0001193125-04-004340.txt : 20120828
0001193125-04-004340.hdr.sgml : 20120828
20040114170721
ACCESSION NUMBER: 0001193125-04-004340
CONFORMED SUBMISSION TYPE: 485APOS
PUBLIC DOCUMENT COUNT: 7
FILED AS OF DATE: 20040114
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISHARES TRUST
CENTRAL INDEX KEY: 0001100663
IRS NUMBER: 943351276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-09729
FILM NUMBER: 04525536
BUSINESS ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
BUSINESS PHONE: (415) 670-2000
MAIL ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
FORMER COMPANY:
FORMER CONFORMED NAME: ISHARES TRUST
DATE OF NAME CHANGE: 19991213
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISHARES TRUST
CENTRAL INDEX KEY: 0001100663
IRS NUMBER: 943351276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-92935
FILM NUMBER: 04525538
BUSINESS ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
BUSINESS PHONE: (415) 670-2000
MAIL ADDRESS:
STREET 1: 400 HOWARD STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
FORMER COMPANY:
FORMER CONFORMED NAME: ISHARES TRUST
DATE OF NAME CHANGE: 19991213
485APOS
1
d485apos.txt
POST -EFFECTIVE AMENDMENT NO. 28 TO THE REGISTRATION STATEMENT ON FORM N-1A.
As filed with the Securities and Exchange Commission on January 14, 2004
File Nos. 333-92935 and 811-09729
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Post-Effective Amendment No. 28 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 28 [x]
(Check appropriate box or boxes)
iSHARES(R) TRUST
(Exact Name of Registrant as Specified in Charter)
c/o Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
(Address of Principal Executive Office)(Zip Code)
Registrant's Telephone Number, including Area Code: (415) 597-2000
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
(Name and Address of Agent for Service)
With Copies to:
W. JOHN MCGUIRE, ESQ. RICHARD MORRIS, ESQ.
MORGAN, LEWIS & BOCKIUS LLP BARCLAYS GLOBAL INVESTORS N.A.
1111 PENNSYLVANIA AVE., NW 45 FREMONT STREET
WASHINGTON, DC 20004 SAN FRANCISCO, CA 94105
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to [ ] On (date) pursuant to
paragraph (b) paragraph (b)
[ ] 60 days after filing pursuant to [ ] On (date) pursuant to paragraph
paragraph (a)(1) (a)(1)
[X] 75 days after filing pursuant to [ ] On (date) pursuant to paragraph
paragraph (a)(2) (a)(2) of Rule 485
If appropriate, check the following box:
[ ] The post-effective amendment designates a new effective date for a
previously filed post-effective amendment
The information in this Prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities described herein may not be
sold until the registration statement becomes effective. This Prospectus is not
an offer to sell or the solicitation of an offer to buy securities and is not
soliciting an offer to buy these securities in any State in which the offer,
solicitation or sale would be unlawful.
iShares(R)
iShares Trust
iShares Trust consists of over 50 separate investment portfolios called "Funds."
Each Fund described in this Prospectus seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of a
particular equity index developed by the New York Stock Exchange (the "NYSE").
This Prospectus relates to the following Funds:
iShares NYSE Composite Index Fund
iShares NYSE 100 Index Fund
Barclays Global Fund Advisors ("BGFA") is the investment advisor to each Fund.
iShares Trust (the "Trust") is a registered investment company. The shares of
the Trust, called "iShares," are listed and traded on national and foreign
securities exchanges, such as the NYSE. Market prices for a Fund's iShares may
be different from its net asset value per share ("NAV"). Each Fund has its own
CUSIP number and exchange trading symbol.
Each Fund issues and redeems iShares at NAV only in blocks of 50,000 iShares or
multiples thereof ("Creation Units"). These transactions are usually in exchange
for a basket of securities and an amount of cash. As a practical matter, only
institutions or large investors purchase or redeem Creation Units.
Except when aggregated in Creation Units, iShares are not redeemable securities.
The Securities and Exchange Commission ("SEC") has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Prospectus dated ______, 2004
Table of Contents
Details on Investing in iShares
Overview..................................................................... 3
Introduction................................................................. 3
Investment Objective......................................................... 3
Principal Investment Strategies.............................................. 3
Replication.................................................................. 4
Representative Sampling...................................................... 4
Correlation.................................................................. 4
Industry Concentration Policy................................................ 4
Details on the Risks of Investing in iShares
Principal Risk Factors Common to All Funds................................... 4
Market Risk.................................................................. 4
Asset Class Risk............................................................. 4
Passive Investments ......................................................... 4
Concentration................................................................ 5
Derivatives ................................................................. 5
Tracking Error Risk ......................................................... 5
Market Trading Risks ........................................................ 5
Lack of Governmental Insurance or Guarantee ................................. 5
Details on Each iShares Fund
Description of iShares NYSE Index Funds...................................... 6
iShares NYSE Composite Index Fund............................................ 7
iShares NYSE 100 Index Fund.................................................. 10
Details on Management and Operations
Management................................................................... 12
Investment Advisor........................................................... 12
Administrator, Custodian and Transfer Agent.................................. 12
Details on Buying and Selling iShares
Shareholder Information...................................................... 12
Buying and Selling iShares................................................... 12
Book Entry................................................................... 13
iShare Prices................................................................ 13
Determination of Net Asset Value............................................. 13
Dividends and Distributions.................................................. 13
Taxes........................................................................ 13
Taxes on Distributions....................................................... 14
Taxes when iShares are Sold.................................................. 14
Creations and Redemptions.................................................... 14
iShares Transaction Fees..................................................... 15
Distribution................................................................. 15
Financial Highlights......................................................... 15
Index Provider............................................................... 16
Disclaimers.................................................................. 17
Overview
Introduction
This Prospectus provides the information you need to make an informed decision
about investing in iShares. It contains important facts about the Trust as a
whole and each Fund in particular.
An index is a group of securities that an index provider selects as
representative of a market, market segment or specific industry sector. The
index provider determines the relative weightings of the securities in the index
and publishes information regarding the market value of the index.
Each Fund is an "index fund" that seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of a
particular index (its "Underlying Index") developed by the NYSE. The NYSE is an
equities marketplace that lists securities of companies valued at approximately
$17 trillion in market capitalization. The NYSE develops and licenses various
indexes based on the securities listed on the NYSE.
BGFA, the investment advisor to each Fund, is a subsidiary of Barclays Global
Investors, N.A. ("BGI"). BGFA and its affiliates are not affiliated with the
NYSE.
The Principal Investment Strategies and the Principal Risk Factors Common to All
Funds sections discuss the principal strategies and risks applicable to the
Funds, while the Description of iShares Funds section provides important
information about each Fund, including a brief description of its Underlying
Index and principal risks specific to that Fund.
Investment Objective
Each Fund seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of its Underlying Index. Each
Fund's investment objective may be changed without shareholder approval.
Principal Investment Strategies
BGFA uses a "passive" or indexing approach to try to achieve each Fund's
investment objective. Unlike many investment companies, the Funds do not try to
"beat" the markets they track and do not seek temporary defensive positions when
markets decline or appear overvalued.
Indexing may eliminate some of the risks of active management, such as poor
security selection. Indexing may also help increase after-tax performance by
keeping portfolio turnover low in comparison to actively managed investment
companies.
Each Fund will invest at least 90% of its assets in the securities of its
Underlying Index or in American Depository Receipts ("ADRs") based on securities
in the Underlying Index. A Fund may invest up to 10% of its assets in securities
not included in its Underlying Index, but which BGFA believes will help the Fund
track its Underlying Index. For example, a Fund may invest in securities not
included in the relevant Underlying Index in order to reflect various corporate
actions (such as mergers) and other changes in its Underlying Index (such as
reconstitutions, additions and deletions). A Fund also may invest its other
assets in futures contracts, options on futures contracts, options, and swaps
related to its Underlying Index, as well as cash and cash equivalents, including
shares of money market funds affiliated with BGFA.
BGFA uses two basic indexing strategies -- Replication and Representative
Sampling -- as described below. The Description of iShares Funds section
describes the strategy of each Fund.
page 3
Replication
"Replication" is investing in substantially all of the securities in the
Underlying Index in approximately the same proportions as in the Underlying
Index.
Representative Sampling
"Representative Sampling" is investing in a representative sample of securities
in the Underlying Index, which have a similar investment profile as the
Underlying Index. Securities selected have aggregate investment characteristics
(based on market capitalization and industry weightings), fundamental
characteristics (such as return variability, earnings valuation and yield) and
liquidity measures similar to those of the relevant Underlying Index. Funds that
use Representative Sampling generally do not hold all of the securities that are
included in the relevant Underlying Index.
Correlation
An index is a theoretical financial calculation, while a Fund is an actual
investment portfolio. The performance of a Fund and its Underlying Index will
vary somewhat due to transaction costs, market impact, corporate actions (such
as mergers and spin-offs) and timing variances.
BGFA expects that, over time, the correlation between each Fund's performance
and that of its Underlying Index, before fees and expenses, will be 95% or
better. A figure of 100% would indicate perfect correlation. Any correlation of
less than 100% is called "tracking error." A Fund using Representative Sampling
can be expected to have a greater tracking error than a Fund using Replication.
Industry Concentration Policy
A Fund will not concentrate its investments (i.e., hold 25% or more of its
assets) in a particular industry or group of industries except that a Fund will
concentrate its investments to approximately the same extent that its Underlying
Index is so concentrated. For purposes of this limitation, securities of the
U.S. Government (including its agencies and instrumentalities), repurchase
agreements collateralized by U.S. Government securities, and securities of state
or municipal governments and their political subdivisions are not considered to
be issued by members of any industry.
Principal Risk Factors Common to all Funds
Each Fund is subject to the principal risks described below. Additional
principal risks associated with a Fund are discussed under the description of
that Fund in the Description of iShares Funds section. Some or all of these
risks may adversely affect a Fund's NAV, trading price, yield, total return
and/or its ability to meet its objectives.
Market Risk
Each Fund's NAV will react to securities markets movements. You could lose money
over short periods due to fluctuation in a Fund's NAV in response to market
movements, and over longer periods during market downturns.
Asset Class Risk
The returns from the types of securities in which a Fund invests may
underperform returns from the various general securities markets or different
asset classes. Different types of securities tend to go through cycles of
out-performance and underperformance in comparison to the general securities
markets.
Passive Investments
The Funds are not actively managed. Each Fund may be affected by a general
decline in the U.S. or foreign market segments relating to its Underlying Index.
Each Fund invests in the securities included in its Underlying Index regardless
of their investment merit. BGFA does not attempt to take defensive positions in
declining markets.
Concentration
If the Underlying Index of a Fund concentrates in a particular industry, group
of industries or sector, that Fund may be adversely affected by the performance
of those securities and be subject to price volatility. In addition, a Fund that
concentrates in a single industry or group of industries may be more susceptible
to any single economic, market, political or regulatory occurrence affecting
that industry or group of industries.
Derivatives
A derivative is a financial contract the value of which depends on, or is
derived from, the value of an underlying asset such as a security or an index.
Each Fund may invest in stock index futures contracts and other derivatives.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus a
Fund's losses may be greater if it invests in derivatives than if it invests
only in conventional securities.
Tracking Error Risk
Factors such as the fees and expenses of a Fund, imperfect correlation between a
Fund's securities and those in its Underlying Index, rounding of prices, changes
to the Underlying Index and regulatory policies may affect a Fund's ability to
achieve close correlation with its Underlying Index. A Fund's returns may
therefore deviate from those of its Underlying Index.
Market Trading Risks
Absence of Prior Active Market
Although the iShares described in this Prospectus are listed for trading
on national securities exchanges, there can be no assurance that an
active trading market for iShares will develop or be maintained.
Lack of Market Liquidity
Secondary market trading in iShares may be halted by a national
securities exchange because of market conditions or for other reasons.
In addition, trading in iShares is subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules.
There can be no assurance that the requirements necessary to maintain
the listing of the iShares of any Fund will continue to be met or will
remain unchanged.
iShares May Trade at Prices Other Than NAV
iShares may trade at, above or below their NAV. The NAV of iShares will
fluctuate with changes in the market value of a Fund's holdings. The
trading prices of a Fund's iShares will fluctuate in accordance with
changes in its NAV as well as market supply and demand. However, given
that iShares can be created and redeemed only in Creation Units at NAV
(unlike shares of many closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their NAVs),
BGFA believes that large discounts or premiums to the NAV of a Fund's
iShares should not be sustained.
Lack of Governmental Insurance or Guarantee
An investment in a Fund is not a bank deposit nor is it insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
page 5
Description of iShares NYSE Index Funds
. iShares NYSE Composite Index Fund
. iShares NYSE 100 Index Fund
The NYSE Composite Index(R) and the NYSE U.S. 100 Index(sm) are service marks of
the NYSE and have been licensed for use for certain purposes by BGI. The Funds
are not sponsored, offered, or sold by the NYSE, and the NYSE does not make any
representation regarding the advisability of investing in iShares.
iShares NYSE Composite Index Fund
Cusip: ___________
NYSE Trading Symbol: _______
Underlying Index: NYSE Composite Index
Investment Objective
The iShares NYSE Composite Index Fund seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
NYSE Composite Index (the "Index"). The Fund's investment objective may be
changed without shareholder approval.
Principal Investment Strategy
The Index measures the performance of all common stocks, ADRs, real estate
investment trusts ("REITs") and tracking stocks listed on the NYSE. As of
January 2004, the Index had a total market capitalization of approximately $14.5
trillion. To become listed on the NYSE, a company must meet the NYSE's
substantive financial and other listing standards. The securities in the Index
represent a broad spectrum of large, mid-cap and small capitalization companies.
Although all of the securities included in the Index are registered for sale in
the U.S., as of January 2004, approximately 33% of the Index's component
securities were issued by non-U.S. companies. The Fund uses a Representative
Sampling strategy to try to track the Index.
The Fund's top portfolio holdings can be found at www.ishares.com. Fund fact
sheets provide information regarding the Fund's top holdings and may be
requested by calling 1-800-iShares.
Principal Risks Specific to the Fund
.. The stocks in the Index may underperform fixed income investments and
stock market investments that track other markets, segments and sectors.
.. The mid-capitalization stocks in the Index:
. Are more vulnerable than large-capitalization stocks to adverse
business or economic developments;
. Are issued by companies that normally have less diverse product
lines than large-capitalization companies and thus are more
susceptible to adverse developments concerning their products;
and
. May be thinly traded and thus may be difficult for the Fund to
buy and sell.
.. The small-capitalization stocks in the Index:
. Are issued by companies that may be less financially secure than
larger, more established companies;
. Are issued by companies that may depend on a small number of
essential personnel and thus are more vulnerable to personnel
loss;
. Are issued by companies that normally have less diverse product
lines than larger capitalization companies and thus are more
susceptible to adverse developments concerning their products;
and
. May be thinly traded and thus may be difficult for the Fund to
buy and sell.
.. Many of the companies included in the Index are located in a foreign
country. Thus, the Fund may be subject to the risks associated with an
investment in foreign securities, including market fluctuations caused
by factors such as economic and political developments, changes in
interest rates and perceived trends in stock prices. Investing in the
Fund generally involves certain risks and considerations not typically
associated with investing in a fund that invests solely in the
securities of U.S. issuers. The principal risk factors, which could
decrease the value of your investment, are listed and described below:
page 7
. Less liquid and less efficient securities markets;
. Greater price volatility;
. Exchange rate fluctuations and exchange controls;
. Less publicly available information about issuers;
. The imposition of withholding or other taxes;
. The imposition of restrictions on the expatriation of funds or
other assets of the Fund;
. Higher transaction and custody costs and delays 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; and
. Greater social, economic, and political uncertainty and the risk
of nationalization or expropriation of assets and risk of war.
Performance Information
As of the date of this Prospectus, the Fund has been in operation for less than
one full calendar year and therefore does not report its annual total returns in
a bar chart and average annual total returns in a table.
Fees and Expenses
Most investors will buy and sell shares of the Fund through brokers. iShares are
listed on the NYSE.
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*
SHAREHOLDER FEES
(fees paid directly from your investment, but see the
Creation Transaction Fees and Redemption Transaction
Fees discussion below) None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from the Fund's assets)**
Management Fees 0.25%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
--------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.25%
--------------------------------------------------------------------
* You will incur customary brokerage commissions when
buying or selling shares of the Fund.
** Expressed as a percentage of average net assets.
*** The Trust's Investment Advisory Agreement provides that
BGFA will pay all operating expenses of the Trust,
except interest expense and taxes (both expected to be
de minimis), any brokerage expenses, future distribution
fees or expenses and extraordinary expenses.
Example
This Example is intended to help you compare the cost of investing in iShares of
the Fund with the cost of investing in other funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your iShares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on the assumptions, your costs would be:
1 YEAR 3 YEARS
$26 $80
Creation Transaction Fees and Redemption Transaction Fees
The Fund issues and redeems shares at NAV only in blocks of 50,000 shares or
multiples thereof. As a practical matter, only institutions or large investors
purchase or redeem these Creation Units. A standard creation transaction fee of
$________ is charged to each purchaser of Creation Units. The fee is a single
charge and will be the same regardless of the number of Creation Units purchased
by an investor on the same day. The approximate value of a Creation Unit as of
__________ was $_________. An investor who holds Creation Units and wishes to
redeem them at NAV would also pay a standard redemption fee of $________ on the
date of such redemption(s), regardless of the number of Creation Units redeemed
that day.* Investors who hold Creation Units will also pay the annual fund
operating expenses described in the table above. Assuming an investment in a
Creation Unit of $__________ and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $_________
if the Creation Unit is redeemed after one year, and $_________ if the Creation
Unit is redeemed after three years.
----------
* See the "iShares Transaction Fees" section at the end of this
Prospectus. If a Creation Unit is purchased or redeemed outside the
usual process through the National Securities Clearing Corporation or
for cash, a variable fee will be charged of up to four times the
standard creation or redemption transaction fee.
page 9
iShares NYSE 100 Index Fund
Cusip: ___________
NYSE Trading Symbol: _______
Underlying Index: NYSE U.S. 100 Index
Investment Objective
The iShares NYSE 100 Index Fund seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
NYSE U.S. 100 Index (the "Index"). The Fund's investment objective may be
changed without shareholder approval.
Principal Investment Strategy
The Index measures the performance of the largest 100 U.S. companies, based on
market capitalization, listed on the NYSE. As of January 2004, these companies
have a total market capitalization of approximately $5.8 trillion, which
represents approximately 47% of the entire market capitalization of U.S.
registered equity securities and approximately 40% of all common stocks listed
on the NYSE.
The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent the Index is so concentrated. As of
the date of this Prospectus, the Index was concentrated in the financial
industry, which comprised 25% of its market capitalization (based on the
composition of the Index). The Fund uses a Representative Sampling strategy to
try to track the Index.
The Fund's top portfolio holdings can be found at www.ishares.com. Fund fact
sheets provide information regarding the Fund's top holdings and may be
requested by calling 1-800-iShares.
Principal Risks Specific to the Fund
.. The stocks in the Index may underperform fixed income investments and
stock market investments that track other markets, segments and sectors.
Performance Information
As of the date of this Prospectus, the Fund has been in operation for less than
one full calendar year and therefore does not report its annual total returns in
a bar chart and average annual total returns in a table.
Fees and Expenses
Most investors will buy and sell shares of the Fund through brokers. iShares are
listed on the NYSE.
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*
SHAREHOLDER FEES
(fees paid directly from your investment, but see the
Creation Transaction Fees and Redemption Transaction
Fees discussion below) None
Annual Fund Operating Expenses
(expenses that are deducted from the Fund's assets)**
Management Fees 0.20%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
--------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.20%
--------------------------------------------------------------------
* You will incur customary brokerage commissions when
buying or selling shares of the Fund.
** Expressed as a percentage of average net assets.
*** The Trust's Investment Advisory Agreement provides that
BGFA will pay all operating expenses of the Trust,
except interest expense and taxes (both expected to be
de minimis), any brokerage expenses, future distribution
fees or expenses and extraordinary expenses.
Example
This Example is intended to help you compare the cost of investing in iShares of
the Fund with the cost of investing in other funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your iShares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on the assumptions, your costs would be:
1 YEAR 3 YEARS
$20 $64
Creation Transaction Fees and Redemption Transaction Fees
The Fund issues and redeems shares at NAV only in blocks of 50,000 shares or
multiples thereof. As a practical matter, only institutions or large investors
purchase or redeem these Creation Units. A standard creation transaction fee of
$________ is charged to each purchaser of Creation Units. The fee is a single
charge and will be the same regardless of the number of Creation Units purchased
by an investor on the same day. The approximate value of a Creation Unit as of
__________ was $_________. An investor who holds Creation Units and wishes to
redeem them at NAV would also pay a standard redemption fee of $________ on the
date of such redemption(s), regardless of the number of Creation Units redeemed
that day.* Investors who hold Creation Units will also pay the annual fund
operating expenses described in the table above. Assuming an investment in a
Creation Unit of $__________ and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $_________
if the Creation Unit is redeemed after one year, and $_________ if the Creation
Unit is redeemed after three years.
----------
* See the "iShares Transaction Fees" section at the end of this
Prospectus. If a Creation Unit is purchased or redeemed outside the
usual process through the National Securities Clearing Corporation or
for cash, a variable fee will be charged of up to four times the
standard creation or redemption transaction fee.
page 11
Management
Investment Advisor
As investment advisor, BGFA has overall responsibility for the general
management and administration of the Trust. BGFA provides an investment program
for each Fund and manages the investment of its assets. BGFA uses teams of
portfolio managers, investment strategists and other investment specialists.
This team approach brings together many disciplines and leverages BGFA's
extensive resources. BGFA also arranges for transfer agency, custody, fund
administration and all other non-distribution related services necessary for the
Funds to operate.
Under the Investment Advisory Agreement, BGFA is responsible for all expenses of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest, taxes, brokerage expenses and
other expenses connected with executions of portfolio transactions, any
distribution fees or expenses and extraordinary expenses.
BGFA receives fees from each Fund based on a percentage of the Fund's average
daily net assets, as shown in the following table.
iSHARES INDEX FUND MANAGEMENT FEE
------------------ --------------
iShares NYSE Composite Index Fund 0.25%
iShares NYSE 100 Index Fund 0.20%
BGFA is located at 45 Fremont Street, San Francisco, CA 94105. It is a
wholly-owned subsidiary of BGI, which in turn is an indirect subsidiary of
Barclays Bank PLC. BGI, together with its affiliates, is the world's largest
investment advisor of institutional investment assets. As of September 30, 2003,
BGI and its affiliates, including BGFA, provided investment advisory services
for assets in excess of $952 billion. BGI, BGFA, Barclays Global Investor
Services, Barclays Bank PLC and their affiliates deal, trade and invest for
their own accounts in the types of securities in which the Funds may also
invest.
Administrator, Custodian and Transfer Agent
Investors Bank & Trust Company ("Investors Bank") is the administrator,
custodian and transfer agent for each Fund.
Shareholder Information
Additional shareholder information, including how to buy and sell iShares of any
Fund, is available free of charge by calling toll-free: 1-800-iShares or
visiting our website www.iShares.com.
Buying and Selling iShares
iShares trade on national securities exchanges and elsewhere during the trading
day and can be bought and sold throughout the trading day like shares of other
publicly-traded securities. There is no minimum investment. When buying or
selling iShares through a broker, you will incur customary brokerage commissions
and charges.
iShares may be acquired or redeemed directly from a Fund only in Creation Units
or multiples thereof, as discussed in the Creations and Redemptions section.
iShares trade under the ticker symbols listed for each Fund in the Description
of iShares Funds section.
The New York Stock Exchange is generally open Monday through Friday and is
closed on weekends and the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Section 12(d)(1) of the Investment Company Act of 1940 restricts investments by
registered investment companies in the securities of other investment companies,
including iShares. Registered investment companies are permitted to invest in
the Funds beyond the limits set forth in section 12(d)(1), subject to certain
terms and conditions set forth in an SEC exemptive order issued to the iShares
Funds, including that such investment companies enter into an agreement with the
Funds.
Book Entry
iShares are held in book-entry form, which means that no stock certificates are
issued. Depository Trust Company ("DTC") or its nominee, is the record owner of
all outstanding iShares of each Fund and is recognized as the owner of all
iShares for all purposes.
Investors owning iShares are beneficial owners as shown on the records of DTC or
its participants. DTC serves as the securities depository for all iShares.
Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
iShares, you are not entitled to receive physical delivery of stock certificates
or to have iShares registered in your name, and you are not considered a
registered owner of iShares. Therefore, to exercise any right as an owner of
iShares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or "street name" form.
iShare Prices
The trading prices of iShares in the secondary market may differ in varying
degrees from their daily NAVs and can be affected by market forces such as
supply and demand, economic conditions and other factors.
The approximate value of iShares of each Fund will be disseminated every fifteen
seconds throughout the trading day by the national securities exchange on which
the Fund is listed or by other information providers, such as Bloomberg. This
approximate value should not be viewed as a "real-time" update of the NAV,
because the approximate value may not be calculated in the same manner as the
NAV, which is computed once a day. The Funds are not involved in, or responsible
for, the calculation or dissemination of the approximate value and make no
warranty as to its accuracy.
Determination of Net Asset Value
Investors Bank calculates each Fund's NAV in accordance with the standard
formula for valuing mutual fund shares as of the close of regular trading
(normally 4:00 p.m. Eastern time) every day the NYSE is open for trading. The
formula calls for deducting all of a Fund's liabilities from the total value of
its assets and dividing the result by the number of shares outstanding.
Investors Bank values the securities at their current market prices. If such
prices are not readily available, Investors Bank uses estimates of the
securities' fair value in accordance with guidelines approved by the Trust's
Board of Trustees.
Dividends and Distributions
Each Fund pays out dividends to investors at least annually. All the Funds
distributes its net capital gains, if any, to investors annually.
Taxes
As with any investment, you should consider how your investment in iShares will
be taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in iShares.
Unless your investment in iShares is made through a tax-exempt entity or
tax-deferred retirement account, such as an IRA plan, you need to be aware of
the possible tax consequences when:
.. Each Fund makes distributions, and
.. You sell iShares.
page 13
Taxes on Distributions
Distributions paid out of a Fund's net investment income (other than qualified
dividend income), including distributions out of a Fund's net short-term capital
gains, if any, and distributions of income from securities lending, are taxable
to you as ordinary income. Distributions by a Fund of net long-term capital
gains in excess of net short-term capital losses (capital gain dividends) are
taxable to you as long-term capital gains, regardless of how long you have held
the Fund's iShares. Distributions by a Fund that qualify as qualified dividend
income are taxable to you at long-term capital gain rates. In order for a
distribution by a Fund to be treated as qualified dividend income, the Fund must
meet holding period and other requirements with respect to its dividend paying
stocks and you must meet holding period requirements and other requirements with
respect to the Fund's iShares. In general, your distributions are subject to
federal income tax for the year when they are paid. Certain distributions paid
in January, however, may be treated as paid on December 31 of the prior year.
Taxes when iShares are Sold
Currently, any capital gain or loss realized upon a sale of iShares is generally
treated as long-term gain or loss if iShares have been held for more than one
year. Any capital gain or loss realized upon a sale of iShares held for one year
or less is generally treated as short-term gain or loss, except that any capital
loss on the sale of iShares held for six months or less is treated as long-term
capital loss to the extent that capital gain dividends were paid with respect to
such iShares.
The foregoing discussion summarizes some of the consequences under current
federal tax law of an investment in a Fund. It is not a substitute for personal
tax advice. You may also be subject to state and local taxation on Fund
distributions and sales of iShares. Consult your personal tax adviser about the
potential tax consequences of an investment in iShares under all applicable tax
laws.
Creations and Redemptions
The iShares that trade in the secondary market are "created" at NAV by market
makers, large investors and institutions only in block-size Creation Units, each
of which generally consists of 50,000 iShares or multiples thereof. Each
"creator" enters into an authorized participant agreement with SEI Investments
Distribution Co. ("SEI"), the Funds' distributor, and deposits into the
applicable Fund a portfolio of securities closely approximating the holdings of
the Fund and a specified amount of cash in exchange for a specified number of
Creation Units.
Similarly, iShares can only be redeemed in a specified number of Creation Units,
principally in-kind for a portfolio of securities held by the Fund and a
specified amount of cash. Except when aggregated in Creation Units, iShares are
not redeemable. The prices at which creations and redemptions occur are based on
the next calculation of NAV after an order is received in a form described in
the authorized participant agreement.
Creations and redemptions must be made through a firm that is either a member of
the Continuous Net Settlement System of the National Securities Clearing
Corporation or a DTC participant, and in each case, must have executed an
agreement with SEI with respect to creations and redemptions of Creation Unit
aggregations. Information about the procedures regarding creation and redemption
of Creation Units (including the cut-off times for receipt of creation and
redemption orders) is included in the Statement of Additional Information.
Because new iShares may be created and issued on an ongoing basis, at any point
during the life of a Fund, a "distribution," as such term is used in the
Securities Act of 1933 (the "Securities Act"), may be occurring. Broker-dealers
and other persons are cautioned that some activities on their part may,
depending on the circumstances, result in their being deemed participants in a
distribution in a manner that could render them statutory underwriters and
subject to the prospectus delivery and liability provisions of the Securities
Act. Nonetheless, any determination of whether one is an underwriter must take
into account all the relevant facts and circumstances of each particular case.
Broker-dealers should also note that dealers who are not "underwriters," but are
participating in a distribution (as contrasted to ordinary secondary
transactions), and thus dealing with iShares that are part of an "unsold
allotment" within the meaning of section 4(3)(C) of the Securities Act, would be
unable to take advantage of the prospectus delivery exemption provided by
section 4(3) of the Securities Act. For delivery of prospectuses to exchange
members, the prospectus delivery mechanism of Rule 153 under the Securities Act
is only available with respect to transactions on an exchange.
iShares Transaction Fees
Each Fund will impose a purchase transaction fee and a redemption transaction
fee to offset transfer and other transaction costs associated with the issuance
and redemption of Creation Units of iShares. Purchasers and redeemers of
Creation Units of iShares for cash are required to pay an additional variable
charge to compensate for brokerage and market impact expenses. The standard
creation and redemption transaction fees for creations and redemptions in kind
for each Fund are discussed below. The standard creation transaction fee is
charged to each purchaser on the day such purchaser creates a Creation Unit. The
fee is a single charge and will be the amount indicated below regardless of the
number of Creation Units purchased by an investor on the same day. BGFA may,
from time to time, at its own expense, compensate purchasers of Creation Units
who have purchased substantial amounts of Creation Units, and other financial
institutions for administrative or marketing services. Similarly, the standard
redemption transaction fee will be the amount indicated regardless of the number
of Creation Units redeemed that day. The creation and redemption transaction
fees for creations and redemptions through DTC and for cash (when cash creations
and redemptions are available or specified) will also be subject to an
additional variable charge of up to a maximum of four times the amount shown
below under "Maximum Creation/Redemption Transaction Fee." In addition,
purchasers of iShares in Creation Units are responsible for payment of the costs
of transferring securities to the Fund. Redeemers of iShares in Creation Units
are responsible for the costs of transferring securities from the Fund.
Investors who use the services of a broker or other such intermediary may pay
fees for such services. The following table also shows, as of __________, the
approximate value of one Creation Unit per Fund, including the creation
transaction fee.
STANDARD MAXIMUM
APPROXIMATE CREATION/ CREATION/
VALUE OF A REDEMPTION REDEMPTION
CREATION UNIT TRANSACTION TRANSACTION
AS OF _______ FEE FEE
------------- ----------- -----------
iShares NYSE Composite Index Fund $ $ $
iShares NYSE 100 Index Fund $ $ $
Distribution
SEI Investments Distribution Co. (the "Distributor") serves as the distributor
of Creation Units for each Fund on an agency basis. The Distributor does not
maintain a secondary market in iShares. The Distributor's address is 1 Freedom
Valley Drive, Oaks, PA 19456.
The Distributor has no role in determining the policies of any Fund or the
securities that are purchased or sold by any Fund.
Financial Highlights
Financial highlights for the Funds are not presented because, as of the date of
this Prospectus, the Funds had no financial information to report.
page 15
Index Provider
The NYSE is the index provider for the NYSE Composite Index and the NYSE U.S.
100 Index. The NYSE is not affiliated with the Trust, BGI, BGFA, Investors Bank,
or the Distributor.
The New York Stock Exchange is an equities marketplace that lists securities of
companies valued at approximately $17 trillion in market capitalization. Dow
Jones Indexes, a part of Dow Jones and Company, maintains and calculates the
NYSE Composite Index and the NYSE U.S. 100 Index for the NYSE pursuant to
contractual agreement. Dow Jones Indexes is not affiliated with the NYSE, the
Trust, BGI, BGFA, Investors Bank, or the Distributor.
BGI has entered into a license agreement with the NYSE to use the NYSE Composite
Index and the NYSE U.S. 100 Index. BGI is sub-licensing rights in the NYSE
Composite Index and the NYSE U.S. 100 Index to iShares Trust at no charge.
Disclaimers
The iShares Funds are not sponsored, offered or sold by the NYSE. The NYSE makes
no representation or warranty, express or implied, to the owners of the iShares
Funds or any member of the public regarding the advisability of investing in
securities generally or in iShares particularly or the ability of an iShares
Fund to track the total return performance of the NYSE Composite Index and the
NYSE U.S. 100 Index (each, a "NYSE Index" and, together, the "NYSE Indices") or
the ability of the NYSE Indices to track stock market performance. The NYSE is
the licensor of certain trademarks and tradenames to BGI. The NYSE Indices are
determined, composed and calculated by NYSE or its agents without regard to BGI
or the Fund. The NYSE has no obligation to take the needs of BGI, BGFA or the
shareholders of the iShares Funds into consideration in determining, composing
or calculating the NYSE Indices. The NYSE is not responsible for, nor has it
participated in, the determination of the prices and amount of iShares or the
timing of the issuance or sale of iShares or in the determination or calculation
of the redemption price per share. The NYSE has no obligation or liability in
connection with the administration of the Trust, or the marketing of the iShares
Funds.
The NYSE does not guarantee the accuracy and/or the completeness of the NYSE
Indices or any data included therein. The NYSE expressly disclaims and shall
have no liability for any errors, omissions, or interruptions therein. The NYSE
makes no warranty, express or implied, as to results to be obtained by BGI,
BGFA, the iShares Funds, the shareholders thereof, or any other person or entity
from the use of a NYSE Index or any data included therein. The NYSE makes no
express or implied warranties, and hereby expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
NYSE Indices or any data included therein. Without limiting any of the
foregoing, in no event shall the NYSE have any liability for any direct,
indirect, special, punitive, consequential or any other damages (including lost
profits) even if notified of the possibility of such damages.
BGFA does not guarantee the accuracy and/or the completeness of the NYSE Indices
or any data included therein and BGFA shall have no liability for any errors,
omissions, or interruptions therein.
BGFA makes no warranty, express or implied, as to results to be obtained by a
Fund, owners of the iShares of a Fund, or any other person or entity from the
use of a NYSE Index or any data included therein. BGFA makes no express or
implied warranties, and expressly disclaims all warranties of merchantability or
fitness for a particular purpose or use with respect to the NYSE Indices or any
data included therein. Without limiting any of the foregoing, in no event shall
BGFA have any liability for any special, punitive, direct, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
Copies of the Prospectus can be found on our website at www.iShares.com. For
more detailed information on the iShares Trust and iShares, you may request a
copy of the Statement of Additional Information ("SAI").
The SAI provides detailed information about the Funds, and is incorporated by
reference into this Prospectus. This means that the SAI, for legal purposes, is
a part of this Prospectus.
If you have questions about the Funds or iShares or you wish to obtain the SAI
free of charge, please:
Call: 1-800-iShares
Monday through Friday
8:00 a.m. to 8:00 p.m. (Eastern time)
Write: iShares Trust
c/o SEI Investments Distribution Co.
1 Freedom Valley Drive
Oaks, PA 19456
Information about each Fund (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. Reports and other information about each Fund are available on
the EDGAR Database on the SEC's Internet site at www.sec.gov, and copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: publicinfo@sec.gov, or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
No person is authorized to give any information or to make any representations
about any Fund and its iShares not contained in this Prospectus and you should
not rely on any other information. Read and keep the Prospectus for future
reference.
Investment Company Act File No. 811-09729
The information in this Statement of Additional Information is not complete and
may be changed. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. The securities described
herein may not be sold until the registration statement becomes effective. This
Statement of Additional Information is not an offer to sell or the solicitation
of an offer to buy securities and is not soliciting an offer to buy these
securities in any State in which the offer, solicitation or sale would be
unlawful.
iShares Trust
Statement of Additional Information for
iShares NYSE Composite Index Fund
iShares NYSE 100 Index Fund
Dated _______________, 2004
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the current Prospectus (the "Prospectus") for the following
Funds of iShares Trust (the "Trust") as such Prospectus may be revised from time
to time. The current Prospectus for the iShares NYSE Composite Index Fund and
the iShares NYSE 100 Index Fund (the "Funds"), is dated _______________, 2004.
Capitalized terms used herein that are not defined have the same meaning as in
the Prospectus, unless otherwise noted. A copy of the Prospectus may be obtained
without charge by writing to the Trust's distributor, SEI Investments
Distribution Co. ("SEI" or the "Distributor"), at 1 Freedom Valley Drive, Oaks,
PA 19456, calling 1-800-iShares or visiting www.ishares.com.
Table of Contents
PAGE
----
General Description of the Trust and its Funds............................ 1
Exchange Listing and Trading.............................................. 1
Investment Strategies and Risks........................................... 2
Lack of Diversification of Certain Funds.............................. 2
Lending Portfolio Securities.......................................... 3
Repurchase Agreements................................................. 3
Reverse Repurchase Agreements......................................... 3
Currency Transactions................................................. 4
Money Market Instruments.............................................. 4
Investment Companies, REITs........................................... 4
Foreign Securities.................................................... 4
Illiquid Securities................................................... 5
Short-Term Instruments and Temporary Investments...................... 5
Futures and Options................................................... 5
Options on Futures Contracts...................................... 5
Swap Agreements....................................................... 6
Future Developments............................................... 6
General Considerations and Risks...................................... 6
Risks of Futures and Options Transactions............................. 6
Risks of Swap Agreements.............................................. 7
Tracking Stock........................................................ 7
Proxy Voting Policy....................................................... 7
Construction and Maintenance Standards for the Underlying Indices......... 8
NYSE Composite Index...................................................... 8
NYSE U.S. 100 Index....................................................... 9
Investment Limitations.................................................... 10
Continuous Offering....................................................... 11
Management................................................................ 12
Trustees and Officers................................................. 13
Committees of the Board of Trustees................................... 15
Approval of Investment Advisory Contract.............................. 15
Remuneration of Trustees.............................................. 16
Investment Advisor.................................................... 17
Code of Ethics........................................................ 17
Administrator, Custodian and Transfer Agent........................... 17
Distributor........................................................... 18
Index Provider........................................................ 18
Brokerage Transactions.................................................... 19
Additional Information Concerning the Trust............................... 19
Shares................................................................ 19
Termination of the Trust or a Fund.................................... 20
DTC Acts as Securities Depository for the iShares..................... 20
Creation and Redemption of Creation Unit Aggregations..................... 21
Creation.............................................................. 21
Fund Deposit.......................................................... 21
Procedures for Creation of Creation Unit Aggregations................. 22
--------------------------------------------------------------------------------
page ii i|Shares
Placement of Creation Orders for Domestic Funds Using
the Clearing Process.................................................... 22
Placement of Creation Orders for Domestic Funds Outside the
Clearing Process........................................................ 22
Acceptance of Orders for Creation Unit Aggregations...................... 23
Creation Transaction Fee................................................. 24
Redemption of iShares in Creation Unit Aggregations...................... 24
Redemption Transaction Fee............................................... 24
Placement of Redemption Orders for Domestic Funds Using the
Clearing Process........................................................ 25
Placement of Redemption Orders for Domestic Funds Outside the
Clearing Process........................................................ 25
Taxes........................................................................ 25
RIC Qualifications....................................................... 25
Taxation of RICs......................................................... 25
Excise Tax............................................................... 26
Back-Up Withholding...................................................... 26
Section 351.............................................................. 26
Qualified Dividend Income................................................ 26
Corporate Dividends Received Deduction................................... 26
Net Capital Loss Carryforwards (Unaudited)............................... 26
Funds Holding Foreign Investments........................................ 26
Federal Tax Treatment of Complex Securities.............................. 26
Determination of NAV......................................................... 27
Dividends and Distributions.................................................. 27
General Policies......................................................... 27
Dividend Reinvestment Service............................................ 28
Financial Statements......................................................... 29
Miscellaneous Information.................................................... 30
Counsel.................................................................. 30
Independent Auditors..................................................... 30
--------------------------------------------------------------------------------
i|Shares page iii
General Description of the Trust and its Funds
The iShares Trust (the "Trust") currently consists of over 50 investment
portfolios. The Trust was organized as a Delaware statutory trust on December
16, 1999 and is authorized to have multiple series or portfolios. The Trust is
an open-end management investment company, registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The offering of the Trust's
shares is registered under the Securities Act of 1933, as amended (the
"Securities Act"). This Statement of Additional Information relates to the
iShares NYSE Composite Index Fund and the iShares NYSE 100 Index Fund (each a
"Fund" and collectively, the "Funds").
The shares of each Fund are referred to herein as "iShares."
The investment objective of each Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of a specified benchmark index (the "Underlying Index") representing
publicly traded equity securities of companies in a particular broad market,
market segment, market sector or group of industries. Each Fund is managed by
Barclays Global Fund Advisors ("BGFA"), a subsidiary of Barclays Global
Investors, N.A. ("BGI").
Each Fund offers and issues iShares at their net asset value per share ("NAV")
only in aggregations of a specified number of iShares (each a "Creation Unit" or
a "Creation Unit Aggregation"), generally in exchange for a basket of equity
securities included in its Underlying Index (the "Deposit Securities"), together
with the deposit of a specified cash payment (the "Cash Component"). The iShares
described in the Prospectus and this SAI are listed and traded on national
securities exchanges, such as the American Stock Exchange ("AMEX"), Chicago
Board Options Exchange ("CBOE") and the New York Stock Exchange, Inc. (the
"NYSE"). iShares trade in the secondary market and elsewhere at market prices
that may be at, above or below NAV. iShares are redeemable only in Creation Unit
Aggregations, and, generally, in exchange for portfolio securities and a
specified cash payment. Creation Units typically are a specified number of
iShares, generally 50,000 or multiples thereof.
The Trust reserves the right to offer a "cash" option for creations and
redemptions of iShares although it has no current intention of doing so. iShares
may be issued in advance of receipt of Deposit Securities subject to various
conditions including a requirement to maintain on deposit with the Trust cash at
least equal to 105%, which BGFA may change from time to time, of the market
value of the missing Deposit Securities. See the Creation and Redemption of
Creation Unit Aggregations section. In each instance of such cash creations or
redemptions, transaction fees may be imposed that will be higher than the
transaction fees associated with in-kind creations or redemptions. In all cases,
such conditions and fees will be limited in accordance with the requirements of
the Securities and Exchange Commission (the "SEC") applicable to management
investment companies offering redeemable securities.
Exchange Listing and Trading
A discussion of exchange listing and trading matters associated with an
investment in each Fund is contained in the Prospectus in the Shareholder
Information section. The discussion below supplements, and should be read in
conjunction with, that section of the Prospectus.
There can be no assurance that the requirements of the Listing Exchange
necessary to maintain the listing of iShares of any Fund will continue to be
met. The Listing Exchange may, but is not required to, remove the iShares of a
Fund from listing if (i) following the initial 12-month period beginning upon
the commencement of trading of a Fund, there are fewer than 50 beneficial owners
of the iShares of a Fund for 30 or more consecutive trading days; (ii) the value
of the Underlying Index on which such Fund is based is no longer calculated or
available; or (iii) such other event shall occur or condition shall exist that,
in the opinion of the Listing Exchange, makes further dealings on the Listing
Exchange inadvisable. The Listing Exchange will remove the iShares of a Fund
from listing and trading upon termination of such Fund.
As in the case of other publicly-traded securities, broker's commissions on
transactions will be based on negotiated commission rates at customary levels.
The Trust reserves the right to adjust the share prices of iShares in the future
to maintain convenient trading ranges for investors. Any adjustments would be
accomplished through stock splits or reverse stock splits, which would have no
effect on the net assets of the applicable Fund.
Investment Strategies and Risks
Each Fund seeks to achieve its objective by investing primarily in the
securities issued by companies that comprise the Relevant Underlying Index. Each
Fund operates as an index fund and will not be actively managed. Adverse
performance of a security in a Fund's portfolio will ordinarily not result in
the elimination of the security from a Fund's portfolio.
Some Funds will engage in Replication, which means they hold substantially all
of the securities of the Underlying Index in approximately the same proportions
as reflected in the Underlying Index. Other Funds will engage in Representative
Sampling, which is investing in a representative sample of securities in the
Underlying Index, selected by BGFA to have a similar investment profile as the
Underlying Index. Securities selected have aggregate investment characteristics
(based on market capitalization and industry weightings), fundamental
characteristics (such as return variability, earnings valuation and yield) and
liquidity measures similar to those of the relevant Underlying Index. Funds that
use Representative Sampling generally do not hold all of the securities that are
included in the relevant Underlying Index.
FUNDS THAT USE REPLICATION FUNDS THAT USE REPRESENTATIVE SAMPLING
-------------------------- --------------------------------------
iShares NYSE Composite Index Fund
iShares NYSE 100 Index Fund
At least 90% of each Fund's assets will be invested in securities in its
Underlying Index or in American Depository Receipts ("ADRs") based on securities
in its Underlying Index. A Fund may invest up to 10% of its assets in securities
not included in its Underlying Index but which BGFA believes will help the fund
track its Underlying Index. The following examples illustrate the circumstances
in which a Fund could hold securities not included in its Underlying Index.
First, in order to reflect various corporate actions (such as mergers) and other
changes in the fund's Underling Index (reconstitutions), a fund may hold
securities that are announced as additions to the Underlying Index prior to
their actual date of inclusion in such Index. Second, a Fund may hold securities
that have been recently deleted from its Underlying Index due to various
corporate actions and reconstitutions. Third, a Fund may invest in securities
outside the Underlying Index when necessary to meet the diversification
requirements of a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"). In such cases, the securities
outside the Underlying Index will be securities in the relevant market, market
segment, market sector or group of industries tracked by such Index. A Fund may
also invest its other assets in futures contracts, options on futures contracts,
options and swaps related to its Underlying Index, as well as cash and cash
equivalents, including shares of money market funds affiliated with BGFA.
Representative Sampling is used for those Funds where BGFA believes that
Replication is not the most effective means to track the Underlying Index. The
number of securities, liquidity of underlying securities, restrictions on the
ownership of securities, high transaction expenses and other trading costs, and
tax and other regulatory restrictions are among the factors that BGFA considers.
Although Representative Sampling has been an effective means of approximating
index performance in the past, it will not usually enable a Fund to track the
Underlying Index's performance with the accuracy achieved by Replication. Each
Fund will be reviewed regularly and adjusted, when necessary, to correlate with
the relevant Underlying Index.
Lack of Diversification of Certain Funds. The following table sets forth the
diversification status of each Fund.
DIVERSIFIED FUNDS NON-DIVERSIFIED FUNDS
----------------- ---------------------
iShares NYSE Composite Index Fund
iShares NYSE 100 Index Fund
With respect to 75% of a Fund's total assets, a diversified Fund does not invest
more than 5% of its total assets in securities of any one issuer and does not
acquire more than 10% of the outstanding voting securities of any one issuer
(excluding cash and cash items, government securities, and securities of other
investment companies). The remaining 25% of the Fund's total assets may be
invested in any manner.
A "non-diversified" classification means that a Fund is not limited by the 1940
Act with regard to the percentage of its assets that may be invested in the
securities of a single issuer. The securities of a particular issuer may
dominate the Underlying Index of such a Fund and, consequently, the Fund's
investment portfolio. This may adversely affect the Fund's performance or
subject its iShares to greater price volatility than that experienced by more
diversified investment companies.
In addition, both diversified and non-diversified Funds may concentrate their
investments in a particular industry or group of industries, as noted in the
description of such Fund. The securities of issuers in particular industries may
dominate the
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page 2 i|Shares
Underlying Index of such a Fund and consequently the Fund's investment
portfolio. This may adversely affect the Fund's performance or subject its
iShares to greater price volatility than that experienced by less concentrated
investment companies.
Each 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 Internal
Revenue Code, and to relieve the Fund of any liability for federal income tax to
the extent that its earnings are distributed to shareholders. Compliance with
the diversification requirements of the Internal Revenue Code severely limits
the investment flexibility of certain Funds and makes it less likely that such
Funds will meet their investment objectives.
Lending Portfolio Securities. Pursuant to guidelines approved by the Board, each
Fund may lend its portfolio securities to brokers, dealers and financial
institutions, provided: (1) the loan is secured continuously by collateral
consisting of cash, securities of the U.S. Government, its agencies or
instrumentalities, or an irrevocable letter of credit issued by a bank organized
under the laws of the U.S., organized under the laws of a state, or a foreign
bank that has filed an agreement with the Federal Reserve Board to comply with
the same rules and regulations applicable to U.S. banks in securities credit
transactions, and such collateral being maintained on a daily marked-to-market
basis in an amount at least equal to the current market value of the securities
loaned plus any accrued interest or dividends; (2) the Fund may at any time call
the loan and obtain the return of the securities loaned upon sufficient prior
notification; (3) the Fund will receive any interest or dividends paid on the
loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed the limits established by the 1940 Act. In determining
whether or not to lend a security to a particular broker, dealer or financial
institution, the Funds' securities lending agent considers all relevant facts
and circumstances, including the size, creditworthiness and reputation of the
broker, dealer, or financial institution.
A Fund will earn income for lending its securities because cash collateral
pursuant to these loans will be invested subject to the investment objectives,
principal investment strategies and policies of the Fund. In connection with
lending securities, a Fund may pay reasonable finders, administrative and
custodial fees. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral. In either
case, a Fund could experience delays in recovering securities or collateral or
could lose all or part of the value of the loaned securities. Although voting
rights, or rights to consent, attendant to securities on loan pass to the
borrower, such loans may be called at any time and will be called so that the
securities may be voted by the applicable Fund if a material event affecting the
investment is to occur. A Fund may pay a portion of the interest or fees earned
from securities lending to a borrower or securities lending agent.
BGI acts as securities lending agent for the Funds, subject to the overall
supervision of BGFA. Pursuant to an exemptive order granted by the Securities
and Exchange Commission (the "SEC"), BGI is entitled to receive a portion of the
revenues generated by securities lending activities as compensation for its
services in this regard. The Funds have also obtained permission from the SEC
(via exemptive order) to lend portfolio securities to certain affiliated
borrowers, subject to a number of conditions.
Repurchase Agreements. Each Fund may enter into repurchase agreements with banks
and securities dealers. Such transactions entail the purchase of securities with
a simultaneous commitment to resell the securities to the bank or the dealer at
an agreed-upon date and price, reflecting a market rate of interest unrelated to
the coupon rate or maturity of the purchased securities. Should a Fund enter
into a repurchase agreement, each such Fund would maintain custody of the
underlying securities prior to their repurchase. Thus, the obligation of the
bank or the dealer to pay the repurchase price on the date agreed would be, in
effect, secured by such securities. If the value of such securities were less
than the repurchase price plus interest, the other party to the agreement would
be required to provide additional collateral so that at all times the collateral
is at least 100% of the repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose each Fund to possible loss because of
adverse market action, expenses or delays in connection with the disposition of
the underlying obligations. The financial institutions with which each Fund may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government securities on the Federal Reserve Bank of New York's list of
reporting dealers, if such banks and non-bank dealers are deemed creditworthy by
BGFA. BGFA will continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain the value of the
securities subject to the agreement to equal at least 100% of the repurchase
price (including accrued interest). In addition, BGFA will require that the
value of this collateral, after transaction costs (including loss of interest)
reasonably expected to be incurred on a default, be equal to or greater than
100% of the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
BGFA will mark-to-market daily the value of the securities. Under the 1940 Act,
repurchase agreements are considered loans.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to repurchase
the securities at an agreed-upon price, date and interest payment and have the
characteristics of borrowing. The securities purchased with the funds obtained
from the agreement and securities collateralizing the agreement will have
maturity dates no later than the repayment date. Generally the effect of such
transactions is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases the Fund is able to keep some of the interest
income associated with those securities. Such transactions are only advantageous
if the Fund has an opportunity to earn a greater rate of interest on the cash
derived from these transactions than the interest cost of obtaining the same
amount of cash. Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to be paid may not
always be available, and each Fund intends to use the reverse repurchase
technique only when BGFA believes it will be advantageous to the Fund. The use
of reverse repurchase agreements may exaggerate any interim increase or decrease
in the value of each Fund's assets. The custodian bank will maintain a separate
account for each Fund with securities having a value equal to or greater than
such commitments. Under the 1940 Act, reverse repurchase agreements are
considered borrowings.
Currency Transactions. No Fund expects to engage in currency transactions for
the purpose of hedging against declines in the value of the Fund's assets that
are denominated in a foreign currency. A Fund may enter into foreign currency
forward and foreign currency futures contracts to facilitate local securities
settlements or to protect against currency exposure in connection with its
distributions to shareholders, but may not enter into such contracts for
speculative purposes.
A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency futures contract is a contract involving an obligation to
deliver or acquire the specified amount of a specific currency, at a specified
price and at a specified future time. Futures contracts may be settled on a net
cash payment basis rather than by the sale and delivery of the underlying
currency.
Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly volatile,
highly specialized and highly technical. Significant changes, including changes
in liquidity prices, can occur in such markets within very short periods of
time, often within minutes. Foreign exchange trading risks include, but are not
limited to, exchange rate risk, maturity gap, interest rate risk, and potential
interference by foreign governments through regulation of local exchange
markets, foreign investment or particular transactions in foreign currency. If
BGFA utilizes foreign exchange transactions at an inappropriate time or judges
market conditions, trends or correlations incorrectly, foreign exchange
transactions may not serve their intended purpose of improving the correlation
of a Fund's return with the performance of the Underlying Index and may lower
the Fund's return. The Fund could experience losses if the value of its currency
forwards, options and futures positions were poorly correlated with its other
investments or if it could not close out its positions because of an illiquid
market. In addition, each Fund could incur transaction costs, including trading
commissions, in connection with certain foreign currency transactions.
Money Market Instruments. Each Fund may invest a portion of its assets in
high-quality money market instruments on an ongoing basis to provide liquidity
or for other reasons. The instruments in which a Fund may invest include: (i)
short-term obligations issued by the U.S. Government; (ii) negotiable
certificates of deposit ("CDs"), fixed time deposits and bankers' acceptances of
U.S. and foreign banks and similar institutions; (iii) commercial paper rated at
the date of purchase "Prime-1" by Moody's or "A-1+" or "A-1" by S&P or, if
unrated, of comparable quality is determined by BGFA; and (iv) repurchase
agreements. CDs are short-term negotiable obligations of commercial banks. Time
deposits are non-negotiable deposits maintained in banking institutions for
specified periods of time at stated interest rates. Banker's acceptances are
time drafts drawn on commercial banks by borrowers, usually in connection with
international transactions.
BGFA received an exemptive order from the SEC which permits the funds it
manages, including the Funds of the Trust, to invest in shares of money market
funds affiliated with BGFA. Pursuant to this order, the Funds are permitted to
invest in shares of money market funds affiliated with BGFA for cash management
purposes.
Investment Companies, REITs. Each Fund may invest in the securities of other
investment companies (including money market funds) and real estate investment
trusts to the extent allowed by law. Under the 1940 Act, a Fund's investment in
investment companies is limited to, subject to certain exceptions, (i) 3% of the
total outstanding voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment company and (iii) 10% of
the Fund's total assets with respect to investment companies in the aggregate.
Each Fund may invest its assets in securities of money market funds advised by
BGFA or otherwise affiliated with such Fund. No Fund will invest more than 10%
of its total assets in investment companies or other pooled investment vehicles.
Foreign Securities. Each Fund may purchase publicly traded common stocks of
foreign corporations represented in the Underlying Index. Each Fund's investment
in common stock of foreign corporations represented in the Underlying Index may
also be in the form of American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs"). ADRs and GDRs are receipts, typically issued by a
bank or trust company, which evidence ownership of underlying securities issued
by a foreign corporation.
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Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, and potential restrictions of the
flow of international capital. Foreign companies may be subject to less
governmental regulation than U.S. companies. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.
Illiquid Securities. Each Fund may invest up to an aggregate amount of 15% of
its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.
Short-Term Instruments and Temporary Investments. Each Fund may invest in
high-quality money market instruments on an ongoing basis to provide liquidity.
The instruments in which a Fund may invest include: (i) short-term obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
(including government-sponsored enterprises); (ii) negotiable certificates of
deposit ("CDs"), bankers' acceptances, fixed time deposits and other obligations
of domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and that are members of the Federal
Reserve System or are examined by the Comptroller of the Currency or whose
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC");
(iii) commercial paper rated at the date of purchase "Prime-1" by Moody's or
"A-1+" or "A-1" by S&P, or, if unrated, of comparable quality as determined by
BGFA, (iv) non-convertible corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date of purchase of not more than
one year that are rated at least "Aa" by Moody's or "AA" by S & P; (v)
repurchase agreements; and (vi) short-term, U.S. dollar-denominated obligations
of foreign banks (including U.S. branches) that, at the time of investment have
more than $10 billion, or the equivalent in other currencies, in total assets
and in the opinion of BGFA are of comparable quality to obligations of U.S.
banks that may be purchased by a Fund.
Futures and Options. Each Fund may enter into U.S. or foreign futures contracts,
options and options on futures contracts. These futures contracts and options
will be used to simulate full investment in the Underlying Index, to facilitate
trading or to reduce transaction costs. Each Fund will only enter into futures
contracts and options on futures contracts that are traded on a U.S. or foreign
exchange. No Fund will use futures or options for speculative purposes. The
Funds intend to use futures and options in accordance with Rule 4.5 of the
Commodity Exchange Act ("CEA"). The Trust, on behalf of each Fund, has filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" in accordance with Rule 4.5 and therefore, the Funds are not
subject to registration or regulation as a commodity pool operator under the
CEA.
A call option gives a holder the right to purchase a specific security at a
specified price ("exercise price") within a specified period of time. A put
option gives a holder the right to sell a specific security at a specified price
within a specified period of time. The initial purchaser of a call option pays
the "writer" a premium, which is paid at the time of purchase and is retained by
the writer whether or not such option is exercised. Each Fund may purchase put
options to hedge its portfolio against the risk of a decline in the market value
of securities held and may purchase call options to hedge against an increase in
the price of securities it is committed to purchase. Each Fund may write put and
call options along with a long position in options to increase its ability to
hedge against a change in the market value of the securities it holds or is
committed to purchase.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific instrument or index at a
specified future time and at a specified price. Stock index contracts are based
on indices that reflect the market value of common stock of the firms included
in the indices. Each Fund may enter into futures contracts to purchase security
indices when BGFA anticipates purchasing the underlying securities and believes
prices will rise before the purchase will be made. Assets committed to futures
contracts will be segregated by the custodian to the extent required by law.
Options on Futures Contracts. An option on a futures contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account that
represents the amount by which the market price of the futures contract exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. The potential for loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option plus transaction costs. Because the value of the option is fixed
at the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value of
the option changes daily and that change would be reflected in the NAV of each
Fund. The potential for loss related to writing options is unlimited.
Each Fund may purchase and write put and call options on futures contracts that
are traded on a U.S. or foreign exchange as a hedge against changes in value of
its portfolio securities, or in anticipation of the purchase of securities, and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected.
Upon entering into a futures contract, a Fund will be required to deposit with
the broker an amount of cash or cash equivalents known as "initial margin,"
which is in the nature of a performance bond or good faith deposit on the
contract and is returned to each Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin", to and from the broker will be made daily as the
price of the index underlying the futures contract fluctuates, making the long
and short positions in the futures contract more or less valuable, a process
known as "marking-to-market." At any time prior to expiration of a futures
contract, each Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
Swap Agreements. Swap agreements are contracts between parties in which one
party agrees to make periodic payments to the other party based on the change in
market value or level of a specified rate, index or asset. In return, the other
party agrees to make periodic payments to the first party based on the return of
a different specified rate, index or asset. Swap agreements will usually be done
on a net basis, the Fund receiving or paying only the net amount of the two
payments. The net amount of the excess, if any, of a Fund's obligations over its
entitlements with respect to each swap is accrued on a daily basis and an amount
of cash or high liquid securities having an aggregate value at least equal to
the accrued excess is maintained in an account at the Trust's custodian bank.
The use of interest-rate and index swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.
Future Developments. The Board may, in the future, authorize each Fund to invest
in securities contracts and investments other than those listed in this
Statement of Additional Information and in the Prospectus, provided they are
consistent with the Fund's investment objective and do not violate any
investment restrictions or policies.
General Considerations and Risks. A discussion of the risks associated with an
investment in a Fund is contained in the Prospectus. The discussion below
supplements, and should be read in conjunction with, the relevant sections of
the Prospectus.
An investment in a Fund should be made with an understanding that the value of a
Fund's portfolio securities may fluctuate in accordance with changes in the
financial condition of the issuers of the portfolio securities, the value of
common stocks in general and other factors that affect the market.
An investment in a Fund should also be made with an understanding of the risks
inherent in an investment in equity securities, including the risk that the
financial condition of issuers may become impaired or that the general condition
of the stock market may deteriorate (either of which may cause a decrease in the
value of the portfolio securities and thus in the value of iShares). Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence and perceptions of their
issuers change. These investor perceptions are based on various and
unpredictable factors, including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, and global or regional political, economic or banking crises.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the issuer, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors, or holders of debt obligations or preferred stocks.
Further, unlike debt securities which typically have a stated principal amount
payable at maturity (whose value, however, is subject to market fluctuations
prior thereto), or preferred stocks, which typically have a liquidation
preference and which may have stated optional or mandatory redemption
provisions, common stocks have neither a fixed principal amount nor a maturity.
Common stock values are subject to market fluctuations as long as the common
stock remains outstanding.
Although most of the securities in the Underlying Indices are listed on a
national securities exchange, the principal trading market for some may be in
the over-the-counter market. The existence of a liquid trading market for
certain securities may depend on whether dealers will make a market in such
securities. There can be no assurance that a market will be made or maintained
or that any such market will be or remain liquid. The price at which securities
may be sold and the value of a Fund's iShares will be adversely affected if
trading markets for a Fund's portfolio securities are limited or absent, or if
bid/ask spreads are wide.
Risks of Futures and Options Transactions. There are several risks accompanying
the utilization of futures contracts and options on futures contracts. First, a
position in futures contracts and options on futures contracts may be closed
only on the exchange on which the contract was made (or a linked exchange).
While each Fund plans to utilize futures contracts only if an active market
exists for such contracts, there is no guarantee that a liquid market will exist
for the contract at a specified time.
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Furthermore, because, by definition, futures contracts project price levels in
the future and not current levels of valuation, market circumstances may result
in a discrepancy between the price of the stock index future and the movement in
the Underlying Index. In the event of adverse price movements, a Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a Fund has insufficient cash, it may have to sell
portfolio securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to deliver the
instruments underlying future contracts it has sold.
The risk of loss in trading futures contracts or uncovered call options in some
strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Funds do not plan to use futures and options
contracts in this way. The risk of a futures position may still be large as
traditionally measured due to the low margin deposits required. In many cases, a
relatively small price movement in a futures contract may result in immediate
and substantial loss or gain to the investor relative to the size of a required
margin deposit. The Funds, however, intend to utilize futures and options
contracts in a manner designed to limit their risk exposure to levels comparable
to direct investment in stocks.
Utilization of futures and options on futures by a Fund involves the risk of
imperfect or even negative correlation to the Underlying Index if the index
underlying the futures contract differs from the Underlying Index. There is also
the risk of loss by a Fund of margin deposits in the event of bankruptcy of a
broker with whom a Fund has an open position in the futures contract or option.
The purchase of put or call options will be based upon predictions by BGFA as to
anticipated trends, which predictions could prove to be incorrect.
Because the futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in the
futures market could result in price fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount by
which the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting each Fund to substantial losses. In the event of adverse price
movements, each Fund would be required to make daily cash payments of variation
margin.
Although each Fund intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time.
Risks of Swap Agreements. The risk of loss with respect to swaps generally is
limited to the net amount of payments that a Fund is contractually obligated to
make. Swap agreements are subject to the risk that the swap counterparty will
default on its obligations. If such a default occurs, a Fund will have
contractual remedies pursuant to the agreements related to the transaction.
However, such remedies may be subject to bankruptcy and insolvency laws that
could affect such Fund's rights as a creditor (e.g., a Fund may not receive the
net amount of payments that it contractually is entitled to receive).
Tracking Stock. A tracking stock is a separate class of common stock whose value
is linked to a specific business unit or operating division within a larger
company and which is designed to "track" the performance of such business unit
or division. The tracking stock may pay dividends to shareholders independent of
the parent company. The parent company, rather than the business unit or
division, generally is the issuer of tracking stock. However, holders of the
tracking stock may not have the same rights as holders of the company's common
stock.
Proxy Voting Policy
The Trust has adopted as its proxy voting policies the proxy voting guidelines
of BGFA, the investment adviser to each Fund. The Trust has delegated to BGFA
the responsibility for voting proxies on the portfolio securities held by each
Fund. Therefore, the remainder of this section discusses BGFA's proxy voting
guidelines.
BGFA votes (or refrains from voting) proxies for each Fund in a manner that
BGFA, in the exercise of its independent business judgement, concludes is in the
best economic interests of such Fund. In some cases, BGFA may determine that it
is in the best interests of a Fund to refrain from exercising the Fund's proxy
voting rights (such as, for example, proxies on certain non-U.S. securities that
might impose costly or time-consuming in-person voting requirements). BGFA will
normally vote on specific proxy issues in accordance with its proxy voting
guidelines. BGFA's proxy voting guidelines provide detailed guidance as to how
to vote proxies on certain important or commonly raised issues. BGFA may, in the
exercise of its business judgment, conclude that the proxy voting guidelines do
not cover the specific matter upon which a proxy vote is requested, or that an
exception to the proxy voting guidelines would be in the best economic interests
of a Fund. BGFA votes (or refrains from voting) proxies without regard to the
relationship of the issuer of the proxy (or any shareholder of such issuer) to
the Fund, the Fund's affiliates (if any), BGFA or BGFA's affiliates, or SEI or
SEI's affiliates. When voting proxies, BGFA attempts to ensure that companies
follow practices that advance their economic value and allow the market to place
a proper value on their assets. With respect to certain specific issues:
. BGFA generally supports management in the election of directors and
generally supports proposals that strengthen the independence of
boards of directors;
. BGFA generally does not support proposals on social issues that lack a
demonstrable economic benefit to the issuer and the Fund investing in
such issuer; and
. BGFA generally votes against anti-takeover proposals and proposals
which would create additional barriers or costs to corporate
transactions.
BGFA maintains institutional policies and procedures that are designed to
prevent any relationship between the issuer of the proxy (or any shareholder of
the issuer) and a Fund, a Fund's affiliates (if any), BGFA or BGFA's affiliates,
or SEI or SEI's affiliates, from having any influence on BGFA's proxy voting
activity. In this way, BGFA seeks to prevent conflicts of interest that might
influence BGFA's independent business judgment on how to vote on specific proxy
issues (or to refrain from voting). In certain instances, BGFA may determine to
engage an independent fiduciary to vote proxies as a further safeguard to avoid
the influence of a potential conflict of interest or as otherwise required by
applicable law. Such independent fiduciary may either (i) vote such proxy, or
(ii) provide BGFA with instructions as to how to vote such proxy. In the latter
case, BGFA would vote the proxy in accordance with the independent fiduciary's
instructions.
Construction and Maintenance Standards for the Underlying Indices
Brief descriptions of the Underlying Indices on which the Funds are based and
the equity markets in which the Funds are invested are provided below.
NYSE Composite Index
Number of Components: approximately 2,000
Index Overview and Description. The NYSE Composite Index measures the
performance of all common stocks, ADRs, REITs and tracking stocks listed on the
NYSE. The Index has a total market capitalization of approximately $14.5
trillion as of January 2004. To become listed on the NYSE, a company must meet
the NYSE's substantive financial and other listing standards. The securities in
the Index represent a broad spectrum of large, mid-cap and small capitalization
companies. Although all of the securities included in the Index are registered
for sale in the U.S., as of January 2004, approximately 33% of the Index's
component securities were issued by non-U.S. companies. The Index is weighted
using free-float market capitalization, and calculated on both price (i.e., real
time) and total return (i.e., end of trading day) basis. The Index is fully
transparent and rule-based. The Index is calculated and maintained by Dow Jones
Indexes pursuant to a contractual agreement with the NYSE.
Methodology. Only common stocks, ADRs, REITs and tracking stocks listed on the
NYSE are eligible for inclusion in the Index. Multiple classes of shares of the
same issuer are eligible to be included in the Index. Preferred stocks,
closed-end funds, exchange-traded funds, trust units, shares of beneficial
interest, limited partnerships, and derivative securities (such as warrants and
rights) are not eligible for inclusion in the Index.
Calculation and Dissemination. The Index is calculated whenever the NYSE is open
using the latest traded price on the NYSE for each security in the Index.
Following the determination of the previous day's closing Index value, the Index
values for the current day are updated and disseminated following the opening of
NYSE trading on a real-time basis beginning when the first traded price of any
of the Index components are received.
If trading in a stock is suspended while the NYSE is open, the last traded price
for that security on the NYSE is used for all subsequent index computations
until trading resumes. If trading is suspended before the opening, the
security's adjusted closing
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price from the previous day is used to calculate the Index. Until a particular
security opens, its adjusted closing price from the previous day is used in the
Index computation. These prices are computed on both a price and total-return
basis in U.S. dollars. The price index is updated on a real-time basis, while
the total-return index is calculated and disseminated on an end-of-day basis.
Weighting. The Index is weighted by float-adjusted market capitalization, rather
than full market capitalization, to reflect the actual number of shares
available to investors. Shares held by governments, corporations, strategic
partners of the issuer and control groups are excluded from an issuer's
available float when determining Index weightings.
Dividend Treatment. Normal dividend payments are not taken into account in the
price index, whereas they are reinvested and accounted for in the total return
index. However, special dividends from non-operating income require Index
divisor adjustments to prevent the distributions from distorting the price
index.
Index Maintenance. The Index is rebalanced on an ongoing basis. Index
maintenance includes monitoring and implementing the adjustments for company
additions and deletions, share changes, stock splits, stock dividends, corporate
restructurings, spin-offs, or other corporate actions. Some corporate actions,
such as stock splits and stock dividends, require simple changes in the common
shares outstanding and the stock prices of the component companies in the Index.
Other corporate actions, such as share issuances, change the aggregate
free-float adjusted market capitalization of the Index and require additional
adjustments. Corporate actions will be implemented after the close of trading
on the day prior to the ex-date of such corporate actions. Whenever possible,
changes to the Index's components will be announced at least two business days
prior to their implementation date.
In addition, the Index is rebalanced on an ongoing basis to accommodate
extraordinary events, such as new listings, initial public offerings, spin-offs,
delistings, bankruptcies, mergers and acquisitions, and changes of more than 10%
in the number of outstanding shares of an Index component.
NYSE U.S. 100 Index
Number of Components: 100
Index Overview and Description. The Index measures the performance of the 100
largest U.S. companies, based on market capitalization, listed on the NYSE. As
of January 2004, these companies have a total market capitalization of
approximately $5.8 trillion, which represents approximately 47% of the entire
market capitalization of U.S. registered equity securities and approximately 40%
the market capitalization of all common stocks listed on the NYSE. The Index is
weighted using free-float market capitalization and is calculated on both price
(i.e., real-time) and total return (i.e., end of trading day) basis. The Index
is fully transparent and rule-based. The Index is calculated and maintained by
Dow Jones Indexes pursuant to a contractual agreement with NYSE.
Methodology. Only common stocks and other securities that have the
characteristics of common equities of U.S. companies listed on the NYSE are
eligible for inclusion in the Index. Fixed-dividend shares and securities such
as convertible notes, warrants, rights, mutual funds, unit investment trusts,
closed-end fund shares, shares in limited partnerships and tracking stocks are
not eligible for inclusion in the Index. Companies that have less than 100,000
shares in average daily trading volume for the preceding three months are
ineligible for inclusion in the Index. If a company has multiple share classes,
only the class of shares that has the highest average daily trading volume
during the preceding three months is included in the Index.
Calculation and Dissemination. The Index is calculated whenever the NYSE is open
using the latest traded price on the NYSE for each security in the Index.
Following the determination of the previous day's closing Index value, the Index
values for the current day are updated and disseminated following the opening of
NYSE trading on a real-time basis beginning when the first traded price of any
of the Index components are received.
If trading in a security is suspended while the NYSE is open, the last traded
price for that security on the NYSE is used for all subsequent index
computations until trading resumes. If trading is suspended before the opening,
the security's adjusted closing price from the previous day is used to calculate
the Index. Until a particular security opens, its adjusted closing price from
the previous day is used in the Index computation. These prices are computed on
both a price and total-return basis in U.S. dollars. The price index is updated
on a real-time basis, while the total-return index is calculated and
disseminated on an end-of-day basis.
Weighting. The Index is weighted by float-adjusted market capitalization, rather
than full market capitalization, to reflect the actual number of shares
available to investors. Shares held by governments, corporations, strategic
partners of the issuer and other control groups are excluded from a company's
available float when determining Index weightings.
Dividend Treatment. Normal dividend payments are not taken into account in the
price index, whereas they are reinvested and
accounted for in the total return index. However, special dividends from
non-operating income require Index divisor adjustments to prevent the
distributions from distorting the price index.
Index Maintenance. The Index is rebalanced quarterly, with an "80-120" buffer
applied to limit turnover. When the eligible universe is ranked by market
capitalization, all stocks (components and new components) in the top 80 are
automatically included in the Index while all stocks ranked below 120, including
prior components, are automatically excluded. The remaining components are
selected from stocks falling between 80 and 120, starting with the highest
ranked prior components. If all prior components in this group have been added
to the Index and spaces are still left, new components are added, starting with
the largest.
Initial public offerings ("IPOs") and new listings are eligible for inclusion at
the quarterly rebalancing following their sale or listing, provided that their
market capitalization and trading volumes have met the threshold for inclusion
for at least five trading days. However, if an IPO company or new listing would
be in the top 25% of the Index's market capitalization, it may be included
between reviews, provided that a minimum notification period of two business
days is observed.
In addition to the scheduled quarterly rebalancing, the Index is rebalanced on
an ongoing basis to accommodate extraordinary events, such as delistings,
bankruptcies, mergers and acquisitions and changes of more than 10% in the
number of outstanding shares of an Index component.
Investment Limitations
The Board has adopted as fundamental policies each Fund's investment
restrictions, numbered one through six below. These restrictions cannot be
changed with respect to a Fund without the approval of the holders of a majority
of that Fund's outstanding voting securities. A vote of a majority of the
outstanding voting securities is defined in the 1940 Act as the lesser of (a)
67% or more of the voting securities present at a fund meeting, if the holders
of more than 50% of the outstanding voting securities are present or represented
by proxy, or (b) more than 50% of outstanding voting securities. Each Fund may
change its investment objective and its Underlying Index without a shareholder
vote.
No Fund will:
1. Concentrate its investments (i.e., hold 25% or more of its total assets in
the stocks of a particular industry or group of industries), except that a
Fund will concentrate to approximately the same extent that its Underlying
Index concentrates in the stocks of such particular industry or group of
industries. For purposes of this limitation, securities of the U.S.
Government (including its agencies and instrumentalities), repurchase
agreements collateralized by U.S. Government securities, and securities of
state or municipal governments and their political subdivisions are not
considered to be issued by members of any industry.
2. Borrow money, except that (i) each Fund may borrow from banks for temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests which might otherwise require the untimely disposition of
securities, and (ii) each Fund may, to the extent consistent with its
investment policies, enter into repurchase agreements, reverse repurchase
agreements, forward roll transactions and similar investment strategies and
techniques. To the extent that it engages in transactions described in (i)
and (ii), each Fund will be limited so that no more than 33 1/3% of the
value of its total assets (including the amount borrowed) is derived from
such transactions. Any borrowings which come to exceed this amount will be
reduced in accordance with applicable law.
3. Issue "senior securities" as defined in the 1940 Act and the rules,
regulations and orders thereunder, except as permitted under the 1940 Act
and the rules, regulations and orders thereunder.
4. Make loans. This restriction does not apply to: (i) the purchase of debt
obligations in which each Fund may invest consistent with its investment
objectives and policies; (ii) repurchase agreements and reverse repurchase
agreements; and (iii) loans of its portfolio securities, to the fullest
extent permitted under the 1940 Act.
5. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts, but this restriction shall not prevent each Fund from
trading in futures contracts and options on futures contracts (including
options on currencies to the extent consistent with each Fund's investment
objective and policies).
--------------------------------------------------------------------------------
page 10 i|Shares
6. Engage in the business of underwriting securities issued by other persons,
except to the extent that each Fund may technically be deemed to be an
underwriter under the Securities Act of 1933, as amended (the "Securities
Act"), in disposing of portfolio securities.
In addition to the investment restrictions adopted as fundamental policies, set
forth above, each Fund will not invest in the securities of a company for the
purpose of exercising management or control or purchase or otherwise acquire any
illiquid security, except as permitted under the 1940 Act, which currently
permits up to 15% of each Fund's net assets to be invested in illiquid
securities.
For purposes of the percentage limitation on each Fund's investments in illiquid
securities, foreign equity securities, though not registered under the
Securities Act, are not deemed illiquid with respect to each Fund if they are
otherwise readily marketable. Such securities ordinarily are considered to be
"readily marketable" if they are traded on an exchange or another organized
market and are not legally restricted from sale by the Fund. BGFA monitors the
liquidity of restricted securities in each Fund's portfolio. In reaching
liquidity decisions, BGFA considers the following factors:
.. The frequency of trades and quotes for the security;
.. The number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;
.. Dealer undertakings to make a market in the security; and
.. The nature of the security and the nature of the marketplace in which it
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
If any percentage restriction described above is complied with at the time of an
investment, a later increase or decrease in percentage resulting from any change
in value or total or net assets will not constitute a violation of such
restriction, except that certain percentage limitations will be observed
continuously in accordance with applicable law.
Continuous Offering
The method by which Creation Unit Aggregations of iShares are created and traded
may raise certain issues under applicable securities laws. Because new Creation
Unit Aggregations of iShares are issued and sold by the Funds on an ongoing
basis, at any point a "distribution" as such term is used in the Securities Act,
may occur. Broker-dealers and other persons are cautioned that some activities
on their part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent iShares, and sells such
iShares directly to customers, or if it chooses to couple the creation of a
supply of new iShares with an active selling effort involving solicitation of
secondary market demand for iShares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or its
client in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to a
categorization as an underwriter.
Broker-dealer firms should also note that dealers who are not "underwriters" but
are effecting transactions in iShares, whether or not participating in the
distribution of iShares, are generally required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3) of the Securities Act
is not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act. Firms that incur a prospectus delivery obligation with respect to
iShares are reminded that, pursuant to Rule 153 under the Securities Act, a
prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed
to an exchange member in connection with a sale on the Listing Exchange is
satisfied by the fact that the Prospectus is available at the Listing Exchange
upon request. The prospectus delivery mechanism provided in Rule 153 is only
available with respect to transactions on an exchange.
Management
Trustees and Officers. The Board has responsibility for the overall management
and operations of the Funds, including general supervision of the duties
performed by BGFA and other service providers. Each Trustee serves until his or
her successor is duly elected or appointed and qualified.
iShares Trust, iShares, Inc., Master Investment Portfolio and Barclays Global
Investors Funds, each an open-end management investment company registered under
the 1940 Act, are considered to be members of the same fund complex, as defined
in Form N-1A under the 1940 Act. Each Trustee also serves as a Director for
iShares, Inc. and, as a result, oversees a total of 82 funds within the fund
complex. In addition, Richard K. Lyons and Lee T. Kranefuss each serve as a
Trustee for Barclays Global Investors Funds and Master Investment Portfolio and,
as a result, oversees an additional 25 portfolios within the fund complex.
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page 12 i|Shares
TRUSTEES AND OFFICERS
---------------------------------------------------------------------------------------------------------
POSITION(s), PRINCIPAL OCCUPATION(s)
NAME, AGE AND ADDRESS LENGTH OF SERVICE DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
*Lee T. Kranefuss (42) Interested Chief Executive Officer of Director (since June 18,
Barclays Global Investors Trustee, the Individual Investor 2003) of iShares, Inc.;
45 Fremont Street Chairman, and Business of Barclays Global Board of Trustees for
San Francisco, CA 94105 President (since Investors, N.A.; The Boston Barclays Global Investors
June 18, 2003) Consulting Group (until Funds and Master
1997). Investment Portfolio
(since 2001).
*Nathan Most (89) Interested Consultant to BGI Director (since 1996) and
P.O. Box 193 Trustee (since (1998-present), American President (1996-2002) of
Burlingame, CA 94011 December 16, Stock Exchange (1996-2000) iShares, Inc.
1999) and the Hong Kong Stock
Exchange (1998 to present);
Consultant to the Amsterdam
Stock Exchange (1997-1998);
Consultant to the Pacific
Stock Exchange (1997-1998).
*John E. Martinez (42) Interested Co-CEO of Global Index and Director (since December
444 Yale Avenue Trustee (since Markets Group of BGI (2001- 5, 2003) of iShares,
Kensington, CA 94708 December 5, 2003) 2003); Chairman of Barclays Inc.; Director (since
Global Investors Services November 2003) of
(2000-2003); CEO of Capital Barclays Global Investors
Markets Group of Barclays UK Holdings.
Global Investors (1996-
2001).
POSITION(s), PRINCIPAL OCCUPATION(s)
NAME, AGE AND ADDRESS LENGTH OF SERVICE DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
---------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
John B. Carroll (68) Trustee (since Retired Vice President of Director (since 1996) of
520 Main Street January 1, 2002) Investment Management iShares, Inc.; Trustee and
Ridgefield, CT 06877 (1984-2000) of Verizon member of the Executive
Corporation; Advisory Board Committee (since 1991) of
member of Ibbotson The Common Fund
Associates (1992-1998); Institutional Funds, a
former Vice Chairman and non-profit organization;
Executive Committee Member Member of the Board of
(1994-1998) of the Committee Managers of JP Morgan
on Investment of Employee Private Equity Funds.
Benefit Assets of the
Financial Executive
Institute.
Richard K. Lyons (42) Trustee (since Professor, University of Director (since 2001) of
Haas School of Business, February 15, 2000) California, Berkeley: Haas iShares, Inc.; Board of
UC Berkeley School of Business (since Trustees: Matthews Asian
Berkeley, CA 94720 1993); Consultant for IMF Funds since 1995 (oversees
World Bank, Federal Reserve 6 portfolios).
Bank, and Citibank N.A.
(since 2000).
George C. Parker (64) Trustee (since Dean Witter Distinguished Director (since 2001) of
Graduate School of Business February 15, 2000) Professor of Finance (since iShares, Inc.; Board of
(Room K301) 1994); Associate Dean for Directors: Affinity Group
Stanford University Academic Affairs, Director (since 1998); Bailard,
521 Memorial Way of MBA Program, and Biehl and Kaiser, Inc.
Stanford, CA 94305 Professor, Stanford (since 1985); California
University: Graduate School Casualty Group of
of Business (1993-2001). Insurance Companies (since
1978); Continental
Airlines, Inc. (since
1996); Community First
Financial Group (since
1995); Dresdner/RCM Mutual
Funds (1994-2002); Tyon
Ranch Company (since 1999).
W. Allen Reed (56) Trustee (since President and Chief Director (since 1996) of
General Motors Investment January 1, 2002) Executive Officer (since iShares, Inc.; Director
Management Corp. 1994) of General Motors (since 1994) of General
767 Fifth Avenue Investment Management Motors Investment
New York, NY 10153 Corporation. Management Corporation;
Director (1995-1998) of
Taubman Centers, Inc. (a
real estate investment
trust); Director (since
1992) of FLIR Systems (an
imaging technology
company); Director (since
1994) of General Motors
Acceptance Corporation;
Director (since 1994) of
GMAC Insurance Holdings,
Inc.; Director (since
1995) of Global Emerging
Markets Fund; Director
(since 2000) of Temple
Inland Industries;
Chairman (since 1995) of
the Investment Advisory
Committee of Howard Hughes
Medical Institute.
OFFICER
Michael Latham (38) Secretary, Director of Mutual Fund None.
Barclays Global Investors Treasurer and Delivery in the U.S.
45 Fremont Street Principal Individual Investor Business
San Francisco, CA 94105 Financial Officer of BGI (since 2000); Head of
Operations, BGI Europe
(1997-2000).
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page 14 i|Shares
The following table sets forth, as of December 31, 2002, the dollar range of
equity securities in the Funds and in other registered investment companies
overseen by the Trustee within the same family of investment companies as the
Trust that are beneficially owned by each Trustee.
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF COMPANIES OVERSEEN BY
EQUITY SECURITIES TRUSTEE IN FAMILY OF
NAME OF TRUSTEE NAME OF FUND IN THE FUND INVESTMENT COMPANIES
--------------------------------------------------------------------------------------------------------
Garrett F. Bouton* iShares MSCI EAFE Over $100,000 Over $100,000
iShares Russell 2000 Growth Over $100,000
John B. Carroll None Not Applicable Not Applicable
Richard K. Lyons iShares S&P 500 $1-$10,000 Over $100,000
iShares Lehman 1-3 Year Treasury Bond Over $100,000
Fund
Nathan Most iShares Russell 2000 Over $100,000 Over $100,000
iShares S&P Midcap 400 Over $100,000
George C. Parker iShares Dow Jones U.S. Technology $10,001-$50,000 Over $100,000
Sector
iShares MSCI France $10,001-$50,000
iShares MSCI South Korea $10,001-$50,000
iShares MSCI Mexico $10,001-$50,000
iShares MSCI Singapore $10,001-$50,000
iShares MSCI United Kingdom $10,001-$50,000
iShares Russell 1000 Value Over $100,000
iShares S&P 100 Index $50,001-$100,000
iShares S&P Global 100 $10,001-$50,000
iShares S&P MidCap 400/Barra Value $10,001-$50,000
W. Allen Reed None Not Applicable Not Applicable
* Served as Trustee through June 17, 2003.
None of the Trustees who are not interested persons (as defined in the 1940 Act)
of the Trust ("Independent Trustees") or their immediate family members own
beneficially or of record any securities of BGFA (the Funds' investment
adviser), SEI (the Funds' distributor) or any person controlling, controlled by
or under control with, BGFA or SEI.
Committees of the Board of Trustees. Each Independent Trustee serves on the
Audit and Nominating Committees of the Board. The purposes of the Audit
Committee are to assist the Board of Trustees (1) in its oversight of the
Trust's accounting and financial reporting principles and policies and related
controls and procedures maintained by or on behalf of the Trust; (2) in its
oversight of the Trust's/Company's financial statements and the independent
audit thereof; (3) in selecting, evaluating and, where deemed appropriate,
replacing the independent accountants (or nominating the independent accountants
to be proposed for shareholder approval in any proxy statement); and (4) in
evaluating the independence of the independent accountants.
The Nominating Committee nominates individuals for Independent Trustee
membership on the Board of Trustees. The Nominating Committee evaluates
candidates' qualifications for board membership, including their independence
from the investment adviser and other principal service providers and the
potential effects of any other relationship that might impair the independence
of a candidate. In addition, the Nominating Committee periodically reviews the
composition of the Board of Trustees to determine whether it may be appropriate
to add individuals with different backgrounds or skills from those already on
the Board of Trustees.
Approval of Investment Advisory Contract. Under Section 15(c) of the 1940 Act,
the Board is generally required to approve the Trust's investment advisory
contract with BGFA (the "Investment Advisory Agreement") annually. The Board is
provided with quantitative and qualitative information to assist the Board in
evaluating the terms of the Investment Advisory Agreement. This information
includes comparative fee information, profitability information, performance
data, a description of the investment philosophy, experience and senior
management of the investment adviser, as well as a description of the quality of
services provided by the investment adviser.
Before approving the Investment Advisory Agreement, the Board reviewed a
detailed profitability analysis of BGFA based on the fees payable under the
Investment Advisory Agreement as well as any other servicing relationships
between the Trust and BGFA or its affiliates. The Board analyzed the Trust's
contractual fees, including the investment advisory fee, as well as
co-administration and Rule 12b-1 distribution fees, if any.
The Board also reviewed statistical information regarding the performance and
expenses of the Funds. Prior to reviewing the statistical information, the Board
was provided with a detailed description of the methodology used to prepare this
information. In addition to the performance information for the Funds, the Board
reviewed the performance information for a group of funds that the BGFA
determined was similar to each Fund ("Peer Group") and an appropriate
broad-based market index. The Board then reviewed a comparison of each Fund's
advisory fee, other fees and total expense ratio to other funds in the Peer
Group.
During its review, the Board considered the advisory fees paid by the Funds as
well as the total fees paid to BGFA and its affiliates for advisory and other
services provided to the Funds. The Board also reviewed information pertaining
to the fee structure for the Funds and considered whether alternative fee
structures (i.e., breakpoint fee structures or performance-based fees) would be
more appropriate or reasonable taking into consideration any economies of scale
or other efficiencies that accrue from increases in the Funds' asset levels.
In addition, the Board analyzed BGFA's background and services that it provides
to the Funds. For example, the Board reviewed and discussed the investment
philosophy and experience of BGFA. The Board also considered the background and
experience of the senior management of BGFA and the level of attention given to
the Funds by senior investment personnel of BGFA. In addition to the above
considerations, the Board also analyzed BGFA's indexing strategies, research
capabilities, means for executing portfolio transactions and scope of investment
services. The Board received a presentation from BGFA and reviewed the
qualifications, backgrounds and responsibilities of the staff performing
investment services for the Funds. The Board recognized that BGFA has the size,
visibility and resources to attract and retain highly qualified investment
professionals. Similarly, the Board reviewed BGFA's ability to provide a
competitive compensation package to its employees such that each entity would be
able to attract and retain high-quality employees.
Based on the above analysis, the Board determined that the Investment Advisory
Agreement for each Fund, including the fee level, was fair and reasonable in
light of all relevant circumstances. This determination was based on the
following factors as discussed above: (i) level of profits that may be realized
by BGFA from its advisory arrangement with the Fund; (ii) an analysis of
advisory fees paid by the Fund compared to other similar funds; (iii) the scope
of BGFA's background and experience; and (iv) the quality of services provided
by BGFA.
Remuneration of Trustees. The Trust pays each Independent Trustee an annual fee
of $32,500 for meetings of the Board attended by the Trustee. The Trust also
reimburses each Trustee for travel and other out-of-pocket expenses incurred by
him/her in connection with attending such meetings.
The table below sets forth the compensation paid to each Trustee for the
calendar year ended December 31, 2002:
AGGREGATE PENSION OR
ESTIMATED RETIREMENT TOTAL ESTIMATED
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL COMPENSATION
FROM THE AS PART OF TRUST BENEFITS UPON FROM THE FUND
NAME OF TRUSTEE TRUST EXPENSES*** RETIREMENT*** AND FUND COMPLEX*
--------------- ------------ ---------------- ---------------- -----------------
Garrett F. Bouton****................................ $ 0 Not Applicable Not Applicable $ 0
John B. Carroll...................................... $ 32,500 Not Applicable Not Applicable $ 65,000
Richard K. Lyons..................................... $ 32,500 Not Applicable Not Applicable $ 90,000**
Nathan Most.......................................... $ 12,500 Not Applicable Not Applicable $ 25,000
George G.C. Parker................................... $ 32,500 Not Applicable Not Applicable $ 65,000
W. Allen Reed........................................ $ 32,500 Not Applicable Not Applicable $ 65,000
* Includes compensation as Director of iShares, Inc., an investment company
with 24 investment portfolios also advised by BGFA.
** Includes compensation as Trustee for Barclays Global Investors Funds and
Master Investment Portfolio, investment companies with 25 portfolios also
advised by BGFA.
*** No Trustee or Officer is entitled to any pension or retirement benefits
from the Trust.
**** Served as Trustee through June 17, 2003.
Trustees and officers of the Trust collectively owned less than 1% of each of
the Fund's outstanding shares as of November 17, 2003.
--------------------------------------------------------------------------------
page 16 i|Shares
Investment Advisor. BGFA serves as investment advisor to each Fund pursuant to
an Investment Advisory Agreement between the Trust and BGFA. BGFA is a
California corporation indirectly owned by Barclays Bank PLC and is registered
as an investment advisor under the Investment Advisers Act of 1940. Under the
Investment Advisory Agreement, BGFA, subject to the supervision of the Board and
in conformity with the stated investment policies of each Fund, manages and
administers the Trust and the investment of each Fund's assets. BGFA is
responsible for placing purchase and sale orders and providing continuous
supervision of the investment portfolio of each Fund.
The Investment Advisory Agreement between the Trust and BGFA was most recently
renewed by the Board of Trustees on June 17, 2003 and approved with respect to
the Funds on December 5, 2003. In making the determination to approve the
Investment Advisory Agreement, the Board considered the qualifications of BGFA
to provide advisory services, an analysis of BGFA's profitability, and the
reasonableness of the advisory fees paid to BGFA in relation to the services
provided and the advisory fees paid by other comparable mutual funds. Based on
these considerations, the Board concluded that the terms of the Investment
Advisory Agreement are fair and reasonable with respect to the Trust, are in the
best interests of the Trust's shareholders, and are similar to those that could
have been obtained through arm's length negotiations.
Under the Investment Advisory Agreement, BGFA is responsible for all expenses of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest, taxes, any brokerage
commissions and other expenses connected with the execution of portfolio
transactions, any distribution fees and extraordinary expenses. For its
investment management services to the iShares NYSE Composite Index Fund, BGFA
will be paid a management fee at the annual rate (as a percentage of the Fund's
aggregate net assets) of 0.20%. For its investment management services to the
iShares NYSE 100 Index Fund, BGFA will be paid a management fee at the annual
rate (as a percentage of the Fund's aggregate net assets) of 0.25%.
The Investment Advisory Agreement with respect to each Fund continues in effect
for two years from its effective date, and thereafter is subject to annual
approval by (i) the Board or (ii) vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, provided that in either
event such continuance also is approved by a majority of the Board who are not
interested persons (as defined in the 1940 Act) of the Fund, by a vote cast in
person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreement with respect to each Fund is terminable
without penalty, on 60-days notice, by the Board or by a vote of the holders of
a majority (as defined in the 1940 Act) of the applicable Fund's outstanding
voting securities. The Investment Advisory Agreement is also terminable upon
60-days notice by BGFA and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
Current interpretations of federal banking laws and regulations (i) may prohibit
Barclays Bank PLC, BGI and BGFA from controlling or underwriting the iShares,
but (ii) would not prohibit Barclays Bank PLC or BGFA generally from acting as
an investment advisor, administrator, transfer agent or custodian to the Funds
or from purchasing iShares as agent for and upon the order of a customer.
BGFA believes that it may perform advisory and related services for the Trust
without violating applicable banking laws or regulations. However, the legal
requirements and interpretations about the permissible activities of banks and
their affiliates may change in the future. These changes could prevent BGFA from
continuing to perform services for the Trust. If this happens, the Board would
consider selecting other qualified firms. Any new investment advisory agreement
would be subject to shareholder approval.
If current restrictions on bank activities with mutual funds were relaxed, BGFA,
or its affiliates, would consider performing additional services for the Trust.
BGFA cannot predict whether these changes will be enacted, or the terms under
which BGFA, or its affiliates, might offer to provide additional services.
Code of Ethics. The Trust, BGFA, and SEI have adopted Codes of Ethics pursuant
to Rule 17j-1 under the 1940 Act. The Codes of Ethics permit personnel subject
to the Codes of Ethics to invest in securities, subject to certain limitations,
including securities that may be purchased or held by the Funds. The Codes
Ethics are on public file with, and are available from, the SEC.
Administrator, Custodian and Transfer Agent. Investors Bank & Trust Company
("Investors Bank") serves as Administrator, Custodian and Transfer Agent for the
Funds. Its principal address is 200 Clarendon Street, Boston, MA 02111. Under
the Administration Agreement with the Trust, Investors Bank provides necessary
administrative and accounting services for the maintenance and operations of the
Trust and each Fund. In addition, Investors Bank makes available the office
space, equipment, personnel and facilities required to provide such services.
Under the Custodian Agreement with the Trust, Investors Bank maintains in
separate accounts cash, securities and other assets of the Trust and each Fund,
keeps all necessary accounts and records, and provides other services. Investors
Bank is required, upon the order of the Trust, to deliver securities held by
Investors Bank and to make payments for securities purchased by the Trust for
each Fund. Also, under a Delegation Agreement, Investors Bank is authorized to
appoint certain foreign custodians or foreign custody managers for Fund
investments outside the United States. Pursuant to a Transfer Agency and Service
Agreement with the Trust, Investors Bank acts as a transfer agent for
each Fund's authorized and issued shares of beneficial interest, and as dividend
disbursing agent of the Trust. As compensation for the foregoing services,
Investors Bank receives certain out-of-pocket costs, transaction fees and
asset-based fees which are accrued daily and paid monthly by BGFA from its
management fee.
Distributor. SEI Investments Distribution Co. (the "Distributor") is the
distributor of iShares. Its address is 1 Freedom Valley Drive, Oaks, PA 19456.
The Distributor has entered into a Distribution Agreement with the Trust
pursuant to which it distributes iShares of each Fund. The Distribution
Agreement will continue for two years from its effective date and is renewable
annually thereafter. iShares are continuously offered for sale by the Funds
through the Distributor only in Creation Unit Aggregations, as described in the
Prospectus and below in the Creation and Redemption of Creation Units
Aggregations section. iShares in less than Creation Unit Aggregations are not
distributed by the Distributor. The Distributor will deliver the Prospectus and,
upon request, the Statement of Additional Information to persons purchasing
Creation Unit Aggregations and will maintain records of both orders placed with
it and confirmations of acceptance furnished by it. The Distributor is a
broker-dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of the National Association of Securities Dealers,
Inc. ("NASD").
The Distribution Agreement for each Fund will provide that it may be terminated
at any time, without the payment of any penalty, on at least 60-days' written
notice to the other party (i) by vote of a majority of the Independent Trustees
or (ii) by vote of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the relevant Fund. The Distribution Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of iShares. Such Soliciting Dealers may also be Authorized Participants (as
defined below), DTC Participants (as defined below) and/or investor services
organizations.
BGFA or BGI may, from time to time and from its own resources, pay, defray or
absorb costs relating to distribution, including payments out of its own
resources to the Distributor, or to otherwise promote the sale of iShares.
Index Provider. The NYSE is the index provider for the NYSE Composite Index and
the NYSE U.S. 100 Index. The NYSE is not affiliated with the Trust, BGI, BGFA,
Investors Bank, or the Distributor. The New York Stock Exchange is an equities
marketplace that lists securities of companies valued at approximately $17
trillion in market capitalization. Dow Jones Indexes, a part of Dow Jones and
Company, maintains and calculates the NYSE Composite Index and the NYSE U.S. 100
Index for the NYSE pursuant to contractual agreement. Dow Jones Indexes is not
affiliated with the NYSE, the Trust, BGI, BGFA, Investors Bank, or the
Distributor. BGI has entered into a license agreement with the NYSE to use the
NYSE Composite Index and the NYSE U.S. 100 Index. BGI is sub-licensing rights in
the NYSE Composite Index and the NYSE U.S. 100 Index to iShares Trust at no
charge.
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page 18 i|Shares
Brokerage Transactions
The policy of the Trust regarding purchases and sales of portfolio securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trust's policy is
to pay commissions that are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
In seeking to determine the reasonableness of brokerage commissions paid in any
transaction, BGFA relies upon its experience and knowledge regarding commissions
generally charged by various brokers.
In seeking to implement the Trust's policies, BGFA effects transactions with
those brokers and dealers that BGFA believes provide the most favorable prices
and are capable of providing efficient executions. BGFA and its affiliates do
not participate in soft dollar transactions.
The Trust may execute brokerage or other agency transactions through affiliates
that are registered broker-dealers, for commissions, in conformity with the 1940
Act, the Exchange Act and rules promulgated by the SEC. Under these provisions,
affiliates of BGFA are permitted to receive and retain compensation for
effecting portfolio transactions for the Trust on an exchange if a written
contract is in effect between the affiliate and the Trust expressly permitting
the affiliate of BGFA to receive and retain such compensation. These rules
further require that the commissions paid by the Trust for exchange transactions
not exceed "usual and customary" brokerage commissions. The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." The Trustees, including the Independent Trustees, have adopted
procedures for evaluating the reasonableness of commissions paid and will review
these procedures periodically.
The Trust will not deal with affiliates in principal transactions unless
permitted by the applicable SEC rule or regulation or by SEC exemptive order.
BGFA assumes general supervision over placing orders on behalf of the Funds for
the purchase or sale of portfolio securities. If purchases or sales of portfolio
securities of the Funds and one or more other investment companies or clients
supervised by BGFA are considered at or about the same time, transactions in
such securities are allocated among the several investment companies and clients
in a manner deemed equitable to all by BGFA. In some cases, this procedure could
have a detrimental effect on the price or volume of the security as far as the
Funds are concerned. However, in other cases, it is possible that the ability to
participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to the Funds. The primary consideration is prompt execution
of orders at the most favorable net price.
Portfolio turnover may vary from year to year, as well as within a year. High
turnover rates are likely to result in comparatively greater brokerage expenses.
The portfolio turnover rate for each Fund is expected to be under 50%. The
overall reasonableness of brokerage commissions is evaluated by BGFA based upon
its knowledge of available information as to the general level of commissions
paid by the other institutional investors for comparable services.
Additional Information Concerning the Trust
Shares. The Trust was established as a Delaware statutory trust on December 16,
1999. The Trust currently is comprised of over 50 Funds. Each Fund issues shares
of beneficial interest, with no par value. The Board may designate additional
Funds. Each Fund is currently registered with the SEC as an open-end management
investment company.
Each iShare issued by a Fund has a pro rata interest in the assets of that Fund.
iShares have no preemptive, exchange, subscription or conversion rights and are
freely transferable. Each iShare is entitled to participate equally in dividends
and distributions declared by the Board with respect to the relevant Fund, and
in the net distributable assets of such Fund on liquidation.
Each iShare has one vote with respect to matters upon which a shareholder vote
is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder. iShares of all Funds vote together as a single class
except that, if the matter being voted on affects only a particular Fund, and,
if a matter affects a particular Fund differently from other Funds, that Fund
will vote separately on such matter.
Under Delaware law, the Trust is not required to hold an annual meeting of
shareholders unless required to do so under the 1940 Act. The policy of the
Trust is not to hold an annual meeting of shareholders unless required to do so
under the 1940 Act. All iShares (regardless of the Fund) have noncumulative
voting rights for the Board. Under Delaware law, Trustees of the Trust may be
removed by vote of the shareholders.
Following the creation of the initial Creation Unit Aggregation(s) of iShares of
a Fund and immediately prior to the commencement of trading in such Fund's
iShares, a holder of iShares may be a "control person" of the Fund, as defined
in the 1940 Act. A Fund cannot predict the length of time for which one or more
shareholders may remain a control person of the Fund.
Shareholders may make inquiries by writing to the Trust, c/o the Distributor,
SEI Investments Distribution Co., at 1 Freedom Valley Drive, Oaks, PA 19456.
Absent an applicable exemption or other relief from the SEC or its staff,
beneficial owners of more than 5% of the iShares of a Fund may be subject to the
reporting provisions of Section 13 of the Exchange Act and the SEC's rules
promulgated thereunder. In addition, absent an applicable exemption or other
relief from the SEC or its staff, officers and Trustees of a Fund and beneficial
owners of 10% of the iShares of a Fund ("Insiders") may be subject to the
insider reporting, short-swing profit and short sale provisions of Section 16 of
the Exchange Act and the SEC's rules promulgated thereunder. Beneficial owners
and Insiders should consult with their own legal counsel concerning their
obligations under Sections 13 and 16 of the Exchange Act.
Termination of the Trust or a Fund. The Trust or a Fund may be terminated by a
majority vote of the Board or the affirmative vote of a super majority of the
holders of the Trust or such Fund entitled to vote on termination. Although the
iShares are not automatically redeemable upon the occurrence of any specific
event, the Trust's organizational documents provide that the Board will have the
unrestricted power to alter the number of iShares in a Creation Unit
Aggregation. In the event of a termination of the Trust or a Fund, the Board, in
its sole discretion, could determine to permit the iShares to be redeemable in
aggregations smaller than Creation Unit Aggregations or to be individually
redeemable. In such circumstance, the Trust may make redemptions in-kind, for
cash, or for a combination of cash or securities.
DTC Acts as Securities Depository for the iShares. iShares of each Fund are
represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.
DTC, a limited-purpose trust company, was created to hold securities of its
participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities'
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the NYSE, the AMEX and the NASD. Access
to the DTC system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant, either directly or indirectly (the "Indirect Participants").
Beneficial ownership of iShares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in iShares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of iShares.
Conveyance of all notices, statements and other communications to Beneficial
Owners is effected as follows. Pursuant to the Depositary Agreement between the
Trust and DTC, DTC is required to make available to the Trust upon request and
for a fee to be charged to the Trust a listing of the iShares of each Fund held
by each DTC Participant. The Trust shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding iShares, directly or indirectly,
through such DTC Participant. The Trust shall provide each such DTC Participant
with copies of such notice, statement or other communication, in such form,
number and at such place as such DTC Participant may reasonably request, in
order that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In addition,
the Trust shall pay to each such DTC Participant a fair and reasonable amount as
reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements.
Share distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all iShares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in iShares of
each Fund as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of iShares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name", and will be the
responsibility of such DTC Participants.
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page 20 i|Shares
The Trust has no responsibility or liability for any aspect of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such iShares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests, or for
any other aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.
DTC may decide to discontinue providing its service with respect to iShares at
any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action to find a replacement for DTC to
perform its functions at a comparable cost.
Creation and Redemption of Creation Unit Aggregations
Creation. The Trust issues and sells iShares of each Fund only in Creation Unit
Aggregations on a continuous basis through the Distributor, without a sales
load, at the NAV next determined after receipt, on any Business Day (as defined
below), of an order in proper form.
A "Business Day" with respect to each Fund is any day on which the NYSE is open
for trading. As of the date of the Prospectus, the NYSE observes the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Fund Deposit. The consideration for purchase of Creation Unit Aggregations of a
Fund generally consists of the in-kind deposit of a designated portfolio of
equity securities (the "Deposit Securities"), which constitutes a substantial
replication, or a portfolio sampling representation, of the stocks involved in
the relevant Fund's Underlying Index, and an amount of cash (the "Cash
Component") computed as described below. Together, the Deposit Securities and
the Cash Component constitute the "Fund Deposit," which represents the minimum
initial and subsequent investment amount for a Creation Unit Aggregation of any
Fund.
The Cash Component is sometimes also referred to as the "Balancing Amount." The
Cash Component serves the function of compensating for any differences between
the NAV per Creation Unit Aggregation and the Deposit Amount (as defined below).
The Cash Component is an amount equal to the difference between the NAV of the
iShares (per Creation Unit Aggregation) and the "Deposit Amount," which is an
amount equal to the market value of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the creator will deliver the Cash Component. If the
Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation
is less than the Deposit Amount), the creator will receive the Cash Component.
Computation of the Cash Component excludes any stamp duty or other similar fees
and expenses payable upon transfer of beneficial ownership of the Deposit
Securities, which shall be the sole responsibility of the Authorized
Participant.
BGFA, through the National Securities Clearing Corporation ("NSCC"), makes
available on each Business Day, prior to the opening of business on the NYSE
(currently 9:30 am, Eastern time), the list of the names and the required number
of shares of each Deposit Security to be included in the current Fund Deposit
(based on information at the end of the previous Business Day) for each Fund.
Such Deposit Securities are applicable, subject to any adjustments as described
below, in order to effect creations of Creation Unit Aggregations of a given
Fund until such time as the next-announced composition of the Deposit Securities
is made available.
The identity and number of shares of the Deposit Securities required for a Fund
Deposit for each Fund changes as rebalancing adjustments and corporate action
events are reflected from time to time by BGFA with a view to the investment
objective of the relevant Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
component securities of the relevant Underlying Index.
In addition, the Trust reserves the right to permit or require the substitution
of an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash
Component to replace any Deposit Security that may not be available in
sufficient quantity for delivery or that may not be eligible for transfer
through the systems of DTC or the Clearing Process (discussed below). The Trust
also reserves the right to permit or require a "cash in lieu" amount where the
delivery of the Deposit Security by the Authorized Participant (as described
below) would be restricted under the securities laws or where the delivery of
the Deposit Security to the Authorized Participant would result in the
disposition of the Deposit Security by the Authorized Participant becoming
restricted under the securities laws, or in certain other situations. The
adjustments described above will reflect changes known to BGFA on the date of
announcement to be in effect by the time of delivery of the Fund Deposit, in the
composition of the Underlying Index being tracked by the relevant Fund or
resulting from certain corporate actions.
Procedures for Creation of Creation Unit Aggregations. To be eligible to place
orders with the Distributor and to create a Creation Unit Aggregation of a Fund,
an entity must be (i) a "Participating Party", i.e., a broker-dealer or other
participant in the clearing process through the Continuous Net Settlement System
of the NSCC (the "Clearing Process"), a clearing agency that is registered with
the SEC; or (ii) a DTC Participant (see the Book Entry Only System section),
and, in each case, must have executed an agreement with the Distributor, with
respect to creations and redemptions of Creation Unit Aggregations ("Participant
Agreement") (discussed below). A Participating Party and DTC Participant are
collectively referred to as an "Authorized Participant". Investors should
contact the Distributor for the names of Authorized Participants that have
signed a Participant Agreement. All iShares of a Fund, however created, will be
entered on the records of DTC in the name of Cede & Co. for the account of a DTC
Participant.
All orders to create iShares must be placed for one or more Creation Unit
Aggregations. Each Fund is hereinafter referred to as a "Domestic Fund." All
orders to create Creation Unit Aggregations, whether through the Clearing
Process (through a Participating Party) or outside the Clearing Process (through
a DTC Participant), must be received by the Distributor no later than the
closing time of the regular trading session on the NYSE ("Closing Time")
(ordinarily 4:00 p.m., Eastern time) in each case on the date such order is
placed in order for creation of Creation Unit Aggregations to be effected based
on the NAV of iShares of the applicable Fund as next determined on such date
after receipt of the order in proper form. The date on which an order to create
Creation Unit Aggregations (or an order to redeem Creation Unit Aggregations, as
discussed below) is placed is referred to as the "Transmittal Date." Orders must
be transmitted by an Authorized Participant by telephone or other transmission
method acceptable to the Distributor pursuant to procedures set forth in the
Participant Agreement, as described below. Economic or market disruptions or
changes, or telephone or other communication failure may impede the ability to
reach the Distributor or an Authorized Participant.
All orders to create Creation Unit Aggregations shall be placed with an
Authorized Participant, as applicable, in the form required by such Authorized
Participant. In addition, the Authorized Participant may request the investor to
make certain representations or enter into agreements with respect to the order,
e.g., to provide for payments of cash, when required. Investors should be aware
that their particular broker may not have executed a Participant Agreement and
that, therefore, orders to create Creation Unit Aggregations of a Fund have to
be placed by the investor's broker through an Authorized Participant that has
executed a Participant Agreement. In such cases there may be additional charges
to such investor. At any given time, there may be only a limited number of
broker-dealers that have executed a Participant Agreement and only a small
number of such Authorized Participants may have international capabilities.
Those placing orders for Creation Unit Aggregations of Domestic Funds through
the Clearing Process should afford sufficient time to permit proper submission
of the order to the Distributor prior to the Closing Time on the Transmittal
Date. Orders for Creation Unit Aggregations of Domestic Funds that are effected
outside the Clearing Process are likely to require transmittal by the DTC
Participant earlier on the Transmittal Date than orders effected using the
Clearing Process. Those persons placing orders outside the Clearing Process
should ascertain the deadlines applicable to DTC and the Federal Reserve Bank
wire system by contacting the operations department of the broker or depository
institution effectuating such transfer of Deposit Securities and Cash Component.
Placement of Creation Orders for Domestic Funds Using the Clearing Process. The
Clearing Process is the process of creating or redeeming Creation Unit
Aggregations. Fund Deposits made through the Clearing Process must be delivered
through a Participating Party that has executed a Participant Agreement. The
Participant Agreement authorizes the Distributor to transmit through Investors
Bank to NSCC, on behalf of the Participating Party, such trade instructions as
are necessary to effect the Participating Party's creation order. Pursuant to
such trade instructions to NSCC, the Participating Party agrees to deliver the
requisite Deposit Securities and the Cash Component to the Trust, together with
such additional information as may be required by the applicable fund. An order
to create Creation Unit Aggregations through the Clearing Process is deemed
received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than the Closing Time on such Transmittal
Date, and (ii) all other procedures set forth in the Participant Agreement are
properly followed.
Placement of Creation Orders for Domestic Funds Outside the Clearing Process.
Fund Deposits made outside the Clearing Process must be delivered through a DTC
Participant that has executed a Participant Agreement. A DTC participant who
wishes to place an order creating Creation Unit Aggregations to be effected
outside the Clearing Process does not need to be a Participating Party, but such
orders must state that the DTC Participant is not using the Clearing Process and
that the creation of Creation Unit Aggregations will instead be effected through
a transfer of securities and cash directly through DTC. The Fund Deposit
transfer must be ordered by the DTC Participant on the Transmittal Date in a
timely fashion so as to ensure the delivery of the requisite number of Deposit
Securities through DTC to the account of the Fund by no later than 2:00 p.m.,
Eastern time, of the third Business Day following the Transmittal Date. In
certain cases Authorized Participants will create and redeem Creation
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page 22 i|Shares
Unit Aggregations of the same Fund on the same trade date. In these instances,
the Trust reserves the right to settle these transactions on a net basis.
All questions as to the number of Deposit Securities to be delivered, and the
validity, form and eligibility (including time of receipt) for the deposit of
any tendered securities, will be determined by the Trust, whose determination
shall be final and binding. The amount of cash equal to the Cash Component must
be transferred directly to Investors Bank through the Federal Reserve Bank wire
transfer system in a timely manner so as to be received by Investors Bank no
later than 2:00 p.m., Eastern time, on the third Business Day following such
Transmittal Date. An order to create Creation Unit Aggregations outside the
Clearing Process is deemed received by the Distributor on the Transmittal Date
if (i) such order is received by the Distributor not later than the Closing Time
on such Transmittal Date; and (ii) all other procedures set forth in the
Participant Agreement are properly followed. However, if Investors Bank does not
receive both the required Deposit Securities and the Cash Component by 2:00 p.m.
on the third Business Day following the Transmittal Date, such order may be
canceled. Upon written notice to the Distributor, such canceled order may be
resubmitted the following Business Day using a Fund Deposit as newly constituted
to reflect the then current NAV of the Fund. The delivery of Creation Unit
Aggregations so created will occur no later than the third (3rd) Business Day
following the day on which the purchase order is deemed received by the
Distributor.
An additional charge of up to three (3) times the normal transaction fee (for a
total charge of up to four (4) times the normal transaction fee) may be imposed
with respect to transactions effected outside the Clearing Process (through a
DTC Participant) and in the limited circumstances in which any cash can be used
in lieu of Deposit Securities to create Creation Units. This charge is subject
to a limit not to exceed 10/100 of 1% (10 basis points) of the value of one
Creation Unit at the time of creation.
Creation Unit Aggregations of Domestic Funds may be created in advance of
receipt by the Trust of all or a portion of the applicable Deposit Securities as
described below. In these circumstances, the initial deposit will have a value
greater than the NAV of the iShares on the date the order is placed in proper
form since, in addition to available Deposit Securities, cash must be deposited
in an amount equal to the sum of (i) the Cash Component, plus (ii) at least
105%, which BGFA may change from time to time, of the market value of the
undelivered Deposit Securities (the "Additional Cash Deposit") with the Fund
pending delivery of any missing Deposit Securities.
If an Authorized Participant determines to post an additional cash deposit as
collateral for any undelivered Deposit Securities, such Authorized Participant
must deposit with Investors Bank the appropriate amount of federal funds by 2:00
p.m., Eastern time, on the date of requested settlement. If the Authorized
Participant does not place its purchase order by the closing time or Investors
Bank does not receive federal funds in the appropriate amount by such time, then
the order may be deemed to be rejected and the Authorized Participant shall be
liable to the Fund for losses, if any, resulting therefrom. An additional amount
of cash shall be required to be deposited with Investors Bank, pending delivery
of the missing Deposit Securities to the extent necessary to maintain the
Additional Cash Deposit with the Trust in an amount at least equal to 105%,
which BGFA may change from time to time, of the daily marked to market value of
the missing Deposit Securities. To the extent that missing Deposit Securities
are not received by 2:00 p.m., Eastern time, on the third Business Day following
the transmittal date or in the event a marked-to-market payment is not made
within one Business Day following notification by the Distributor that such a
payment is required, the Trust may use the cash on deposit to purchase the
missing Deposit Securities. Authorized Participants will be liable to the Trust
for the costs incurred by the Trust in connection with any such purchases. These
costs will be deemed to include the amount by which the actual purchase price of
the Deposit Securities exceeds the market value of such Deposit Securities on
the transmittal date plus the brokerage and related transaction costs associated
with such purchases. The Trust will return any unused portion of the Additional
Cash Deposit once all of the missing Deposit Securities have been properly
received by Investors Bank or purchased by the Trust and deposited into the
Trust. In addition, a transaction fee, as listed below, will be charged in all
cases. The delivery of Creation Unit Aggregations so created will occur no later
than the third Business Day following the day on which the purchase order is
deemed received by the Distributor.
Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the
absolute right to reject a creation order transmitted to it by the Distributor
in respect of any Fund if: (i) the order is not in proper form; (ii) the
investor(s), upon obtaining the iShares ordered, would own 80% or more of the
currently outstanding shares of any Fund; (iii) the Deposit Securities delivered
are not as disseminated through the facilities of the NSCC for that date by
BGFA, as described above; (iv) acceptance of the Deposit Securities would have
certain adverse tax consequences to the Fund; (v) acceptance of the Fund Deposit
would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund
Deposit would otherwise, in the discretion of the Trust or BGFA, have an adverse
effect on the Trust or the rights of beneficial owners; or (vii) in the event
that circumstances outside the control of the Trust, Investors Bank, the
Distributor or BGFA make it for all practical purposes impossible to process
creation orders. Examples of such circumstances include acts of God; public
service or utility problems such as fires, floods, extreme weather conditions
and power outages resulting in telephone, telecopy and computer failures; market
conditions or activities causing trading halts; systems failures involving
computer or other information systems affecting the Trust, BGFA, the
Distributor, DTC, NSCC, Investors Bank or sub-custodian or any other participant
in the creation process, and similar extraordinary events. The Distributor shall
notify a prospective creator of a Creation Unit and/or the Authorized
Participant acting on behalf of the creator of a Creation Unit Aggregation of
its rejection of the order of such person. The Trust, Investors Bank, a
sub-custodian and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall any of them incur any liability for the failure to give any such
notification.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Trust, and the Trust's
determination shall be final and binding.
Creation Transaction Fee. A purchase transaction fee is imposed for the transfer
and other transaction costs of a Fund associated with the issuance of Creation
Units of iShares. The fee is a single charge and will be the same regardless of
the number of Creation Units purchased by a purchaser on the same day.
Purchasers of Creation Units of iShares for cash are required to pay an
additional variable charge to compensate for brokerage and market impact
expenses. Where the Trust permits an in-kind purchaser to substitute cash in
lieu of depositing a portion of the Deposit Securities, the purchaser will be
assessed the additional variable charge for cash purchases on the "cash in lieu"
portion of its investment. Investors will also bear the costs of transferring
the Deposit Securities to the Trust. Investors who use the services of a broker
or other such intermediary may be charged a fee for such services.
The following table sets forth the creation transaction fees for each Fund.
STANDARD MAXIMUM
CREATION CREATION
TRANSACTION TRANSACTION
NAME OF FUND FEE* FEE*
------------ ----------- -----------
iShares NYSE Composite Index Fund $ $
iShares NYSE 100 Index Fund $ $
* If a Creation Unit is purchased outside the usual process through the NSCC
or for cash, a variable fee will be charged of up to four times the
Standard Creation or Redemption Transaction Fee.
Redemption of iShares in Creation Units Aggregations. Shares may be redeemed
only in Creation Unit Aggregations at their NAV next determined after receipt of
a redemption request in proper form by the Fund through Investors Bank and only
on a Business Day. A Fund will not redeem iShares in amounts less than Creation
Unit Aggregations. Beneficial Owners must accumulate enough iShares in the
secondary market to constitute a Creation Unit Aggregation in order to have such
iShares redeemed by the Trust. There can be no assurance, however, that there
will be sufficient liquidity in the public trading market at any time to permit
assembly of a Creation Unit Aggregation. Investors should expect to incur
brokerage and other costs in connection with assembling a sufficient number of
shares to constitute a redeemable Creation Unit Aggregation.
With respect to each Fund, BGFA, (i) through the NSCC for Domestic Funds, and
(ii) through the Distributor, makes available immediately prior to the opening
of business on the NYSE (currently 9:30 am, Eastern time) on each Business Day,
the identity of the fund securities that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
described below) on that day ("Fund Securities"). Fund Securities received on
redemption may not be identical to Deposit Securities that are applicable to
creations of Creation Unit Aggregations.
Unless cash redemptions are available or specified for a Fund, the redemption
proceeds for a Creation Unit Aggregation generally consist of Fund Securities --
as announced on the Business Day of the request for redemption received in
proper form -- plus cash in an amount equal to the difference between the NAV of
the iShares being redeemed, as next determined after a receipt of a request in
proper form, and the value of the Fund Securities (the "Cash Redemption
Amount"), less a redemption transaction fee as listed below. In the event that
the Fund Securities have a value greater then the NAV of the iShares, a
compensating cash payment equal to the difference is required to be made by or
through an Authorized Participant by the redeeming shareholder.
The right of redemption may be suspended or the date of payment postponed with
respect to any Fund (i) for any period during which the NYSE is closed (other
than customary weekend and holiday closings); (ii) for any period during which
trading on the NYSE is suspended or restricted; (iii) for any period during
which an emergency exists as a result of which disposal of the iShares of a Fund
or determination of such Fund's NAV is not reasonably practicable; or (iv) in
such other circumstances as is permitted by the SEC.
Redemption Transaction Fee. A redemption transaction fee is imposed to offset
transfer and other transaction costs that may be incurred by the relevant Fund.
The fee is a single charge and will be the same regardless of the number of
Creation Units redeemed by an investor on the same day. The redemption
transaction fees for redemptions in kind and for cash and the additional
variable charge for cash redemptions (when cash redemptions are available or
specified) are listed below. Investors will also bear the costs of transferring
the Fund Securities from the Trust to their account or on their order. Investors
who use the services of a broker or other such intermediary may be charged a fee
for such services. The following table sets forth the redemption transaction fee
for each Fund.
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page 24 i|Shares
STANDARD MAXIMUM
REDEMPTION REDEMPTION
TRANSACTION TRANSACTION
NAME OF FUND FEE* FEE*
------------ ----------- -----------
iShares NYSE Composite Index Fund $ $
iShares NYSE 100 Index Fund $ $
* If a Creation Unit is redeemed outside the usual process through the NSCC
or for cash, a variable fee will be charged of up to four times the
Standard Creation or Redemption Transaction Fee.
Placement of Redemption Orders for Domestic Funds Using the Clearing Process.
Orders to redeem Creation Unit Aggregations of Domestic Funds through the
Clearing Process must be delivered through a Participating Party that has
executed the Participant Agreement. An order to redeem Creation Unit
Aggregations using the Clearing Process is deemed received by the Trust on the
Transmittal Date if (i) such order is received by Investors Bank not later than
the Closing Time, on such Transmittal Date, and (ii) all other procedures set
forth in the Participant Agreement are properly followed; such order will be
effected based on the NAV of the Fund as next determined. An order to redeem
Creation Unit Aggregations using the Clearing Process made in proper form but
received by the Trust after the Closing Time, will be deemed received on the
next Business Day immediately following the Transmittal Date and will be
effected at the NAV next determined on such Business Day. The requisite Fund
Securities and the Cash Redemption Amount will be transferred by the third NSCC
Business Day following the date on which such request for redemption is deemed
received.
Placement of Redemption Orders for Domestic Funds Outside the Clearing Process.
Orders to redeem Creation Unit Aggregations of Domestic Funds outside the
Clearing Process must be delivered through a DTC Participant that has executed
the Participant Agreement. A DTC Participant who wishes to place an order for
redemption of Creation Unit Aggregations to be effected outside the Clearing
Process does not need to be a Participating Party, but such orders must state
that the DTC Participant is not using the Clearing Process and that redemption
of Creation Unit Aggregations will instead be effected through transfer of
iShares directly through DTC. An order to redeem Creation Unit Aggregations
outside the Clearing Process is deemed received by the Trust on the Transmittal
Date if (i) such order is received by Investors Bank not later than the Closing
Time, on such Transmittal Date; (ii) such order is accompanied or followed by
the requisite number of iShares of the Fund specified in such order, which
delivery must be made through DTC to Investors Bank no later than 11:00 am,
Eastern time, on the contracted settlement date; and (iii) all other procedures
set forth in the Participant Agreement are properly followed. After the Trust
has deemed an order for redemption outside the Clearing Process received, the
Trust will initiate procedures to transfer the requisite Fund Securities which
are expected to be delivered within three Business Days and the Cash Redemption
Amount to the Authorized Participant on behalf of the redeeming Beneficial Owner
by the third Business Day following the Transmittal Date on which such
redemption order is deemed received by the Trust. In certain cases Authorized
Participants will redeem and create Creation Unit Aggregations of the same Fund
on the same trade date. In these instances, the Trust reserves the right to
settle these transactions on a net basis.
Taxes
RIC Qualifications. Each Fund intends to qualify for and to elect treatment as a
separate Regulated Investment Company ("RIC") under Subchapter M of the Internal
Revenue Code. To qualify for treatment as a RIC, each Fund must annually
distribute at least 90% of its net investment company taxable income (which
includes dividends, interest and net short-term capital gains) and meet several
other requirements. Among such other requirements are the following: (i) at
least 90% of each Fund's annual gross income must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (ii) at the close of each quarter of the company's taxable year, (a) at
least 50% of the market value of each Fund's total assets must be represented by
cash and cash items, U.S. Government securities, securities of other RICs and
other securities, with such other securities limited for purposes of this
calculation in respect of any one issuer to an amount not greater than 5% of the
value of each Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of each Fund's
total assets may be invested in the securities of any one issuer or of two or
more issuers that are controlled by each Fund (within the meaning of Section
851(b)(3)(B) of the Internal Revenue Code) and that are engaged in the same or
similar trades or businesses or related trades or businesses (other than U.S.
Government securities or the securities of other regulated investment
companies).
Taxation of RICs. If a Fund fails to qualify for any taxable year as a RIC, all
of its taxable income will be subject to tax at regular corporate income tax
rates without any deduction for distributions to shareholders, and such
distributions generally will be taxable to shareholders as ordinary dividends to
the extent of the Fund's current and accumulated earnings and profits. In such
event, distributions to individuals should qualify as qualified dividend income
and distributions to corporate shareholders generally should be eligible for the
dividends-received deduction. Although each Fund intends to distribute
substantially all of its net investment income and its capital gains for each
taxable year, each Fund will be subject to federal income taxation to the
extent any such income or gains are not distributed. If a Fund's distributions
exceed its taxable income and capital gains realized during a taxable year, all
or a portion of the distributions made in the taxable year may be
recharacterized as a return of capital to shareholders. A return of capital
distribution generally will not be taxable but will reduce the shareholder's
cost basis in the iShares and result in a higher capital gain or lower capital
loss when those iShares on which the distribution was received are sold.
Excise Tax. Each Fund will be subject to a 4% excise tax on certain
undistributed income if it does not distribute to its shareholders in each
calendar year at least 98% of its ordinary income for the calendar year (taking
into account any net capital loss carryforwards) plus 98% of its capital gain
net income for the twelve months ended October 31 of such year. Each Fund
intends to declare and distribute dividends and distributions in the amounts and
at the times necessary to avoid the application of this 4% excise tax.
Back-Up Withholding. In certain cases, a Fund will be required to withhold at
the applicable withholding rate, and remit to the U.S. Treasury such amounts
withheld from any distributions paid to a shareholder who: (1) has failed to
provide a correct taxpayer identification number; (2) is subject to backup
withholding by the Internal Revenue Service; (3) has failed to certify to a Fund
that such shareholder is not subject to backup withholding; or (4) has not
certified that such shareholder is a U.S. person (including a U.S. resident
alien).
Section 351. The Trust on behalf of each Fund has the right to reject an order
for a purchase of iShares if the purchaser (or group of purchasers) would, upon
obtaining the iShares so ordered, own 80% or more of the outstanding iShares of
a given Fund and if, pursuant to Section 351 of the Internal Revenue Code, the
Fund would have a basis in the securities different from the market value of
such securities on the date of deposit. The Trust also has the right to require
information necessary to determine beneficial share ownership for purposes of
the 80% determination.
Qualified Dividend Income. Distributions by each Fund of investment company
taxable income (excluding any short-term capital gains) whether received in cash
or shares will be taxable either as ordinary income or as qualified dividend
income, eligible for the reduced maximum rate to individuals of 15% (5% for
individuals in lower tax brackets) to the extent that the Fund receives
qualified dividend income on the securities it holds. Qualified dividend income
is, in general, dividend income from taxable domestic corporations and certain
foreign corporations (e.g., foreign corporations incorporated in a possession of
the United States or in certain countries with a comprehensive tax treaty with
the United States, or the stock of which is readily tradable on an established
securities market in the United States). A dividend will not be treated as
qualified dividend income to the extent that (i) the shareholder has not held
the iShares on which the dividend was paid for more than 60 days during the
120-day period that begins on the date that is 60 days before the date on which
the iShares become ex dividend with respect to such dividend (and each Fund also
satisfies those holding period requirements with respect to the securities it
holds that paid the dividends distributed to the shareholder), (ii) the
shareholder is under an obligation (whether pursuant to a short sale or
otherwise) to make related payments with respect to substantially similar or
related property, or (iii) the shareholder elects to treat such dividend as
investment income under section 163(d)(4)(B) of the Internal Revenue Code.
Absent further legislation, the maximum 15% rate on qualified dividend income
will not apply to dividends received in taxable years beginning after December
31, 2008. Distributions by each Fund of its net short-term capital gains will be
taxable as ordinary income. Capital gain distributions consisting of each Fund's
net capital gains will be taxable as long-term capital gains.
Corporate Dividends Received Deduction. A Fund's dividends that are paid to its
corporate shareholders and are attributable to qualifying dividends it received
from U.S. domestic corporations may be eligible, in the hands of such
shareholders, for the corporate dividends received deduction, subject to certain
holding period requirements and debt financing limitations.
Net Capital Loss Carryforwards (Unaudited). Net capital loss carryforwards may
be applied against any net realized capital gains in each succeeding year, or
until their respective expiration dates, whichever occurs first.
Funds Holding Foreign Investments. Each Fund may be subject to foreign income
taxes withheld from distributions it receives on any foreign securities it
holds. It is unlikely that a Fund will be permitted to "pass through" these
foreign taxes to its shareholders. Accordingly, a Fund may either take a
deduction for the foreign taxes it has paid in computing its investment company
taxable income or credit the foreign taxes against its U.S. federal income tax
liability, if any.
Federal Tax Treatment of Complex Securities. The Funds may invest in complex
securities. These investments may be subject to numerous special and complex tax
rules. These rules could affect whether gains and losses recognized by a Fund
are treated as ordinary income or capital gain, accelerate the recognition of
income to a Fund and/or defer a Fund's ability to recognize losses. In turn,
these rules may affect the amount, timing or character of the income distributed
to you by a Fund.
--------------------------------------------------------------------------------
page 26 i|Shares
Each Fund is required, for federal income tax purposes, to mark-to-market and
recognize as income for each taxable year its net unrealized gains and losses on
certain futures and options contracts as of the end of the year as well as those
actually realized during the year. Gain or loss from futures and options
contracts on broad-based indices required to be marked-to-market will be 60%
long-term and 40% short-term capital gain or loss. Application of this rule may
alter the timing and character of distributions to shareholders. A Fund may be
required to defer the recognition of losses on futures contracts, option
contracts and swaps to the extent of any unrecognized gains on offsetting
positions held by the Fund.
It is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered qualifying income for purposes of the 90%
requirement for a Fund to qualify as a RIC.
Each Fund intends to distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on futures or options transactions.
Such distributions are combined with distributions of capital gains realized on
a Fund's other investments and shareholders are advised on the nature of the
distributions.
The foregoing discussion is a summary only and is not intended as a substitute
for careful tax planning. Purchasers of iShares should consult their own tax
advisors as to the tax consequences of investing in such shares, including under
state, local and foreign tax laws. Finally, the foregoing discussion is based on
applicable provisions of the Internal Revenue Code, regulations, judicial
authority and administrative interpretations in effect on the date of this
Statement of Additional Information. Changes in applicable authority could
materially affect the conclusions discussed above, and such changes often occur.
Determination of NAV
The NAV of each Fund is computed by dividing the value of the net assets of such
Fund (i.e., the value of its total assets less total liabilities) by the total
number of iShares of such Fund outstanding, rounded to the nearest cent.
Expenses and fees, including without limitation, the management, administration
and distribution fees, are accrued daily and taken into account for purposes of
determining NAV. The NAV of each Fund is calculated by Investors Bank and
determined as of the close of regular trading on the NYSE (ordinarily 4:00 p.m.,
Eastern time) on each day that such exchange is open for trading.
In computing a Fund's NAV, the Fund's securities holdings are valued based on
their last quoted current price. Price information on listed securities is taken
from the exchange where the security is primarily traded. Securities regularly
traded in an over-the-counter market are valued at the latest quoted sales price
on the primary exchange or national securities market on which such securities
are traded. Securities not listed on an exchange or national securities market,
or securities in which there was no last reported sales price, are valued at the
most recent bid price. Other portfolio securities and assets for which market
quotations are not readily available are valued based on fair value as
determined in good faith by BGFA in accordance with procedures adopted by the
Board.
Securities held under a repurchase agreement will be valued at a price equal to
the amount of the cash investment at the time of valuation on the valuation
date. The market value of the underlying securities will be determined in
accordance with the above discussed valuation procedures, as appropriate, for
the purpose of determining the adequacy of collateral.
Shares of investment companies, other than investment companies whose shares are
traded on an exchange, will be valued at the fund's published net asset value
per share.
Securities and other assets for which current market quotations are not readily
available will be valued at fair value by BGI in accordance with BGI's pricing
policy. The Board has expressly delegated the authority and duty to make such
fair value determinations to BGI; however, the Board is responsible for the
oversight of BGI and retains the authority to make any valuation decisions as
the Board deems appropriate.
The approximate value of iShares of each Fund is disseminated every fifteen
seconds throughout the trading day by the applicable listing exchange or other
information providers, such as Bloomberg. This approximate value should not be
viewed as a "real-time" update of the NAV of any Fund, because it may not be
calculated in the same manner as the NAV, which is computed once a day. The
Funds are not involved in, or responsible for, the calculation or dissemination
of the approximate value and makes no warranty as to its accuracy.
Dividends and Distributions
General Policies. Dividends from net investment income, if any, are declared and
paid at least annually by each Fund. Distributions of net realized securities
gains, if any, generally are declared and paid once a year, but the Trust may
make distributions on a more frequent basis for certain Funds. The Trust
reserves the right to declare special distributions if, in its
reasonable discretion, such action is necessary or advisable to preserve the
status of each Fund as a RIC or to avoid imposition of income or excise taxes on
undistributed income.
Dividends and other distributions on iShares are distributed on a pro rata basis
to Beneficial Owners of such iShares. Dividend payments are made through DTC
Participants and Indirect Participants to Beneficial Owners then of record with
proceeds received from the Funds.
Dividend Reinvestment Service. No dividend reinvestment service is provided by
the Trust. Broker-dealers may make available the DTC book-entry Dividend
Reinvestment Service for use by Beneficial Owners of the Funds for reinvestment
of their dividend distributions. Beneficial Owners should contact their broker
to determine the availability and costs of the service and the details of
participation therein. Brokers may require Beneficial Owners to adhere to
specific procedures and timetables. If this service is available and used,
dividend distributions of both income and realized gains will be automatically
reinvested in additional whole iShares of the same Fund purchased in the
secondary market.
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page 28 i|Shares
Financial Statements
Financial statements for the Funds are not available because, as of the date of
this Statement of Additional Information, the Funds had no financial information
to report.
Miscellaneous Information
Counsel. Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue, NW, Washington,
DC, 20004, is counsel to the Trust.
Independent Auditors. ______________ serves as the independent accountants of
the Trust. They audit the Funds' financial statements and may perform other
services.
--------------------------------------------------------------------------------
page 30 i|Shares
OTHER INFORMATION
ITEM 23. EXHIBITS:
Exhibit Number Description
-------------- -----------
(a) Agreement and Declaration of Trust is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(b) Amended and Restated By-Laws is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(c) Not applicable.
(d.1) Investment Advisory Agreement between the Trust and Barclays
Global Fund advisors is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(d.2) Schedule A to the Investment Advisory Agreement between the
Trust and Barclays Global Fund Advisors as amended for iShares
NYSE 100 Index Fund and iShares NYSE Composite Index Fund is
filed herewith.
(d.3) Schedule A to the Investment Advisory Agreement between the
Trust and Barclays Global Fund Advisors as amended for iShares
FTSE/Xinhua HK China 25 Index Fund, iShares Dow Jones
Transportation Average Index Fund, iShares Lehman U.S.
Treasury Inflation Protected Securities Fund, iShares Dow
Jones Select Dividend Index Fund, and iShares S&P 1500 Index
Fund is incorporated herein by reference to Post-Effective
Amendment No. 27, filed November 28, 2003.
(d.4) Schedule A to the Investment Advisory Agreement between the
Trust and Barclays Global Fund Advisors amended as of December
13, 2002 for iShares CSFB Liquid U.S. Agency Bond Fund and
Lehman U.S. Aggregate Bond Fund is incorporated herein by
reference to Post-Effective Amendment No. 19 filed March 3,
2003.
(e.1) Distribution Agreement between the Trust and SEI Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(e.2) Exhibit A to the Distribution Agreement between the Trust and
SEI Investments Distribution Company as amended for iShares
NYSE 100 Index Fund and iShares NYSE Composite Index Fund is
filed herewith.
(e.3) Exhibit A to the Distribution Agreement between the Trust and
SEI Investments Distribution Company as amended for iShares
FTSE/Xinhua HK China 25 Index Fund, iShares Dow Jones
Transportation Average Index Fund, iShares Lehman U.S.
Treasury Inflation Protected Securities Fund, iShares Dow
Jones Select Dividend Index, and iShares S&P 1500 Index Fund
is incorporated herein by reference to Post-Effective
Amendment No. 27, filed November 28, 2003.
(e.4) Form of Authorized Participant Agreement is incorporated
herein by reference to exhibit (e.3) of Post-Effective
Amendment No. 21, filed June 27, 2003.
(e.5) Exhibit A to the Distribution Agreement between the Trust and
SEI Investments Distribution Company amended as of December
13, 2002 for iShares CSFB Liquid U.S. Agency Bond Fund and
Lehman U.S. Aggregate Bond Fund is incorporated herein by
reference to Post-Effective Amendment No. 19, filed March 3,
2003.
(f) Not applicable.
(g.1) Custodian Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to Post-Effective
Amendment No. 2, filed May 12, 2000.
(g.2.) Appendix A to the Custodian Agreement between the Trust and
Investors Bank & Trust as amended for iShares NYSE 100 Index
Fund and iShares Composite Index Fund is filed herewith.
(g.3) Appendix A to the Custodian Agreement between the Trust and
Investors Bank & Trust as amended for iShares FTSE/Xinhua HK
China 25 Index Fund, iShares Dow Jones Transportation Average
Index Fund, iShares Lehman U.S. Treasury Inflation Protected
Securities Fund iShares Dow Jones Select Dividend Index Fund,
and iShares S&P 1500 Index Fund is incorporated herein by
reference to Post-Effective Amendment No. 27, filed November
28, 2003.
(g.4) Appendix A to the Custodian Agreement between the Trust and
Investors Bank & Trust amended as of December 13, 2002 for
iShares CSFB Liquid U.S. Agency Bond Fund and Lehman U.S.
Aggregate Bond Fund is incorporated herein by reference to
Post-Effective Amendment No. 19, filed March 3, 2003.
(g.5) Securities Lending Agency Agreement between Barclays Global
Investors and the Trust is incorporated herein by reference to
exhibit (g.3) of Post-Effective Amendment No. 21, filed June
27, 2003.
(g.6) Delegation Agreement between the Trust and Investors Bank &
Trust is incorporated herein by reference to exhibit (g.3) of
Post-Effective Amendment No. 2, filed May 12, 2000.
(h.1) Administration Agreement between the Trust and Investors Bank
& Trust is incorporated herein by reference to the
Post-Effective Amendment No. 2, filed May 12, 2000.
(h.2) Appendix A to the Administration Agreement between the Trust
and Investors Bank & Trust as amended for iShares NYSE 100
Index Fund and iShares NYSE Composite Index Fund is filed
herewith.
(h.3) Appendix A to the Administration Agreement between the Trust
and Investors Bank & Trust as amended for iShares FTSE/Xinhua
HK China 25 Index Fund, iShares Dow Jones Transportation
Average Index Fund, iShares Lehman U.S. Treasury Inflation
Protected Securities Fund, iShares Dow Jones Select Dividend
Index Fund, and iShares S&P 1500 Index Fund is incorporated
herein by reference to Post-Effective Amendment No. 27, filed
November 28, 2003.
(h.4) Transfer Agency and Service Agreement between the Trust and
Investors Bank & Trust is incorporated herein by reference to
exhibit (h.2) of Post-Effective Amendment No. 2, filed May 12,
2000.
(h.5) Appendix A to the Transfer Agency and Service Agreement
between the Trust and Investors Bank & Trust as amended for
iShares NYSE 100 Index Fund and iShares NYSE Composite Index
Fund is filed herewith.
(h.6) Appendix A to the Transfer Agency and Service Agreement
between the Trust and Investors Bank & Trust as amended
iShares FTSE/Xinhua HK China 25 Index Fund, iShares Dow Jones
Transportation Average Index Fund, iShares Lehman U.S.
Treasury Inflation Protected Securities Fund, iShares Dow
Jones Select Dividend Index Fund, and iShares S&P 1500 Index
Fund is incorporated herein by reference to Post-Effective
Amendment No. 27, filed November 28, 2003.
(h.7) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for S&P Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.8) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Dow Jones Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.9) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for Russell Funds is incorporated herein by
reference to Post-Effective Amendment No. 2, filed May 12,
2000.
(h.10) Amended Exhibit A to the Sublicense Agreement between Barclays
Global Investors, N.A. and the Trust for S&P Funds for iShares
S&P 100 Index Fund and iShares S&P Global 100 Index Fund is
incorporated herein by reference to Post-Effective Amendment
No. 6, filed October 19, 2000.
(h.11) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares MSCI EAFE Index Fund is incorporated
herein by reference to Post-Effective Amendment No. 10, filed
June 1, 2001.
(h.12) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares Nasdaq Biotechnology Index Fund is
incorporated herein by reference to Post-Effective Amendment
No. 13, filed July 31, 2001.
(h.13) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares Goldman Sachs Technology Index Fund,
iShares Goldman Sachs Utilities Index Fund, iShares Goldman
Sachs Health Care Index Fund, iShares Goldman Sachs Natural
Resources Index Fund, iShares Goldman Sachs Cyclical
Industries Index Fund, iShares Goldman Sachs Consumer
Industries Index Fund, iShares Goldman Sachs Financials Index
Fund, iShares Goldman Sachs Hardware Index Fund, iShares
Goldman Sachs Multimedia Networking Index Fund, iShares
Goldman Sachs Semiconductor Index Fund, and iShares Goldman
Sachs Software Index Fund - to be filed by amendment.
(h.14) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares Lehman Brothers 1-3 year Treasury
Index Fund, iShares Lehman Brothers 7-10 year Treasury Index
Fund, iShares Lehman Brothers 20+ year Treasury Index Fund,
iShares Lehman Brothers Treasury Index Fund, iShares Lehman
Brothers Government/Credit Index Fund, iShares U.S. Credit
Index Fund is incorporated herein by reference to
Post-Effective Amendment No. 16, filed July 31, 2002.
(h.15) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares GS $ InvesTop Corporate Bond Fund is
incorporated herein by reference to Post-Effective Amendment
No. 16, filed July 31, 2002.
(h.16) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares S&P ADR International Index Fund and
KLD Nasdaq Social Index Fund to be filed by amendment.
(h.17) Sublicense Agreements between Barclays Global Investors, N.A.
and the Trust for iShares FTSE/Xinhua HK China 25 Index Fund,
iShares Dow Jones Transportation Average Index Fund, iShares
Lehman U.S. Treasury Inflation Protected Securities Fund, and
iShares S&P 1500 Index Fund to be filed by amendment.
(h.18) Appendix A to the Administration Agreement between the Trust
and Investors Bank & Trust as amended December 13, 2002 for
iShares CSFB Liquid U.S. Agency Bond Fund and Lehman U.S.
Aggregate Bond Fund is incorporated herein by reference to
Post-Effective Amendment No. 19, filed March 3, 2003.
(h.19) Appendix A to the Transfer Agency and Service Agreement
between the Trust and Investors Bank & Trust as amended
December 13, 2002 for iShares CSFB Liquid U.S. Agency Bond
Fund and Lehman U.S. Aggregate Bond Fund is incorporated
herein by reference to Post-Effective Amendment No. 19, filed
March 3, 2003.
(h.20) Sublicense Agreement between Barclays Global Investors, N.A.
and the Trust for iShares CSFB Liquid U.S. Agency Bond Fund
and Lehman U.S. Aggregate Bond Fund to be filed by amendment.
(i) Legal Opinion and Consent of Counsel is incorporated herein by
reference to Post-Effective Amendment No. 27, filed November
28, 2003.
(j) Not applicable.
(k) Not applicable.
(l.1) Subscription Agreement between the Trust and SEI Investments
Distribution Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(l.2) Letter of Representations between the Trust and Depository
Trust Company is incorporated herein by reference to
Post-Effective Amendment No. 2, filed May 12, 2000.
(l.3) Amendment of Letter of Representations between the Trust and
Depository Trust Company for iShares S&P Global 100 Index Fund
and iShares Cohen & Steers Realty Majors Index Fund is
incorporated herein by reference to Post-Effective Amendment
No. 11, filed July 2, 2001.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p.1) iShares Trust Code of Ethics is incorporated herein by
reference to Post-Effective Amendment No. 21, filed June 27,
2003.
(p.2) Barclays Global Investors, N.A. Code of Ethics is incorporated
herein by reference to Post-Effective Amendment No. 21, filed
June 27, 2003.
(p.3) Code of SEI Investments Company as amended December 2001 is
incorporated herein by reference to Exhibit (p)(1) of
Post-Effective Amendment No. 50 to the Registration Statement
of SEI Tax Exempt Trust (SEC Nos. 2-76940 and 811-3447) filed
with the SEC on December 30, 2002.
Item 24. Persons Controlled By or Under Common Control with Registrant:
Not applicable.
Item 25. Indemnification:
The Trust is organized as a Delaware business trust and is operated
pursuant to an Agreement and Declaration of Trust, (the "Declaration of Trust"),
that permits the Trust to indemnify its trustees and officers under certain
circumstances. Such indemnification, however, is subject to the limitations
imposed by the Securities Act of 1933, as amended (the "Act"), and the
Investment Company Act of 1940, as amended. The Declaration of Trust provides
that officers and trustees of the Trust shall be indemnified by the Trust
against liabilities and expenses incurred or paid in connection with any claim,
action, suit, or proceedings against them by reason of the fact that they each
serve as an officer or trustee of the Trust or as an officer or trustee of
another entity at the request of the entity. This indemnification is subject to
the following conditions:
(a) no trustee or officer of the Trust is indemnified against any liability to
the Trust or its security holders that was the result of any willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office; and
(b) officers and trustees of the Trust are indemnified only for actions taken in
good faith which the officers and trustees believed were in or not opposed to
the best interests of the Trust.
The Declaration of Trust provides that if indemnification is not ordered by a
court, indemnification may be authorized upon determination by shareholders, or
by a majority vote of a quorum of the trustees who were not parties to the
proceedings or, if this quorum is not obtainable, if directed by a quorum of
disinterested trustees, or by independent legal counsel in a written opinion,
that the persons to be indemnified have met the applicable standard.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Trust pursuant
to foregoing provisions, or otherwise, the Trust has been advised that in the
opinion of the SEC such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for Fund expenses incurred or paid by a director,
officer or controlling person of the Fund in the successful defense of any
action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, the Trust will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 26. (a) Business and Other Connections of the Investment Adviser:
The Trust is advised by Barclays Global Fund Advisors ("BGFA"), a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI"), 45 Fremont
Street, San Francisco, CA 94105. BGFA's business is that of a registered
investment adviser to certain open-end, management investment companies and
various other institutional investors.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management
business. Each of the directors and executive officers of BGFA will also have
substantial responsibilities as directors and/or officers of BGI. To the
knowledge of the Registrant, except as set forth below, none of the directors or
executive officers of BGFA is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of a
substantial nature.
Name and Position Principal Business(es) During the last Two Fiscal Years
------------------ -------------------------------------------------------
Blake Grossman Director and Chairman of the Board of Directors of BGFA and
Chairman Chief Executive Officer and Director of BGI
45 Fremont Street, San Francisco, CA 94105
Frank Ryan Chief Financial Officer of BGFA and Chief Financial Officer
Officer and Cashier of BGI
45 Fremont Street, San Francisco, CA 94105
Richard Ricci Director and Chief Operating Officer of BGFA and BGI
Director 45 Fremont Street, San Francisco, CA 94105
Item 27. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
STI Classic Funds May 29, 1992
The Arbor Fund January 28, 1993
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
SEI Asset Allocation Trust April 1, 1996
SEI Institutional Investments Trust June 14, 1996
HighMark Funds February 15, 1997
Expedition Funds June 9, 1997
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
CNI Charter Funds April 1, 1999
Amerindo Funds Inc. July 13, 1999
iShares, Inc. January 28, 2000
iShares Trust April 25, 2000
Pitcairn Funds August 1, 2000
JohnsonFamily Funds, Inc. November 1, 2000
The MDL Funds January 24, 2001
Causeway Capital Management Trust September 20, 2001
The Japan Fund, Inc. October 7, 2002
TT International USA Master Trust October 6, 2003
TT International USA Feeder Trust October 6, 2003
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").
(b) Furnish the information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 20 of Part B. Unless otherwise noted, the business address of
each director or officer is One Freedom Valley Drive, Oaks, PA 19456.
Position and Office Positions and Offices
Name with Underwriter with Registrant
---- ------------------- ---------------------
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Mark J. Held President & Chief Operating Officer --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
Dennis J. McGonigle Executive Vice President --
Robert Aller Vice President --
John D. Anderson Vice President & Managing Director --
Jeff Jacobs Vice President --
Sam King Vice President --
John Kirk Vice President & Managing Director --
Kim Kirk Vice President & Managing Director --
Karen LaTourette Secretary --
Alan H. Lauder Vice President --
Mark Nagle Vice President --
Carl A. Guarino Senior Vice President --
Jack May Senior Vice President --
Kevin P. Robins Senior Vice President --
Patrick K. Walsh Senior Vice President --
Wayne M. Withrow Senior Vice President --
Timothy D. Barto Vice President & Assistant Secretary --
Robert Crudup Vice President --
Richard A. Deak Vice President & Assistant Secretary --
Scott W. Dellorfano Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Scott C. Fanatico Vice President --
Michael Farrell Vice President --
Vic Galef Vice President --
Steven A. Gardner Vice President --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President --
Kathy Heilig Vice President --
Bridget Jensen Vice President --
John Krzeminski Vice President & Managing Director --
Paul Lonergan Vice President & Managing Director --
Ellen Marquis Vice President --
Christine M. McCullough Vice President & Assistant Secretary --
Carolyn McLaurin Vice President --
Rosanne Miller Vice President & Assistant Secretary --
John C. Munch Vice President & Assistant Secretary --
Joanne Nelson Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President --
Sherry K. Vetterlein Vice President & Assistant Secretary --
Lori L. White Vice President & Assistant Secretary --
William E. Zitelli, Jr. Vice President & Assistant Secretary --
Item 28. Location of Accounts and Records:
(a) The Fund maintains accounts, books and other documents required by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
(collectively, the "Records") at the offices of Investors Bank & Trust, 200
Clarendon Street, Boston, MA 02116.
(b) BGFA maintains all Records relating to its services as advisor at 45
Fremont Street, San Francisco, CA, 94105.
(c) SEI Investments Distribution Company maintains all Records relating to
its services as distributor at 1 Freedom Valley Drive, Oaks, PA 19456.
(d) IBT maintains all Records relating to its services as transfer agent,
fund accountant and custodian at 200 Clarendon Street, Boston, MA 02116.
Item 29. Management Services:
Not applicable.
Item 30. Undertaking:
Not applicable.
Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act"), and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 28 to Registration Statement No.
333-92935 to be signed on its behalf by the undersigned, duly authorized, in the
City of San Francisco and the State of California on the 14th day of January,
2004.
By: /s/ Lee T. Kranefuss
----------------------------
Lee T. Kranefuss
President
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment No. 28 to the Registration Statement has been signed below by the
following persons in the capacity and on the dates indicated.
By: /s/ Lee T. Kranefuss
----------------------------
Lee T. Kranefuss
Chairman
Date: January 14, 2004
----------------------------
John B. Carroll*
Trustee
Date: January 14, 2004
----------------------------
Richard K. Lyons*
Trustee
Date: January 14, 2004
----------------------------
Nathan Most*
Trustee
Date: January 14, 2004
----------------------------
George G. C. Parker*
Trustee
Date: January 14, 2004
----------------------------
W. Allen Reed*
Trustee
Date: January 14, 2004
/s/ Michael Latham
----------------------------
Michael Latham
Treasurer
Date: January 14, 2004
*By: /s/ Michael Latham
----------------------------
Michael Latham
Attorney-in-fact
Date: January 14, 2004
Power of Attorney dated February 28, 2002 is incorporated herein by reference to
Post-Effective Amendment No. 15, filed March 29, 2002.
Exhibit Number Description
-------------- -----------
(d.2) Schedule A to the Investment Advisory Agreement between the
Trust and Barclays Global Fund Advisors as amended for iShares
NYSE 100 Index Fund and iShares NYSE Composite Index Fund is
filed herewith.
(e.2) Exhibit A to the Distribution Agreement between the Trust and
SEI Investments Distribution Company as amended for iShares
NYSE 100 Index Fund and iShares NYSE Composite Index Fund is
filed herewith.
(g.2.) Appendix A to the Custodian Agreement between the Trust and
Investors Bank & Trust as amended for iShares NYSE 100 Index
Fund and iShares Composite Index Fund is filed herewith.
(h.2) Appendix A to the Administration Agreement between the Trust
and Investors Bank & Trust as amended for iShares NYSE 100
Index Fund and iShares NYSE Composite Index Fund is filed
herewith.
(h.5) Appendix A to the Transfer Agency and Service Agreement
between the Trust and Investors Bank & Trust as amended for
iShares NYSE 100 Index Fund and iShares NYSE Composite Index
Fund is filed herewith.
EX-99.(D)(2)
3
dex99d2.txt
SCHEDULE A TO THE INVESTMENT ADVISORY AGREEMENT.
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT DATED MAY 12, 2000
BETWEEN
iSHARES TRUST
AND
BARCLAYS GLOBAL FUND ADVISORS
Pursuant to Section 4, the Trust shall pay the Adviser compensation at the
following annual rates:
Fund Annual Fee
---- ----------
iShares Cohen & Steers Realty Majors Index Fund 0.35%
iShares CSFB Callable Bond Index Fund 0.20%
iShares Dow Jones Select Dividend Index Fund 0.40%
iShares Dow Jones Transportation Average Index Fund 0.60%
iShares Dow Jones U.S. Basic Materials Sector Index Fund 0.60%
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund 0.60%
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund 0.60%
iShares Dow Jones U.S. Energy Sector Index Fund 0.60%
iShares Dow Jones U.S. Financial Sector Index Fund 0.60%
iShares Dow Jones U.S. Financial Services Index Fund 0.60%
iShares Dow Jones U.S. Healthcare Sector Index Fund 0.60%
iShares Dow Jones U.S. Industrial Average Index Fund 0.28%
iShares Dow Jones U.S. Industrial Sector Index Fund 0.60%
iShares Dow Jones U.S. Real Estate Index Fund 0.60%
iShares Dow Jones U.S. Technology Sector Index Fund 0.60%
iShares Dow Jones U.S. Telecommunications Sector Index Fund 0.60%
iShares Dow Jones U.S. Total Market Index Fund 0.20%
iShares Dow Jones U.S. Utilities Sector Index Fund 0.60%
iShares FTSE/Xinhua HK China 25 Index Fund 0.99%
iShares Goldman Sachs Consumer Industries Index Fund 0.60%
iShares Goldman Sachs Cyclical Industries Index Fund 0.60%
iShares Goldman Sachs Financials Index Fund 0.60%
iShares Goldman Sachs Hardware Index Fund 0.50%
iShares Goldman Sachs Health Care Index Fund 0.60%
iShares Goldman Sachs Natural Resources Index Fund 0.50%
iShares Goldman Sachs Networking Index Fund 0.50%
iShares Goldman Sachs Semiconductor Index Fund 0.50%
iShares Goldman Sachs Software Index Fund 0.50%
iShares Goldman Sachs Technology Index Fund 0.50%
iShares Goldman Sachs Utilities Index Fund 0.60%
iShares GS $ InvesTop Bond Fund 0.15%
iShares Lehman 1-3 Year Treasury Bond Fund 0.15%
iShares Lehman 7-10 Year Treasury Bond Fund 0.15%
iShares Lehman 20+ Year Treasury Bond Fund 0.15%
iShares Lehman Government/Credit Bond Fund 0.25%
iShares Lehman Liquid Corporate Bond Fund 0.20%
iShares Lehman Treasury Bond Fund 0.25%
iShares U.S. Treasury Inflation Protected Securities Fund 0.20%
Annual Fee
----------
FUND
iShares Lehman U.S. Aggregate Bond Fund 0.25%
iShares MSCI EAFE Index Fund 0.35%
iShares Nasdaq Biotechnology Index Fund 0.50%
iShares KLD Nasdaq Social Index Fund 0.50%
iShares NYSE 100 Index Fund 0.25%
iShares NYSE Composite Index Fund 0.25%
iShares Russell 1000 Index Fund 0.15%
iShares Russell 1000 Growth Index Fund 0.20%
iShares Russell 1000 Value Index Fund 0.20%
iShares Russell 2000 Index Fund 0.20%
iShares Russell 2000 Growth Index Fund 0.25%
iShares Russell 2000 Value Index Fund 0.25%
iShares Russell 3000 Index Fund 0.20%
iShares Russell 3000 Growth Index Fund 0.25%
iShares Russell 3000 Value Index Fund 0.25%
iShares Russell Midcap Index Fund 0.20%
iShares Russell Midcap Growth Index Fund 0.25%
iShares Russell Midcap Value Index Fund 0.25%
iShares S&P 100 Index Fund 0.20%
iShares S&P 500 Index Fund 0.09%
iShares S&P 500/BARRA Growth Index Fund 0.18%
iShares S&P 500/BARRA Value Index Fund 0.18%
iShares S&P 1500 Index Fund 0.20%
iShares S&P ADR International Index Fund 0.30%
iShares S&P Asia Pacific 100 Index Fund 0.60%
iShares S&P Europe 350 Index Fund 0.60%
iShares S&P Global 100 Index Fund 0.40%
iShares S&P Global 1200 Index Fund ___%
iShares S&P Global Consumer Discretionary Sector Index Fund 0.65%
iShares S&P Global Consumer Staples Sector Index Fund 0.65%
iShares S&P Global Energy Sector Index Fund 0.65%
iShares S&P Global Financials Sector Index Fund 0.65%
iShares S&P Global Health Care Sector Index Fund 0.65%
iShares S&P Global Industrials Sector Index Fund 0.65%
iShares S&P Global Technology Sector Index Fund 0.65%
iShares S&P Global Materials Sector Index Fund 0.65%
iShares S&P Global Telecommunications Services Sector Index Fund 0.65%
A-2
iShares S&P Global Utilities Sector Index Fund 0.65%
iShares S&P Latin America 40 Index Fund 0.50%
iShares S&P MidCap 400 Index Fund 0.20%
iShares S&P MidCap 400/BARRA Growth Index Fund 0.25%
iShares S&P MidCap 400/BARRA Value Index Fund 0.25%
iShares S&P SmallCap 600 Index Fund 0.20%
iShares S&P SmallCap 600/BARRA Growth Index Fund 0.25%
iShares S&P SmallCap 600/BARRA Value Index Fund 0.25%
iShares S&P/TOPIX 150 Index Fund 0.50%
A-3
EX-99.(E)(2)
4
dex99e2.txt
EXHIBIT A TO THE DISTRIBUTION AGREEMENT.
Distribution Agreement
EXHIBIT A
INDEX SERIES
iShares Cohen & Steers Realty Majors Index Fund
iShares CSFB Callable Bond Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Dow Jones U.S. Basic Materials Sector Index Fund
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
iShares Dow Jones U.S. Energy Sector Index Fund
iShares Dow Jones U.S. Financial Sector Index Fund
iShares Dow Jones U.S. Financial Services Composite Index Fund
iShares Dow Jones U.S. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Average Index Fund
iShares Dow Jones U.S. Industrial Sector Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones U.S. Technology Sector Index Fund
iShares Dow Jones U.S. Telecommunications Sector Index Fund
iShares Dow Jones U.S. Total Market Index Fund
iShares FTSE/Xinhua HK China 25 Index Fund
iShares Dow Jones U.S. Utilities Sector Index Fund
iShares Goldman Sachs Consumer Industries Index Fund
iShares Goldman Sachs Cyclical Industries Index Fund
iShares Goldman Sachs Financials Index Fund
iShares Goldman Sachs Hardware Index
iShares Goldman Sachs Health Care Index Fund
iShares Goldman Sachs Natural Resources Index Fund
iShares Goldman Sachs Networking Index
iShares Goldman Sachs Semiconductor Index
iShares Goldman Sachs Software Index
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Utilities Index Fund
iShares GS $ InvesTop Bond Fund
iShares Lehman 1-3 Year Treasury Bond Fund
iShares Lehman 7-10 Year Treasury Bond Fund
iShares Lehman 20+ Year Treasury Bond Fund
iShares Lehman Government/Credit Bond Fund
iShares Lehman Treasury Bond Fund
iShares Lehman Liquid Corporate Bond Fund
iShares U.S. Treasury Inflation Protected Securities Fund
iShares Lehman Aggregate Bond Fund
iShares Nasdaq Biotechnology Index Fund
iShares KLD Nasdaq Social Index Fund
iShares NYSE 100 Index Fund
iShares NYSE Composite Index Fund
iShares Russell 1000 Growth Index Fund
iShares Russell 1000 Index Fund
iShares Russell 1000 Value Index Fund
iShares Russell 2000 Growth Index Fund
iShares Russell 2000 Index Fund
iShares Russell 2000 Value Index Fund
iShares Russell 3000 Growth Index Fund
iShares Russell 3000 Index Fund
iShares Russell 3000 Value Index Fund
iShares Russell Midcap Index Fund
iShares Russell Midcap Growth Index Fund
iShares Russell Midcap Value Index Fund
Distribution Agreement
EXHIBIT A (continued)
INDEX SERIES
iShares S&P 100 Index Fund
iShares S&P 500 Index Fund
iShares S&P 500/BARRA Growth Index Fund
iShares S&P 500/BARRA Value Index Fund
iShares S&P 1500 Index Fund
iShares S&P ADR International Index Fund
iShares S&P Asia Pacific 100 Index Fund
iShares S&P Europe 350 Index Fund
iShares S&P Global 100 Index Fund
iShares S&P Global 1200 Index Fund
iShares S&P Global Consumer Discretionary Index Fund
iShares S&P Global Consumer Staples Index Fund
iShares S&P Global Energy Index Fund
iShares S&P Global Financials Index Fund
iShares S&P Global Health Care Index Fund
iShares S&P Global Industrials Index Fund
iShares S&P Global Information Technology Index Fund
iShares S&P Global Materials Index Fund
iShares S&P Global Telecommunications Services Index Fund
iShares S&P Global Utilities Index Fund
iShares S&P Latin America 40 Index Fund
iShares S&P MidCap 400 Index Fund
iShares S&P MidCap 400/BARRA Growth Index Fund
iShares S&P MidCap 400/BARRA Value Index Fund
iShares S&P SmallCap 600 Index Fund
iShares S&P SmallCap 600/BARRA Growth Index Fund
iShares S&P SmallCap 600/BARRA Value Index Fund
iShares S&P/TOPIX 150 Index Fund
EX-99.(G)(2)
5
dex99g2.txt
APPENDIX A TO THE CUSTODIAN AGREEMENT.
Custodian Agreement
APPENDIX A
INDEX SERIES
iShares Cohen & Steers Realty Majors Index Fund
iShares CSFB Callable Bond Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Dow Jones U.S. Basic Materials Sector Index Fund
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
iShares Dow Jones U.S. Energy Sector Index Fund
iShares Dow Jones U.S. Financial Sector Index Fund
iShares Dow Jones U.S. Financial Services Composite Index Fund
iShares Dow Jones U.S. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Average Index Fund
iShares Dow Jones U.S. Industrial Sector Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones U.S. Technology Sector Index Fund
iShares Dow Jones U.S. Telecommunications Sector Index Fund
iShares Dow Jones U.S. Total Market Index Fund
iShares FTSE/Xinhua HK China 25 Index Fund
iShares Dow Jones U.S. Utilities Sector Index Fund
iShares Goldman Sachs Consumer Industries Index Fund
iShares Goldman Sachs Cyclical Industries Index Fund
iShares Goldman Sachs Financials Index Fund
iShares Goldman Sachs Hardware Index
iShares Goldman Sachs Health Care Index Fund
iShares Goldman Sachs Natural Resources Index Fund
iShares Goldman Sachs Networking Index
iShares Goldman Sachs Semiconductor Index
iShares Goldman Sachs Software Index
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Utilities Index Fund
iShares GS $ InvesTop Bond Fund
iShares Lehman 1-3 Year Treasury Bond Fund
iShares Lehman 7-10 Year Treasury Bond Fund
iShares Lehman 20+ Year Treasury Bond Fund
iShares Lehman Government/Credit Bond Fund
iShares Lehman Treasury Bond Fund
iShares Lehman Liquid Corporate Bond Fund
iShares U.S. Treasury Inflation Protected Securities Fund
iShares Lehman Aggregate Bond Fund
iShares Nasdaq Biotechnology Index Fund
iShares KLD Nasdaq Social Index Fund
iShares NYSE 100 Index Fund
iShares NYSE Composite Index Fund
iShares Russell 1000 Growth Index Fund
iShares Russell 1000 Index Fund
iShares Russell 1000 Value Index Fund
iShares Russell 2000 Growth Index Fund
iShares Russell 2000 Index Fund
iShares Russell 2000 Value Index Fund
iShares Russell 3000 Growth Index Fund
iShares Russell 3000 Index Fund
iShares Russell 3000 Value Index Fund
iShares Russell Midcap Index Fund
iShares Russell Midcap Growth Index Fund
Custodian Agreement
EXHIBIT A (continued)
INDEX SERIES
iShares Russell Midcap Value Index Fund
iShares S&P 100 Index Fund
iShares S&P 500 Index Fund
iShares S&P 500/BARRA Growth Index Fund
iShares S&P 500/BARRA Value Index Fund
iShares S&P 1500 Index Fund
iShares S&P ADR International Index Fund
iShares S&P Asia Pacific 100 Index Fund
iShares S&P Europe 350 Index Fund
iShares S&P Global 100 Index Fund
iShares S&P Global 1200 Index Fund
iShares S&P Global Consumer Discretionary Index Fund
iShares S&P Global Consumer Staples Index Fund
iShares S&P Global Energy Index Fund
iShares S&P Global Financials Index Fund
iShares S&P Global Health Care Index Fund
iShares S&P Global Industrials Index Fund
iShares S&P Global Information Technology Index Fund
iShares S&P Global Materials Index Fund
iShares S&P Global Telecommunications Services Index Fund
iShares S&P Global Utilities Index Fund
iShares S&P Latin America 40 Index Fund
iShares S&P MidCap 400 Index Fund
iShares S&P MidCap 400/BARRA Growth Index Fund
iShares S&P MidCap 400/BARRA Value Index Fund
iShares S&P SmallCap 600 Index Fund
iShares S&P SmallCap 600/BARRA Growth Index Fund
iShares S&P SmallCap 600/BARRA Value Index Fund
iShares S&P/TOPIX 150 Index Fund
EX-99.(H)(2)
6
dex99h2.txt
APPENDIX A TO THE ADMINISTRATION AGREEMENT.
Administration Agreement
APPENDIX A
INDEX SERIES
iShares Cohen & Steers Realty Majors Index Fund
iShares CSFB Callable Bond Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Dow Jones U.S. Basic Materials Sector Index Fund
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
iShares Dow Jones U.S. Energy Sector Index Fund
iShares Dow Jones U.S. Financial Sector Index Fund
iShares Dow Jones U.S. Financial Services Composite Index Fund
iShares Dow Jones U.S. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Average Index Fund
iShares Dow Jones U.S. Industrial Sector Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones U.S. Technology Sector Index Fund
iShares Dow Jones U.S. Telecommunications Sector Index Fund
iShares Dow Jones U.S. Total Market Index Fund
iShares FTSE/Xinhua HK China 25 Index Fund
iShares Dow Jones U.S. Utilities Sector Index Fund
iShares Goldman Sachs Consumer Industries Index Fund
iShares Goldman Sachs Cyclical Industries Index Fund
iShares Goldman Sachs Financials Index Fund
iShares Goldman Sachs Hardware Index
iShares Goldman Sachs Health Care Index Fund
iShares Goldman Sachs Natural Resources Index Fund
iShares Goldman Sachs Networking Index
iShares Goldman Sachs Semiconductor Index
iShares Goldman Sachs Software Index
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Utilities Index Fund
iShares GS $ InvesTop Bond Fund
iShares Lehman 1-3 Year Treasury Bond Fund
iShares Lehman 7-10 Year Treasury Bond Fund
iShares Lehman 20+ Year Treasury Bond Fund
iShares Lehman Government/Credit Bond Fund
iShares Lehman Treasury Bond Fund
iShares Lehman Liquid Corporate Bond Fund
iShares U.S. Treasury Inflation Protected Securities Fund
iShares Lehman Aggregate Bond Fund
iShares Nasdaq Biotechnology Index Fund
iShares KLD Nasdaq Social Index Fund
iShares NYSE 100 Index Fund
iShares NYSE Composite Index Fund
iShares Russell 1000 Growth Index Fund
iShares Russell 1000 Index Fund
iShares Russell 1000 Value Index Fund
iShares Russell 2000 Growth Index Fund
iShares Russell 2000 Index Fund
iShares Russell 2000 Value Index Fund
iShares Russell 3000 Growth Index Fund
iShares Russell 3000 Index Fund
iShares Russell 3000 Value Index Fund
iShares Russell Midcap Index Fund
iShares Russell Midcap Growth Index Fund
Administration Agreement
EXHIBIT A (continued)
INDEX SERIES
iShares Russell Midcap Value Index Fund
iShares S&P 100 Index Fund
iShares S&P 500 Index Fund
iShares S&P 500/BARRA Growth Index Fund
iShares S&P 500/BARRA Value Index Fund
iShares S&P 1500 Index Fund
iShares S&P ADR International Index Fund
iShares S&P Asia Pacific 100 Index Fund
iShares S&P Europe 350 Index Fund
iShares S&P Global 100 Index Fund
iShares S&P Global 1200 Index Fund
iShares S&P Global Consumer Discretionary Index Fund
iShares S&P Global Consumer Staples Index Fund
iShares S&P Global Energy Index Fund
iShares S&P Global Financials Index Fund
iShares S&P Global Health Care Index Fund
iShares S&P Global Industrials Index Fund
iShares S&P Global Information Technology Index Fund
iShares S&P Global Materials Index Fund
iShares S&P Global Telecommunications Services Index Fund
iShares S&P Global Utilities Index Fund
iShares S&P Latin America 40 Index Fund
iShares S&P MidCap 400 Index Fund
iShares S&P MidCap 400/BARRA Growth Index Fund
iShares S&P MidCap 400/BARRA Value Index Fund
iShares S&P SmallCap 600 Index Fund
iShares S&P SmallCap 600/BARRA Growth Index Fund
iShares S&P SmallCap 600/BARRA Value Index Fund
iShares S&P/TOPIX 150 Index Fund
EX-99.(H)(5)
7
dex99h5.txt
APPENDIX A TO THE TRANSFER AGENCY AND SERVICE AGREEMENT.
Transfer Agency and Service Agreement
APPENDIX A
INDEX SERIES
iShares Cohen & Steers Realty Majors Index Fund
iShares CSFB Callable Bond Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Dow Jones U.S. Basic Materials Sector Index Fund
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
iShares Dow Jones U.S. Energy Sector Index Fund
iShares Dow Jones U.S. Financial Sector Index Fund
iShares Dow Jones U.S. Financial Services Composite Index Fund
iShares Dow Jones U.S. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Average Index Fund
iShares Dow Jones U.S. Industrial Sector Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones U.S. Technology Sector Index Fund
iShares Dow Jones U.S. Telecommunications Sector Index Fund
iShares Dow Jones U.S. Total Market Index Fund
iShares FTSE/Xinhua HK China 25 Index Fund
iShares Dow Jones U.S. Utilities Sector Index Fund
iShares Goldman Sachs Consumer Industries Index Fund
iShares Goldman Sachs Cyclical Industries Index Fund
iShares Goldman Sachs Financials Index Fund
iShares Goldman Sachs Hardware Index
iShares Goldman Sachs Health Care Index Fund
iShares Goldman Sachs Natural Resources Index Fund
iShares Goldman Sachs Networking Index
iShares Goldman Sachs Semiconductor Index
iShares Goldman Sachs Software Index
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Utilities Index Fund
iShares GS $ InvesTop Bond Fund
iShares Lehman 1-3 Year Treasury Bond Fund
iShares Lehman 7-10 Year Treasury Bond Fund
iShares Lehman 20+ Year Treasury Bond Fund
iShares Lehman Government/Credit Bond Fund
iShares Lehman Treasury Bond Fund
iShares Lehman Liquid Corporate Bond Fund
iShares U.S. Treasury Inflation Protected Securities Fund
iShares Lehman Aggregate Bond Fund
iShares Nasdaq Biotechnology Index Fund
iShares KLD Nasdaq Social Index Fund
iShares NYSE 100 Index Fund
iShares NYSE Composite Index Fund
iShares Russell 1000 Growth Index Fund
iShares Russell 1000 Index Fund
iShares Russell 1000 Value Index Fund
iShares Russell 2000 Growth Index Fund
iShares Russell 2000 Index Fund
iShares Russell 2000 Value Index Fund
iShares Russell 3000 Growth Index Fund
iShares Russell 3000 Index Fund
iShares Russell 3000 Value Index Fund
iShares Russell Midcap Index Fund
iShares Russell Midcap Growth Index Fund
Transfer Agency and Service Agreement
EXHIBIT A (continued)
INDEX SERIES
iShares Russell Midcap Value Index Fund
iShares S&P 100 Index Fund
iShares S&P 500 Index Fund
iShares S&P 500/BARRA Growth Index Fund
iShares S&P 500/BARRA Value Index Fund
iShares S&P 1500 Index Fund
iShares S&P ADR International Index Fund
iShares S&P Asia Pacific 100 Index Fund
iShares S&P Europe 350 Index Fund
iShares S&P Global 100 Index Fund
iShares S&P Global 1200 Index Fund
iShares S&P Global Consumer Discretionary Index Fund
iShares S&P Global Consumer Staples Index Fund
iShares S&P Global Energy Index Fund
iShares S&P Global Financials Index Fund
iShares S&P Global Health Care Index Fund
iShares S&P Global Industrials Index Fund
iShares S&P Global Information Technology Index Fund
iShares S&P Global Materials Index Fund
iShares S&P Global Telecommunications Services Index Fund
iShares S&P Global Utilities Index Fund
iShares S&P Latin America 40 Index Fund
iShares S&P MidCap 400 Index Fund
iShares S&P MidCap 400/BARRA Growth Index Fund
iShares S&P MidCap 400/BARRA Value Index Fund
iShares S&P SmallCap 600 Index Fund
iShares S&P SmallCap 600/BARRA Growth Index Fund
iShares S&P SmallCap 600/BARRA Value Index Fund
iShares S&P/TOPIX 150 Index Fund
CORRESP
8
filename8.txt
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
January 14, 2004
Re: iShares Trust
File Nos. 333-92935; 811-09729
Post-Effective Amendment No. 28 to the Registration Statement on Form N-1A
Ladies and Gentlemen:
On behalf of our client, iShares Trust (the "Trust"), we enclose for filing,
pursuant to Rule 485(a)(2) under the Securities Act of 1933, Post-Effective
Amendment no. 28 to the Trust's registration statement on Form N-1A. The purpose
of this filing is to register two new series of the Trust, iShares NYSE
Composite Index Fund and NYSE 100 Index Fund (the "Funds").
With the exception of disclosure specific to the Funds, the format and
disclosure utilized in the enclosed registration statement is substantially
similar to that in each of the Trust's Post-Effective Amendments, including
Post-Effective Amendment No. 26, filed on October 21, 2003, that were reviewed
by the staff. Accordingly, on behalf of the Trust, we hereby request, in
reliance upon Securities Act Release No. 13768 (Feb. 15, 1984), that
Post-Effective Amendment No. 28 receive selective review by the Commission and
its staff. Further, due to business constraints, the Trust intends to launch the
Funds on March 12, 2003. We would appreciate any assistance you can provide in
this regard.
If you have any questions about or comments on this filing, please do not
hesitate to contact me at (202) 739-5116 or John McGuire at (202) 739-5654.
Sincerely,
/s/ Lisa Chaikin Hamman
Lisa Chaikin Hamman
Enclosures
cc: James E. O'Connor, Esq.
Richard Morris, Esq.
W. John McGuire, Esq.