<PAGE>
SUPPLEMENT DATED SEPTEMBER 18, 2000
TO
iSHARES, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 30, 1999
The information in this Supplement updates the information in, and should
be read in conjunction with the Statement of Additional Information ("SAI") of
iShares, Inc., dated December 30, 1999
Change in Creation Unit Size and Classification of the iShares MSCI EMU Index
Fund
A Creation Unit of the iShares MSCI EMU Index Fund consists of 50,000
iShares, with a par value per Creation Unit of $385,926. The Fund commenced
operations on July 28, 2000, and trades on the American Stock Exchange, under
the ticker symbol "EZU".
The initial shareholder of the iShares MSCI EMU Index Fund approved a
proposal on July 27, 2000 to change that fund from "diversified" to "non-
diversified". Such change became effective immediately. As a consequence, the
iShares EMU Index Fund is now subject to the non-diversification risks described
under "Investment Strategies and Risks".
Change From Diversified to Non-diversified Status of the iShares MSCI Canada
Index Fund
The shareholders of the MSCI Canada Index Fund approved a proposal on June
27, 2000 to change that fund from "diversified" to "non-diversified". Such
change became effective immediately. As a consequence, the iShares MSCI Canada
Index Fund is now subject to the non-diversification risks described under
"Investment Strategies and Risks".
Commencement of Sales to the Public of the iShares MSCI Brazil and EMU Index
Funds
The iShares MSCI Brazil and EMU Index Funds commenced operations on July
14, 2000 and July 28, 2000, respectively.
Commencement of Sales to the Public of the iShares MSCI South Africa and USA
Index Funds
Dates for the commencement of sales to the public of the iShares MSCI South
Africa and USA Index Funds have yet to be determined.
<PAGE>
iShares MSCI Series
The information provided
in the wrapper is not part
of the prospectus.
[LOGO OF BARCLAYS GLOBAL INVESTORS] The way you invest now.
Only better.
<PAGE>
iShares, Inc.
iShares, Inc. is an index fund consisting of separate series, each of which
seeks investment results similar to the performance of a single stock market or
all of the stock markets in a geographic region.
.iShares MSCI Australia Index Fund
.iShares MSCI Austria Index Fund
.iShares MSCI Belgium Index Fund
.iShares MSCI Brazil (Free) Index Fund
.iShares MSCI Canada Index Fund
.iShares MSCI EMU Index Fund
.iShares MSCI France Index Fund
.iShares MSCI Germany Index Fund
.iShares MSCI Hong Kong Index Fund
.iShares MSCI Italy Index Fund
.iShares MSCI Japan Index Fund
.iShares MSCI Malaysia (Free) Index Fund
--------------------------------------------------------------------------------
.iShares MSCI Mexico (Free) Index Fund
.iShares MSCI Netherlands Index Fund
.iShares MSCI Singapore (Free) Index Fund
.iShares MSCI South Africa Index Fund
.iShares MSCI South Korea Index Fund
.iShares MSCI Spain Index Fund
.iShares MSCI Sweden Index Fund
.iShares MSCI Switzerland Index Fund
.iShares MSCI Taiwan Index Fund
.iShares MSCI United Kingdom Index Fund
.iShares MSCI USA Index Fund
--------------------------------------------------------------------------------
The iShares MSCI Index Fund Shares, known as "iSharesSM", are listed for
trading on the American Stock Exchange LLC (the "AMEX"). Individual iShares are
not redeemable at their net asset value, but trade on the AMEX during the day
at prices that are normally close to, but not the same as, their net asset
value. There is no assurance that an active trading market will be maintained
for iShares or that market prices of iShares of any iShares MSCI Index Fund
will be close to their net asset values in the future. Each iShares MSCI Index
Fund issues and redeems iShares on a continuous basis -- at net asset value --
only in large specified numbers of iShares called "Creation Units", usually in
exchange for a basket of portfolio securities and an amount of cash.
Except when aggregated in Creation Units, iShares are not redeemable
securities.
iShares, Inc. will apply to have the South Africa and USA Index Funds listed on
the AMEX. Dates for the commencement of sales to the public of the iShares MSCI
South Africa and USA Index Funds have yet to be determined.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the SEC determined whether the information in this
prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
Prospectus Dated December 30, 1999
(As Revised September 15, 2000)
<PAGE>
Table of Contents
Details on each Index Fund's market, benchmark index and performance
Details on the management and operations of the Index Funds
Details on buying and selling iShares
Details on the Rule 12b-1 Distribution Plan
Per share financial data for each Index Fund
<TABLE>
<S> <C>
Introduction................................................................ 1
Investment Objective........................................................ 1
Principal Investment Strategies............................................. 1
Principal Risk Factors...................................................... 2
Fees and Expenses........................................................... 3
The iShares MSCI Index Funds
iShares MSCI Australia Index Fund......................................... 7
iShares MSCI Austria Index Fund........................................... 8
iShares MSCI Belgium Index Fund........................................... 9
iShares MSCI Brazil (Free) Index Fund..................................... 10
iShares MSCI Canada Index Fund............................................ 11
iShares MSCI EMU Index Fund............................................... 12
iShares MSCI France Index Fund............................................ 13
iShares MSCI Germany Index Fund........................................... 14
iShares MSCI Hong Kong Index Fund......................................... 15
iShares MSCI Italy Index Fund............................................. 16
iShares MSCI Japan Index Fund............................................. 17
iShares MSCI Malaysia (Free) Index Fund................................... 18
iShares MSCI Mexico (Free) Index Fund..................................... 20
iShares MSCI Netherlands Index Fund....................................... 21
iShares MSCI Singapore (Free) Index Fund.................................. 22
iShares MSCI South Africa Index Fund...................................... 23
iShares MSCI South Korea Index Fund....................................... 24
iShares MSCI Spain Index Fund............................................. 25
iShares MSCI Sweden Index Fund............................................ 26
iShares MSCI Switzerland Index Fund....................................... 27
iShares MSCI Taiwan Index Fund............................................ 28
iShares MSCI United Kingdom Index Fund.................................... 29
iShares MSCI USA Index Fund............................................... 30
Investment Policies and Strategies.......................................... 31
Additional Information About Principal Risk Factors......................... 33
Management
Investment Adviser.......................................................... 36
Shareholder Information
Determination of Net Asset Value............................................ 36
Buying and Selling iShares.................................................. 36
Dividends and Capital Gains Distributions................................... 38
Tax Matters................................................................. 38
Distribution Arrangements................................................... 39
Financial Highlights........................................................ 40
</TABLE>
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iShares
page i
<PAGE>
Introduction
This Prospectus provides you with information you need to make an informed
decision about whether to invest in an iShares MSCI Index Fund (each an "Index
Fund" and collectively, the "Index Funds") of iShares, Inc. (the "Company"). It
is organized to provide you with important facts about the Company as a whole
and each particular Index Fund. The Investment Objective, Principal Investment
Strategies and Principal Risk Factors sections discuss the general strategies
and risks applicable to all Index Funds, while The iShares MSCI Index Funds
section provides important information about each particular Index Fund,
including a brief description of its benchmark index, specific risks associated
with a particular market or region and prior performance.
Investment Objective
Each Index Fund seeks investment results similar to the performance of a single
stock market or all of the stock markets in a geographic region. The
performance of these markets is measured by stock indices compiled by Morgan
Stanley Capital International Inc. ("MSCI"), and calculated based on the
reinvestment of net dividends (gross dividends in the case of the MSCI Mexico
(Free) Index).
Principal Investment Strategies
Unlike many investment companies, an Index Fund does not attempt to "beat" the
market or its benchmark index. Instead, it uses a "passive," or indexing,
investment approach to try to produce investment results that come as close as
possible to matching the performance of its benchmark index. The Index Fund
does this by investing in a representative sample of index stocks that the
investment adviser selects using a "portfolio sampling" technique. However,
most Index Funds do not usually invest in all of the stocks of a benchmark
index. Some Index Funds may even invest in stocks that are not in its benchmark
index.
The use of an indexing approach may eliminate some of the risks of active
management such as poor stock selection. An indexing approach may also help
increase after-tax performance by keeping portfolio turnover low in comparison
to actively managed investment companies.
One negative feature of indexing is that the Company's investment adviser
cannot change a strategy even if it would be beneficial to do so. For example,
an Index Fund would not ordinarily sell a stock because its issuer was in
financial trouble. It would normally only sell a stock if the stock was removed
from an Index Fund's benchmark index by MSCI or if the investment adviser
believes that selling the stock would make an Index Fund's performance more
like that of its benchmark index.
Under each Index Fund's industry concentration policy, the industry weightings
in an Index Fund must be within 10% of the weightings of the two most heavily
weighted industries in its benchmark index.
iShares are designed for investors who want a relatively inexpensive passive
approach to investing in a portfolio of stocks from a single country or region.
International diversification is a generally recognized way to reduce
investment portfolio risk. Also, many of the foreign stocks in an Index Fund
(other than the iShares MSCI USA Index Fund) are difficult to purchase or hold,
or are, as a practical matter, not available to retail investors.
The Index Funds offer investors a convenient way to obtain index-based exposure
to the stock markets of a specific country or region. The prices of iShares may
be volatile. Therefore, if you purchase iShares, you should be able to tolerate
sudden, or even drastic, changes in the value of your investment. We cannot
assure that any Index Fund will achieve its investment objective, and you
should understand that your investment (other than an investment in the iShares
MSCI USA Index Fund) will be exposed to the risks of international equity
investing.
Each Index Fund issues and redeems iShares on a continuous basis -- at net
asset value -- only in large specified numbers of iShares called "Creation
Units" usually in exchange for a basket of portfolio
Introduction
--------------------------------------------------------------------------------
page 1
<PAGE>
securities and an amount of cash. As a practical matter, only large
institutions purchase or redeem Creation Units of iShares. Information about
the fees paid when they do this is included in the Company's Statement of
Additional Information. Except when aggregated in Creation Units, iShares are
not redeemable securities.
Principal Risk Factors
You may lose money by investing in an Index Fund. Each Index Fund is also
subject to the following principal risks, more fully described in the
Additional Risk Considerations section in this prospectus. Additional risks
associated with a particular market or region in which an Index Fund invests
are discussed under each Index Fund's profile in The iShares MSCI Index Funds
section. Some or all of these risks may adversely affect an Index Fund's net
asset value, yield, total return and/or its ability to achieve its objective:
. Market Risk. The net asset value of an Index Fund will change with changes
in the market value of the stocks it holds.
. Foreign Security Risk. Each Index Fund invests entirely within the equity
markets of a single country or region. These markets (other than for the
iShares MSCI USA Index Fund) are subject to special risks associated with
foreign investment including, but not limited to: generally less liquid and
less efficient securities markets; generally greater price volatility;
exchange rate fluctuations and exchange controls; less publicly available
information about issuers; the imposition of taxes; exchange controls;
higher transaction and custody costs; settlement delays and risk of loss;
difficulties in enforcing contracts; less liquidity and smaller market
capitalizations; lesser regulation of securities markets; different
accounting and disclosure standards; governmental interference; higher
inflation; and social, economic and political uncertainties and the risk of
expropriation of assets.
. Management Risk. Because an Index Fund does not fully replicate its
benchmark index and may hold non-index stocks, it is subject to management
risk. This is the risk that the investment advisor's strategy, the
implementation of which is subject to a number of constraints, may not
produce the intended results.
. Currency Risk. Because each Index Fund's net asset value is determined on
the basis of US dollars, you may lose money if you invest in any Index Fund
other than the iShares MSCI USA Index Fund if the local currency of a
foreign market depreciates against the US dollar, even if the local currency
value of an Index Fund's holdings goes up.
. Emerging Market Risk. Some foreign markets in which the Index Funds invest
are considered to be emerging market countries. Investment in these
countries subjects an Index Fund to a greater risk of loss than investments
in a developed country. This is due to, among other things, greater market
volatility, lower trading volume, political and economic instability,
greater risk of market shut down and more governmental limitations on
foreign investment policy than those typically found in a developed market.
The following Index Funds invest in emerging markets: the iShares MSCI
Brazil (Free), South Korea, Malaysia (Free), Mexico (Free), South Africa and
Taiwan Index Funds.
. Non-Diversification Risk. Each Index Fund (except for the iShares Japan,
United Kingdom and USA Index Funds) is classified as "non-diversified." This
means that these Index Funds may invest most of their assets in securities
issued by a small number of companies. As a result, these Index Funds are
more susceptible to the risks associated with these particular companies, or
to a single economic, political or regulatory occurrence.
. Trading Risk. While the creation/redemption feature of iShares is designed
to make it likely that iShares will trade close to their net asset value,
disruptions to creations and redemptions (as has occurred because of
Malaysia's capital controls) may result in trading prices that differ
significantly from net asset value. Also, there can be no assurance that an
active trading market will exist for iShares of each Index Fund on the AMEX.
--------------------------------------------------------------------------------
iShares
page 2
<PAGE>
Fees and Expenses
If you invest in an Index Fund, you will pay various expenses, either directly
or indirectly. The following tables and examples describe the fees and expenses
that you may pay if you buy and hold iShares of an Index Fund.
Shareholder Transaction Fees (fees paid directly from your investment). When
buying or selling iShares of an Index Fund through a broker, you will incur
customary brokerage commissions and charges.*
Annual Index Fund Operating Expenses (expenses that are deducted from the Index
Fund's assets). For the Index Funds that have commenced investment operations
(except the iShares MSCI Brazil (Free), EMU, South Korea and Taiwan Index
Funds, which commenced sales of iShares to the public in 2000), total annual
Index Fund operating expenses are based on actual expenses accrued by those
Index Funds for the fiscal year ended August 31, 1999, but have been restated
to reflect the changes in the fee arrangements for the management fees and
other expenses of these Index Funds that were approved by their shareholders at
or following a special meeting held on May 5, 2000.
<TABLE>
<CAPTION>
Brazil
iShares MSCI Index Fund Australia Austria Belgium (Free)+
----------------------- --------- ------- ------- ------
<S> <C> <C> <C> <C>
Management fees.......................... 0.15% 0.00% 0.00% 0.74%
Distribution (Rule 12b-1) fees........... 0.25% 0.25% 0.25% 0.25%
Other expenses........................... 0.44% 0.74% 0.66% 0.53%
------ ------ ------ ------
Total annual Index Fund operating
expenses................................ 0.84% 0.99% 0.91% 1.52%
Expense Reimbursement by investment
adviser................................. 0.00% (0.15%) (0.07%) (0.53%)
------ ------ ------ ------
Net Expenses............................. 0.84% 0.84% 0.84% 0.99%
====== ====== ====== ======
<CAPTION>
iShares MSCI Index Fund Canada EMU+ France Germany
----------------------- ------ --- ------ --------
<S> <C> <C> <C> <C>
Management fees.......................... 0.00% 0.59% 0.11% 0.17%
Distribution (Rule 12b-1) fees........... 0.25% 0.25% 0.25% 0.25%
Other expenses........................... 0.66% 0.41% 0.48% 0.42%
------ ------ ------ ------
Total annual Index Fund operating
expenses................................ 0.91% 1.25% 0.84% 0.84%
Expense Reimbursement by investment
adviser................................. (0.07%) (0.41%) 0.00% 0.00%
------ ------ ------ ------
Net Expenses............................. 0.84% 0.84% 0.84% 0.84%
====== ====== ====== ======
<CAPTION>
Malaysia
iShares MSCI Index Fund Hong Kong Italy Japan (Free)
----------------------- --------- ----- ----- --------
<S> <C> <C> <C> <C>
Management fees.......................... 0.18% 0.13% 0.22% 0.00%
Distribution (Rule 12b-1) fees........... 0.25% 0.25% 0.25% 0.25%
Other expenses........................... 0.41% 0.46% 0.37% 0.86%
------ ------ ------ ------
Total annual Index Fund operating
expenses................................ 0.84% 0.84% 0.84% 1.11%
Expense Reimbursement by investment
adviser................................. 0.00% 0.00% 0.00% (0.27%)
------ ------ ------ ------
Net Expenses............................. 0.84% 0.84% 0.84% 0.84%
====== ====== ====== ======
</TABLE>
--------
* Creation Unit Transaction Fees for Institutional Investors. The Company
issues and redeems shares of iShares only in "Creation Units", which are
large blocks of at least 50,000 to 600,000 shares, depending on the Index
Fund. As a practical matter, only institutions are capable of purchasing or
redeeming these Creation Units. In connection with the purchase or the
redemption of a Creation Unit of an Index Fund, an investor must pay to the
Company a purchase or redemption transaction fee, which is intended to
offset the issuance/redemption transaction costs incurred by that Index
Fund. The basic transaction fees (per Creation Unit purchase or redemption
transaction) range from maximums of $1,500 to $8,000, depending on the Index
Fund. In addition to the basic transaction fee, Creation Unit purchase or
redemption transactions for cash (only if available) require an additional
maximum variable charge based on the value of the Creation Unit being
purchased or redeemed, depending on the Index Fund. See "Shareholder
Information -- Buying and Selling iShares" in this Prospectus for a list of
the Creation Unit maximum transaction fees for each Index Fund.
+ These expenses are based on estimated expenses the Index Fund expects to
incur for the current fiscal year. Fees paid to the administrator are
included in "other expenses" and are estimated based on assumed average
daily net assets of $50 million for each of the iShares MSCI Brazil (Free),
EMU, South Africa, South Korea, Taiwan and USA Index Funds.
Fees and Expenses
--------------------------------------------------------------------------------
page 3
<PAGE>
<TABLE>
<CAPTION>
Mexico Singapore South
iShares MSCI Index Fund (Free) Netherlands (Free) Africa**+
----------------------- ------ ----------- --------- ------
<S> <C> <C> <C> <C>
Management fees..................... 0.00% 0.11% 0.20% 0.74%
Distribution (Rule 12b-1) fees...... 0.25% 0.25% 0.25% 0.25%
Other expenses...................... 0.72% 0.48% 0.39% 0.45%
------ ------ ----- ------
Total annual Index Fund operating
expenses........................... 0.97% 0.84% 0.84% 1.44%
Expense Reimbursement by investment
adviser............................ (0.13%) 0.00% 0.00% (0.45%)
------ ------ ----- ------
Net Expenses........................ 0.84% 0.84% 0.84% 0.99%
====== ====== ===== ======
<CAPTION>
South
iShares MSCI Index Fund Korea+ Spain Sweden Switzerland
----------------------- ----- ----- ------ -----------
<S> <C> <C> <C> <C>
Management fees..................... 0.74% 0.13% 0.04% 0.08%
Distribution (Rule 12b-1) fees...... 0.25% 0.25% 0.25% 0.25%
Other expenses...................... 0.48% 0.46% 0.55% 0.51%
------ ------ ----- ------
Total annual Index Fund operating
expenses........................... 1.47% 0.84% 0.84% 0.84%
Expense Reimbursement by investment
adviser............................ (0.48%) 0.00% 0.00% 0.00%
------ ------ ----- ------
Net Expenses........................ 0.99% 0.84% 0.84% 0.84%
====== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
United
iShares MSCI Index Fund Taiwan+ Kingdom USA**+
----------------------- ------ ------- ---
<S> <C> <C> <C>
Management fees........................................ 0.74% 0.20% 0.59%
Distribution (Rule 12b-1) fees......................... 0.25% 0.25% 0.25%
Other expenses......................................... 0.54% 0.39% 0.36%
------ ----- ------
Total annual Index Fund operating expenses............. 1.53% 0.84% 1.20%
Expense Reimbursement by investment adviser............ (0.54%) 0.00% (0.36%)
------ ----- ------
Net Expenses........................................... 0.99% 0.84% 0.84%
====== ===== ======
</TABLE>
--------
** As of the date of this prospectus, this Index Fund has not started
investment operations.
+ These expenses are based on estimated expenses the Index Fund expects to
incur for the current fiscal year. Fees paid to the administrator are
included in "other expenses" and are estimated based on assumed average
daily net assets of $50 million for each of the iShares MSCI Brazil (Free),
EMU, South Africa, South Korea, Taiwan and USA Index Funds.
--------------------------------------------------------------------------------
iShares
page 4
<PAGE>
Example of Expenses
These examples are intended to help you compare the cost of investing in an
Index Fund with the cost of investing in other mutual funds. We are assuming an
initial investment of $10,000, a 5% total return each year with no changes in
operating expenses and redemption at the end of each period. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
iShares MSCI Index Fund ($) ($) ($) ($)
----------------------- ---- ----- ----- -----
<S> <C> <C> <C> <C>
Australia......................................... 104 286 483 1,052
Austria........................................... 123 305 502 1,071
Belgium........................................... 134 316 513 1,081
Brazil (Free)..................................... 598 806 N/A N/A
Canada............................................ 131 313 510 1,078
EMU............................................... 260 473 N/A N/A
France............................................ 100 282 479 1,048
Germany........................................... 93 275 473 1,042
Hong Kong......................................... 171 352 549 1,116
Italy............................................. 90 281 478 1,047
Japan............................................. 103 285 482 1,051
Malaysia (Free)................................... 484 663 856 1,414
Mexico (Free)..................................... 118 299 497 1,065
Netherlands....................................... 119 301 498 1,066
Singapore (Free).................................. 147 329 526 1,094
South Africa...................................... 165 378 N/A N/A
South Korea....................................... 499 709 N/A N/A
Spain............................................. 110 292 489 1,058
Sweden............................................ 116 298 495 1,063
Switzerland....................................... 108 290 487 1,056
Taiwan............................................ 499 709 N/A N/A
United Kingdom.................................... 109 291 488 1,057
USA............................................... 95 277 N/A N/A
</TABLE>
The above examples are for illustration purposes only and are not a
representation of the Index Funds' actual expenses and returns, either past or
future (e.g., the above examples include the maximum transaction fees
chargeable by an Index Fund).
The iShares MSCI Index Series
--------------------------------------------------------------------------------
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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iShares
page 6
<PAGE>
The iShares MSCI Index Funds
iShares MSCI Australia Index Fund
CUSIP: 464286103
AMEX Trading Symbol: EWA
Fund Investment Objective
The iShares MSCI Australia Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Australian market, as
measured by the MSCI Australia Index (the "Index").
Benchmark Index Information
The Index consists of 52 stocks traded primarily on the Australian Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Telstra
Corp., News Corp. and News Corp. PLVO (which comprise 15.43%, 12.28% and
10.96%, respectively, of the Index's market capitalization) and its three
largest industries were media, diversified telecommunication services and
metals & mining (which comprise 23.23%, 15.43% and 14.01%, respectively, of the
Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
(10.19%) 2.18% 19.24%
1997 1998 1999
2000 Total Return as of March 31: (7.95%)
Best Quarter Worst Quarter
(12.94%)
13.59% (Quarter ended December 31, 1997)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since Inception
1 Year (3/12/96)
------ ---------------
<S> <C> <C>
Australia Index Fund 19.24% 5.57%
MSCI Australia Index 17.62% 6.06%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 7
<PAGE>
iShares MSCI Austria Index Fund
CUSIP: 464286202
AMEX Trading Symbol: EWO
Fund Investment Objective
The iShares MSCI Austria Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Austrian market, as
represented by the MSCI Austria Index (the "Index").
Benchmark Index Information
The Index consists of 18 stocks traded primarily on the Vienna Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Bank Austria,
Verbund Oesterreich Elektrik A and OMV Ag (which comprise 28.55%, 16.62% and
10.39%, respectively, of the Index's market capitalization) and its three
largest industries were banks, electric utilities and oil & gas (which comprise
28.55%, 16.62% and 10.39%, respectively, of the Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
1.05% (1.83%) (10.36%)
1997 1998 1999
2000 Total Return as of March 31: (9.11%)
Best Quarter Worst Quarter
(23.45%)
12.76% (Quarter ended September 30, 1998)
(Quarter ended March 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/12/96)
------- ---------
<S> <C> <C>
Austria Index Fund (10.36%) (3.74%)
MSCI Austria Index (9.11%) (1.39%)
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
page 8
<PAGE>
iShares MSCI Belgium Index Fund
CUSIP: 464286301
AMEX Trading Symbol: EWK
Fund Investment Objective
The iShares MSCI Belgium Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Belgian market, as measured
by the MSCI Belgium Index (the "Index").
Benchmark Index Information
The Index consists of 14 stocks traded primarily on the Brussels Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Fortis
Belgium, Electrabel and KBC Bancassurance (which comprise 26.09%, 20.42% and
15.10%, respectively, of the Index's market capitalization) and its three
largest industries were diversified financials, electric utilities and banks
(which comprise 33.46%, 20.42% and 15.10%, respectively, of the Index's
market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
11.84% 51.69% (14.05%)
1997 1998 1999
2000 Total Return as of March 31: (22.08%)
Best Quarter Worst Quarter
(14.06%)
17.78% (Quarter ended March 31, 1999)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/12/96)
-------- ---------
<S> <C> <C>
Belgium Index Fund (14.05%) 12.92%
MSCI Belgium Index (14.26%) 17.05%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 9
<PAGE>
iShares MSCI Brazil (Free) Index Fund
CUSIP: 464286400
AMEX Trading Symbol: EWZ
Fund Investment Objective
The iShares MSCI Brazil (Free) Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Brazilian market, as
measured by the MSCI Brazil (Free) Index (the "Index").
Benchmark Index Information
The Index consists of 46 stocks traded primarily on the Bolsa de Valores de Sao
Paulo. As of March 31, 2000, the Index's three largest stocks were Petrobras
Pn, Vale Do Rio Doce Pna and Eletrobras On (which comprise 10.88%, 9.41% and
8.45%, respectively, of the Index's market capitalization) and its three
largest industries were diversified telecommunication services, metals & mining
and electric utilities (which comprise 28.88%, 13.09% and 11.61%, respectively,
of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that Brazil has in recent history experienced
substantial economic instability resulting from, among other things, periods of
very high inflation and significant devaluations of the Brazilian currency.
Brazil also has suffered from chronic structural public sector deficits. Such
challenges have contributed to high price volatility in the Brazilian equity
markets.
Prior Performance
Since the Fund was first offered to the public on July 14, 2000, and has been
in existence for less than one year, prior performance information is not
presented.
--------------------------------------------------------------------------------
iShares
page 10
<PAGE>
iShares MSCI Canada Index Fund
CUSIP: 464286509
AMEX Trading Symbol: EWC
Fund Investment Objective
The iShares MSCI Canada Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Canadian market, as measured
by the MSCI Canada Index (the "Index").
Benchmark Index Information
The Index consists of 72 stocks traded primarily on the Toronto Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Nortel Networks
Corp., BCE Inc. and Seagram Co. (which comprise 35.61%, 15.92% and 5.10%,
respectively, of the Index's market capitalization) and its three largest
industries were communications equipment, electric utilities and media (which
comprise 36.75%, 17.31% and 10.36%, respectively, of the Index's
market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
10.91% (6.47%) 46.13%
1997 1998 1999
2000 Total Return as of March 31: 9.03%
Best Quarter Worst Quarter
(24.40%)
21.44% (Quarter ended September 30, 1998)
(Quarter ended December 31, 1999)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
Canada Index Fund 46.13% 17.30%
MSCI Canada Index 53.74% 19.78%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 11
<PAGE>
iShares MSCI EMU Index Fund
CUSIP: 464286608
AMEX Trading Symbol: EZU
Fund Investment Objective
The iShares MSCI EMU Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the European Monetary Union
(EMU) markets, as measured by the MSCI EMU Index (the "Index").
Benchmark Index Information
The Index is comprised of 307 stocks from the following ten countries: Austria,
Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Portugal
and Spain. As of March 31, 2000, the Index's three largest stocks were Nokia
Corp., Deutsche Telekom and France Telecom (which comprise 6.83%, 6.49% and
4.69%, respectively, of the Index's market capitalization) and its three
largest industries were diversified telecommunication services, banks and
communications equipment (which comprise 18.85%, 9.70% and 8.41%, respectively,
of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that EMU was implemented only recently (January 1,
1999) and it is anticipated that additional countries will join the system over
time. Also, it is possible that countries may withdraw from EMU or that EMU may
be abandoned at some future time. Any change to EMU may adversely affect the
investment performance of the Fund. If EMU were to be abandoned the Board of
Directors would propose a change in the investment objective of the Series or
cause its liquidation.
Prior Performance
Since the Fund was first offered to the public on July 28, 2000, and has been
in existence for less than one year, prior performance information is not
presented.
--------------------------------------------------------------------------------
iShares
page 12
<PAGE>
iShares MSCI France Index Fund
CUSIP: 464286707
AMEX Trading Symbol: EWQ
Fund Investment Objective
The iShares MSCI France Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the French market, as measured
by the MSCI France Index (the "Index").
Benchmark Index Information
The Index consists of 56 stocks traded primarily on the Paris Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were France Telecom,
Total Fina Elf, and Vivendi (which comprise 16.42%, 10.35% and 6.33%,
respectively, of the Index's market capitalization) and its three largest
industries were diversified telecommunication services, oil & gas and multi-
utilities (which comprise 16.42%, 10.35% and 9.51%, respectively, of the
Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
11.47% 40.78% 29.97%
1997 1998 1999
2000 Total Return as of March 31: 1.94%
Best Quarter Worst Quarter
(16.16%)
23.51% (Quarter ended September 30, 1998)
(Quarter ended March 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
France Index Fund 29.97% 26.32%
MSCI France Index 29.27% 26.31%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 13
<PAGE>
iShares MSCI Germany Index Fund
CUSIP: 464286806
AMEX Trading Symbol: EWG
Fund Investment Objective
The iShares MSCI Germany Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the German market, as measured
by the MSCI Germany Index (the "Index").
Benchmark Index Information
The Index consists of 55 stocks traded primarily on the Frankfurt Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Deutsche
Telekom, Allianz and Siemens (which comprise 25.43%, 10.44% and 8.90%,
respectively, of the Index's market capitalization) and its three largest
industries were diversified telecommunication services, insurance and
industrial conglomerates (which comprise 25.43%, 16.17% and 9.74%,
respectively, of the Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
22.75% 28.28% 20.87%
1997 1998 1999
2000 Total Return as of March 31: 3.44%
Best Quarter Worst Quarter
27.11% (15.76%)
(Quarter ended December 31, 1999) (Quarter ended September 30, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
Germany Index Fund 20.87% 21.26%
MSCI Germany Index 20.04% 22.15%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
page 14
<PAGE>
iShares MSCI Hong Kong Index Fund
CUSIP: 464286871
AMEX Trading Symbol: EWH
Fund Investment Objective
The iShares MSCI Hong Kong Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Hong Kong market, as
measured by the MSCI Hong Kong Index (the "Index").
Benchmark Index Information
The Index consists of 33 stocks traded primarily on the Stock Exchange of Hong
Kong Limited (SEHK). As of March 31, 2000, the Index's three largest stocks
were Hutchison Whampoa, Cheung Kong Holdings and Cable & Wireless HKT (which
comprise 29.54%, 14.52% and 13.46%, respectively, of the Index's market
capitalization) and its three largest industries were diversified financials,
real estate and diversified telecommunication services (which comprise 33.26%,
28.22% and 13.46%, respectively, of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that in recent times, Hong Kong's economy has been
adversely affected by the Asian economic crisis, contributing to the current
recession. Issues and uncertainties linger regarding the integration of Hong
Kong's economy with that of China, and the manner in which the Chinese
government will honor and interpret the agreement pursuant to which Hong Kong
was returned to China by the United Kingdom.
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
(26.74%) (9.21%) 54.00%
1997 1998 1999
2000 Total Return as of March 31: (2.01%)
Best Quarter Worst Quarter
(30.12%)
26.95% (Quarter ended December 31, 1997)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
Hong Kong Index Fund 54.00% 6.29%
MSCI Hong Kong Index 59.50% 10.89%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 15
<PAGE>
iShares MSCI Italy Index Fund
CUSIP: 464286855
AMEX Trading Symbol: EWI
Fund Investment Objective
The iShares MSCI Italy Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Italian market, as measured
by the MSCI Italy Index (the "Index").
Benchmark Index Information
The Index consists of 48 stocks traded primarily on the Milan Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Tim Ord, Telecom
Italia Ord and ENI (which comprise 19.30%, 13.12% and 9.55%, respectively, of
the Index's market capitalization) and its three largest industries were
wireless telecommunication services, diversified telecommunication services and
banks (which comprise 21.06%, 18.74% and 16.51%, respectively, of the Index's
market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
35.77% 50.24% 0.53%
1997 1998 1999
2000 Total Return as of March 31: (0.92%)
Best Quarter Worst Quarter
(10.61%)
34.44% (Quarter ended September 30, 1998)
(Quarter ended March 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/12/96)
------ ---------
<S> <C> <C>
Italy Index Fund 0.53% 24.67%
MSCI Italy Index (0.26%) 24.65%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
page 16
<PAGE>
iShares MSCI Japan Index Fund
CUSIP: 464286848
AMEX Trading Symbol: EWJ
Fund Investment Objective
The iShares MSCI Japan Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Japanese market, as measured
by the MSCI Japan Index (the "Index").
Benchmark Index Information
The Index consists of 296 stocks traded primarily on the Tokyo Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were NTT Corp., Toyota
Motor Corp. and Sony Corp. (which comprise 7.16%, 6.97% and 4.44%,
respectively, of the Index's market capitalization) and its three largest
industries were banks, automobiles and household durables (which comprise
9.37%, 8.97% and 8.79%, respectively, of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that the Japanese economy faces several concerns,
including: a financial system with large levels of nonperforming loans; over-
leveraged corporate balance sheets; a labor market undergoing fundamental
structural changes, as traditional lifetime employment clashes with the need
for increased labor mobility; and a changing corporate governance structure.
Japan's economy is heavily dependent on international trade and has been
adversely affected by trade tariffs and other protectionist measures.
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
(23.63%) 3.53% 57.89%
1997 1998 1999
2000 Total Return as of March 31: 0.68%
Best Quarter Worst Quarter
(19.80%)
26.25% (Quarter ended December 31, 1997)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
Japan Index Fund 57.89% 2.67%
MSCI Japan Index 61.53% 3.80%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 17
<PAGE>
iShares MSCI Malaysia (Free) Index Fund
CUSIP: 464286830
AMEX Trading Symbol: EWM
Fund Investment Objective
The iShares MSCI Malaysia (Free) Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Malaysian market, as
measured by the MSCI Malaysia (Free) Index (the "Index").
Benchmark Index Information
The Index consists of 74 stocks traded primarily on the Kuala Lumpur Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Telekom
Malaysia, Tenaga Nasional and Malayan Banking (which comprise 13.04%, 11.04%
and 10.65%, respectively, of the Index's market capitalization) and its three
largest industries were banks, electric utilities and diversified
telecommunication services (which comprise 20.47%, 15.12% and 14.30%,
respectively, of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that Malaysian currency volatility and general
economic deterioration led to the imposition of stringent capital controls in
September 1998, including a one-year prohibition on repatriation of capital and
an indefinite prohibition on free transfers of securities. The prohibition on
repatriation of capital was removed in February 1999 when a two-tier system of
graduated exit levies and levies on profits was introduced. This system was
further modified in September 1999. The Company suspended creations of the Fund
when the capital controls were implemented, and advised investors that it
would, to the extent possible under the applicable Malaysian regulations,
deliver Malaysian ringgits in satisfaction of redemption requests received. The
disruption of the creation/redemption mechanism for the Fund adversely affected
the trading market for iShares of the Fund, resulting in their trading at
prices that differed materially from their net asset value on many days.
The Company currently offers and redeems Creation Units for U.S. dollars. The
Company continues to seek relief from the Malaysian authorities to permit it to
effect sales and redemptions of Creation Units of the Fund's iShares on an "in
kind" basis. There can be no assurances that such relief will be obtained, or
that the Company's decision to permit offers and redemptions of Creation Units
of the Fund's iShares for U.S. dollars will result in the Fund's iShares
trading close to their net asset value. In connection with the decision to
redeem Creation Units of the Fund for U.S. dollars, the Company combined its
accounts in Malaysia effective May 12, 2000, and Malaysian securities acquired
by the Fund before September 1, 1998 acquired a basis for purposes of the
Malaysian profits levy equal to their fair market value at the time of the
combination. Previously, the proceeds of such securities could be repatriated
without payment of the profits levy. Under the current Malaysian capital
controls, the Fund will pay a profits levy at a rate of 10% (with any profits
computed based on the cost basis for purposes of the Malaysian capital
controls) when it sells Malaysian securities and repatriates the proceeds
(e.g., in connection with redemptions). Since the levy is not a foreign income
tax it will not be "passed through" to shareholders of the Fund for possible
use as a foreign tax credit.
The Malaysian capital controls have been changed in significant ways since they
were first adopted without warning on September 1, 1998. There can be no
assurance that the Malaysian capital controls will not be changed in the future
in ways that adversely affect the Fund and its shareholders. Since the capital
controls were imposed, the iShares of the Fund have often traded at discounts
or premiums to their net asset value. There can be no assurance that the
Company's decision to permit redemptions of Creation Units of Fund's iShares
for U.S. dollars will result in the Fund's iShares trading close to their net
asset values.
--------------------------------------------------------------------------------
iShares
page 18
<PAGE>
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
(66.93%) (29.31%) 92.98%
1997 1998 1999
2000 Total Return as of March 31: 21.95%
Best Quarter Worst Quarter
(46.01%)
122.01% (Quarter ended June 30, 1998)
(Quarter ended June 30, 1999)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/12/96)
------ ---------
<S> <C> <C>
Malaysia (Free) Index Fund 92.98% (16.18%)
MSCI Malaysia (Free) Index 114.61% (14.70%)
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 19
<PAGE>
iShares MSCI Mexico (Free) Index Fund
CUSIP: 464286822
AMEX Trading Symbol: EWW
Fund Investment Objective
The iShares MSCI Mexico (Free) Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Mexican market, as
measured by the MSCI Mexico (Free) Index (the "Index").
Benchmark Index Information
The Index consists of 34 stocks traded primarily on the Mexican Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Telefonos Mexico L,
Telefonos Mexico A and Grupo Televisa CPO (which comprise 25.88%, 12.23% and
8.01%, respectively, of the Index's market capitalization) and its three
largest industries were diversified telecommunication services, beverages and
multiline retail (which comprise 38.11%, 9.64% and 9.42%, respectively, of the
Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that the Mexican economy is heavily dependent on
the health of the US economy, as the United States purchases most of Mexico's
exports. Mexico also has suffered from severe currency devaluations in the
past, and has been destabilized by local insurrections in certain regions,
particularly the State of Chiapas.
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
48.53% (35.00%) 76.12%
1997 1998 1999
2000 Total Return as of March 31: 2.11%
Best Quarter Worst Quarter
(24.30%)
35.92% (Quarter ended September 30, 1998)
(Quarter ended December 31, 1999)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
1 Inception
Year (3/12/96)
----- ---------
<S> <C> <C>
Mexico (Free) Index Fund 76.12% 19.40%
MSCI Mexico (Free) Index 80.07% 22.57%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
page 20
<PAGE>
iShares MSCI Netherlands Index Fund
CUSIP: 464286814
AMEX Trading Symbol: EWN
Fund Investment Objective
The iShares MSCI Netherlands Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Dutch market, as measured
by the MSCI Netherlands Index (the "Index").
Benchmark Index Information
The Index consists of 26 stocks traded primarily on the Amsterdam Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Royal
Dutch Petroleum Co., Philips Electronics (Kon.) and KPN (Kon.) (which comprise
24.51%, 11.16% and 10.68%, respectively, of the Index's market capitalization)
and its three largest industries were oil & gas, household durables and
diversified telecommunication services (which comprise 24.51%, 11.16% and
10.68%, respectively, of the Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
20.11% 24.09% 4.54%
1997 1998 1999
2000 Total Return as of March 31: (4.83%)
Best Quarter Worst Quarter
(15.33%)
17.76% (Quarter ended September 30, 1998)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since
Inception
1 Year (3/12/96)
------ ---------
<S> <C> <C>
Netherlands Index Fund 4.54% 19.13%
MSCI Netherlands Index 6.88% 20.66%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 21
<PAGE>
iShares MSCI Singapore (Free) Index Fund
CUSIP: 464286673
AMEX Trading Symbol: EWS
Fund Investment Objective
The iShares MSCI Singapore (Free) Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Singaporean market, as
measured by the MSCI Singapore (Free) Index (the "Index").
Benchmark Index Information
The Index consists of 28 stocks traded primarily on the Singapore Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were DBS Group
Holdings, Singapore Airlines and Singapore Telecom (which comprise 21.34%,
13.78% and 10.38%, respectively, of the Index's market capitalization) and its
three largest industries were banks, airlines and diversified telecommunication
services (which comprise 38.30%, 13.78% and 10.38%, respectively, of the
Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that as a small open economy, Singapore is
particularly vulnerable to external economic influences, including in recent
times the Asian economic crisis. While Singapore has been a leading
manufacturer of electronics goods, the extent to which other countries can
successfully compete with Singapore in this and related industries, and adverse
Asian economic influences generally, may adversely impact Singapore's economy.
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
(43.87%) (5.44%) 55.35%
1997 1998 1999
2000 Total Return as of March 31: (18.90%)
Best Quarter Worst Quarter
(36.28%)
55.99% (Quarter ended June 30, 1998)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
1 Since Inception
Year (3/12/96)
----- ---------------
<S> <C> <C>
Singapore (Free) Index Fund 55.35% (5.65%)
MSCI Singapore (Free) Index 60.17% (3.27%)
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
page 22
<PAGE>
iShares MSCI South Africa Index Fund
CUSIP: 464286780
AMEX Trading Symbol: EWR
Fund Investment Objective
The iShares MSCI South Africa Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the South African market, as
measured by the MSCI South Africa Index (the "Index").
Benchmark Index Information
The Index consists of 46 stocks traded primarily on the Johannesburg Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were De Beers
Consolidated Mines, Dimension Data Holdings and Firstrand (which comprise
8.31%, 7.73% and 6.06%, respectively, of the Index's market capitalization) and
its three largest industries were metals & mining, diversified financials and
banks (which comprise 22.45%, 14.19% and 12.66%, respectively, of the Index's
market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that South Africa has in the past experienced
internal racial and political turmoil in connection with the recently-abolished
system of apartheid. While South Africa's international isolation ended with
the enfranchisement of the black majority, the country continues to face
significant social and economic challenges, including managing the expectations
of its people in the post-apartheid era.
Prior Performance
As of the date of this prospectus, the Fund has not started investment
operations, and therefore no prior performance information is available.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 23
<PAGE>
iShares MSCI South Korea Index Fund
CUSIP: 464286772
AMEX Trading Symbol: EWY
Fund Investment Objective
The iShares MSCI South Korea Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the South Korean market, as
measured by the MSCI Korea Index (the "Index").
Benchmark Index Information
The Index consists of 91 stocks traded primarily on the South Korean Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Samsung
Electronics Co., Kepco Korea Electric Power and SK Telecom Co. (which comprise
35.41%, 12.26% and 9.13%, respectively, of the Index's market capitalization)
and its three largest industries were semiconductor equipment & products,
electric utilities and wireless telecommunication services (which comprise
36.07%, 12.26% and 9.13%, respectively, of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that while South Korea's relations with communist
North Korea have improved somewhat in recent times, each has substantial
military capabilities, and there is a risk of war between North and South Korea
at any time. Any outbreak of hostilities between the two countries could have a
severe adverse effect on the South Korean economy.
Prior Performance
Since the Fund was first offered for sale to the public on May 12, 2000, and
has been in existence for less than one year, prior performance information is
not presented.
--------------------------------------------------------------------------------
iShares
page 24
<PAGE>
iShares MSCI Spain Index Fund
CUSIP: 464286764
AMEX Trading Symbol: EWP
Fund Investment Objective
The iShares MSCI Spain Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Spanish market, as measured
by the MSCI Spain Index (the "Index").
Benchmark Index Information
The Index consists of 35 stocks traded primarily on the Madrid Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Telefonica, BSCH
BCO Santander Central and BBVA (BCC Bilbao Vizcaya) (which comprise 29.54%,
15.40% and 15.26%, respectively, of the Index's market capitalization) and its
three largest industries were banks, diversified telecommunication services and
electric utilities (electrical & gas) (which comprise 30.66%, 29.54% and
15.16%, respectively, of the Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
23.90% 51.30% (2.12%)
1997 1998 1999
2000 Total Return as of March 31: 1.67%
Best Quarter Worst Quarter
(16.56%)
38.58% (Quarter ended September 30, 1998)
(Quarter ended March 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since Inception
1 Year (3/12/96)
------ ---------------
<S> <C> <C>
Spain Index Fund (2.12%) 27.07%
MSCI Spain Index 4.83% 29.99%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 25
<PAGE>
iShares MSCI Sweden Index Fund
CUSIP: 464286756
AMEX Trading Symbol: EWD
Fund Investment Objective
The iShares MSCI Sweden Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Swedish market, as measured
by the MSCI Sweden Index (the "Index").
Benchmark Index Information
The Index consists of 34 stocks traded primarily on the Stockholm Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Ericsson
(Lm) B, Skandia Forsakring and Hennes & Mauritz B (which comprise 53.60%, 7.57%
and 7.19%, respectively, of the Index's market capitalization) and its three
largest industries were communications equipment, machinery and banks (which
comprise 53.60%, 8.12% and 7.36%, respectively, of the Index's market
capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
11.00% 11.06% 63.93%
1997 1998 1999
2000 Total Return as of March 31: 15.49%
Best Quarter Worst Quarter
(24.05%)
36.63% (Quarter ended September 30, 1998)
(Quarter ended December 31, 1999)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since Inception
1 Year (3/12/96)
------ ---------------
<S> <C> <C>
Sweden Index Fund 63.93% 29.47%
MSCI Sweden Index 79.74% 33.78%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
--------------------------------------------------------------------------------
iShares
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<PAGE>
iShares MSCI Switzerland Index Fund
CUSIP: 464286749
AMEX Trading Symbol: EWL
Fund Investment Objective
The iShares MSCI Switzerland Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the Swiss market, as measured
by the MSCI Switzerland Index (the "Index").
Benchmark Index Information
The Index consists of 31 stocks traded primarily on the Zurich Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Novartis, Roche
Holding Genuss and Nestle (which comprise 18.21%, 14.09% and 13.04%,
respectively, of the Index's market capitalization) and its three largest
industries were pharmaceuticals, banks and food products (which comprise
35.94%, 20.48% and 13.04%, respectively, of the Index's market capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
35.23% 18.27% (3.25%)
1997 1998 1999
2000 Total Return as of March 31: (5.16%)
Best Quarter Worst Quarter
(22.09%)
24.63% (Quarter ended September 30, 1998)
(Quarter ended December 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
Since Inception
1 Year (3/12/96)
------ ---------------
<S> <C> <C>
Switzerland Index Fund (3.25%) 12.00%
MSCI Switzerland Index (7.02%) 13.95%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 27
<PAGE>
iShares MSCI Taiwan Index Fund
CUSIP: 464286731
AMEX Trading Symbol: EWT
Fund Investment Objective
The iShares MSCI Taiwan Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the Taiwanese market, as
measured by the MSCI Taiwan Index (the "Index").
Benchmark Index Information
The Index consists of 76 stocks traded primarily on the Taiwan Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Taiwan
Semiconductor Mfg, United Microelectronics and Asustek Computer (which comprise
17.67%, 11.98% and 4.91%, respectively, of the Index's market capitalization)
and its three largest industries were semiconductor equipment & products,
computers & peripherals and chemicals (which comprise 37.65%, 14.54% and 8.89%,
respectively, of the Index's market capitalization).
Fund-Specific Risks
In addition to the principal risk factors referred to elsewhere in this
prospectus, you should know that owing to Taiwan's size and geographic
proximity to the People's Republic of China, and its history of political
contention with China (which regards Taiwan as a renegade province),
developments in Taiwan's ongoing relations with China, including the ongoing
risk of invasion by or war with China and other factors, may materially impact
the Taiwanese economy. The recent election of a new government in Taiwan has
resulted in increased tensions with China, which is concerned that the new
government is in favor of independence for Taiwan.
Prior Performance
Since the Fund was first offered to the public on June 23, 2000, and has been
in existence for less than one year, prior performance information is not
presented.
--------------------------------------------------------------------------------
iShares
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<PAGE>
iShares MSCI United Kingdom Index Fund
CUSIP: 464286699
AMEX Trading Symbol: EWU
Fund Investment Objective
The iShares MSCI United Kingdom Index Fund (the "Fund") seeks to provide
investment results that correspond generally to the price and yield performance
of publicly traded securities in the aggregate in the British market, as
measured by the MSCI United Kingdom Index (the "Index").
Benchmark Index Information
The Index consists of 122 stocks traded primarily on the London Stock Exchange.
As of March 31, 2000, the Index's three largest stocks were Vodafone Airtouch,
BP Amoco and British Telecom (which comprise 16.70%, 8.82% and 6.00%,
respectively, of the Index's market capitalization) and its three largest
industries were wireless telecommunication services, banks and pharmaceuticals
(which comprise 16.70%, 13.74% and 12.35%, respectively, of the Index's market
capitalization).
Prior Performance
The chart and table below give you a picture of the Fund's long-term
performance. The information shows how the Fund's performance has varied year
by year and provides some indication of the risks of investing in the Fund.
Annual Total Returns as of 12/31/99
[GRAPH]
20.85% 18.42% 12.14%
1997 1998 1999
2000 Total Return as of March 31: (5.65%)
Best Quarter Worst Quarter
(10.56%)
18.43% (Quarter ended September 30, 1998)
(Quarter ended March 31, 1998)
Average Annual Total Returns as of 12/31/99 -- Comparison
<TABLE>
<CAPTION>
1 Since Inception
Year (3/12/96)
----- ---------------
<S> <C> <C>
United Kingdom Index Fund 12.14% 20.87%
MSCI United Kingdom Index 12.45% 21.64%
</TABLE>
Past performance is not necessarily an indicator of how the Fund will perform
in the future.
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 29
<PAGE>
iShares MSCI USA Index Fund
CUSIP: 464286681
AMEX Trading Symbol: EZA
Fund Investment Objective
The iShares MSCI USA Index Fund (the "Fund") seeks to provide investment
results that correspond generally to the price and yield performance of
publicly traded securities in the aggregate in the U.S. market, as measured by
the MSCI USA Index (the "Index").
Benchmark Index Information
The Index consists of 323 stocks traded primarily on the New York Stock
Exchange. As of March 31, 2000, the Index's three largest stocks were Microsoft
Corp., Cisco Systems and General Electric Co. (which comprise 5.31%, 5.00% and
4.93%, respectively, of the Index's market capitalization) and its three
largest industries were communications equipment, software and pharmaceuticals
(which comprise 8.91%, 8.27% and 6.70%, respectively, of the Index's market
capitalization).
Prior Performance
As of the date of this prospectus, the Fund has not started investment
operations, and therefore no prior performance information is available.
--------------------------------------------------------------------------------
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<PAGE>
Investment Policies and Strategies
Indexing Investment Approach. Index Funds are not managed according to
traditional methods of "active" investment management, which involve the buying
and selling of securities based on economic, financial and market analysis and
investment judgment. Instead, each Index Fund, using a "passive" or indexing
investment approach, attempts to approximate the investment performance of its
benchmark MSCI Index by investing in a portfolio of stocks selected by using
quantitative analytical procedures. Stocks are selected for inclusion in an
Index Fund in order to have investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics (such as
return variability, earnings valuation and yield) and liquidity measures that,
taken together, are similar to those of the benchmark MSCI Index taken in its
entirety.
Portfolio Sampling. Generally, an Index Fund does not hold all of the issues
that comprise its benchmark MSCI Index, due in part to the costs involved and,
in certain instances, the potential illiquidity of certain securities. Instead,
an Index Fund will attempt to hold a representative sample of the securities in
its benchmark MSCI Index, which will be selected by the investment adviser
using quantitative analytical models in a technique known as "portfolio
sampling". Under this technique, each stock is considered for inclusion in an
Index Fund based on its contribution to certain capitalization, industry and
fundamental investment characteristics. The investment adviser seeks to
construct the portfolio of an Index Fund so that, in the aggregate, its
capitalization, industry and fundamental investment characteristics perform
like those of its benchmark MSCI Index. Over time, the portfolio composition of
an Index Fund may be altered (or "rebalanced") to reflect changes in the
characteristics of its benchmark MSCI Index or to bring the performance and
characteristics of an Index Fund more in line with that of its benchmark MSCI
Index. Rebalancing may also be required for tax purposes. These rebalancings
will require an Index Fund to incur transaction costs and other expenses.
An Index Fund reserves the right to invest in all of the securities in its
benchmark MSCI Index, and an Index Fund with a benchmark index comprised of
relatively few stocks may do so on a regular basis. In addition, the iShares
MSCI Australia, Austria, Belgium, Brazil (Free), Hong Kong, Italy, South Korea,
Mexico (Free), Netherlands, Singapore (Free), South Africa, Spain, Sweden,
Switzerland and Taiwan Index Funds may hold stocks that are not in their
benchmark MSCI Index if the investment adviser determines this to be
appropriate in light of the Index Fund's investment objective and relevant
investment constraints.
Investment Assets. Each Index Fund has a policy to remain as fully invested as
practicable in a pool of equity securities. Each Index Fund will normally
invest at least 95% of its total assets in stocks that are represented in its
benchmark MSCI Index except, in limited circumstances, to help meet shareholder
redemptions of Creation Units. To comply with the US Internal Revenue Code, and
manage corporate actions and index changes in the smaller markets, each of the
iShares MSCI Australia, Austria, Belgium, Brazil (Free), Hong Kong, Italy,
South Korea, Mexico (Free), Netherlands, Singapore (Free), South Africa, Spain,
Sweden, Switzerland and Taiwan Index Funds will at all times invest at least
80% of its total assets in such stocks and at least half of the remaining 20%
of its total assets in such stocks or in stocks included in the relevant
market, but not in its benchmark MSCI Index.
Each Index Fund may invest its remaining assets in money market instruments or
funds that invest exclusively in money market instruments (subject to
applicable limitations under the Investment Company Act of 1940), in repurchase
agreements, in stocks that are in the relevant market but not its benchmark
MSCI Index (as indicated above), and/or in combinations of stock index futures
contracts, options on futures contracts, stock index options, stock index
swaps, cash, local currency and forward currency exchange contracts that are
intended to provide an Index Fund with exposure to a stock. The investment
adviser may attempt to reduce tracking error by using futures contracts whose
behavior is expected to represent the market performance of the Index Fund's
underlying securities, although there can be no assurance that these futures
will correlate with the performance of its benchmark MSCI Index. An Index Fund
will not use these instruments to leverage, or borrow against, their
Investment Policies and Strategies
--------------------------------------------------------------------------------
page 31
<PAGE>
securities holdings or for speculative purposes. In some cases the use of these
special investment techniques can adversely affect the performance of an Index
Fund.
Lending of Securities. Each Index Fund may lend its portfolio securities. In
connection with these loans, the Company receives liquid collateral equal to at
least 105% of the value of the portfolio securities being lent. This collateral
is marked to market on a frequent basis. Notwithstanding such collateral, the
Index Fund would lose value to the extent that a borrower defaults on its
obligation to return borrowed portfolio securities and the value of the
collateral is less than the value of the borrowed securities.
Industry Concentration. With respect to the two most heavily weighted
industries or groups of industries in its benchmark MSCI Index, an Index Fund
will invest in securities (consistent with its investment objective and other
investment policies) so that the weighting of each such industry or group of
industries in the Index Fund does not diverge by more than 10% from the
respective weighting of such industry or group of industries in its benchmark
MSCI Index. An exception to this policy is that if investment in the stock of a
single issuer would account for more than 25% of the Index Fund, the Index Fund
will invest less than 25% of its net assets in such stock and will reallocate
the excess to stock(s) in the same industry or group of industries, and/or to
stock(s) in another industry or group of industries, in its benchmark MSCI
Index. Each Index Fund will evaluate these industry weightings at least weekly,
and at the time of evaluation will adjust its portfolio composition to the
extent necessary to maintain compliance with the above policy. An Index Fund
may not concentrate its investments except as discussed above. This policy is a
fundamental investment policy and may not be changed without the approval of a
majority of an Index Fund's shareholders.
As of March 31, 2000, as a result of this policy with respect to industry
concentration, the following Index Funds were concentrated (that is, invested
25% or more of the value of their assets) in the specified industries:
<TABLE>
<CAPTION>
Index Fund Industry or Industries
---------- ----------------------
<S> <C>
Austria Banks
Canada Communications Equipment
Hong Kong Diversified Financials
Italy Diversified Telecommunication Services
Singapore (Free) Banks
Switzerland Pharmaceuticals
</TABLE>
Borrowing Money. An Index Fund may borrow money from a bank up to a limit of
33% of the market value of its assets, but only for temporary or emergency
purposes. To the extent that an Index Fund borrows money, it may be leveraged;
at such times, the Index Fund's value may appreciate or depreciate more rapidly
than its benchmark MSCI Index. An Index Fund will not make cash purchases of
securities when the amount of money borrowed exceeds 5% of the market value of
its total assets.
Fundamental Policies. The concentration policy of each Index Fund is a
fundamental policy that may be changed only with shareholder approval. Each of
the other investment policies is a non-fundamental policy that may be changed
by the Board of Directors without shareholder approval. Shareholders will be
notified before any material change in these policies is implemented.
Tracking Error. Due to the use of the portfolio sampling technique described
above and other factors discussed in this Prospectus, an Index Fund is not
expected to track its benchmark MSCI Index with the same degree of accuracy as
would an investment vehicle that invested in every component security of its
benchmark index. The investment adviser expects that, over time, an Index
Fund's "expected tracking error" relative to the performance of its benchmark
index will be less than 5% and its tracking error will generally be greater if
its benchmark index has fewer rather than greater numbers of component stocks.
An expected tracking error of 5% means that there is a 68% probability that the
net asset value of an Index Fund will be within plus or minus 5% of its
benchmark MSCI Index level after
--------------------------------------------------------------------------------
iShares
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<PAGE>
one year, without rebalancing the portfolio composition. Thus, actual tracking
error in a period may exceed 5%, perhaps significantly, even though the
expected tracking error is less than 5%. In addition, it is possible that
future developments (e.g., the domination of an Index Fund's benchmark index by
a small number of stocks) may result in an Index Fund having an unexpected
tracking error of greater than 5%. For the fiscal year ended August 31, 1999,
the following Index Funds had a tracking error greater than 5%: Malaysia (Free)
(-18.87%); Mexico (Free) (-8.37%); and Singapore (Free) (10.47%). A tracking
error of 0% would indicate perfect tracking, which would be achieved when the
net asset value of an Index Fund increases or decreases in exact proportion to
changes in its benchmark MSCI Index.
The following factors may adversely affect the tracking of an Index Fund to
that of its benchmark MSCI Index:
. the Index Funds must pay various expenses, while the benchmark MSCI Index
does not reflect any expenses;
. since the investment portfolios of the Index Funds do not generally replicate
the underlying MSCI Indices, their investment performance is likely to differ
from that of the MSCI Indices;
. the portfolio sampling technique used to manage the Index Funds is based on
historical price relationships and changes to those relationships can
adversely affect tracking. In some situations, the requirements of the US
Internal Revenue Code can adversely affect tracking by preventing an Index
Fund from holding optimal positions in particular securities;
. an Index Fund must comply with regulatory constraints that do not affect the
calculation of its corresponding MSCI Index;
. the existence of uninvested assets in the portfolios (including cash and
deferred organizational expenses);
. the fact that each MSCI Index "smooths" dividend payments evenly over a year
while each Index Fund records dividends on the ex-dividend date; and
. the fact that an Index Fund may be subject to a different foreign withholding
tax rate than that assumed by its benchmark MSCI Index.
Although the investment adviser regularly monitors the tracking error of each
Index Fund, there can be no assurance that any Index Fund will achieve any
particular level of tracking error relative to the performance of its benchmark
MSCI Index. Semi-annual and annual reports of the Company disclose tracking
error for each Index Fund over the previous six-month period, and in the event
that tracking error exceeds 5%, the Board of Directors will consider whether it
would be appropriate to take action.
Additional Information About Principal Risk Factors
An investment in iShares of an Index Fund involves risks similar to those of
investing in a broad-based portfolio of equity securities traded on exchanges
in the relevant foreign securities market, including market fluctuations caused
by factors such as economic and political developments, changes in interest
rates and perceived trends in stock prices. Investing in iShares MSCI Index
Funds other than the iShares MSCI USA Index Fund generally involves certain
risks and considerations not typically associated with investing in a fund that
invests in the securities of US issuers. The principal risk factors, which
could decrease the value of your investment, are listed and described below:
. less liquid and less efficient securities markets;
. greater price volatility;
. exchange rate fluctuations and exchange controls;
Additional Information About Principal Risk Factors
--------------------------------------------------------------------------------
page 33
<PAGE>
. 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 an Index Fund;
. higher transaction and custody costs and delays and risks of loss attendant
in 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 and the risk of
nationalization or expropriation of assets and risk of war.
Index Funds that issue and/or redeem Creation Units for cash (the Brazil
(Free), Malaysia (Free), South Korea and Taiwan Index Funds) may have greater
tracking error than other Index Funds since they are at risk that the prices
they pay or receive for portfolio securities will be different than the prices
in effect when they determine the value of the Creation Units being issued
or redeemed.
Volatility of Foreign Equity Markets. The US dollar performance of foreign
equity markets, particularly emerging markets, has generally been substantially
more volatile than that of US markets. Greater volatility connotes greater
uncertainty as to a portfolio's liquidation value at a future point in time.
The volatility information below is a measurement of the standard deviation of
five years of monthly total returns of the MSCI Index. The percentages reflect
the historical average annual volatility for each MSCI Index, based on monthly
total returns of the MSCI Indices from November 30, 1994 to November 30, 1999.
<TABLE>
<C> <C> <S> <C>
MSCI Australia.......... 16.8% MSCI Mexico (Free)...... 40.4%
MSCI Austria............ 18.9% MSCI Netherlands........ 15.4%
MSCI Belgium............ 13.4% MSCI Singapore (Free)... 35.0%
MSCI Brazil (Free)...... 41.4% MSCI South Africa....... 29.5%
MSCI Canada............. 18.1% MSCI South Korea........ 57.6%
MSCI France............. 16.2% MSCI Spain.............. 21.3%
MSCI Germany............ 16.4% MSCI Sweden............. 20.0%
MSCI Hong Kong.......... 34.0% MSCI Switzerland........ 17.5%
MSCI Italy.............. 23.2% MSCI Taiwan............. 33.8%
MSCI Japan.............. 21.7% MSCI United Kingdom..... 10.9%
MSCI Malaysia (Free).... 47.7% MSCI USA................ 13.9%
</TABLE>
The larger the percentage stated for an MSCI Index, the greater the historical
average annual volatility of that MSCI Index. Among the listed MSCI Indices,
MSCI United Kingdom reflects the lowest historical volatility, and MSCI South
Korea reflects the highest historical volatility. Short-term volatility in
these markets can be significantly greater than average annual volatility.
Foreign Currency Fluctuations. Because each Index Fund's assets are generally
invested in non-US securities (except for the iShares MSCI USA Index Fund), and
because a substantial portion of the revenue and income of each Index Fund
(except for the iShares MSCI USA Index Fund) is received in a foreign currency,
the dollar value of an Index Fund's net assets is reduced by declines in the
value of the relevant foreign currency relative to the dollar and are
positively affected by increases in the value of that currency relative to the
dollar. Also, government or monetary authorities may impose or alter exchange
controls in a way that would adversely affect exchange rates.
--------------------------------------------------------------------------------
iShares
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<PAGE>
Any currency fluctuations will affect the net asset value of an Index Fund
regardless of the performance of its underlying portfolio. Other than to
facilitate settlements in local markets or to protect against currency exposure
in connection with its distributions to shareholders or borrowings, no Index
Fund expects to engage in currency transactions for the purpose of hedging
against a decline in value of any foreign currencies.
Concentration and Lack of Diversification of Certain Index Funds. Each Index
Fund (except for the iShares MSCI Japan, United Kingdom and USA Index Funds) is
classified as "non-diversified" for purposes of the Investment Company Act of
1940, which means that it is not limited by that Act with regard to the portion
of its assets that may be invested in the securities of a single issuer. In
addition, a number of Index Funds concentrate their investments in particular
industries as noted in the descriptions of each non-diversified Index Fund.
Each Index Fund, however, whether diversified or non-diversified, intends 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 US Internal Revenue Code, to relieve the Index 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
US Internal Revenue Code severely limits the investment flexibility of certain
Index Funds and makes it less likely that such Index Funds will meet their
investment objectives.
The stocks of particular issuers, or of issuers in particular industries, may
dominate the benchmark index of an Index Fund and, consequently, the investment
portfolio of an Index Fund. This may adversely affect the performance of an
Index Fund or subject it to greater price volatility than that experienced by
more diversified investment companies. The iShares of an Index Fund may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of an investment company that is more broadly invested in
the equity securities of the relevant market.
Trading Issues. Trading in iShares on the AMEX may be halted due to market
conditions or for reasons that, in the AMEX's view, make trading in iShares
inadvisable. In addition, trading in iShares on the AMEX is subject to trading
halts caused by extraordinary market volatility pursuant to AMEX "circuit
breaker" rules. If trading on the AMEX is halted, you may not be able to sell
your iShares until trading resumes. There can be no assurance that the
requirements of the AMEX necessary to maintain the listing of any Index Fund
will continue to be met or will remain unchanged.
Fluctuation of Net Asset Value and Trading Prices. The net asset value of
iShares of an Index Fund will fluctuate with changes in the market value of an
Index Fund's security holdings and changes in the exchange rate between the US
dollar and the subject foreign currency. The market prices of iShares will
fluctuate in accordance with changes in net asset value and supply and demand
on the AMEX. The Company cannot predict whether iShares will trade below, at or
above their net asset value. Price differences may be due, in large part, to
the fact that supply and demand forces in the secondary trading market for
iShares will be closely related, but not identical, to the same forces
influencing the prices of the stocks of the MSCI Index trading individually or
in the aggregate at any point in time. Given, however, that iShares must be
created and redeemed in Creation Unit aggregations (unlike shares of many
closed-end funds, which frequently trade at appreciable discounts from, and
sometimes at premiums to, their net asset value), the investment adviser
believes that ordinarily large discounts or premiums to the net asset value of
iShares should not be sustained. In the event that the Company must suspend or
discourage creations and/or redemptions of Creation Unit aggregations of
iShares of an Index Fund, we expect larger discounts or premiums. This occurred
in the case of the Malaysia (Free) Index Fund iShares, which have frequently
traded at prices that materially differed from their net asset values since
creations and "in kind" redemptions of the Malaysia (Free) Series iShares were
suspended in response to capital controls imposed by Malaysia from
September 1998. Effective May 26, 2000, the Fund commenced offers of Creation
Units of its iShares for U.S. dollars. The Company continues to seek relief
from the Malaysian authorities to permit it to effect shares and redemptions of
Creation Units of the Fund's iShares on an "in kind" basis. There can be no
assurances that such relief will be obtained, or that the Company's decision to
permit offers and redemptions of a Creation Units of the Fund's iShares for
U.S. dollars will result in the Fund's iShares trading close to their net asset
value.
Additional Information About Principal Risk Factors
--------------------------------------------------------------------------------
page 35
<PAGE>
Management
Investment Adviser
Barclays Global Fund Advisors (the "Advisor") is responsible for the investment
management of each Index Fund. The Advisor is a California corporation
indirectly owned by Barclays Bank PLC and is registered under the Investment
Advisers Act of 1940. Barclays Global Fund Advisors have managed equity
portfolios, including index funds and mutual funds, for over 25 years. As of
March 31, 2000, the investment adviser and its affiliates managed, administered
or advised assets aggregating in excess of $809 billion.
For the fiscal year ended August 31, 1999, the investment adviser received a
fee of 0.27% of average daily net assets of each of the iShares MSCI Australia,
Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia
(Free), Mexico (Free), Netherlands, Singapore (Free), Spain, Sweden,
Switzerland and United Kingdom Index Funds. In May 2000, the shareholders of
each of these Index Funds approved a new advisory agreement that provides for
the fee arrangements disclosed in the Fees and Expenses section of this
Prospectus.
Shareholder Information
Determination of Net Asset Value
The net asset value per iShares for each Index Fund is computed by dividing the
value of the net assets of an Index Fund (i.e., the value of its total assets
less total liabilities) by the total number of iShares outstanding, rounded to
the nearest cent. Expenses and fees, including the management, administration
and distribution fees, are accrued daily and taken into account for purposes of
determining net asset value. Except for the Index Funds named below, the net
asset value of each Index Fund is determined as of the close of the regular
trading session on the New York Stock Exchange, Inc. ("NYSE") (ordinarily
4:00pm, Eastern time) on each day that the NYSE is open. The net asset values
of the iShares MSCI South Korea, Malaysia (Free) and Taiwan Index Funds are
determined as of 8:30am (Eastern time) and the net asset value of the iShares
MSCI Brazil (Free) Index Fund is determined at 5:00pm (Eastern time), on each
day that the NYSE is open. The price at which a purchase or redemption of
Creation Units of iShares is made is based on the next calculation of net asset
value. In the case of Index Funds that effect creations and/or redemptions only
for cash (i.e., the iShares MSCI Brazil (Free), Malaysia (Free), South Korea
and Taiwan Index Funds), it is possible that portfolio securities transactions
by the Company in the relevant local markets of those Index Funds could affect
the prices of those portfolio securities at the time those Index Funds' net
asset values are calculated.
Buying and Selling iShares
There are two ways for you to buy and sell iShares. Most investors buy and sell
iShares through a broker in transactions on the AMEX. iShares are also issued
and redeemed directly by the Company, but only in transactions involving
aggregations of very large numbers of iShares, referred to as Creation Units.
These transactions occur on an "in kind" basis for most Index Funds.
Institutions capable of purchasing or redeeming Creation Units of iShares
should refer to the Company's Statement of Additional Information for further
details.
In connection with the purchase or the redemption of a Creation Unit of an
Index Fund, an investor must pay to the Company a purchase or redemption
transaction fee, which is intended to offset the transfer and other transaction
costs incurred by that Index Fund. The maximum transaction fees that may apply
to in-kind Creation Unit purchases and redemptions are listed in the second
column on the table below. To the extent purchases and redemptions for cash are
available, additional variable
--------------------------------------------------------------------------------
iShares
page 36
<PAGE>
charges, up to the maximums listed in the third and fourth columns of the table
below, will apply (in addition to the fees listed in the second column). This
table is subject to revision from time to time. (Investors are also responsible
for payment of the costs of transferring portfolio securities to the Company,
in the case of a purchase transaction, or from the Company to their own
account, in the case of a redemption transaction.)
<TABLE>
<CAPTION>
In-kind and Cash Additional Variable Additional Variable
iShares Purchases and Charge for Cash Charge for Cash
MSCI Index Series Redemptions Purchases* Redemptions*
----------------- ---------------- ------------------- -------------------
<S> <C> <C> <C>
Australia............... $1,750 0.60% 0.60%
Austria................. $1,600 0.67% 0.67%
Belgium................. $1,500 0.30% 0.30%
Brazil (Free)........... $4,725 ** ***
Canada.................. $3,250 0.30% 0.30%
EMU..................... $8,000 1.05% 1.05%
France.................. $3,400 0.25% 0.25%
Germany................. $2,400 0.25% 0.25%
Hong Kong............... $3,800 0.60% 0.60%
Italy................... $2,100 0.30% 0.30%
Japan................... $7,600 0.15% 0.40%
Malaysia (Free)......... $4,150 *** ***
Mexico (Free)........... $2,200 0.50% 0.50%
Netherlands............. $1,900 0.25% 0.25%
Singapore (Free)........ $2,500 1.60% 1.30%
South Africa............ $3,200 1.60% 1.60%
South Korea............. $4,400 *** ***
Spain................... $2,300 0.25% 0.45%
Sweden.................. $2,700 0.30% 0.30%
Switzerland............. $2,200 0.40% 0.40%
Taiwan.................. $7,200 *** ***
United Kingdom.......... $4,750 0.25% 0.75%
USA..................... $1,900 0.50% 0.50%
</TABLE>
--------
* As a percentage of amount invested.
** This percentage, when aggregated with the basic in-kind transaction
fee, will not exceed 3.00%.
***This percentage, when aggregated with the basic in-kind transaction
fee, will not exceed 2.00%.
iShares may trade on the AMEX at prices that differ to some degree from their
net asset value. If you buy or sell iShares in the secondary market, you will
incur customary brokerage commissions and charges and may pay some or all of
the difference between the bid price and the offered price in the secondary
market on each leg of a round trip (purchase and sale) transaction. Given that
iShares may be created or redeemed in Creation Units, however, the investment
adviser believes that ordinarily large discounts or premiums to the net asset
value of iShares should not be sustained for long periods. If creations or
redemptions of iShares in Creation Units are suspended or difficult to effect,
the iShares may trade at sustained discounts or premiums from net asset value.
This occurred in the case of iShares of the iShares MSCI Malaysia (Free) Index
Fund after the Company suspended creations and "in kind" redemptions of these
iShares in September 1998 as a result of capital controls imposed in Malaysia.
The AMEX disseminates during its trading day an indicative optimized portfolio
value, or IOPV, for each Index Fund. This should not be viewed as a real time
update of the net asset value per iShares of an Index Fund, which is calculated
only once a day, because it may not be computed in a manner consistent with
such net asset value.
The Depository Trust Company ("DTC") serves as securities depository for
iShares. iShares may be held only in book-entry form; stock certificates will
not be issued. DTC, or its nominee, is the record or registered owner of all
outstanding iShares of each Index Fund. Beneficial ownership of iShares will be
Shareholder Information
--------------------------------------------------------------------------------
page 37
<PAGE>
shown on the records of DTC or its participants (described below). Beneficial
owners of iShares are not entitled to have iShares registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and are not considered the registered holder of iShares.
Accordingly, to exercise any rights of a holder of iShares, a beneficial owner
must rely on the procedures of (i) DTC; (ii) "DTC Participants", i.e.,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives)
own DTC; and (iii) "Indirect Participants", i.e., brokers, dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly, through which the beneficial
owner holds its interests.
As described above, the Company recognizes DTC or its nominee as the owner of
all iShares for all purposes.
The Company will send its shareholders, through DTC Participants, unaudited
semi-annual reports, audited annual reports and other information as may be
required by applicable laws, rules and regulations. Beneficial owners also
receive an annual notification as to the tax status of the
Company's distributions.
For purposes of the Investment Company Act of 1940, iShares are issued by the
Index Funds, and the acquisition of iShares by investment companies is subject
to the restrictions of section 12(d)(1) of the Investment Company Act.
Dividends and Capital Gains Distributions
Dividends from net investment income, including any net foreign currency gains,
are declared and paid at least annually and any net realized securities gains,
are distributed at least annually. In order to improve tracking error or comply
with the distribution requirements of the Internal Revenue Code of 1986,
dividends may be declared and paid more frequently than annually for certain
Index Funds. In addition, the Company intends to distribute, at least annually,
amounts representing the full dividend yield on the underlying portfolio
securities of each Index Fund, net of expenses, as if the Index Fund owned the
underlying portfolio securities for the entire dividend period. As a result,
some portion of each distribution may result in a return of capital. See "Tax
Matters" below. Dividends and securities gains distributions are distributed in
US dollars and cannot be automatically reinvested in additional iShares. The
Company will inform shareholders within 60 days after the close of an Index
Fund's taxable year of the amount and nature of all distributions made to them.
Tax Matters
As with any investment, you should consider how the iShares of an Index Fund
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 an Index Fund is through a tax-exempt entity or
taxed-deferred retirement account, such as an IRA plan, you need to be aware of
the possible tax consequences when:
. An Index Fund makes distributions, and
. You sell iShares on the AMEX.
Taxes on Distributions. Each Index Fund will distribute annually any net
investment income, and any net realized long-term or short-term capital gains.
Each Index Fund may also pay a special distribution at the end of the calendar
year to comply with federal tax requirements. In general, your distributions
are subject to federal income tax when they are paid. Dividends paid out of an
Index Fund's income and net short-term gains, if any, are taxable as ordinary
income. Distributions of net long-term capital gains, if any, in excess of net
short-term capital losses are taxable as long-term capital gains, regardless of
how long you have held the iShares.
--------------------------------------------------------------------------------
iShares
page 38
<PAGE>
Distributions in excess of an Index Fund's current and accumulated earnings and
profits are treated as a tax-free return of capital to the extent of your basis
in iShares, and as capital gain thereafter. A distribution may be taxable to
you as ordinary income or capital gain even though, from an investment
standpoint, it may constitute a return of capital.
Dividends and interest received by each Index Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Since more
than 50% of each Index Fund's total assets at the end of its taxable year will
consist of foreign stocks or securities, each Index Fund will "pass through" to
you any foreign income taxes (including withholding taxes) paid by an Index
Fund, if you held the Index Fund, and the Index Fund held the security, on the
dividend entitlement date and for at least fifteen additional days immediately
before and/or after. Subject to certain limitations, the foreign income taxes
passed through may qualify as a deduction in calculating US taxable income or
as a credit in calculating US federal income tax. You will be notified of your
portion of the foreign income taxes paid to each country and the portion of
dividends that represents income derived from sources within each country.
Taxes other than foreign income taxes, including any profits levy payable by
the iShares MSCI Malaysia (Free) Index Fund, are not passed through to you in
this way.
If you are neither a lawful permanent resident nor a citizen of the United
States or if you are a foreign entity, each Index Fund's ordinary income
dividends (which include distributions of net short-term capital gains) will
generally be subject to a 30% US withholding tax, unless a lower treaty rate
applies.
By law, each Index Fund must withhold 31% of a shareholder's distributions and
proceeds if the shareholder has not provided a taxpayer identification number
or social security number.
Taxes When iShares Are Sold on the AMEX. Currently, any capital gain or loss
realized upon a sale of iShares is generally treated as long-term capital gain
or loss if the iShares have been held for more than one year and as short-term
capital gain or loss if the 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 an Index Fund. It is not a substitute for
personal tax advice. Consult your personal tax adviser about the potential tax
consequences of an investment in an Index Series under all applicable tax laws.
Distribution Arrangements
The Company has adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940 that allows the Company to pay distribution fees for the sale and
distribution of iShares. Because these fees are paid out of an Index Fund's
assets on an ongoing basis, over time the fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. The
fees paid under the Rule 12b-1 Plan are calculated and paid monthly with
respect to each Index Fund at a rate set from time to time by the Board,
provided that the annual rate may not exceed .25% of the average daily net
assets of each Index Fund. These fees are currently being paid at the maximum
rate. The distribution fees payable under the 12b-1 Plan are used to pay
distributions-related expenses, including: compensation to the distributor at a
rate fixed by the Company's Board of Directors from time to time (currently
.02% of the Company's average daily net assets, subject to an annual minimum of
$845,000); compensation to a sales and marketing consultant retained by the
Company at a rate of .035% of the Company's average daily net assets; and
reimbursements of expenses incurred by the distributor and other persons
(including the investment adviser in connection with the distribution of the
Company's shares). In addition, the distributor has entered into sales and
investor services agreements with broker-dealers or other persons that are DTC
Participants to provide distribution assistance, including broker-dealer and
shareholder support and educational and promotional services. Under the terms
of each sales and investor services agreement, the distributor will pay broker-
dealers or other persons, out of 12b-1 fees received from an Index Fund, at the
annual rate of up to .25% of 1% of the average
Distribution Arrangements
--------------------------------------------------------------------------------
page 39
<PAGE>
daily net asset value of iShares held through DTC for the account of such DTC
Participant. The amounts of the fees paid to the distributor and the sales and
marketing consultant are not dependent on the amount of distribution expenses
actually incurred by them. The distributor has no role in determining the
investment policies of any Index Fund or which securities are to be purchased
or sold by any Index Fund.
Financial Highlights
The financial highlights table is intended to help you understand the financial
performance since inception of the following Index Funds that have commenced
investment operations: the iShares MSCI Australia, Austria, Belgium, Canada,
France, Germany, Hong Kong, Italy, Japan, Malaysia (Free), Mexico (Free),
Netherlands, Singapore (Free), Spain, Sweden, Switzerland and United Kingdom
Index Funds. Certain information reflects financial results for a single
iShares of an Index Fund. The total returns in the table represent the rate
that a shareholder would have earned (or lost) on an investment in an Index
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young, LLP, whose report, along with
the financial statements of those Index Funds that have commenced operations,
is included in the Annual Report, which is incorporated by reference in the SAI
and available without charge upon request. In reviewing this information, you
should note that the fee arrangements for the Company were significantly
changed in May 2000, as described in the Fees and Expenses section of this
Prospectus.
--------------------------------------------------------------------------------
iShares
page 40
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI Australia Index Fund
------------------------------------------
For the For the For the For the
year year year period
ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period.......... $ 7.75 $ 10.35 $ 10.15 $ 9.95(1)
------- ------- ------- -------
Net investment
income/(loss)+.. 0.20 0.23 0.17 0.10
Net
realized and unrealized gain/(loss)
on investments
and foreign
currency related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies...... 2.29 (2.60) 0.47 0.29
------- ------- ------- -------
Net
increase/(decrease)
in net assets
resulting from
operations..... 2.49 (2.37) 0.64 0.39
------- ------- ------- -------
Less
Distributions
Dividends from net investment income.. (0.19) (0.23) (0.16) (0.08)
Dividends in
excess of net
investment
income.......... 0.00** 0.00** (0.04) (0.05)
Distributions
from net
realized gains.. -- -- (0.04) (0.02)
Distributions
in excess of net
realized gains.. -- -- -- --
Return of
capital......... (0.06) -- (0.20) (0.04)
------- ------- ------- -------
Total
dividends and
distributions.. (0.25) (0.23) (0.44) (0.19)
------- ------- ------- -------
Net asset value,
end of period... $ 9.99 $ 7.75 $ 10.35 $ 10.15
======= ======= ======= =======
Total Investment
Return(2)........ 32.09% (23.11)% 6.23% 3.88%(4)
<CAPTION>
iShares MSCI Austria Index Fund iShares MSCI Belgium Index Fund
--------------------------------------------- -------------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96 08/31/99 08/31/98 08/31/97 08/31/96
---------- --------- --------- -------------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period.......... $ 10.11 $10.51 $10.40 $ 10.91(1) $ 18.40 $ 15.64 $ 14.99 $14.92(1)
---------- --------- --------- -------------- ---------- --------- --------- ------------
Net investment
income/(loss)+.. 0.10 0.06 (0.02) 0.04 0.08 0.24 0.77 0.40
Net
realized and unrealized gain/(loss)
on investments
and foreign
currency related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies...... (0.98) 0.20 0.13 (0.41) (0.30) 6.09 0.62 0.36
---------- --------- --------- -------------- ---------- --------- --------- ------------
Net
increase/(decrease)
in net assets
resulting from
operations..... (0.88) 0.26 0.11 (0.37) (0.22) 6.33 1.39 0.76
---------- --------- --------- -------------- ---------- --------- --------- ------------
Less
Distributions
Dividends from net investment income.. (0.07) (0.04) -- (0.02) -- (0.27) (0.33) (0.54)
Dividends in
excess of net
investment
income.......... (0.01) (0.01) -- (0.01) (0.01) (1.21) (0.28) (0.09)
Distributions
from net
realized gains.. -- (0.61) -- (0.03) (1.19) (1.99) (0.12) (0.06)
Distributions
in excess of net
realized gains.. -- 0.00** -- -- -- -- -- --
Return of
capital......... (0.02) 0.00** -- (0.08) (0.91) (0.10) (0.01) --
---------- --------- --------- -------------- ---------- --------- --------- ------------
Total
dividends and
distributions.. (0.10) (0.66) -- (0.14) (2.11) (3.57) (0.74) (0.69)
---------- --------- --------- -------------- ---------- --------- --------- ------------
Net asset value,
end of period... $ 9.13 $10.11 $10.51 $ 10.40 $ 16.07 $ 18.40 $ 15.64 $14.99
========== ========= ========= ============== ========== ========= ========= ============
Total Investment
Return(2)........ (8.69)% 2.16% 1.06 % (3.39)%(4) (1.00)% 39.42% 9.26% 5.01%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's).......... $53,957 $34,099 $41,406 $12,177
Ratios of
expenses to
average net
assets(5)....... 1.00% 1.05 % 1.33% 1.59%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)....... 2.03% 2.38 % 1.57% 2.18%(3)
Portfolio
turnover(6)..... 13.83% 1.49 % 5.30% 8.84%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's).......... $12,776 $8,085 $4,205 $13,520 $13,496 $25,765 $32,528 $1,800
Ratios of
expenses to
average net
assets(5)....... 1.31 % 1.41% 1.68 % 1.56 %(3) 1.24 % 1.04% 1.24% 2.29%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)....... 1.04 % 0.51% (0.22)% 0.87 %(3) 0.45 % 1.28% 4.63% 5.67%(3)
Portfolio
turnover(6)..... 49.95 % 36.14% 28.47 % 9.60 %(4) 62.99 % 50.46% 16.83% 6.25%(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/(loss) to average net assets would have been as
follows:
Ratios of
expenses to
average net
assets before
waivers........ -- -- 1.33% 1.60%(3)
Ratios of net
investment
income/(loss)
to average net
assets before
waivers........ -- -- 1.57% 2.17%(3)
Ratios of
expenses to
average net
assets before
waivers........ -- -- 1.69 % 1.57%(3) -- -- 1.24% 2.30%(3)
Ratios of net
investment
income/(loss)
to average net
assets before
waivers........ -- -- (0.22)% 0.86%(3) -- -- 4.63% 5.66%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
iShares Financial Highlights
--------------------------------------------------------------------------------
page 41
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI Canada Index Fund iShares MSCI France Index Fund
------------------------------------------ ----------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 8/31/96 08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 9.90 $13.43 $ 10.60 $10.17(1) $ 19.13 $ 14.50 $ 12.73 $ 12.42(1)
------ ------ ------- ------- ------- ------- ------- -------
Net investment
income/(loss)+... 0.07 0.07 0.05 0.04 0.14 0.30 0.17 0.17
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 3.87 (2.89) 2.97 0.43 3.88 4.76 1.95 0.45
------ ------ ------- ------- ------- ------- ------- -------
Net
increase/(decrease)
in net assets
resulting from
operations...... 3.94 (2.82) 3.02 0.47 4.02 5.06 2.12 0.62
------ ------ ------- ------- ------- ------- ------- -------
Less Distributions
Dividends from
net investment
income........... (0.08) (0.13) (0.05) (0.03) (0.10) (0.19) (0.15) (0.09)
Dividends in
excess of net
investment
income........... (0.01) (0.00)** (0.00)** (0.01) (0.02) (0.03) -- (0.01)
Distributions
from net realized
gains............ (0.53) (0.58) (0.14) -- (0.05) (0.13) (0.20) 0.00**
Distributions in
excess of net
realized gains... -- -- -- 0.00** -- (0.01) -- --
Return of
capital.......... -- -- -- 0.00** (0.08) (0.07) -- (0.21)
------ ------ ------- ------- ------- ------- ------- -------
Total dividends
and
distributions... (0.62) (0.71) (0.19) (0.04) (0.25) (0.43) (0.35) (0.31)
------ ------ ------- ------- ------- ------- ------- -------
Net asset value,
end of period.... $13.22 $ 9.90 $ 13.43 $ 10.60 $ 22.90 $ 19.13 $ 14.50 $ 12.73
====== ====== ======= ======= ======= ======= ======= =======
Total Investment
Return(2)......... 39.71% (21.69)% 28.50% 4.63%(4) 21.01% 34.77% 16.60% 4.95%(4)
<CAPTION>
iShares MSCI Germany Index Fund
--------------------------------------------
For the For the For the For the
year year year period
ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96
--------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 20.25 $ 16.31 $ 13.64 $ 13.23(1)
--------- ---------- --------- -------------
Net investment
income/(loss)+... 0.12 0.29 0.03 0.06
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 1.31 3.92 2.77 0.47
--------- ---------- --------- -------------
Net
increase/(decrease)
in net assets
resulting from
operations...... 1.43 4.21 2.80 0.53
--------- ---------- --------- -------------
Less Distributions
Dividends from
net investment
income........... (0.10) (0.17) (0.03) (0.03)
Dividends in
excess of net
investment
income........... (0.01) (0.01) (0.01) (0.01)
Distributions
from net realized
gains............ (0.31) (0.01) (0.07) --
Distributions in
excess of net
realized gains... (0.08) 0.00** -- (0.01)
Return of
capital.......... (0.01) (0.08) (0.02) (0.07)
--------- ---------- --------- -------------
Total dividends
and
distributions... (0.51) (0.27) (0.13) (0.12)
--------- ---------- --------- -------------
Net asset value,
end of period.... $ 21.17 $ 20.25 $ 16.31 $ 13.04
========= ========== ========= =============
Total Investment
Return(2)......... 7.04% 25.69% 20.51% 4.00%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $9,253 $6,932 $24,168 $13,776 $77,885 $45,922 $14,519 $22,930
Ratios of
expenses to
average net
assets(5)........ 1.23% 1.14 % 1.35% 1.44%(3) 1.06% 1.18% 1.52% 1.84%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 0.53% 0.46 % 0.39% 0.79%(3) 0.67% 1.58% 1.17% 2.72%(3)
Portfolio
turnover(6)...... 11.66% 3.70 % 11.02% 0.00%(4) 0.00% 5.65% 7.13% 0.00%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $101,645 $72,934 $24,486 $28,664
Ratios of
expenses to
average net
assets(5)........ 1.00% 1.08% 1.37% 1.68%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 0.57% 1.43% 0.23% 1.00%(3)
Portfolio
turnover(6)...... 13.67% 0.64% 9.04% 0.00%(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/(loss) to average net assets would have been as
follows:
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.36% 1.45%(3) -- -- 1.52% 1.85%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 0.39% 0.78%(3) -- -- 1.17% 2.71%(3)
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.37% 1.69%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 0.22% 0.99%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
--------------------------------------------------------------------------------
iShares
page 42
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI Hong Kong Index Fund iShares MSCI Italy Index Fund
------------------------------------------ ----------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96 08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 6.41 $ 14.73 $ 13.05 $12.83(1) $ 22.89 $ 16.66 $ 13.79 $ 13.62(1)
------- ------- ------- ------ ------- ------- ------- -------
Net investment
income/(loss)+... 0.29 0.35 0.26 0.15 0.17 0.18 0.12 0.25
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 5.49 (8.27) 2.12 0.27 1.05 7.94 3.10 0.31
------- ------- ------- ------ ------- ------- ------- -------
Net
increase/(decrease)
in net assets
resulting from
operations...... 5.78 (7.92) 2.38 0.42 1.22 8.12 3.22 0.56
------- ------- ------- ------ ------- ------- ------- -------
Less Distributions
Dividends from
net investment
income........... (0.31) (0.28) (0.21) (0.13) (0.06) (0.18) (0.11) (0.14)
Dividends in
excess of net
investment
income........... (0.05) 0.00** (0.01) (0.02) -- (1.02) (0.24) (0.03)
Distributions
from net realized
gains............ -- -- (0.34) (0.01) (2.24) (0.69) -- (0.14)
Distributions in
excess of net
realized gains... -- -- 0.00** -- -- -- -- --
Return of
capital.......... -- (0.12) (0.14) (0.04) (0.25) -- -- (0.08)
------- ------- ------- ------ ------- ------- ------- -------
Total dividends
and
distributions... (0.36) (0.40) (0.70) (0.20) (2.55) (1.89) (0.35) (0.39)
------- ------- ------- ------ ------- ------- ------- -------
Net asset value,
end of period.... $ 11.83 $ 6.41 $ 14.73 $13.05 $ 21.56 $ 22.89 $ 16.66 $ 13.79
======= ======= ======= ====== ======= ======= ======= =======
Total Investment
Return(2)......... 90.51% (54.22)% 17.80% 3.22%(4) 5.14% 47.66% 23.37% 4.11%(4)
<CAPTION>
iShares MSCI Japan Index Fund
-----------------------------------------------
For the For the For the For the
year year year period
ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 8.39 $ 12.61 $ 14.33 $ 14.79(1)
---------- ---------- ---------- --------------
Net investment
income/(loss)+... (0.03) (0.02) (0.06) (0.07)
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 4.91 (4.19) (1.65) (0.39)
---------- ---------- ---------- --------------
Net
increase/(decrease)
in net assets
resulting from
operations...... 4.88 (4.21) (1.71) (0.46)
---------- ---------- ---------- --------------
Less Distributions
Dividends from
net investment
income........... -- -- -- --
Dividends in
excess of net
investment
income........... (0.04) -- -- --
Distributions
from net realized
gains............ -- 0.00** -- --
Distributions in
excess of net
realized gains... -- -- (0.01) --
Return of
capital.......... (0.01) (0.01) -- --
---------- ---------- ---------- --------------
Total dividends
and
distributions... (0.05) (0.01) (0.01) --
---------- ---------- ---------- --------------
Net asset value,
end of period.... $ 13.22 $ 8.39 $ 12.61 $ 14.33
========== ========== ========== ==============
Total Investment
Return(2)......... 58.14 % (33.38)% (11.97)% (3.11)%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $77,200 $49,973 $25,417 $7,845 $58,224 $58,368 $32,495 $35,170
Ratios of
expenses to
average net
assets(5)........ 1.01% 1.09 % 1.43% 1.52%(3) 1.03% 1.02% 1.33% 1.43%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 2.84% 3.76 % 1.71% 2.37%(3) 0.70% 0.76% 0.76% 3.69%(3)
Portfolio
turnover(6)...... 42.89% 21.50 % 22.90% 0.00%(4) 7.89% 8.16% 13.70% 19.80%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $713,653 $201,485 $158,957 $103,164
Ratios of
expenses to
average net
assets(5)........ 0.94 % 1.04 % 1.19 % 1.37 %(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ (0.27)% (0.21)% (0.48)% (1.01)%(3)
Portfolio
turnover(6)...... 0.00 % 0.00 % 12.90 % 21.54 %(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/(loss) to average net assets would have been as
follows:
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.43% 1.53%(3) -- -- 1.33% 1.44%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 1.71% 2.36%(3) -- -- 0.76% 3.68%(3)
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.19 % 1.38 %(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- (0.48)% (1.02)%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
iShares Financial Highlights
--------------------------------------------------------------------------------
page 43
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI Malaysia
(Free) Index Fund iShares MSCI Mexico (Free) Index Fund
------------------------------------------ ----------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96 08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 2.11 $ 8.23 $ 13.80 $13.24(1) $ 8.11 $15.11 $ 11.52 $ 9.95(1)
------- ------- ------- ------ ------- ------ ------- ------
Net investment
income/(loss)+... 0.01 0.06 0.01 (0.02) 0.06 0.09 0.02 0.00**
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 3.67 (6.10) (5.55) 0.59 5.36 (6.71) 4.07 1.59
------- ------- ------- ------ ------- ------ ------- ------
Net
increase/(decrease)
in net assets
resulting from
operations...... 3.68 (6.04) (5.54) 0.57 5.42 (6.62) 4.09 1.59
------- ------- ------- ------ ------- ------ ------- ------
Less Distributions
Dividends from
net investment
income........... (0.01) (0.05) 0.00** -- (0.06) (0.09) (0.01) --
Dividends in
excess of net
investment
income........... -- -- (0.01) -- (0.01) -- (0.01) (0.01)
Distributions
from net realized
gains............ -- -- -- -- -- (0.29) (0.44) --
Distributions in
excess of net
realized gains... -- -- -- -- (0.01) -- -- --
Returns of
capital.......... (0.19) (0.03) (0.02) (0.01) (0.06) -- (0.04) (0.01)
------- ------- ------- ------ ------- ------ ------- ------
Total dividends
and
distributions... (0.02) (0.08) (0.03) (0.01) (0.14) (0.38) (0.50) (0.02)
------- ------- ------- ------ ------- ------ ------- ------
Net assets value,
end of period.... $ 5.59 $ 2.11 $ 8.23 $13.80 $ 13.39 $ 8.11 $ 15.11 $11.52
======= ======= ======= ====== ======= ====== ======= ======
Total Investment
Return(2)......... 185.81% (73.57)% (40.20)% 4.28 %(4) 66.92% (44.18)% 35.21% 15.93%(4)
<CAPTION>
iShares MSCI Netherlands Index Fund
-----------------------------------------
For the For the For the For the
year year year period
ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96
--------- --------- -------- ------------
<S> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 23.50 $ 21.42 $17.36 $15.91(1)
--------- --------- -------- ------------
Net investment
income/(loss)+... 0.53 0.25 0.11 0.24
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 1.60 3.53 4.79 1.54
--------- --------- -------- ------------
Net
increase/(decrease)
in net assets
resulting from
operations...... 2.13 3.78 4.90 1.78
--------- --------- -------- ------------
Less Distributions
Dividends from
net investment
income........... (0.43) (0.16) (0.10) (0.14)
Dividends in
excess of net
investment
income........... (0.01) -- (0.01) (0.01)
Distributions
from net realized
gains............ (1.42) (1.47) (0.71) (0.08)
Distributions in
excess of net
realized gains... (0.24) -- -- (0.01)
Returns of
capital.......... (0.08) (0.07) (0.02) (0.09)
--------- --------- -------- ------------
Total dividends
and
distributions... (2.18) (1.70) (0.84) (0.33)
--------- --------- -------- ------------
Net assets value,
end of period.... $ 23.45 $ 23.50 $21.42 $17.36
========= ========= ======== ============
Total Investment
Return(2)......... 8.98% 17.41% 28.04% 11.19%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $95,251 $35,867 $12,339 $9,318 $21,430 $7,296 $16,627 $5,759
Ratios of
expenses to
average net
assets(5)........ 1.43% 1.09 % 1.46 % 1.58 %(3) 1.26% 1.34 % 1.63% 1.75%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 0.33% 1.40 % 0.04 % (0.35)%(3) 0.52% 0.60 % 0.14% 0.01%(3)
Portfolio
turnover(6)...... 7.24% 2.11 % 0.00 % 0.00 %(4) 18.36% 14.05 % 22.80% 0.00%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $31,685 $22,349 $9,661 $6,962
Ratios of
expenses to
average net
assets(5)........ 1.07% 1.12% 1.46% 1.63%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 2.20% 1.00% 0.54% 2.93%(3)
Portfolio
turnover(6)...... 32.13% 15.81% 12.68% 4.32%(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/(loss) to average net assets would have been as
follows:
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.47% 1.59 %(3) -- -- 1.63% 1.76%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 0.04% (0.36)%(3) -- -- 0.13% 0.00%(3)
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.46% 1.64%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 0.53% 2.92%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
--------------------------------------------------------------------------------
iShares
page 44
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI Singapore (Free) Index
Fund iShares MSCI Spain Index Fund
------------------------------------------ ---------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96 08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 3.30 $ 8.66 $ 11.38 $12.24(1) $ 23.84 $ 18.49 $14.09 $13.28(1)
-------- ------- ------- ------ ------- ------- ------ ------
Net investment
income/(loss)+... 0.05 0.07 0.00** 0.04 0.09 0.16 0.19 0.14
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 4.70 (5.37) (2.67) (0.86) 3.14 5.94 5.33 0.98
-------- ------- ------- ------ ------- ------- ------ ------
Net
increase/(decrease)
in net assets
resulting from
operations...... 4.75 (5.30) (2.67) (0.82) 3.23 6.10 5.52 1.12
-------- ------- ------- ------ ------- ------- ------ ------
Less Distributions
Dividends from
net investment
income........... (0.05) (0.04) 0.00** (0.03) (0.07) (0.12) (0.12) (0.18)
Dividends in
excess of net
investment
income........... (0.06) (0.01) (0.01) (0.01) (0.02) (0.02) (0.05) --
Distributions
from net realized
gains............ -- -- (0.02) -- (1.35) (0.55) (0.86) (0.13)
Distributions in
excess of net
realized gains... -- -- -- -- -- -- -- --
Return of
capital.......... (0.01) (0.01) (0.02) -- (0.04) (0.06) (0.09) --
-------- ------- ------- ------ ------- ------- ------ ------
Total dividends
and
distributions... (0.12) (0.06) (0.05) (0.04) (1.48) (0.75) (1.12) (0.31)
-------- ------- ------- ------ ------- ------- ------ ------
Net asset value,
end of period.... $ 7.93 $ 3.30 $ 8.66 $11.38 $ 25.59 $ 23.84 $18.49 $14.09
======== ======= ======= ====== ======= ======= ====== ======
Total Investment
Return(2)......... 144.52% (61.29)% (23.48)% (6.73)%(4) 13.39% 32.58% 39.15% 8.45%(4)
<CAPTION>
iShares MSCI Sweden Index Fund
------------------------------------------
For the For the For the For the
year year year period
ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset value,
beginning of
period........... $ 18.39 $ 18.32 $14.67 $13.22(1)
--------- --------- --------- ------------
Net investment
income/(loss)+... 0.10 0.10 (0.03) 0.20
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
related
transactions and
translation of
other assets and
liabilities
denominated in
foreign
currencies....... 4.52 0.95 4.45 1.67
--------- --------- --------- ------------
Net
increase/(decrease)
in net assets
resulting from
operations...... 4.62 1.05 4.42 1.87
--------- --------- --------- ------------
Less Distributions
Dividends from
net investment
income........... (0.09) (0.08) -- (0.23)
Dividends in
excess of net
investment
income........... (0.01) (0.01) -- (0.07)
Distributions
from net realized
gains............ (0.62) (0.86) (0.77) (0.12)
Distributions in
excess of net
realized gains... (0.01) (0.01) -- --
Return of
capital.......... (0.02) (0.02) -- --
--------- --------- --------- ------------
Total dividends
and
distributions... (0.75) (0.98) (0.77) (0.42)
--------- --------- --------- ------------
Net asset value,
end of period.... $ 22.26 $ 18.39 $18.32 $14.67
========= ========= ========= ============
Total Investment
Return(2)......... 25.09% 5.48% 30.10 % 14.13%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $113,438 $47,248 $14,722 $9,107 $36,469 $25,029 $8,321 $4,227
Ratios of
expenses to
average net
assets(5)........ 0.97% 1.08 % 1.43 % 1.56 %(3) 1.04% 1.11% 1.67% 1.76%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 0.76% 1.17 % 0.03 % 0.69 %(3) 0.31% 0.61% 1.04% 2.04%(3)
Portfolio
turnover(6)...... 25.31% 67.17 % 13.40 % 26.29 %(4) 16.58% 9.10% 19.21% 4.73%(4)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's)........... $20,034 $13,791 $8,243 $4,400
Ratios of
expenses to
average net
assets(5)........ 1.13% 1.17% 1.64 % 1.75%(3)
Ratios of net
investment
income/(loss) to
average net
assets(5)........ 0.49% 0.48% (0.19)% 3.05%(3)
Portfolio
turnover(6)...... 33.44% 10.88% 13.71 % 5.87%(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/loss to average net assets would have been as
follows:
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.43% 1.57%(3) -- -- 1.67% 1.77%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- 0.03% 0.68%(3) -- -- 1.04% 2.03%(3)
Ratios of
expenses to
average net
assets before
waivers......... -- -- 1.64 % 1.76%(3)
Ratios of net
investment
income/(loss) to
average net
assets before
waivers......... -- -- (0.19)% 3.04%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
iShares Financial Highlights
--------------------------------------------------------------------------------
page 45
<PAGE>
<TABLE>
<CAPTION>
iShares MSCI United Kingdom Index
iShares MSCI Switzerland Index Fund Fund
-------------------------------------------- ----------------------------------------
For the For the For the For the For the For the For the For the
year year year period year year year period
ended ended ended 03/12/96*- ended ended ended 03/12/96*-
08/31/99 08/31/98 08/31/97 08/31/96 08/31/99 08/31/98 08/31/97 08/31/96
-------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value,
beginning of period...... $ 15.55 $ 13.79 $ 12.29 $12.07(1) $ 18.48 $ 16.50 $ 13.15 $ 12.14(1)
------- ------- ------- ------ -------- ------- ------- -------
Net investment
income/loss+............. 0.04 (0.00)%** (0.04) 0.08 0.44 0.37 0.38 0.21
Net realized and
unrealized gain/ (loss)
on investments and
foreign currency related
transactions and
translation of other
assets and liabilities
denominated in foreign
currencies............... 0.19 3.01 2.11 0.24 2.40 2.12 3.62 1.06
------- ------- ------- ------ -------- ------- ------- -------
Net increase/(decrease)
in net assets resulting
from operations......... 0.23 3.01 2.07 0.32 2.84 2.49 4.00 1.27
------- ------- ------- ------ -------- ------- ------- -------
Less Distributions
Dividends from net
investment income........ (0.03) -- -- (0.10) (0.36) (0.29) (0.32) (0.20)
Dividends in excess of
net investment income.... (0.04) (0.01) -- -- (0.01) (0.04) (0.06) (0.03)
Distributions from net
realized gains........... (0.17) (1.21) (0.57) -- (0.60) (0.11) (0.17) 0.00**
Distributions in excess
of net realized gains.... (0.14) -- -- -- (0.02) -- -- --
Return of capital........ (0.01) (0.03) 0.00** -- (0.08) (0.07) (0.10) (0.03)
------- ------- ------- ------ -------- ------- ------- -------
Total dividends and
distributions........... (0.39) (1.25) (0.57) (0.10) (1.07) (0.51) (0.65) (0.26)
------- ------- ------- ------ -------- ------- ------- -------
Net asset value, end of
period................... $ 15.39 $ 15.55 $ 13.79 $12.29 $ 20.25 $ 18.48 $ 16.50 $ 13.15
======= ======= ======= ====== ======== ======= ======= =======
Total Investment
Return(2)................. 1.47% 21.24 % 16.69 % 2.60%(4) 15.33% 14.98% 30.48% 10.41%(4)
Ratios/Supplemental Data
Net assets, end of period
(in 000's)............... $38,499 $29,153 $13,805 $6,158 $113,402 $62,846 $29,721 $15,790
Ratios of expenses to
average net assets(5).... 1.09% 1.15 % 1.52 % 1.82%(3) 0.97% 1.03% 1.38% 1.61%(3)
Ratios of net investment
income/(loss) to average
net assets(5)............ 0.24% (0.03)% (0.29)% 1.39%(3) 2.16% 1.90% 2.47% 3.62%(3)
Portfolio turnover(6).... 35.10% 43.09 % 48.05 % 17.06%(4) 13.24% 2.83% 1.84% 0.00%(4)
----
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers through December 31, 1996. If such waivers had
not been made the ratios of expenses to average net assets and ratios of
net investment income/(loss) to average net assets would have been as
follows:
Ratios of expenses to
average net assets
before waivers.......... -- -- 1.53 % 1.83%(3) -- -- 1.38% 1.62%(3)
Ratios of net Investment
Income/(loss) to average
net assets before
waivers................. -- -- (0.29)% 1.38%(3) -- -- 2.47% 3.61%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
--------------------------------------------------------------------------------
iShares
page 46
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
The iShares MSCI Index Funds
--------------------------------------------------------------------------------
page 47
<PAGE>
For More Information
FOR INVESTORS WHO WANT MORE INFORMATION ON
THE iSHARES MSCI INDEX FUNDS,
THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports: Contain performance data and information on
portfolio holdings for the Company's most recently completed fiscal year or
half year, a statement from management and, on an annual basis, the auditor's
report.
Statement of Additional Information (SAI): Contains more detailed information
about the Company's policies, investment restrictions, risks and business
structure. This Prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about Index Funds may be
obtained without charge by contacting:
iSHARES, INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
1-800-474-2737
www.iShares.com
Information about Index Funds (including the SAI) can be viewed and copied at
the Public Reference Room of the SEC in Washington, D.C. Copies of this
information may be obtained, upon payment of a duplicating fee, by writing the
Public Reference Room of the SEC, Washington, D.C., 20549-6009. Information on
the operation of the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330. Reports and other information about Index Funds may be
viewed on-screen or downloaded from the SEC's Internet site at www.sec.gov.
FOR MORE INFORMATION ON iSHARES MSCI INDEX FUNDS, PLEASE CALL:
1-800-iSHARES
(1-800-474-2737)
Investment Company Act File No. 811-09102.
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The iShares MSCI Index Funds
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iShares
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[LOGO OF BARCLAYS GLOBAL INVESTORS]
45 Fremont Street www.ishares.com 1-800-iSHARES
San Francisco,CA 1-800-474-2737
94105
iShares are distributed by SEI Investments Distribution C. Barclays Global Fund
Advisors serves as an advisor to iShares and is a subsidiary of Barclays Global
Investors, N.A., neither of which is affiliated with SEI.
iShares are not sponsored, endorsed, sold or promoted by MSCI. Nor does this
company make any representation regarding the advisability of investing in
iShares.
(C)2000 Barclays Global Investors, All rights reserved, iShares is a servicemark
of Barclays Global Investors, N.A. All other trademarks, servicemarks or
registered trademarks are the property of their respective owners.
BGI-F-002-02000 (9/00)
Not FDIC Insured
Have no bank guarantee
May lose value
