is adjusted to reflect only those shares that are
available to foreign investors. The Fund uses a Representative Sampling strategy
to try to track the Underlying Index.
As of March 31, 2000, the Underlying Index consisted of 100 stocks. Its three
largest stocks were General Electric, Intel Corp. and Microsoft Corp. (which
comprised 5.85%, 4.81% and 4.77%, respectively, of its market capitalization).
Also as of March 31, 2000, the Underlying Index was comprised of stocks of
companies in the following countries: Belgium, Canada, Finland, France, Germany,
Great Britain, Italy, Japan, Korea, Mexico, Netherlands, Spain, Sweden,
Switzerland and the United States.
Principal Risks Specific to the Fund
. The stocks in the Underlying Index may underperform fixed income
investments and stock market indices that track other markets,
segments and sectors.
. The Fund is classified as "non-diversified." A non-diversified fund
generally will 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.
. Since foreign exchanges are open on days when the Fund does not price
its shares, the value of the securities in the Fund's portfolio may
change on days when shareholders will not be able to purchase or sell
the Fund's shares.
_______________
/1/ "Standard & Poor's(R)", "S&P(R)", "S&P Global 100 Index" and "S&P Global
1200 Index" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use for certain purposes by BGI. The Fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in iShares of the Fund.
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. An investment in the Fund involves risks similar to those of investing
in a broad-based portfolio of equity securities traded on exchanges in
the securities markets of the component countries. These risks
include:
. Less liquid and less efficient securities markets;
. Greater price volatility;
. Exchange rate fluctuations and exchange controls;
. 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;
. More substantial government involvement in the economy;
. Higher rates of inflation;
. Greater social, economic and political uncertainty.
. The stocks in the Underlying Index may underperform fixed income
investments and stock market indices that track other markets,
segments and sectors.
Performance Information
As of the date of this Prospectus, the Fund has been in operation for less than
one full calendar year and therefore does not report its annual total returns in
a bar chart and average annual total returns in a table.
6
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Fees and Expenses
Most investors will buy and sell shares of the Fund through brokers. iShares of
the Fund are traded on the NYSE.
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*
Shareholder Fees
(fees paid directly from your investment, but see the Creation
Transaction Fees and Redemption Transaction Fees discussion below) None
Annual Fund Operating Expenses
(expenses that are deducted from the Fund's assets)**
Management Fees %
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses %
-------------------------------------------------------------------------------
* You will incur customary brokerage commissions when buying or selling
shares of the Fund.
** Expressed as a percentage of average net assets.
*** The Trust's Investment Advisory Agreement provides that BGFA will pay
the operating expenses of the Trust, except interest expense and taxes
(expected to be de minimus), any future distribution fees or expenses
and extraordinary expenses.
Example
This Example is intended to help you compare the cost of investing in iShares
with the cost of investing in other funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your iShares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on the assumptions, your costs would be:
1 Year 3 Years
$ $
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Creation Transaction Fees and Redemption Transaction Fees
The Fund issues and redeems shares at NAV only in large blocks of ______ shares
or multiples thereof. As a practical matter, only institutions or large
investors purchase or redeem these Creation Units. A Standard Creation
Transaction Fee of $_____ is charged to each purchaser of Creation Units. The
fee is a single charge and will be the same regardless of the number of Creation
Units of the Fund purchased by an investor on the same day. The approximate
value of a Creation Unit as of March 31, 2000 was $_____. An investor who holds
Creation Units and wishes to redeem them at NAV would also pay a Standard
Redemption Fee of $_____ on the date of such redemption(s), regardless of the
number of Creation Units of the Fund redeemed that day.* Investors who hold
Creation Units will also pay the Annual Fund Operating Expenses described in the
table above. Assuming an investment in a Creation Unit of $____ and a 5% return
each year, and assuming that the Fund's operating expenses remain the same, the
total costs would be $_______ if the Creation Unit is redeemed after one year,
and $_________ if the Creation Unit is redeemed after three years.
______________
* See Creations and Redemptions at the end of this Prospectus. If a Creation
Unit is purchased or redeemed outside the usual process through the National
Securities Clearing Corporation or for cash, a variable fee will be charged of
up to four times the Standard Creation or Redemption Transaction Fee.
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MANAGEMENT
Investment Advisor
As investment advisor, BGFA has overall responsibility for the general
management and administration of the Trust. BGFA provides an investment program
for the Fund and manages the investment of its assets. BGFA uses teams of
portfolio managers, investment strategists and other investment specialists.
This team-approach brings together many disciplines and leverages BGFA's
extensive resources. BGFA also arranges for transfer agency, custody, fund
administration and all other non-distribution related services necessary for the
Fund to operate.
Under the Investment Advisory Agreement, BGFA is responsible for all expenses of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest, taxes, brokerage commissions
and other expenses connected with executions of portfolio transactions (which
are included in NAV), any distribution fees or expenses and extraordinary
expenses.
BGFA will receive a fee from the Fund based on a rate of the Fund's average
daily net assets, as shown in the following table.
iShares Index Fund Management Fee
------------------ --------------
iShares S&P Global 100 Index Fund %
BGFA is located at 45 Fremont Street, San Francisco, CA 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 investment
advisor of institutional investment assets. As of March 31, 2000, BGI and its
affiliates, including BGFA, provided investment advisory services for assets in
excess of $826 billion. BGI, BGFA, Barclays Global Investor Services, Barclays
Bank PLC and their affiliates deal, trade and invest for their own accounts in
the types of securities in which the Fund portfolios may also invest.
Administrator, Custodian, Transfer Agent and Securities Lending Agent
Investors Bank & Trust Company ("IBT") is the administrator, custodian, transfer
agent and securities lending agent for the Fund.
SHAREHOLDER INFORMATION
Additional shareholder information, including how to buy and sell iShares of the
Fund, is available free of charge by calling toll-free: 1-800-iShares.
Buying and Selling iShares
iShares trade on an auction market on the NYSE during the trading day and can be
bought and sold throughout the trading day like other shares of publicly traded
stocks. iShares may trade on the NYSE until 4:15 p.m. (Eastern time), every day
the NYSE is open. There is no minimum investment, although generally iShares
are purchased in "round lots" of 100 iShares. When
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buying or selling iShares through a broker, you will incur customary brokerage
commissions and charges.
iShares may be acquired or redeemed directly from the Fund only in Creation
Units, as discussed in the Creations and Redemptions section.
iShares trade under the ticker symbol listed under the Description of the Fund
section. iShares prices are reported in dollars and fractions per iShare.
Fractions are quoted in 1/64s.
The NYSE is generally open Monday through Friday and is closed on weekends and
the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Section 12(d)(1) of the Investment Company Act of 1940 restricts investments by
registered investment companies in the securities of other investment companies,
including iShares.
Book Entry
iShares are held in book-entry form, which means that no stock certificates are
issued. Depository Trust Company ("DTC") or its nominee is the record owner of
all outstanding iShares of the 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 depository 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 of iShares on the NYSE may differ in varying degrees from
their daily NAVs and can be affected by market forces such as supply and demand,
economic conditions and other factors. The trading price of iShares may be
higher or lower than the Fund's NAV.
The NYSE intends to disseminate the approximate value of iShares every fifteen
seconds. This approximate value should not be viewed as a "real-time" update of
the NAV per iShare, because the approximate value may not be calculated in the
same manner as the Fund's NAV, which is computed once a day. The Fund is not
involved in, or responsible for, the calculation or dissemination of such
information and makes no warranty as to its accuracy.
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DETERMINING NAV
IBT calculates the 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), although iShares continue to trade on the exchange until 4:15
p.m. Eastern time, every day the NYSE is open. The formula calls for deducting
all of the Fund's liabilities from the total value of its assets 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 Trust's Board of Trustees.
Dividends and Distributions
The Fund pays out dividends, if any, to investors at least annually and may pay
them on a more frequent basis. The Fund distributes its net 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 your own tax professional about the tax
consequences of an investment in iShares.
Unless your investment in iShares is made through a tax-exempt entity or tax-
deferred retirement account, such as an IRA plan, you need to be aware of the
possible tax consequences when:
. The Fund makes distributions, and
. You sell iShares.
Taxes on Distributions
Dividends from net investment income, if any, are declared and paid at least
annually by the Fund. In general, your distributions are subject to federal
income tax for the year when they are paid. Certain dividends paid in January,
however, may be treated as paid in the prior year. A distribution may be taxable
to you as ordinary income or as capital gain.
Dividends paid out of the Fund's net investment income and net short-term
capital 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.
If you are neither a lawful permanent resident nor a citizen of the United
States or if you are a foreign entity, the 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.
The Fund must withhold 31% of a shareholder's distributions and proceeds if the
shareholder has not provided a correct taxpayer identification number or social
security number in the manner required by law.
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<PAGE>
Taxes when iShares are Sold
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. You may also be subject to state and local taxation on Fund
distributions, and sales of iShares. Consult your personal tax adviser about the
potential tax consequences of an investment in iShares under all applicable tax
laws.
Creations and Redemptions
The iShares are "created" at their NAV by specialists, large investors and
institutions only in block-size Creation Units of ____ iShares. A "creator"
deposits into the Fund a portfolio of stocks closely approximating the holdings
of the Fund and a specified amount of cash in exchange for _____ iShares.
Similarly, iShares can only be redeemed in Creation Units of _____ iShares,
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. The prices at which creations and redemptions occur are based on the
next calculation of NAV after an order is received in proper form.
Creations and redemptions must be made through a firm that is either a member of
the Continuous Net Settlement System of the National Securities Clearing
Corporation or a DTC Participant and, in each case, must have executed an
agreement with the Distributor with respect to creations and redemptions of
creation unit aggregations ("Participant Agreement"). Information about the
procedures regarding creation and redemption of Creation Units is included in
the Statement of Additional Information.
Fund Transaction Fees
The Fund will impose a purchase transaction fee and a redemption transaction fee
to offset transfer and other transaction costs associated with the issuance and
redemption of Creation Units of iShares. Purchasers and redeemers of Creation
Units of iShares for cash are required to pay an additional variable charge to
compensate for brokerage and market impact expenses. The creation and redemption
transaction fees for in-kind creations and redemptions for the Fund are listed
below. The creation and redemption transaction fees for creations and
redemptions (i) made through DTC and (ii) made for cash (when cash creations and
redemptions are available or specified) will also be subject to an additional
variable charge of up to a maximum of four times the amount shown below. In
addition, purchasers of iShares in Creation Units are responsible for payment of
the costs of transferring the Deposit Securities to the Trust. Redeemers of
iShares in Creation Units are responsible for the costs of transferring the Fund
Securities from the Trust to
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their accounts or on their order. Investors who use the services of a broker or
other such intermediary may pay fees for such services. The following table also
shows, as of March 31, 2000, the approximate cost of one Creation Unit per Fund,
including the Creation Transaction Fee.
<TABLE>
<CAPTION>
Approximate
Value of a Standard Maximum
Creation Unit Creation/ Creation/
as of Redemption Redemption
Name of Fund March 31, 2000 Transaction Fee Transaction Fee
------------ -------------- --------------- ---------------
<S> <C> <C> <C>
iShares S&P Global 100 Index $______ $ ______ $______
Fund
</TABLE>
DISTRIBUTION
SEI Investments Distribution Co. (the "Distributor") serves as the distributor
of Creation Units for the Fund on an agency basis. The Distributor does not
maintain a secondary market in iShares. The Distributor's principal address is 1
Freedom Valley Drive, Oaks, PA 19456.
The Distributor has no role in determining the policies of the Fund or the
securities that are purchased or sold by the Fund.
INDEX PROVIDER
Standard & Poor's (a division of The McGraw-Hill Companies, Inc.) is the Index
Provider for the S&P Global 100 Index. Standard & Poor's is not affiliated with
the iShares Trust, BGI, BGFA, IBT, the Distributor or the NYSE.
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 1200 Index,
which includes the S&P Europe 350 for Continental Europe and the U.K., 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 and the S&P Latin America 40. 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.
BGI has entered into a license agreement with Standard & Poor's to use the S&P
Global 100 Index. BGI is sub-licensing rights in the S&P Global 100 Index to the
iShares Trust at no charge.
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DISCLAIMERS
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 Index 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 Index that is 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 Index. 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 or in the determination of any
financial calculations relating thereto. 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
Index 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 Index 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 Index 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 Index or any data included therein, even if notified of
the possibility of such damages.
iShares are not sponsored, endorsed or promoted by the NYSE. The NYSE 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 Index or the ability of the Index identified
herein to track stock market performance. The Index identified herein is
determined, composed and calculated by Standard & Poor's without regard to the
iShares of any Fund. The NYSE is not responsible for, nor has it participated
in, the determination of the compilation or the calculation of the Index, nor in
the determination of the timing of, prices of, or quantities of the iShares of
the Fund to be issued, nor in the determination or calculation of the equation
by which the iShares are redeemable. The NYSE has no obligation or liability to
owners of the iShares of the Fund in connection with the administration,
marketing or trading of the iShares of the Fund.
The NYSE does not guarantee the accuracy and/or the completeness of any indices
or any data included therein. The NYSE makes no warranty, express or implied, as
to results to be obtained by the iShares Trust on behalf of the Fund as
licensee, licensee's customers and counterparties, owners of the iShares, or any
other person or entity from the use of the subject indices or any data included
therein in connection with the rights licensed as described herein or for any
other use. The NYSE makes no express or implied warranties, and hereby expressly
disclaims all warranties of merchantability or fitness for a particular purpose
with respect to the Index or any data included therein. Without limiting any of
the foregoing, in no event shall the NYSE have any liability for any direct,
indirect, special,
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punitive, consequential or any other damages (including lost profits) even if
notified of the possibility of such damages.
BGFA does not guarantee the accuracy and/or the completeness of the Index or any
data included therein and BGFA shall have no liability for any errors,
omissions, or interruptions therein.
BGFA makes no warranty, express or implied, as to results to be obtained by the
Fund, owners of the iShares of the Fund, or any other person or entity from the
use of the Index or any data included therein. BGFA makes no express or implied
warranties, and expressly disclaims all warranties of merchantability or fitness
for a particular purpose or use with respect to the Index or any data included
therein. Without limiting any of the foregoing, in no event shall BGFA have any
liability for any special, punitive, direct, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages.
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For more detailed information on the iShares Trust and iShares, you may request
a copy of the Statement of Additional Information ("SAI").
The SAI provides detailed information about the Fund, and is incorporated by
reference into this Prospectus. This means that the SAI, for legal purposes, is
a part of this Prospectus.
If you have questions about the Funds or iShares or you wish to obtain the SAI
free of charge, please:
Call: 1-800-iShares
Monday through Friday
8:00 a.m. to 8:00 p.m. (Eastern time)
Write: iShares Trust
c/o SEI Investments Distribution Co.
1 Freedom Valley Drive
Oaks, PA 19456
Visit: www.ishares.com
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.,
and information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available on the EDGAR Database on the Commission's Internet site
at www.sec.gov, and copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following email address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102. The iShares Trust's registration number under the
Investment Company Act of 1940 is 811-09729.
No person is authorized to give any information or to make any representations
about the 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.
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iShares Trust
Statement of Additional Information
for the iShares S&P Global 100 Index Fund
Dated October 4, 2000
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus dated October 4, 2000 (the "Prospectus") for
the iShares S&P Global 100 Index Fund (the "Fund"), 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 Co., at 1 Freedom Valley Drive, Oaks, PA 19456.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
General Description of the Trust and the Fund.................................................... 1
Exchange Listing and Trading..................................................................... 1
Investment Strategies and Risks.................................................................. 2
Non-diversification.................................................................... 3
Loans of Portfolio Securities.......................................................... 3
Repurchase Agreements.................................................................. 3
Reverse Repurchase Agreements.......................................................... 4
Currency Transactions.................................................................. 4
Money Market Instruments............................................................... 5
Foreign Securities..................................................................... 5
Investment Companies, REITs............................................................ 5
Illiquid Securities.................................................................... 6
Futures and Options.................................................................... 6
Options on Futures Contracts........................................................... 6
Restrictions on the Use of Futures Contracts and Options on Futures Contracts.......... 7
Swap Agreements........................................................................ 7
Future Developments.................................................................... 7
General Considerations and Risks....................................................... 7
Risks of Futures and Options Transactions.............................................. 8
Risks of Swap Agreements............................................................... 9
Construction and Maintenance Standards for the Underlying Index.................................. 10
Index Dissemination.................................................................... 10
The S&P Indices Generally........................................................................ 10
Component Selection Criteria........................................................... 10
Issue Changes.......................................................................... 10
Index Maintenance...................................................................... 10
Index Availability..................................................................... 10
S&P Global 100 Index............................................................................. 10
Index Description...................................................................... 11
Investment Limitations........................................................................... 11
Continuous Offering.............................................................................. 13
Management....................................................................................... 13
Trustees and Officers.................................................................. 13
Remuneration of Trustees and Officers.................................................. 15
Investment Advisor..................................................................... 15
Administrator, Custodian, Transfer Agent and Securities Lending Agent.................. 16
Distributor............................................................................ 17
Aggregations........................................................................... 17
Index Provider......................................................................... 17
Brokerage Transactions........................................................................... 17
Additional Information Concerning the Trust...................................................... 19
Shares................................................................................. 19
Book Entry Only System................................................................. 19
</TABLE>
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<TABLE>
<S> <C>
DTC Acts as Securities Depository for the iShares...................................... 19
Creation and Redemption of Creation Unit Aggregations............................................ 21
Creation............................................................................... 21
Fund Deposit........................................................................... 21
Procedures for Creation of Creation Unit Aggregations.................................. 22
Placement of Creation Orders for the Fund.............................................. 23
Acceptance of Orders for Creation Unit Aggregations.................................... 24
Creation Transaction Fee............................................................... 24
Redemption of iShares in Creation Unit Aggregations.................................... 25
Redemption Transaction Fee............................................................. 25
Placement of Redemption Orders for the Fund............................................ 26
Foreign Market Hours............................................................................. 27
Regular Holidays................................................................................. 29
Settlement Periods Greater than Seven Days for Year 2000......................................... 30
Taxes............................................................................................ 30
Federal Tax Treatment of Futures and Options Contracts................................. 32
Determination of NAV............................................................................. 32
Dividends and Distributions...................................................................... 33
General Policies....................................................................... 33
Dividend Reinvestment Service.......................................................... 33
Performance and Other Information................................................................ 33
Miscellaneous Information........................................................................ 35
Counsel................................................................................ 35
Independent Auditors................................................................... 35
Financial Statements................................................................... 35
</TABLE>
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General Description of the Trust and the Fund
The Trust currently consists of over 37 investment portfolios (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, or funds. Each
Fund in the Trust is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). This Statement of Additional Information ("SAI")
relates solely to the iShares S&P Global 100 Index Fund (the "Fund"). The shares
of the Fund are referred to herein as "iShares". Shares of other funds of the
Trust are also called iShares. Each Fund has its own CUSIP number and exchange
trading symbol.
The investment objective of the Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the S&P Global 100 Index (the "Underlying Index"). The Fund is
managed by Barclays Global Fund Advisors ("BGFA").
The Fund offers and issues iShares at their net asset value ("NAV") only in
aggregations of a specified number of iShares (each a "Creation Unit" or a
"Creation Unit Aggregation"), generally in exchange for a basket of equity
securities included in the Underlying Index (the "Deposit Securities"), together
with the deposit of a specified cash payment (the "Cash Component"). The iShares
described in the Prospectus and SAI have been approved for listing and secondary
trading on the New York Stock Exchange (the "NYSE"), subject to notice of
issuance. iShares will trade on the NYSE at market prices that may be below, at,
or above NAV. iShares are redeemable only in Creation Unit aggregations, and,
generally, in exchange for portfolio securities and a specified cash payment.
Creation Units are aggregations of ______ iShares. The iShares of the other
Funds of the Trust are listed and traded on the American Stock Exchange ("AMEX")
or the Chicago Board of Options Exchange ("CBOE").
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 125% of the market value of the missing Deposit Securities. See
the Creation and Redemption of Creation Unit Aggregations section. In each
instance of such cash creations or redemptions, transaction fees may be imposed
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 the Fund is contained in the Prospectus in the Overview and the
Shareholder Information sections. 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 NYSE necessary to
maintain the listing of iShares of the Fund will continue to be met. The NYSE
may, but is not required to, remove the
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iShares of the Fund from listing if (i) following the initial 12-month period
beginning upon the commencement of trading of the Fund, there are fewer than 50
beneficial owners of the iShares of the Fund for 30 or more consecutive trading
days; (ii) the value of the Underlying Index is no longer calculated or
available; or (iii) such other event shall occur or condition exist that, in the
opinion of the NYSE, makes further dealings on the NYSE inadvisable. The NYSE
will remove the iShares of the Fund from listing and trading upon termination of
the Fund.
As in the case of other securities traded on the NYSE, broker's commissions on
transactions will be based on negotiated commission rates at customary levels.
The following table sets forth the ratio of NAV to the Underlying Index's value
as of the date of this Statement of Additional Information.
Ratio of
NAV/Index
iShares Index Fund Value
------------------ -----
iShares S&P Global 100 Index Fund _____
The Trust reserves the right to adjust the stock prices of iShares in the future
to maintain convenient trading ranges for investors. Any adjustments would be
accomplished through stock splits or reverse stock splits, which would have no
effect on the net assets of the Fund. However, the ratio of the Fund's NAV to
the Underlying Index value would change in such instance.
Investment Strategies and Risks
The Fund seeks to achieve its objective by investing in common stocks included
in the Underlying Index. The Fund operates as an index fund and will not be
actively managed. Adverse performance of a security in the Fund's portfolio will
ordinarily not result in the elimination of the security from the Fund's
portfolio.
The Fund will engage in Representative Sampling, by which it holds a
representative sample of the securities of the Underlying Index, selected by
BGFA to have a similar investment profile as the Underlying Index. A fund that
uses Representative Sampling generally does not hold all of the stocks that are
included in its underlying index.
At least 90% of the Fund's total assets will be invested in stocks in the
Underlying Index. The Fund may also invest up to 10% of its total assets in
futures, options and swap contracts (in each case related to the Underlying
Index and its component stocks), cash and cash equivalents, as well as in stocks
not included in the Underlying Index if BGFA determines this to be appropriate
in light of the Fund's investment objective and relevant investment constraints.
The following examples illustrate the circumstances in which the Fund would hold
stocks not included in the Underlying Index. First, in order to reflect various
corporate actions (such as mergers) and other changes in the Underlying Index
(reconstitutions), the Fund may hold stocks that are announced as additions to
the Underlying Index prior to their actual date of inclusion in the Underlying
Index. Second, the Fund may hold stocks that have been recently deleted from the
Underlying Index due to various corporate action and reconstitutions. Third, the
Fund may invest in stocks outside the Underlying Index when necessary to meet
the diversification requirements of a
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regulated investment company under the Internal Revenue Code (the "Code"). In
such cases, the stocks outside the Underlying Index will be stocks in the
relevant market, market segment, market sector or group of industries tracked by
such Underlying Index.
Non-Diversification. The Fund is classified as "non-diversified". A non-
diversified classification means that a fund is not limited by the 1940 Act with
regard to the percentage of its assets that may be invested in the securities of
a single issuer. The stocks of a particular issuer, or of issuers in particular
industries, may dominate the Underlying Index and, consequently, the Fund's
investment portfolio. This may adversely affect the Fund's performance or
subject iShares to greater price volatility than that experienced by more
diversified investment companies.
The Fund, however, does intend to maintain the required level of diversification
and otherwise conduct its operations so as to qualify as a regulated investment
company for purposes of the Code, and to relieve the Fund of any liability for
federal income tax to the extent that its earnings are distributed to
shareholders. Compliance with the diversification requirements of the Code may
severely limit the investment flexibility of the Fund and may make it less
likely that the Fund will meet its investment objectives.
Loans of Portfolio Securities. The Fund may lend its investment securities to
approved borrowers. Investors Bank and Trust serves as the lending agent for the
Fund and, as such, shares in any net income earned by the Fund. 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 Fund. These loans cannot exceed 30% of
the Fund's total assets.
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
U.S. Government having a value at all times of not less than 100% of the value
of the securities loaned (on a "mark-to-market" basis); (ii) the loan be made
subject to termination by the Fund at any time; and (iii) the 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, the 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. The 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 the Fund enter
into a repurchase agreement, the 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
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<PAGE>
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 the
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 the 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. The 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
transactions 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 the Fund is 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 these transactions 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 the 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 decrease in the
value of the Fund's assets. The custodian bank will maintain a separate account
for the Fund with securities having a value equal to or greater than such
commitments. Under the 1940 Act, reverse repurchase agreements are considered
loans.
Currency Transactions. The Fund does not expect to engage in currency
transactions for the purpose of hedging against declines in the value of the
Fund's currency. The 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 contracts may be settled on a net
cash payment basis rather than by the sale and delivery of the underlying
currency.
4
<PAGE>
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 gap, 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 the Fund's return with the performance of the Underlying Index and may lower
the Fund's return. The Fund could experience losses if the value 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, the Fund could incur transaction costs, including trading
commissions, in connection with certain foreign currency transactions.
Money Market Instruments. The Fund may invest a portion of its assets in high-
quality money market instruments on an ongoing basis to provide liquidity. The
instruments in which the Fund may invest include: (i) short-term obligations
issued by the U.S. Government; (ii) negotiable certificates of deposit ("CDs"),
fixed time deposits and bankers' acceptances of U.S. and foreign banks and
similar institutions; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's or "A-1+" or "A-1" by S&P or, if unrated, of comparable
quality is determined by BGFA; and (iv) repurchase agreements. CDs 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. Banker's acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
transactions.
Foreign Securities. The Fund may purchase publicly traded common stocks of
foreign corporations represented in the Underlying Index. The Fund's investment
in common stock of foreign corporations represented in the Underlying Index 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.
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. The 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. Under the 1940 Act, the Fund's investment
in investment companies is limited to, subject to certain exceptions, (i) 3% of
the total outstanding voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment
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company and (iii) 10% of the Fund's total assets with respect to investment
companies in the aggregate.
Illiquid Securities. The 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. The 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 Underlying Index, to facilitate
trading or to reduce transaction costs. The Fund will only enter into futures
contracts and options on futures contracts that are traded on a U.S. or foreign
exchange. The Fund will not 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. The 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. The 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 indices that reflect the market value of common stock of the firms included
in the indices. The Fund may enter into futures contracts to purchase security
indices 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.
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 that
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 NAV of the
Fund. The potential for loss related to writing options is unlimited.
The 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
6
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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, the Fund will comply with the following
restriction when purchasing or selling futures. Aggregate initial margin and
premiums that are 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 the Fund's total market value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. In addition, the Fund will not purchase options to the extent that more
than 5% of the value of its total assets would be invested in premiums on open
put option positions.
Upon entering into a futures contract, the Fund will be required to deposit with
the broker an amount of cash or cash equivalents in the range of approximately
5% to 7% 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 the 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, the 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 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 the 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.
The use of interest-rate and index swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.
Future Developments. The Board may, in the future, authorize the Fund to invest
in securities contracts and investments other than those listed in this
Statement of Additional Information and in the Prospectus, provided they are
consistent with the 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 the Fund is contained in the Prospectus in the Principal Risk
Factors and the Shareholder
7
<PAGE>
Information sections. The discussion below supplements, and should be read in
conjunction with, these sections of the Prospectus.
An investment in the Fund should be made with an understanding that the value of
the 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 that affect the market.
An investment in the 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 Index 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 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 the Fund's iShares will be adversely affected if trading
markets for the 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 the 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 its underlying index. In the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments to maintain its required margin. In such situations, if the Fund
has insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a
8
<PAGE>
time when it may be disadvantageous to do so. In addition, the 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 Fund does 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 Fund, however, intends 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 the 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 the Fund of margin deposits in the event of bankruptcy of a
broker with whom the 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, and such 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 by
which 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 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 the Fund to substantial losses. In the event of adverse price
movements, the Fund would be required to make daily cash payments of variation
margin.
Although the 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. The risk of loss with respect to swaps generally is
limited to the net amount of payments that the Fund is contractually obligated
to make. Swap agreements are subject to the risk that the swap counterparty will
default on its obligations. If such a default occurs, the Fund will have
contractual remedies pursuant to the agreements related to the transaction.
However, such remedies may be subject to bankruptcy and insolvency laws which
could affect the Fund's rights as a creditor -- e.g. the Fund may not receive
the net amount of payments that it contractually is entitled to receive.
9
<PAGE>
Construction and Maintenance Standards for the Underlying Index
Index Dissemination. The NYSE intends to disseminate every fifteen seconds the
approximate value of the iShares of the Fund. This approximate value should not
be viewed as a "real-time" update of the NAV per iShare of the Fund, because it
may not be calculated in the same manner as the NAV, which is computed once a
day. The Fund is not involved in, or responsible for, the calculation or
dissemination of such amount and makes no warranty as to its accuracy.
A brief description of the Underlying Index on which the Fund is based and the
equity markets in which the Fund is invested is provided below.
S&P Indices Generally.
Component Selection Criteria. The Standard & Poor's Index Committee is
responsible for the overall management of S&P indices. Companies selected for
inclusion in S&P indices represent a broad range of industry segments within the
U.S., regional or global economies, as appropriate, depending upon whether a
given index pertains to the U.S., a given regional or the global market. The
starting universe, all publicly traded companies in the relevant markets, is
screened to eliminate ADRs, mutual funds, limited partnerships, royalty trusts,
and REITs. The following criteria are then analyzed to determine a company's
eligibility for inclusion in the indices. Ownership of a company's outstanding
common shares is carefully analyzed in order to screen out closely held
companies. The trading volume of a company's stock is analyzed to ensure ample
liquidity and efficient share pricing. Both the financial and operating
condition of a company are rigorously analyzed.
Issue Changes. A company will be removed from the S&P indices as a result of
mergers/acquisitions, bankruptcy, restructuring, or if it is no longer
representative of its industry group. A company is removed from the relevant
index as close as possible to the actual date on which the event occurred. A
company can be removed from an index because it no longer meets current criteria
for inclusion and/or is no longer representative of its industry group. All
replacement companies are selected based on the above component section
criteria.
Index Maintenance. The maintenance of S&P indices includes monitoring and
completing the adjustments for company additions and deletions, share changes,
stock splits, stock dividends, and stock price adjustments due to restructuring
and spin-offs. Share changes of 5% or greater are implemented when they occur.
All share changes of less than 5% are only updated on a quarterly basis on the
Friday near the end of the calendar quarter. The divisor is adjusted for changes
in company structure to leave the value of the S&P Indices unaffected. All
divisor adjustments are made after the close of trading and after the
calculation of the closing value of S&P indices.
Index Availability. The S&P Indices are calculated continuously and widely
disseminated to major data vendors.
S&P Global 100 Index
Number of Components: 100
Index Description. The Standard & Poor's Global 100 Index is designed to measure
the performance of 100 large transnational companies that are of major
importance in the global markets. A global company is defined as a corporation
that has production facilities and/or other fixed assets in at least one foreign
country, and makes its major management decisions in a global context. The
degree to which sales are executed outside the home country is a factor in
determining a company's global reach. The market capitalization of index
constituent companies is adjusted to reflect only those shares that are
available to foreign investors. The composition of the S&P Global 100 Index is
derived from the S&P Global 1200 Index and only includes transnational
corporations under the above definition which had a minimum adjusted market
capitalization of US$ 5 billion. The base value for the Underlying Index is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. As of March
31, 2000, the ten largest companies in the Underlying Index were General
Electric, Intel Corp., Microsoft Corp., Vodafone AirTouch, Exxon Mobil Corp.,
Nokia "A", International Business Machines Corp., Citigroup Inc., Lucent
Technologies and AT&T Corp. Also as of March 31, 2000, the Underlying Index was
comprised of stocks of companies in the following countries: Belgium, Canada,
Finland, France, Germany, Great Britain, Italy, Japan, Korea, Mexico,
Netherlands, Spain, Sweden, Switzerland and the United States.
10
<PAGE>
Investment Limitations
The Board has adopted as fundamental policies the Fund's investment objectives
and investment restrictions, numbered one through six below. These restrictions
cannot be changed without the approval of the holders of a majority of the
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.
The Fund will not:
1. Concentrate its investments (i.e. hold 25% or more of its total assets in
the stocks of a particular industry or group of industries), except that the
Fund will concentrate to approximately the same extent that the Underlying Index
concentrates in the stocks of such particular industry or group of industries.
For purposes of this limitation, securities of the U.S. Government (including
its agencies and instrumentalities), repurchase agreements collateralized by
U.S. Government securities, 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) the 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) the Fund may, to the extent consistent with its investment policies,
enter into repurchase agreements, reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To the extent
that it engages in transactions described in (i) and (ii), the Fund will be
limited so that no more than 30% of the value of its total assets (including the
amount borrowed) valued at the time the borrowing is made, is derived from such
transactions.
11
<PAGE>
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 the Fund may invest consistent with its investment
objectives and policies; (ii) repurchase agreements and reverse 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 the Fund from
trading in futures contracts and options on futures contracts (including options
on currencies to the extent consistent with the Fund's investment objective and
policies).
6. Engage in the business of underwriting securities issued by other persons,
except to the extent that the 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, set
forth above, the Fund will not invest in the securities of a company for the
purpose of exercising management or control or invest more than 15% of the
Fund's net assets in illiquid securities.
For purposes of the percentage limitation on the Fund's investments in illiquid
securities, foreign equity securities, though not registered under the
Securities Act of 1933, are not deemed illiquid with respect to the Fund if they
are otherwise readily marketable. Such securities ordinarily are considered to
be "readily marketable" if they are traded on an exchange or another organized
market and are not legally restricted from sale by the Fund. BGFA monitors the
liquidity of restricted securities in the Fund's portfolio. In reaching
liquidity decisions, BGFA considers the following factors:
. The frequency of trades and quotes for the security;
. The number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;
. Dealer undertakings to make a market in the security; and
. 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).
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 of assets will not constitute a violation of such restriction.
12
<PAGE>
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 Fund 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 NYSE is satisfied by the fact
that the prospectus is available at the NYSE 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.
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
four (4) Trustees.
Principal occupations and
Name (age) Address Position affiliations during the past five years
------------------ -------- ---------------------------------------
13
<PAGE>
<TABLE>
<S> <C> <C>
Nathan Most (86)* Trustee, President & Chairman of the Board, iShares, Inc.
PO Box 193 President, (formerly WEBS Index Fund, Inc.) (Since 1996)
Burlingame, CA 94011-0193 Treasurer, Consultant to Barclays Global Investors, American Stock
Principal Exchange and the Hong Kong Stock Exchange
Financial Formerly Senior Vice President American Stock Exchange
Officer (New Product Development) (1976-1996)
Formerly President and Chairman of the Board, Pacific
Commodities Exchange (1973-1976)
Thomas E. Flanigan (51) Trustee President, Thomas E. Flanigan, Inc., a pension and
2155 Promontory Point Lane investment consulting firm (since 1997)
Gold River, CA 95670 Formerly, Chief Investment Officer, California State
Teachers' Retirement System (1985-1997)
Formerly held various positions with New York State
Common Retirement Fund (1964-1985)
Richard K. Lyons (39) Trustee Professor, University of California, Berkeley: Haas School
350 Barrows Hall of Business (Since 1993)
Haas School of Business Professor, Columbia University: School of Business &
UC Berkeley School of International Affairs (1987-1993)
Berkeley, CA 94720 Member, Council on Foreign Relations
Consultant: IMF World Bank, Federal Reserve Bank,
European Commission and United Nations
Board of Directors: Matthews International Funds
George G.C. Parker (60) Trustee Associate Dean for Academic Affairs, Director of MBA
Graduate School of Business, Program, Professor, Stanford University: Graduate
Stanford University School of Business (Since 1988)
521 Memorial Way, Room K301 Formerly, Director Executive Education, Stanford
Stanford, CA 94305 Business School (1979-1988)
Board of Directors: Affinity Group, Bailard, Biehl and
Kaiser, Inc., California Casualty Group of Insurance
Companies, Continental Airlines, Inc., Community
First Financial Group, Dresdner/RCM Mutual Funds,
H. Warshow & Sons, Inc.
Donna M. McCarthy (33) Assistant Director, (formerly Manager) Mutual Fund
Investors Bank and Trust Company Treasurer Administration, Investors Bank and Trust Company
200 Clarendon Street Formerly, Manager, Business Assurance Group, Coopers
Boston, MA 02116 & Lybrand (1988-1994)
Jeffrey J. Gaboury (31) Assistant Manager, Mutual Fund Administration, Reporting and
Investors Bank and Trust Company Treasurer Compliance, Investors Bank and Trust Company (since
200 Clarendon Street 1996)
Boston, MA 02116 Formerly, Assistant Manager, Fund Compliance, Scudder,
Stevens & Clark (1992-1996)
Susan C. Mosher (45) Secretary Director & Senior Counsel, Mutual Fund Administration,
Investors Bank and Trust Company Investors Bank and Trust Company (since 1995)
200 Clarendon Street Formerly, Associate Counsel, 440 Financial Group (1992-
Boston, MA 02116 1995)
Sandra I. Madden (33) Assistant Associate Counsel, Mutual Fund Administration, Investors
Investors Bank and Trust Company Secretary Bank and Trust Company (since 1999)
200 Clarendon Street Formerly, Associate, Scudder Kemper Investments, Inc.
Boston, MA 02116 (1996-1999)
</TABLE>
14
<PAGE>
* Mr. Most is deemed to be an "interested person" (as defined in the 1940
Act) of the Trust and the Fund. He serves as Director to iShares, Inc. (formerly
WEBS Index Inc.), an investment company with 23 investment portfolios also
advised by BGFA, and is a consultant to BGI.
Remuneration of Trustees and Officers. The Trust pays each Trustee an annual fee
of $50,000 plus a per meeting fee of $500 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) regularly scheduled meetings and four (4) special
meetings of the Board are held annually, it is estimated that the compensation
paid to each Trustee during the calendar year ending December 31, 2000 will be:
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Total Estimated
Estimated Retirement Benefits Annual Compensation
Compensation Accrued As Part of Benefits Upon from Fund and
Name of Trustee from the Trust Trust Expenses Retirement Fund Complex*
--------------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Nathan Most $54,000 None None $121,500
Thomas E. Flanigan $54,000 None None $ 54,000
Richard K. Lyons $54,000 None None $ 54,000
George G. C. Parker $54,000 None None $ 54,000
</TABLE>
* As of May 31, 2000, there were 59 funds in the BGFA Fund Complex.
As of the date of this SAI, the Trust has been organized for less than one full
calendar year and therefore does not report the total remuneration for the
preceding fiscal year.
No Trustee or Officer is entitled to any pension or retirement benefits from the
Trust.
Investment Advisor. BGFA serves as investment advisor to the Fund pursuant to an
Investment Advisory Agreement between the Trust and BGFA. BGFA is a California
corporation indirectly owned by Barclays Bank PLC and is registered as an
investment advisor under the Investment Advisers Act of 1940 (the "Advisers
Act"). Under the Investment Advisory Agreement, BGFA, subject to the supervision
of the Board and in conformity with the stated investment policies of the Fund,
manages and administers the Trust and the investment of the Fund's assets. BGFA
is responsible for placing purchase and sale orders and providing continuous
supervision of the investment portfolio of the Fund.
Under the Investment Advisory Agreement, BGFA is responsible for all expenses of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest, taxes, brokerage commissions
and other expenses connected with the execution of portfolio transactions (which
are included in NAV), distribution fees and extraordinary expenses. For its
investment management services to the Fund, BGFA will be paid a management fee
equal to percentage listed below of the Fund's aggregate net assets.
iShares Index Fund Management Fee
------------------ ---
iShares S&P Global 100 Index Fund %
15
<PAGE>
The Investment Advisory Agreement 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 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 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) may prohibit
Barclays Bank PLC, Barclays Global Investors, N.A. ("BGI"), and BGFA 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 Fund 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.
The Trust and BGFA have adopted Codes of Ethics under Rule 17j-1 of the 1940
Act. The Codes permit personnel subject to the Codes to invest in securities,
subject to certain limitations, including securities that may be purchased or
held by the Fund.
Administrator, Custodian, Transfer Agent and Securities Lending Agent. Investors
Bank & Trust Co. ("IBT") serves as Administrator, Custodian, Transfer Agent and
Securities Lending Agent for the Fund. Its principal address is 200 Clarendon
Street, Boston, MA 02111. Under the Administration Agreement with the Trust, IBT
provides necessary administrative and accounting services for the maintenance
and operations of the Trust and the Fund. In addition, IBT makes available the
office space, equipment, personnel and facilities required to provide such
services. Under the Custodian Agreement with the Trust, IBT maintains in
separate accounts cash, securities and other assets of the Trust and the Fund,
keeps all necessary accounts and records, and provides other services. IBT is
required, upon the order of the Trust, to deliver securities held by IBT and to
make payments for securities purchased by the Trust for the Fund. Also, under a
Delegation Agreement, IBT is authorized to appoint certain foreign custodians or
foreign custody managers for Fund investments outside the United States.
Pursuant to a Transfer Agency and Service Agreement with the Trust, IBT acts as
a transfer agent for the Fund's authorized and
16
<PAGE>
issued shares of beneficial interest, and as dividend disbursing agent of the
Trust. Under a Securities Lending Agency Agreement with the Trust, IBT acts as
the Trust's agent for the purpose of lending Trust securities to third parties.
As compensation for the foregoing services, IBT receives certain out-of-pocket
costs, transaction fees, and asset-based fees which are accrued daily and paid
monthly.
Distributor. SEI Investments Distribution Co. is the Distributor of iShares. Its
principal address is 1 Freedom Valley Drive, Oaks, PA 19456. The Distributor has
entered into a Distribution Agreement with the Trust pursuant to which it
distributes iShares of the 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 Fund through the Distributor only in
Creation Unit Aggregations, as described in the Prospectus and below under the
heading Creation and Redemption of Creation Units.
Aggregations. iShares in less than Creation Unit Aggregations are not
distributed by the Distributor. The Distributor will deliver the Prospectus and,
upon request, the SAI 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 Distribution Agreement for the Fund provides 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 Fund. The Distribution Agreement 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.
BGFA or BGI may, from time to time and from its own resources, pay, defray or
absorb costs relating to distribution, including payments out of its own
resources to the Distributor or to otherwise promote the sale of iShares.
Index Provider. The Fund will be based upon the S&P Global 100 Index , which is
compiled and published by Standard & Poor's (a division of The McGraw-Hill
Companies, Inc.). Standard & Poor's is not affiliated with the Fund or with BGI
or its affiliates. The Fund is entitled to use the Index pursuant to a sub-
licensing agreement with BGI, which in turn has a licensing agreement with
Standard & Poor's. BGI provides the sub-license without charge to the Fund.
Brokerage Transactions
The policy of the Trust regarding purchases and sales of portfolio securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient executions of
17
<PAGE>
transactions. Consistent with this policy, when securities transactions are
effected on a stock exchange, the Trust's policy is to pay commissions that are
considered fair and reasonable without necessarily determining that the lowest
possible commissions are paid in all circumstances. 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.
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. BGFA and its affiliates do
not participate in soft dollar transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through affiliates that are registered broker-dealers, for commissions, in
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." 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 by exemptive order.
BGFA assumes general supervision over placing orders on behalf of the Fund for
the purchase or sale of portfolio securities. If purchases or sales of portfolio
securities of the Fund 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 of the security as far as the
Fund is 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 Fund. 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 the 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.
18
<PAGE>
Additional Information Concerning the Trust
Shares. The Trust was established as a Delaware business trust on December 16,
1999. The Trust currently consists of over 37 Funds. Each Fund issues shares of
beneficial interest, with no par value. The Board may designate additional
funds.
Each iShare issued by the Fund has a pro rata interest in the assets of the
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 Fund, and
in the net distributable assets of the 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 the funds of the Trust 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 the Fund's
iShares and immediately prior to the commencement of trading in the Fund's
iShares, a holder of iShares may be a "control person" of the Fund, as defined
in the 1940 Act. The Fund cannot predict the length of time for which 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).
Shareholders may make inquiries by writing to the Trust, c/o the Distributor,
SEI Investments Distribution Co., 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
the Fund ("Insiders") may be subject to the insider reporting, short-swing
profit and short sale provisions of Section 16 of the Exchange Act and the SEC's
rules promulgated 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 Depository for the iShares. iShares of the Fund are
represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.
19
<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 NYSE, 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 the 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
the 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 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 aspect 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
20
<PAGE>
Participants or the relationship between such DTC Participants and the Indirect
Participants and Beneficial Owners owning through such DTC Participants.
DTC may decide 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 to find a replacement for DTC to
perform its functions at a comparable cost.
Creation and Redemption of Creation Unit Aggregations
Creation. The Trust issues and sells iShares of the Fund only in Creation Unit
Aggregations on a continuous basis through the Distributor, without a sales
load, at their NAVs next determined after receipt, on any Business Day (as
defined below), of an order in proper form.
A "Business Day" with respect to the Fund is any day on which the NYSE is open
for business. As of the date of this SAI, the NYSE observes the following
holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Fund Deposit. The consideration for purchase of Creation Unit Aggregations of
the 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 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 the Fund.
The Cash Component is sometimes also referred to as the Balancing Amount. The
Cash Component serves the function of compensating for any differences between
the NAV per Creation Unit Aggregation and the Deposit Amount (as defined below).
The Cash Component is an amount equal to the difference between the NAV of the
iShares (per Creation Unit Aggregation) and the "Deposit Amount" -- an amount
equal to the market value of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit
Amount), the creator will deliver the Cash Component. If the Cash Component is a
negative number (i.e., the NAV per Creation Unit Aggregation is less than the
Deposit Amount), the creator will receive the Cash Component.
BGFA, through the National Securities Clearing Corporation ("NSCC") (discussed
below), makes available on each Business Day, prior to the opening of business
on the NYSE (currently 9:30 a.m., Eastern 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
the Fund.
21
<PAGE>
Such Fund Deposit is applicable, subject to any adjustments as described below,
in order to effect creations of Creation Unit Aggregations of the 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 the
Fund Deposit for the Fund changes as rebalancing adjustments and corporate
action events are reflected from time to time by BGFA with a view to the Fund's
investment objective. The composition of the Deposit Securities may also change
in response to adjustments to the weighting or composition of the Component
Stocks of the 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 that may not be available in sufficient quantity for delivery or that
may not be eligible for transfer through the systems of DTC or the Clearing
Process (discussed below). 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 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 the
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 the Book Entry Only
System section), and, in each case, must have executed an agreement with the
Distributor, 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 the Fund,
however created, will be entered on the records of DTC in the name of Cede & Co.
for the account of a DTC Participant.
All orders to create iShares must be placed for one or more Creation Unit
Aggregations. 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., Eastern 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 NAV of iShares of the 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. 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.
All 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,
22
<PAGE>
therefore, orders to create Creation Unit Aggregations of the Fund have to be
placed by the investor's broker through an Authorized Participant that has
executed a Participant Agreement. In such cases there may be additional charges
to such investor. At any given time, there may be only a limited number of
broker-dealers that have executed a Participant Agreement and only a small
number of such Authorized Participants may have international capabilities.
Those placing orders for Creation Unit Aggregations of the Fund 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 Unit Aggregations of the Fund that 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 for the Fund. Fund Deposits in connection with the
Fund will not be made either through the Clearing Process or through DTC.
Instead, to initiate an order for a Creation Unit Aggregation of a particular
Fund, the Authorized Participant must give notice to the Distributor of its
intent to submit such an order to purchase not later than 4:00 p.m., Eastern
time on the relevant Business Day. The Distributor shall cause BGFA and IBT to
be informed of such advice. IBT will then provide such information to the
appropriate sub-custodian(s). For each Fund, IBT shall cause the sub-custodian
of the Funds to maintain an account into which the Authorized Participant shall
deliver, on behalf of itself or the party on whose behalf it is acting, the
securities included in the designated Fund Deposit (or the cash value of all or
part of such securities, in the case of a permitted or required cash purchase or
"cash in lieu" amount), with any appropriate adjustments as advised by the
Trust. Deposit Securities must be delivered to an account maintained at the
applicable local sub-custodian(s). Following the notice of intention, an
irrevocable order to purchase Creation Unit Aggregations, in the form required
by the Trust, must be received by the Distributor from an Authorized Participant
on its own or another investor's behalf by the closing time of the regular
trading session on the NYSE (currently 4:00 p.m., Eastern time) on the relevant
Business Day. However when a relevant local market is closed due to local market
holidays, the local market settlement process will not commence until the end of
the local holiday period. Settlement must occur by 2:00 p.m., Eastern time, on
the contractual settlement date.
The Authorized Participant must also make available no later than 2:00 p.m.,
Eastern time, on the contractual settlement date, by means satisfactory to the
Trust, immediately-available or same-day funds estimated by the Trust to be
sufficient to pay the Cash Component next determined after acceptance of the
purchase order, together with the applicable purchase Transaction Fee. Any
excess funds will be returned following settlement of the issue of the Creation
Unit Aggregation.
To the extent contemplated by the applicable Participant Agreement, Creation
Unit Aggregations of the Fund will be issued to such Authorized Participant
notwithstanding the fact that the corresponding Fund Deposits have not been
received in part or in whole, in reliance on the undertaking of the Authorized
Participant to deliver the missing Deposit Securities as soon as possible, which
undertaking shall be secured by such Authorized Participant's delivery and
maintenance of collateral consisting of cash in the form of U.S. dollars in
immediately available funds having a value (marked to market daily) at least
equal to 125% of the value of the missing Deposit Securities. Such cash
collateral must be delivered no later than 2:00 p.m., Eastern time, on the
contractual settlement date. The Participant Agreement will permit the Fund to
buy the missing Deposit Securities at any time and will subject the Authorized
Participant to liability for
23
<PAGE>
any shortfall between the cost to the Trust of purchasing such securities and
the value of the collateral.
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 the 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 the Fund; (iii) the Deposit Securities delivered
are not as disseminated through the facilities of the NYSE for that date by IBT,
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, IBT, the Distributor or 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, IBT
or sub-custodian 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 creator
of a Creation Unit Aggregation of its rejection of the order of such person. The
Trust, IBT, a sub-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 any 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 is imposed for the transfer
and other transaction costs of the Fund associated with the issuance of Creation
Units of iShares. The fee is a single charge and will be the same regardless of
the number of Creation Units purchased by an investor on the same day.
Purchasers of Creation Units of iShares for cash are required to pay an
additional variable charge to compensate 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.
Investors who use the services of a broker or other such intermediary may be
charged a fee for such services.
The following table sets forth the creation transaction fee for the Fund.
<TABLE>
<CAPTION>
Maximum Creation
Name of Fund Amount Transaction Fee*
------------ ------ ----------------
<S> <C> <C>
iShares S&P Global 100 Index Fund $_____ $______
</TABLE>
24
<PAGE>
* If a Creation Unit is purchased or redeemed outside the usual process through
the National Securities Clearing Corporation or for cash, a variable fee will be
charged of up to four times the Standard Creation or Redemption Transaction Fee.
Redemption of iShares in Creation Units Aggregations. Shares may be redeemed
only in Creation Unit Aggregations at their NAV next determined after receipt of
a redemption request in proper form by the Fund through IBT and only on a
Business Day. The 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.
Immediately prior to the opening of business on the NYSE (currently 9:30 a.m.,
Eastern time) on each Business Day BGFA makes available, through the NSCC and
through the Distributor, the identity of the Fund Securities that will be
applicable (subject to possible amendment or correction) to redemption requests
received in proper form (as described below) on that day. Fund Securities
received on redemption may not be identical to Deposit Securities that are
applicable to creations of Creation Unit Aggregations.
Unless cash redemptions are available or specified for the Fund, the redemption
proceeds for a Creation Unit Aggregation generally consist of Fund Securities --
as announced on the Business Day of the request for redemption received in
proper form -- plus cash in an amount equal to the difference between the NAV 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 as listed below. In the event that
the Fund Securities have a value greater then the NAV 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.
The right of redemption may be suspended or the date of payment postponed with
respect to the 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 its NAV is not reasonably practicable; or (iv) in such
other circumstances as is permitted by the SEC.
Redemption Transaction Fee. A redemption transaction fee is imposed to offset
transfer and other transaction costs that may be incurred by the Fund. The fee
is a single charge and will be the same regardless of the number of Creation
Units redeemed by an investor on the same day. The redemption transaction fees
for redemptions in kind and for cash and the additional variable charge for cash
redemptions (when cash redemptions are available or specified) are listed below.
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.
The following table sets forth the redemption transaction fee for the Fund.
25
<PAGE>
<TABLE>
<CAPTION>
Maximum
Redemption
Name of Fund Amount Transaction Fee
------------ ------ ---------------
<S> <C> <C>
iShares S&P Global 100 Index Fund $ $
</TABLE>
Placement of Redemption Orders for the Fund. Orders to redeem Creation Unit
Aggregations of tThe Fund must be delivered through an Authorized Participant
that has executed a Participant Agreement. Investors other than Authorized
Participants are responsible for making arrangements for a redemption request to
be made through an Authorized Participant. An order to redeem Creation Unit
Aggregations of the Fund is deemed received by the Trust on the Transmittal Date
if (i) such order is received by IBT not later than 4:00 p.m., Eastern time, on
such Transmittal Date; (ii) such order is accompanied or followed by the
requisite number of iShares of the Fund specified in such order, which delivery
must be made through DTC to IBT no later than the DTC Cut-Off time; and (iii)
all other procedures set forth in the Participant Agreement are properly
followed. Deliveries of Fund Securities to redeeming investors generally will be
made within three Business Days. Due to the schedule of holidays in certain
countries, however, the delivery of in- kind redemption proceeds for the Fund
may take longer than three Business Days after the day on which the redemption
request is received in proper form. In such cases, the local market settlement
procedures will not commence until the end of the local holiday periods. See
below for a list of the local holidays in the foreign countries relevant to the
Fund.
In connection with taking delivery of shares of Fund Securities upon redemption
of iShares of the Fund, a redeeming Beneficial Owner or Authorized Participant
action on behalf of such Beneficial Owner must maintain appropriate security
arrangements with a qualified broker-dealer, bank or other custody providers in
each jurisdiction in which any of the Fund Securities are customarily traded, to
which account such Fund Securities will be delivered.
To the extent contemplated by an Authorized Participant's agreement, in the
event the Authorized Participant has submitted a redemption request in proper
form but is unable to transfer all or part of the Creation Unit Aggregation to
be redeemed to the Distributor, on behalf of the Fund, at or prior to the
closing time of the regular trading session on the NYSE on the date such
redemption request is submitted, the Distributor will nonetheless accept the
redemption request in reliance on the undertaking by the Authorized Participant
to deliver the missing iShares as soon as possible, which undertaking shall be
secured by the Authorized Participant's delivery and maintenance of collateral
consisting of cash having a value (marked to market daily) at least equal to
125% of the value of the missing iShares. The current procedures for
collateralization of missing iShares require, among other things, that any cash
collateral shall be in the form of U.S. dollars in immediately-available funds
and shall be held by IBT and marked to market daily, and that the fees of IBT
and any sub-custodians in respect of the delivery, maintenance and redelivery of
the cash collateral shall be payable by the Authorized Participant. The
Authorized Participant's agreement will permit the Trust, on behalf of the Fund,
to purchase the missing iShares or acquire the Deposit Securities and the Cash
Component underlying such shares at any time and will subject the Authorized
Participant to liability for any shortfall between the cost to the Trust of
purchasing such shares, Deposit Securities or Cash Component and the value of
the collateral.
The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered upon redemption will be made by IBT according to the
procedures set forth under Determination of NAV computed on the Business Day on
which a redemption order is deemed received by the Trust. Therefore, if a
redemption order in proper form is submitted to IBT by a
26
<PAGE>
DTC Participant not later than Closing Time on the Transmittal Date, and the
requisite number of iShares of the Fund are delivered to IBT 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 IBT on such Transmittal Date. If,
however, a redemption order is submitted to IBT by a DTC Participant not later
than the Closing Time on the Transmittal Date but either (i) the requisite
number of iShares of the Fund are not delivered by the DTC Cut-Off-Time, as
described above, on such 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 Trust, i.e., the Business Day on which
the iShares of the Fund are delivered through DTC to IBT 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 that the Fund
may, in its sole discretion, permit. In either case, the investor will receive a
cash payment equal to the NAV of its iShares based on the NAV of the 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). The Fund may also, in its
sole discretion, upon request of a shareholder, provide such redeemer a
portfolio of securities that differs from the exact composition of the Fund
Securities but does not differ in NAV.
Redemptions of iShares for Fund Securities will be subject to compliance with
applicable federal and state securities laws and the 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 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.
Foreign Market Hours
<TABLE>
<S> <C>
Belgium
Primary Exchange Trading Hours: Monday through Friday, 10:00 a.m. to 4:45 p.m.
Canada
Primary Exchange Trading Hours: Monday through Friday, 9:30 a.m. to 4:00 p.m.
Finland
Primary Exchange Trading Hours: Monday through Friday 10:30 a.m. to 5:30 p.m.
Continuous trading (Preceded by a 10 min pre-matching period)
France
Primary Exchange Trading Hours: Monday through Friday, 8:30 a.m. to 10:00 a.m. (Pre-market) 10:00 a.m. to 5:05
p.m.
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
Germany
Primary Exchange Trading Hours: Monday through Friday, 8:30 a.m. to 5:00 p.m.
Great Britain
Primary Exchange Trading Hours: Monday through Friday, 9:00 a.m. to 4:30 p.m.
Italy
Primary Exchange Trading Hours: Monday through Friday, 8:00 a.m. to 9:30 a.m.(Pre-open)/ 9:30-5:45 (Trading)
Korea
Primary Exchange Trading Hours: Monday through Friday, 9:30 a.m. to 12:00 p.m., 1:00 p.m. to 3:00 p.m./ 3:10 p.m.
to 3:40 p.m. (After-hours session)
Mexico
Primary Exchange Trading Hours: Monday through Friday, 8:30 a.m. to 3:00 p.m.
Netherlands
Primary Exchange Trading Hours: Monday through Friday, 9:30 a.m. to 4:30 p.m.
Spain
Primary Exchange Trading Hours: Monday through Friday, 9:00 a.m. to 10:00 a.m. (Pre-opening) 10:00 a.m. to 5:00
p.m. (Trading)
Sweden
Primary Exchange Trading Hours: Monday through Friday, 10:00 a.m. to 5:00 p.m.
Switzerland
Primary Exchange Trading Hours: Monday through Friday, 9:00 a.m. to 5:00 p.m.
United Kingdom
Primary Exchange Trading Hours: Monday through Friday, 9:00 a.m. to 4:30 p.m.
United States
Primary Exchange Trading Hours: Monday through Friday, 9:00 a.m. to 4:00 p.m. (NASDAQ) 9:30 a.m. to 4:00
p.m. (NYSE)
</TABLE>
28
<PAGE>
Regular Holidays
The dates in calendar year 2000 in which the regular holidays affecting the
relevant securities markets of the below listed countries are as follows:
Belgium
April 24 June 12 November 1
May 1 July 21 December 25
June 1 August 15 December 26
Canada
January 3 July 3 October 9
April 21 August 7 December 25
May 22 September 4 December 26
Finland
January 6 April 24 June 23
April 20 (early close) May 1 December 6
April 21 June 1 December 25
December 26
France
April 21 June 1 November 1
April 24 June 12 December 25
May 1 July 14 December 26
May 8 August 15
Germany
April 21 June 1 October 3
April 24 June 12 December 25
May 1 June 22 December 26
Italy
April 24 August 15 December 8
May 1 November 1 December 25
December 26
Japan
January 3 May 3 September 15
January 10 May 4 October 9
February 11 May 5 November 3
March 20 July 20 November 23
Korea
January 3 May 1 August 15
February 4 May 5 September 11
March 1 May 11 September 12
April 5 June 6 September 13
December 25
Mexico
March 21 May 1 December 12
April 20 May 5 December 25
April 21 December 1
Netherlands
April 21 May 5 June 12
April 24 June 1 December 25
December 26
Spain
January 6 May 1 December 6
April 21 October 12 December 8
Sweden
January 6 May 1 June 23
April 21 June 1 December 25
April 24 June 12 December 26
Switzerland
January 3 May 1 August 1
April 21 June 1 December 25
April 24 June 12 December 26
Great Britain
January 3 May 1 December 25
April 21 May 29 December 26
April 24 August 28
United States
January 17 May 29 October 9
February 21 July 4 November 10
April 21 September 4 November 23
December 25
29
<PAGE>
Settlement Periods Greater than Seven Days for Year 2000
<TABLE>
<CAPTION>
Country Settlement Period Trade Date Settlement # of Calendar Days
------- ----------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Belgium Forward Market 12/11/00 12/27/00 16
Stocks: End of a two week period
Denmark T+3 4/17/00 4/25/00 8
France Last day of acct trading month 8/1/00 8/31/00 30
Germany T+5 12/18/00 12/27/00 9
Great Britain T+5 12/18/00 12/27/00 9
Italy T+5 12/18/00 12/27/00 9
</TABLE>
Taxes
The following information also supplements and should be read in conjunction
with the section in the Prospectus entitled Taxes.
The Fund intends to qualify for and to elect treatment as a separate Regulated
Investment Company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). To qualify for treatment as a RIC, a company must annually distribute
at least 90% 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: (i) at least 90%
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 (ii) at the close of each quarter of the company's taxable year, (a) at
least 50% 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% 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 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).
The Fund will be subject to a 4% excise tax on certain undistributed income if
it does not distribute to its shareholders in each calendar year at least 98% of
its ordinary income for the calendar year plus 98% of its capital gain net
income for the twelve months ended October 31 of such year. The Fund intends to
declare and distribute dividends and distributions in the amounts and at the
times necessary to avoid the application of this 4% excise tax.
The Fund may be subject to foreign income taxes withheld at source. If the Fund
is permitted to do so, it will elect to "pass through" to its investors the
amount of foreign income taxes paid by
30
<PAGE>
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 that 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 the 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 may be entitled to mark-to-market
annually the shares of the passive foreign investment company, and, in such
event, would be required to distribute to shareholders any such mark-to-market
gains in accordance with the distribution requirements set forth above.
The Trust on behalf of the 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 the Fund and
if, pursuant to section 351 of the Code, the 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.
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 foreign tax laws. Finally, the foregoing discussion is based on
applicable provisions of the 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.
31
<PAGE>
Federal Tax Treatment of Futures and Options Contracts. The 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 and
options 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
indices 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. The 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 the 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 qualifying income for purposes of the 90%
requirement.
The Fund intends to distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's 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
the 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 the Fund.
Determination of NAV
The following information supplements and should be read in conjunction with the
section in the Prospectus entitled Determining NAV.
The NAV per iShare of the Fund is computed by dividing the value of the net
assets of the Fund (i.e., the value of its total assets less total liabilities)
by the total number of iShares of the Fund outstanding, rounded to the nearest
cent. Expenses and fees are accrued daily and taken into account for purposes of
determining NAV. The NAV of per iShare for the Fund is calculated by IBT and
determined as of the close of the regular trading session on the NYSE
(ordinarily 4:00 p.m., Eastern time), although iShares of the Fund continue to
trade on the exchange until 4:15 p.m. Eastern time, on each day that such
exchange is open.
In computing the Fund's NAV, 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
32
<PAGE>
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 at least annually by the Fund. Distributions of net realized securities
gains, if any, generally are declared and paid once a year. The Trust reserves
the right to declare special distributions if, in its reasonable discretion,
such action is necessary or advisable to preserve the status of the 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 Fund.
Dividend Reinvestment Service. No reinvestment service is provided by the Trust.
Broker-dealers may make available the DTC book-entry Dividend Reinvestment
Service for use by Beneficial Owners of Fund for reinvestment of their dividend
distributions. Beneficial Owners should contact their broker to determine the
availability and costs of the service and the details of participation therein.
Brokers may require Beneficial Owners to adhere to specific procedures and
timetables. If this service is available and used, dividend distributions of
both income and realized gains will be automatically reinvested in additional
whole iShares of the Fund purchased in the secondary market.
Performance and Other Information
The performance of the Fund 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 the Fund over periods of
1, 5 and 10 years (or the life of the Fund, if shorter). Such total return
figures will reflect the deduction of a proportional share of the Fund's
expenses on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
Average annual 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 or fractional portion).
33
<PAGE>
Quotations of a cumulative total return will be calculated for any specified
period by assuming a hypothetical investment in the 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 the Trust does not make a 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 will
not be 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 the Fund during the
particular time period on which the calculations are based. Such quotations for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance that 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.
Whenever the Trust calculates total return using the market values of iShares as
reported by the NYSE, it will also calculate a similar total return using the
Fund's NAV. The Trust may also provide reported closing price data for iShares
and calculations of any applicable premiums or discounts against NAV on its
website and in the Trust prospectuses and annual reports.
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 of the methods used to calculate performance when
comparing performance of the Fund with performance quoted with respect to other
investment companies or types of investments.
Because some of the Fund's investments may be denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the 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 the 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, the 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
34
<PAGE>
these organizations' tracking results are used, the 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, the 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
Miscellaneous Information
Counsel. Morgan, Lewis & Bockius LLP, Washington, D.C., is counsel to the Trust.
Independent Auditors. PricewaterhouseCoopers LLP, located at 333 Market Street,
San Francisco, CA 94105, serve as the independent auditors and accountants of
the Trust. They audit the Funds' financial statements and perform other related
audit services.
Financial Statements. The Fund is newly organized and has no financial
statements at this time.
35
<PAGE>
Other Information
Item 23 Exhibits
Exhibit Number Description
(a) Agreement and Declaration of Trust is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(b) Amended and Restated By-Laws is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(c) Not applicable
(d.1) Investment Advisory Agreement between the Trust and Barclays
Global Fund advisors is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(d.2) Amended Schedule A to the Investment Advisory Agreement
between the Trust and Barclays Global Fund Advisors for
iShares S&P 100 Index Fund and iShares S&P Global 100 Index
Fund - to be filed by amendment.
(e.1) Distribution Agreement between the Trust and Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(e.2) Form of Authorized Participant Agreement is incorporated
herein by reference to Post-Effective Amendment No. 2, filed
May 12, 2000.
(f) Not applicable
(g.1) Custodian Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to Post-Effective
Amendment No. 2, filed May 12, 2000.
(g.2) Amended Appendix A to the Custodian Agreement between the
Trust and Investors Bank & Trust relating to iShares S&P 100
Index Fund and iShares S&P Global 100 Index Fund - to be
filed by amendment.
(g.3) Securities Lending Agency Agreement between Bank & Trust and
the Trust is incorporated herein by reference to Post-
Effective Amendment No. 2, filed May 12, 2000.
<PAGE>
(g.4) Delegation Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to Post-Effective
Amendment No. 2, filed May 12, 2000.
(h.1) Administration Agreement between the Trust and Investors
Bank & Trust is incorporated herein by reference to the
Post-Effective Amendment No. 2, filed May 12, 2000.
(h.2) Amended Appendix A to the Administration Agreement between
the Trust and Investors Bank & Trust relating to iShares S&P
100 Index Fund and iShares S&P Global 100 Index Fund - to be
filed by amendment.
(h.3) Transfer Agency and Service Agreement between the Trust and
Investors Bank & Trust is incorporated herein by reference
to Post-Effective Amendment No. 2, filed May 12, 2000.
(h.4) Amended Appendix A to the Transfer Agency and Service
Agreement between the and Investors Bank & Trust for iShares
S&P 100 Index Fund and iShares S&P Global 100 Index Fund -
to be filed by amendment.
(h.5) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for S&P Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.6) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Dow Jones Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.7) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Russell Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.8) Amended Exhibit A to the Sublicense Agreement between
Barclays Global Investors, N.A. and the Trust for S&P Funds
for iShares S&P 100 Index Fund and iShares S&P Global 100
Index Fund - to be filed by amendment.
(i) Legal Opinion and Consent of Counsel is incorporated herein
by reference to Post-Effective Amendment No. 2, filed May
12, 2000.
(j.1) Not applicable
(j.2) Power of Attorney is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(k) Not applicable
<PAGE>
(l.1) Subscription Agreement between the Trust and SEI Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(l.2) Letter of Representations between the Trust and Depository
Trust Company is incorporated herein by reference to Post-
Effective Amendment No. 2, filed May 12, 2000.
(1.3) Letter of Representations between the Trust and Depository
Trust Company for iShares S&P 100 Index Fund and iShares S&P
Global 100 Index Fund - to be filed by amendment.
(m) Not applicable
(n) Not applicable
(o) Not applicable
(p.i) iShares Trust Code of Ethics is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(p.ii) Barclays Global Investors, N.A. Code of Ethics is
incorporated herein by reference to Post-Effective Amendment
No. 2, filed May 12, 2000.
Item 24 Persons Controlled By or Under Common Control with Registrant
None
Item 25 Indemnification
The Trust 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 Trust 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 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 that was the result of any willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
<PAGE>
(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 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.
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 Trust pursuant to foregoing provisions, or otherwise, the Trust
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 Trust 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.
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, CA 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 fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
Name and Position Principal Business(es) During the last Two Fiscal Years
Patricia Dunn Director of BGFA and Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
<PAGE>
Garrett F. Bouton Chairman of the Board of Directors of BGFA and Chief
Chairman 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
Chief Financial 45 Fremont Street San Francisco, CA 94105
Officer
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 Co. (the "Distributor"),
acts as distributor for:
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 June 1, 1993
The PBHG Funds, Inc July 16, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
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
<PAGE>
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
CNI Charter Funds April 1, 1999
Amerindo Funds Inc July 13, 1999
Huntington VA Funds October 15, 1999
Friends Ivory Funds December 16, 1999
SEI Insurance Products Trust March 29, 2000
iShares MSCI Index Fund, Inc. March 27, 2000
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
and automated execution, clearing and settlement of securities transactions.
(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 1 Freedom Valley Drive, Oaks, PA 19456.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Name Position and Office Positions and Office
with Underwriter with Registrant
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors None
Richard B. Lieb Director, Executive Vice President None
Carmen V. Romeo Director None
Mark J. Held President & Chief Operating Officer None
Gilbert L. Beebower Executive Vice President None
Dennis J. McGonigle Executive Vice President None
Robert M. Silvestri Chief Financial Officer & Treasurer None
Leo J. Dolan, Jr Senior Vice President None
Carl A. Guarino Senior Vice President None
Jack May Senior Vice President None
Hartland J. McKeown Senior Vice President None
Kevin P. Robins Senior Vice President & General Counsel None
Patrick K. Walsh Senior Vice President None
Robert Aller Vice President None
Todd Cipperman Senior Vice President & General Counsel None
S. Courtney E. Collier Vice President & Assistant Secretary None
Robert Crudup Vice President & Managing Director None
Richard A. Deak Vice President & Assistant Secretary None
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Barbara Doyne Vice President None
Jeff Drennen Vice President None
James R. Foggo Vice President & Assistant Secretary None
Vic Galef Vice President & Managing Director None
Lydia A. Gavalis Vice President & Assistant Secretary None
Greg Gettinger Vice President & Assistant Secretary None
Kathy Heilig Vice President None
Jeff Jacobs Vice President None
Samuel King Vice President None
Kim Kirk Vice President & Managing Director None
John Krzeminski Vice President & Managing Director None
Carolyn McLaurin Vice President & Managing Director None
Mark Nagle Vice President None
Joanne Nelson Vice President None
Cynthia M. Parrish Vice President & Secretary None
Rob Redican Vice President None
Maria Rinehart Vice President None
Steve Smith Vice President None
Daniel Spaventa Vice President None
Kathryn L. Stanton Vice President None
Lynda J. Striegel Vice President & Assistant Secretary None
Lori L. White Vice President & Assistant Secretary None
Wayne M. Withrow Senior Vice President & Managing Director None
Timothy Barto Vice President & Assistant Secretary None
Christine McCullogh Vice President & Assistant Secretary None
</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, the "Records") at the offices of Investors Bank & Trust, 200
Clarendon Street, Boston, MA 02116.
(b) BGFA maintains all Records relating to its services as advisor at 45
Fremont Street, San Francisco, CA, 94105.
(c) SEI Investments Distributor Company maintains all Records relating to its
services as distributor at 1 Freedom Valley Drive, Oaks, PA 19456.
(d) IBT maintains all Records relating to its services as transfer agent, fund
accountant and custodian at 200 Clarendon Street, Boston, MA 02116.
Item 29 Management Services.
Not applicable.
<PAGE>
Item 30 Undertaking
Not applicable.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment company Act, the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of San Francisco and the State of
California on the 21 day of July, 2000.
By: /s/ Nathan Most
__________________________________
Nathan Most
President and Treasurer
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment to the Registgration Statement has been signed below by the following
persons in the capacity and on the dates indicated.
By: /s/ Nathan Most
__________________________________
Nathan Most
Trustee, President and Treasurer
Date: July 21, 2000
Thomas E. Flanigan*
----------------------------------
Thomas E. Flanigan
Trustee
Richard K. Lyons*
----------------------------------
Richard K. Lyons
Trustee
George G. C. Parker*
----------------------------------
George G. C. Parker
Trustee
*By: /s/ W. John McGuire
__________________________________
W. John McGuire
Attorney in fact
Date: July 21, 2000
<PAGE>
Exhibit Index
Exhibit Number Description
(a) Agreement and Declaration of Trust is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(b) Amended and Restated By-Laws is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(c) Not applicable
(d.1) Investment Advisory Agreement between the Trust and Barclays
Global Fund advisors is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(d.2) Amended Schedule A to the Investment Advisory Agreement
between the Trust and Barclays Global Fund Advisors for
iShares S&P 100 Index Fund and iShares S&P Global 100 Index
Fund - to be filed by amendment.
(e.1) Distribution Agreement between the Trust and Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(e.2) Form of Authorized Participant Agreement is incorporated
herein by reference to Post-Effective Amendment No. 2, filed
May 12, 2000.
(f) Not applicable
(g.1) Custodian Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to Post-Effective
Amendment No. 2, filed May 12, 2000.
(g.2) Amended Appendix A to the Custodian Agreement between the
Trust and Investors Bank & Trust relating to iShares S&P 100
Index Fund and iShares S&P Global 100 Index Fund - to be
filed by amendment.
(g.3) Securities Lending Agency Agreement between Bank & Trust and
the Trust is incorporated herein by reference to Post-
Effective Amendment No. 2, filed May 12, 2000.
(g.4) Delegation Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to Post-Effective
Amendment No. 2, filed May 12, 2000.
<PAGE>
(h.1) Administration Agreement between the Trust and Investors
Bank & Trust is incorporated herein by reference to the
Post-Effective Amendment No. 2, filed May 12, 2000.
(h.2) Amended Appendix A to the Administration Agreement between
the Trust and Investors Bank & Trust relating to iShares S&P
100 Index Fund and iShares S&P Global 100 Index Fund - to be
filed by amendment.
(h.3) Transfer Agency and Service Agreement between the Trust and
Investors Bank & Trust is incorporated herein by reference
to Post-Effective Amendment No. 2, filed May 12, 2000.
(h.4) Amended Appendix A to the Transfer Agency and Service
Agreement between the and Investors Bank & Trust for iShares
S&P 100 Index Fund and iShares S&P Global 100 Index Fund -
to be filed by amendment.
(h.5) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for S&P Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.6) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Dow Jones Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.7) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Russell Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.8) Amended Exhibit A to the Sublicense Agreement between
Barclays Global Investors, N.A. and the Trust for S&P Funds
for iShares S&P 100 Index Fund and iShares S&P Global 100
Index Fund - to be filed by amendment.
(i) Legal Opinion and Consent of Counsel is incorporated herein
by reference to Post-Effective Amendment No. 2, filed May
12, 2000.
(j.1) Not applicable
(j.2) Power of Attorney is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(k) Not applicable
(l.1) Subscription Agreement between the Trust and SEI Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
<PAGE>
(l.2) Letter of Representations between the Trust and Depository
Trust Company is incorporated herein by reference to Post-
Effective Amendment No. 2, filed May 12, 2000.
(1.3) Letter of Representations between the Trust and Depository
Trust Company for iShares S&P 100 Index Fund and iShares S&P
Global 100 Index Fund - to be filed by amendment.
(m) Not applicable
(n) Not applicable
(o) Not applicable
(p.i) iShares Trust Code of Ethics is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(p.ii) Barclays Global Investors, N.A. Code of Ethics is
incorporated herein by reference to Post-Effective Amendment
No. 2, filed May 12, 2000.
