<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>d497.txt
<DESCRIPTION>ISHARES TRUST PURSUANT TO RULE 497
<TEXT>
<PAGE>

iShares(R)

PROSPECTUS for

iSHARES
DOW JONES SERIES

iSHARES
COHEN & STEERS SERIES

YOUR iSHARES investments AT A GLANCE

<PAGE>

iShares(R)

iShares Trust

The 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 market index compiled by Dow Jones & Company
or Cohen & Steers Capital Management, Inc. (each, an "Index Provider"). This
Prospectus relates to the following Funds:

iShares Dow Jones U.S. Total Market 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. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Sector 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. Utilities Sector Index Fund
iShares Dow Jones U.S. Financial Services Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Cohen & Steers Realty Majors 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(R)," are listed and traded at market prices on
national securities exchanges, such as the American Stock Exchange and the New
York Stock Exchange. 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 August 1, 2003
(as revised February 3, 2004)

<PAGE>

Table of Contents

Details on Investing Overview...................................................... 1
in iShares Introduction.................................................. 1
Investment Objective.......................................... 1

Principal Investment Strategies............................... 1
Replication................................................... 2
Representative Sampling....................................... 2
Correlation................................................... 2
Industry Concentration Policy................................. 2

Details on the Risks of Principal Risk Factors Common to All
Investing in iShares Funds...................................................... 3
Market Risk................................................... 3
Asset Class Risk.............................................. 3
Passive Investments........................................... 3
Concentration................................................. 3
Derivatives................................................... 3
Tracking Error Risk........................................... 3
Market Trading Risks.......................................... 4
Lack of Governmental Insurance or Guarantee................... 4

Details on Each Description of iShares Dow Jones Index
iShares Fund Funds...................................................... 5
iShares Dow Jones U.S. Total Market Index Fund................ 6
iShares Dow Jones U.S. Basic Materials Sector Index Fund...... 9
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund.... 12
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund 15
iShares Dow Jones U.S. Energy Sector Index Fund............... 18
iShares Dow Jones U.S. Financial Sector Index Fund............ 21
iShares Dow Jones U.S. Healthcare Sector Index Fund........... 24
iShares Dow Jones U.S. Industrial Sector Index Fund........... 27
iShares Dow Jones U.S. Technology Sector Index Fund........... 30
iShares Dow Jones U.S. Telecommunications Sector Index Fund... 33
iShares Dow Jones U.S. Utilities Sector Index Fund............ 36
iShares Dow Jones U.S. Financial Services Index Fund.......... 39
iShares Dow Jones U.S. Real Estate Index Fund................. 42
iShares Dow Jones Select Dividend Index Fund.................. 45
iShares Dow Jones Transportation Average Index Fund........... 47

Description of iShares Cohen & Steers
Index Fund................................................. 49
iShares Cohen & Steers Realty Majors Index Fund............... 50

Details on Management Management.................................................... 53
and Operations Investment Advisor............................................ 53
Administrator, Custodian and Transfer Agent................... 53
</TABLE>

page i

<PAGE>

<TABLE>
<C> <S> <C>
Details on Buying and Shareholder Information......... 54
Selling iShares Buying and Selling iShares...... 54
Book Entry...................... 54
iShare Prices................... 54
Determination of Net Asset Value 55
Dividends and Distributions..... 55
Taxes........................... 55
Taxes on Distributions.......... 55
Taxes when iShares are Sold..... 55
Creations and Redemptions....... 56
iShares Transaction Fees........ 57
Legal Proceedings............... 58

Distribution.................... 58

Financial Highlights............ 58

Index Providers................. 66

Disclaimers..................... 66

Supplemental Information........ 69
Premium/Discount Information.... 69
Total Return Information........ 73
</TABLE>

i Shares

page ii

<PAGE>

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 one of the following
Index Providers:

Dow Jones & Company ("Dow Jones") publishes The Wall Street Journal and
its international and interactive editions, Barron's and SmartMoney
magazines and other periodicals, the Dow Jones Newswires, dowjones.com,
and the Ottaway group of community newspapers.

Cohen & Steers Capital Management, Inc. ("Cohen & Steers") provides
financial, economic and investment information and analytical services to
the financial community.

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 either
Index Provider.

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 sections provide 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.

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 the remainder 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 its 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 sections
describe the strategy of each Fund.

iShares Overview

page 1

<PAGE>

Replication

"Replication" is investing in substantially all of the securities in the
relevant 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
total 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.

i Shares

page 2

<PAGE>

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. market segments relating to its Underlying Index. Each Fund
invests in securities included in, or representative of, 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 future contracts and other derivatives.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus 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 Investments 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.

iShares Overview

page 3

<PAGE>

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.

i Shares

page 4

<PAGE>

Description of iShares Dow Jones Index Funds

. iShares Dow Jones U.S. Total Market 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. Healthcare Sector Index Fund

. iShares Dow Jones U.S. Industrial Sector 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. Utilities Sector Index Fund

. iShares Dow Jones U.S. Financial Services Index Fund

. iShares Dow Jones U.S. Real Estate Index Fund

. iShares Dow Jones Select Dividend Index Fund

. iShares Dow Jones Transportation Average Index Fund

Dow Jones, Dow Jones U.S. Total Market Index, Dow Jones U.S. Basic Materials
Sector Index, Dow Jones U.S. Consumer Cyclical Sector Index, Dow Jones U.S.
Consumer Non-Cyclical Sector Index, Dow Jones U.S. Energy Sector Index, Dow
Jones U.S. Financial Sector Index, Dow Jones U.S. Healthcare Sector Index, Dow
Jones U.S. Industrial Sector Index, Dow Jones U.S. Technology Sector Index, Dow
Jones U.S. Telecommunications Sector Index, Dow Jones U.S. Utilities Sector
Index, Dow Jones U.S. Financial Services Index, Dow Jones U.S. Real Estate
Index, Dow Jones Select Dividend Index and Dow Jones Transportation Average
Index are servicemarks of Dow Jones & Company, Inc. and have been licensed for
use for certain purposes by BGI. The Funds that are based on Dow Jones Indexes
are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes
no representations regarding the advisability of investing in iShares.

iShares Dow Jones Index Funds

page 5

<PAGE>

iShares Dow Jones U.S. Total Market Index Fund

Cusip: 464287846
Trading Symbol: IYY
Underlying Index: Dow Jones U.S. Total Market Index

Investment Objective

The iShares Dow Jones U.S. Total Market Index Fund seeks investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones U.S. Total Market Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the U.S. equity broad market. The Index
is comprised of all of the companies in the Dow Jones Large-Cap Index, Dow
Jones Mid-Cap Index and Dow Jones Small-Cap Index. The Fund uses a Replication
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 Fund

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 6

<PAGE>

Performance Information

The bar chart and table that follow show how the Fund has performed in the past
on a calendar year basis and provide an indication of the risks of investing in
the Fund. Both assume that all dividends and distributions will be reinvested
in the Fund. How the Fund has performed in the past (before and after taxes)
does not necessarily show how it will perform in the future. Supplemental
information about the Fund's performance is shown under the heading Total
Return Information in the Supplemental Information section at the end of this
Prospectus.

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -12.14
2002 -22.17

--------
1 The Fund's total return for the six months ended June 30, 2003 was 12.53%.
The best calendar quarter return during the period shown above was 11.84% in
the 4th quarter of 2001; the worst was -17.07% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -22.17% -16.64%
Return After Taxes on Distributions/2/ -22.58% -17.00%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -13.60% -13.04%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -22.08% -16.53%
</TABLE>
--------
1 Inception date: 6/12/2000.

2 After-tax returns in the table above are calculated using the historical
highest individual federal marginal income tax rates and do not reflect the
impact of state and local taxes. Actual after-tax returns depend on an
investor's tax situation and may differ from those shown, and after-tax
returns shown are not relevant to investors who hold iShares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. The Fund's returns after taxes on distributions and sale of fund
shares are calculated assuming that an investor has sufficient capital gains
of the same character from other investments to offset any capital losses
from the sale of fund shares. As a result, the Fund's returns after taxes on
distributions and sale of fund shares may exceed the Fund's returns before
taxes and/or returns after taxes on distributions.

iShares Dow Jones U.S. Total Market Index Fund

page 7

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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%
-------------------------------------------------------------------------------------------------
</TABLE>

* 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:

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$20 $64 $113 $255
</TABLE>

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
$8,000 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 September 1, 2003 was $2,390,500. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$8,000 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 $2,390,500 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $20,879 if the Creation Unit is redeemed after one year, $31,352 if
the Creation Unit is redeemed after three years, $42,854 if the Creation Unit
is redeemed after five years, and $76,802 if the Creation Unit is redeemed
after ten 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.

i Shares

page 8

<PAGE>

iShares Dow Jones U.S. Basic Materials Sector Index Fund

Cusip: 464287838
Trading Symbol: IYM
Underlying Index: Dow Jones U.S. Basic Materials Sector Index

Investment Objective

The iShares Dow Jones U.S. Basic Materials Sector Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones U.S. Basic Materials Sector Index (the
"Index").

Principal Investment Strategy

The Index measures the performance of the basic materials sector of the U.S.
equity market. Component companies are involved in the production of aluminum,
chemicals, commodities, chemicals specialty products, forest products,
non-ferrous mining products, paper products, precious metals and steel. The
Fund uses a Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
chemicals, which comprised 59.70% of market capitalization (based on the
composition of 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 Fund

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

. Companies in the basic materials sector could be adversely affected by
commodity price volatility, exchange rates, import controls and increased
competition.

. Production of industrial materials often exceeds demand as a result of
over-building or economic downturns, leading to poor investment returns.

. Companies in the basic materials sector are at risk for environmental damage
and product liability claims.

. Companies in the basic materials sector may be adversely affected by
depletion of resources, technical progress, labor relations, and government
regulations.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Basic Materials Sector Index Fund

page 9

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 1.08
2002 8.80

--------
1 The Fund's total return for the six months ended June 30, 2003 was 3.92%.
The best calendar quarter return during the period shown above was 12.79% in
the 4th quarter of 2001; the worst was -23.04% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -8.80% -0.03%
Return After Taxes on Distributions/2/ -9.38% -0.74%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -5.38% -0.36%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -8.32% 0.44%
</TABLE>
--------
1 Inception date: 6/12/2000.

i Shares

page 10

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$500 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
September 1, 2003 was $1,963,500. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $500 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 $1,963,500 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $13,037 if
the Creation Unit is redeemed after one year, $38,724 if the Creation Unit is
redeemed after three years, $66,720 if the Creation Unit is redeemed after five
years, and $148,228 if the Creation Unit is redeemed after ten 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.

iShares Dow Jones U.S. Basic Materials Sector Index Fund

page 11

<PAGE>

iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund

Cusip: 464287580
Trading Symbol: IYC
Underlying Index: Dow Jones U.S. Consumer Cyclical Sector Index

Investment Objective

The iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones U.S. Consumer Cyclical Sector Index (the
"Index").

Principal Investment Strategy

The Index measures the performance of the consumer cyclical sector of the U.S.
equity market. Component companies include advertising, airlines, auto parts,
auto manufacturers, broadcasting, casinos, clothing & fabrics, consumer
electronics, entertainment, footwear, furnishing & appliances, home
construction, lodging, publishing, recreational products & services,
restaurants, apparel retailers, broadline retailers, drug-base retailers,
specialty retailers, tires, and toys. The Fund uses a Representative Sampling
strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
broadcasting, which comprised 23.40% of market capitalization (based on the
composition of 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 Fund

. The success of consumer product manufacturers and retailers is tied closely
to the performance of the domestic and international economy, interest
rates, competition and consumer confidence.

. The success of companies in the consumer cyclical sector depends heavily on
disposable household income and consumer spending.

. Companies in the consumer cyclical sector are subject to severe competition.

. Changes in demographics and consumer tastes can affect the success of
consumer products.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 12

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 0.34%
2002 -24.54%
--------
1 The Fund's total return for the six months ended June 30, 2003 was 16.23%.
The best calendar quarter return during the period shown above was 17.87% in
the 4th quarter of 2001; the worst was -22.15% in the 3rd quarter of 2001.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -24.54% -12.70%
Return After Taxes on Distributions/2/ -24.55% -12.79%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -15.07% -9.97%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -24.12% -12.28%
</TABLE>
--------
1 Inception date: 6/12/2000.

iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund

page 13

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$1,500 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 September 1, 2003 was $2,610,500. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$1,500 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 $2,610,500 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $18,998 if the Creation Unit is redeemed after one year, $53,138 if
the Creation Unit is redeemed after three years, $90,348, if the Creation Unit
is redeemed after five years, and $198,679 if the Creation Unit is redeemed
after ten 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.

i Shares

page 14

<PAGE>

iShares Dow Jones U.S. Consumer
Non-Cyclical Sector Index Fund

Cusip: 464287812
Trading Symbol: IYK
Underlying Index: Dow Jones U.S. Consumer Non-Cyclical Sector Index

Investment Objective

The iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund seeks
investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Dow Jones U.S. Non-Cyclical
Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the consumer non-cyclical sector of the
U.S. equity market. Component companies include distillers and brewers,
producers of soft drinks, consumer service companies, durable and non-durable
household product manufacturers, cosmetics companies, food retailers, other
food companies, tobacco and agricultural companies. The Fund uses a
Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the extent as the Index is so concentrated. As of
the close of business on September 1, 2003, the Index was concentrated in food
and beverage, and household products, which comprised 41.46% and 21.05%,
respectively, of its market capitalization (based on the composition of 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 Fund

. Governmental regulation affecting the permissibility of using various food
additives and production methods could affect the profitability of companies
in the consumer non-cyclical sector.

. Tobacco companies may be adversely affected by new laws and/or by litigation.

. The success of food, soft drink and fashion related products might be
strongly affected by fads, marketing campaigns and other factors affecting
supply and demand.

. The products of internet-related and software companies may face product
obsolescence due to rapid technological developments and frequent new
product introduction.

. Software and computer companies are heavily dependent on patents and
intellectual property rights. The loss or impairment of such rights may
adversely affect the profitability of these companies.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund

page 15

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 2.21%
2002 -4.95%
--------
1 The Fund's total return for the six months ended June 30, 2003 was 7.89%.
The best calendar quarter return during the period shown above was 8.67% in
the 1st quarter of 2002; the worst was -10.41% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -4.95% 1.27%
Return After Taxes on Distributions/2/ -5.46% 0.78%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -3.02% 0.79%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -4.37% 2.02%
</TABLE>
--------
1 Inception date: 6/12/2000.

i Shares

page 16

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$500 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
September 1, 2003 was $2,163,000. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $500 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 $2,163,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $14,260 if
the Creation Unit is redeemed after one year, $42,557 if the Creation Unit is
redeemed after three years, $73,399 if the Creation Unit is redeemed after five
years, and $163,191 if the Creation Unit is redeemed after ten 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.

iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund

page 17

<PAGE>

iShares Dow Jones U.S. Energy Sector Index Fund

Cusip: 464287796
Trading Symbol: IYE
Underlying Index: Dow Jones U.S. Energy Sector Index

Investment Objective

The iShares Dow Jones U.S. Energy Sector Index Fund seeks investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones U.S. Energy Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the energy sector of the U.S. equity
market. Component companies include oil equipment and services, oil-major,
oil-secondary and pipelines. The Fund uses a Representative Sampling strategy
to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
oil and gas, which comprised 97.04% of its market capitalization (based on the
composition of 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 Fund

. The profitability of companies in the energy sector is related to worldwide
energy prices and exploration, and production spending.

. Companies in the energy sector could be adversely affected by changes in
exchange rates.

. Companies in the energy sector are affected by government regulation, world
events and economic conditions.

. Companies in the energy sector are at risk for environmental damage claims.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 18

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -11.83%
2002 -15.48%
--------
1 The Fund's total return for the six months ended June 30, 2003 was 9.54%.
The best calendar quarter return during the period shown above was 9.24% in
the 4th quarter of 2001; the worst was -17.55% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -15.48% -8.10%
Return After Taxes on Distributions/2/ -15.99% -8.57%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -9.47% -6.59%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -13.52% -7.13%
</TABLE>
--------
1 Inception date: 6/12/2000.

iShares Dow Jones U.S. Energy Sector Index Fund

page 19

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$500 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
September 1, 2003 was $2,200,000. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $500 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 $2,200,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $14,487 if
the Creation Unit is redeemed after one year, $43,268 if the Creation Unit is
redeemed after three years, $74,638 if the Creation Unit is redeemed after five
years, and $165,966 if the Creation Unit is redeemed after ten 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.

i Shares

page 20

<PAGE>

iShares Dow Jones U.S. Financial Sector Index Fund

Cusip: 464287788
Trading Symbol: IYF
Underlying Index: Dow Jones U.S. Financial Sector Index

Investment Objective

The iShares Dow Jones U.S. Financial Sector Index Fund seeks investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones U.S. Financial Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the financial sector of the U.S. equity
market. Component companies include major banks, regional banks, diversified
financial companies, insurance companies, real estate companies, savings and
loan associations, and securities brokers. The Fund uses a Representative
Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
banks and financial services, which comprised 35.55% and 44.06%, respectively,
of its market capitalization (based on the composition of 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 Fund

. Companies in the financial sector are subject to extensive governmental
regulation that affects the scope of their activities, the prices they can
charge and the amount of capital they must maintain.

. The profitability of companies in the financial sector is adversely affected
by increases in interest rates.

. The profitability of companies in the financial sector is adversely affected
by loans losses, which usually increase in economic downturns.

. Insurance companies may be subject to severe price competition.

. Newly enacted laws are expected to result in increased inter-industry
consolidation and competition in the financial sector.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Financial Sector Index Fund

page 21

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 - 7.07%
2002 -12.81%
--------
1 The Fund's total return for the six months ended June 30, 2003 was 12.32%.
The best calendar quarter return during the period shown above was 8.05% in
the 2nd quarter of 2001; the worst was -15.92% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -12.81% 0.17%
Return After Taxes on Distributions/2/ -13.35% -0.61%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -7.84% -0.22%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -12.35% 0.76%
</TABLE>
--------
1 Inception date: 5/22/2000.

i Shares

page 22

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$1,500 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 September 1, 2003 was $3,954,000. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$1,500 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 $3,954,000 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $27,237 if the Creation Unit is redeemed after one year, $78,956 if
the Creation Unit is redeemed after three years, $135,327 if the Creation Unit
is redeemed after five years, and $299,444 if the Creation Unit is redeemed
after ten 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.

iShares Dow Jones U.S. Financial Sector Index Fund

page 23

<PAGE>

iShares Dow Jones U.S. Healthcare Sector Index Fund

Cusip: 464287762
Trading Symbol: IYH
Underlying Index: Dow Jones U.S. Healthcare Sector Index

Investment Objective

The iShares Dow Jones U.S. Healthcare Sector Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones U.S. Healthcare Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the healthcare sector of the U.S. equity
market. Component companies include health care providers, biotechnology
companies and manufacturers of medical supplies, advanced medical devices and
pharmaceuticals. The Fund uses a Representative Sampling strategy to try to
track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
pharmaceuticals and biotechnology, which comprised 69.60% of its market
capitalization (based on the composition of 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 Fund

. Many companies in the healthcare sector are heavily dependent on patent
protection. The expiration of patents may adversely affect the profitability
of these companies.

. Companies in the healthcare sector are subject to extensive litigation based
on product liability and similar claims.

. Companies in the healthcare sector are subject to competitive forces that
may make it difficult to raise prices and, in fact, may result in price
discounting.

. Many new products in the healthcare sector are subject to the approval of
the Food and Drug Administration. The process of obtaining such approval is
long and costly.

. Companies in the healthcare sector may be thinly capitalized.

. Companies in the healthcare sector may be susceptible to product
obsolescence.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 24

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -13.34
2002 -21.20

--------
1 The Fund's total return for the six months ended June 30, 2003 was 12.66%.
The best calendar quarter return during the period shown above was 4.30% in
the 4th quarter of 2002; the worst was -16.96% in the 1st quarter of 2001.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -21.20% -7.25%
Return After Taxes on Distributions/2/ -21.43% -7.44%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -13.01% -5.80%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -20.81% -6.67%
</TABLE>
--------
1 Inception date: 6/12/2000.

iShares Dow Jones U.S. Healthcare Sector Index Fund

page 25

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$750 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
September 1, 2003 was $2,631,500. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $750 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 $2,631,500 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $17,632 if
the Creation Unit is redeemed after one year, $52,056 if the Creation Unit is
redeemed after three years, $89,576 if the Creation Unit is redeemed after five
years, and $198,811 if the Creation Unit is redeemed after ten 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.

i Shares

page 26

<PAGE>

iShares Dow Jones U.S. Industrial Sector Index Fund

Cusip: 464287754
Trading Symbol: IYJ
Underlying Index: Dow Jones U.S. Industrial Sector Index

Investment Objective

The iShares Dow Jones U.S. Industrial Sector Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones U.S. Industrial Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the industrial sector of the U.S. equity
market. Component companies include aerospace and defense companies, advanced
industrial companies, equipment manufacturers, air freight companies, building
materials manufacturers, packaging companies, manufacturers of electrical
components and equipment, heavy construction companies, manufacturers of heavy
machinery, industrial services companies, industrial companies, marine
transportation companies, railroads, shipbuilders, and trucking companies. The
Fund uses a Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
industrial diversified, which comprised 42.80% of its market capitalization
(based on the composition of 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 Fund

. The stock prices of companies in the industrial sector are affected by
supply and demand both for their specific product or service and for
industrial sector products in general.

. The products of manufacturing companies may face product obsolescence due to
rapid technological developments and frequent new product introduction.

. Government regulation, world events and economic conditions affect the
performance of companies in the industrial sector.

. Companies in the industrial sector are at risk for environmental damage and
product liability claims.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Industrial Sector Index Fund

page 27

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -10.43
2002 -24.97

--------
1 The Fund's total return for the six months ended June 30, 2003 was 9.00%.
The best calendar quarter return during the period shown above was 18.43% in
the 4th quarter of 2001; the worst was -18.73% in the 3rd quarter of 2001.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -24.97% -15.20%
Return After Taxes on Distributions/2/ -25.22% -15.46%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -15.32% -11.93%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -25.54% -16.09%
</TABLE>
--------
1 Inception date: 6/12/2000.

i Shares

page 28

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$1,500 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 September 1, 2003 was $2,208,500. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$1,500 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 $2,208,500 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $16,533 if the Creation Unit is redeemed after one year, $45,413 if
the Creation Unit is redeemed after three years, $76,889 if the Creation Unit
is redeemed after five years, and $168,529 if the Creation Unit is redeemed
after ten 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.

iShares Dow Jones U.S. Industrial Sector Index Fund

page 29

<PAGE>

iShares Dow Jones U.S. Technology Sector Index Fund

Cusip: 464287721
Trading Symbol: IYW
Underlying Index: Dow Jones U.S. Technology Sector Index

Investment Objective

The iShares Dow Jones U.S. Technology Sector Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, the Dow Jones U.S. Technology Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the technology sector of the U.S. equity
market. Component companies include those involved in the development and
production of technology products, including computer hardware and software,
telecommunications equipment, microcomputer components, integrated computer
circuits and office equipment utilizing technology. The Fund uses a
Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
software and semiconductors, which comprised 27.90% and 27.40%, respectively,
of its market capitalization (based on the composition of 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 Fund

. Technology companies face intense competition, both domestically and
internationally.

. Technology companies may have limited product lines, markets, financial
resources or personnel.

. The products of technology companies may face product obsolescence due to
rapid technological developments and frequent new product introduction.

. Technology companies may face dramatic and often unpredictable changes in
growth rates and competition for the services of qualified personnel.

. Companies in the technology sector are heavily dependent on patent and
intellectual property rights. The loss or impairment of these rights may
adversely affect the profitability of these companies.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 30

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -28.73
2002 -39.02

--------
1 The Fund's total return for the six months ended June 30, 2003 was 19.19%.
The best calendar quarter return during the period shown above was 36.98% in
the 4th quarter of 2001; the worst was -36.47% in the 3rd quarter of 2001.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -39.02% -38.50%
Return After Taxes on Distributions/2/ -39.02% -38.50%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -23.96% -27.91%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -38.66% -38.15%
</TABLE>
--------
1 Inception date: 5/15/2000.

iShares Dow Jones U.S. Technology Sector Index Fund

page 31

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$1,250 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 September 1, 2003 was $2,174,000. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$1,250 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 $2,174,000 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $15,823 if the Creation Unit is redeemed after one year, $44,254 if
the Creation Unit is redeemed after three years, $75,242 if the Creation Unit
is redeemed after five years, and $165,460 if the Creation Unit is redeemed
after ten 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.

i Shares

page 32

<PAGE>

iShares Dow Jones U.S. Telecommunications Sector Index Fund

Cusip: 464287713
Trading Symbol: IYZ
Underlying Index: Dow Jones U.S. Telecommunications Sector Index

Investment Objective

The iShares Dow Jones U.S. Telecommunications Sector Index Fund seeks
investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Dow Jones U.S. Telecommunications
Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the telecommunications sector of the U.S.
equity market. Component companies include fixed line communications and
wireless communications companies. The Fund uses a Representative Sampling
strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
fixed line communications, which comprised 80.60% of its market capitalization
(based on the composition of 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 Fund

. The domestic telecommunications market is characterized by increasing
competition and regulation by the Federal Communications Commission and
various state regulatory authorities.

. Companies in the telecommunications sector need to commit substantial
capital to meet increasing competition, particularly in formulating new
products and services using new technology.

. Technological innovations may make the products and services of
telecommunications companies obsolete.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Telecommunications Sector Index Fund

page 33

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -18.66
2002 -38.13

--------
1 The Fund's total return for the six months ended June 30, 2003 was 9.10%.
The best calendar quarter return during the period shown above was 34.65% in
the 4th quarter of 2002; the worst was -27.17% in the 2nd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -38.13% -33.03%
Return After Taxes on Distributions/2/ -38.51% -33.45%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -23.40% -24.55%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -34.55% -27.88%
</TABLE>
--------
1 Inception date: 5/22/2000.

i Shares

page 34

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$250 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
September 1, 2003 was $986,500. An investor who holds Creation Units and wishes
to redeem at NAV would also pay a standard redemption fee of $250 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 $986,500 and a 5% return each year, and assuming that the Fund's
operating expenses remain the same, the total costs would be $6,548 if the
Creation Unit is redeemed after one year, $19,453 if the Creation Unit is
redeemed after three years, $33,519 if the Creation Unit is redeemed after five
years, and $74,470 if the Creation Unit is redeemed after ten 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.

iShares Dow Jones U.S. Telecommunications Sector Index Fund

page 35

<PAGE>

iShares Dow Jones U.S. Utilities Sector Index Fund

Cusip: 464287697
Trading Symbol: IDU
Underlying Index: Dow Jones U.S. Utilities Sector Index

Investment Objective

The iShares Dow Jones U.S. Utilities Sector Index Fund seeks investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones U.S. Utilities Sector Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the utilities sector of the U.S. equity
market. Component companies include electric utilities, gas utilities and water
utilities. The Fund uses a Representative Sampling strategy to try to track the
Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business September 1, 2003, the Index was concentrated in
electric, which comprised 90.60% of its market capitalization (based on the
composition of 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 Fund

. The rates of regulated utility companies are subject to review and
limitation by governmental regulatory commissions.

. The value of regulated utility debt securities (and, to a lesser extent,
equity securities) tends to have an inverse relationship to the movement of
interest rates.

. As deregulation allows utilities to diversify outside of their original
geographic regions and their traditional lines of business, utilities may
engage in riskier ventures where they have no experience.

. Deregulation is subjecting utility companies to greater competition and may
adversely affect profitability.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 36

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 -26.42
2002 -21.62

--------
1 The Fund's total return for the six months ended June 30, 2003 was 14.94%.
The best calendar quarter return during the period shown above was 4.54% in
the 1st quarter of 2002; the worst was -20.05% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -21.62% -10.85%
Return After Taxes on Distributions/2/ -22.77% -11.95%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -13.21% -8.91%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -21.19% -10.47%
</TABLE>
--------
1 Inception date: 6/12/2000.

iShares Dow Jones U.S. Utilities Sector Index Fund

page 37

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$500 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
September 1, 2003 was $2,591,000. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $500 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 $2,591,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $16,885 if
the Creation Unit is redeemed after one year, $50,782 if the Creation Unit is
redeemed after three years, $87,728 if the Creation Unit is redeemed after five
years, and $195,292 if the Creation Unit is redeemed after ten 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.

i Shares

page 38

<PAGE>

iShares Dow Jones U.S. Financial Services
Index Fund

Cusip: 464287770
Trading Symbol: IYG
Underlying Index: Dow Jones U.S. Financial Services Index

Investment Objective

The iShares Dow Jones U.S. Financial Services Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones U.S. Financial Services Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the financial services sector of the U.S.
equity market. It is a subset of the Dow Jones U.S. Financial Sector Index.
Component companies include banks, savings and loan associations, specialty
financial firms, and other financial services firms. The Fund uses a
Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
banks and diversified financial, which comprised 48.20% and 30.20%,
respectively, of its market capitalization (based on the composition of 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 Fund

. Companies in the financial services sector are subject to extensive
government regulation that affects the scope of their activities, the prices
they can charge and the amount of capital they must maintain.

. The profitability of companies in the financial services sector is adversely
affected by increases in interest rates.

. The profitability of companies in the financial services sector is adversely
affected by loan losses, which usually increase in economic downturns.

. Newly enacted laws are expected to result in increased inter-industry
consolidation and competition in the financial services sector.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

iShares Dow Jones U.S. Financial Services Index Fund

page 39

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 - 6.39
2002 -12.41

--------
1 The Fund's total return for the six months ended June 30, 2003 was 14.53%.
The best calendar quarter return during the period shown above was 9.26% in
the 4th quarter of 2001; the worst was -15.85% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes -12.41% -1.81%
Return After Taxes on Distributions/2/ -13.01% -2.44%
Return After Taxes on Distributions and Sale of Fund Shares/2/ -7.60% -1.72%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) -11.92% -1.22%
</TABLE>
--------
1 Inception date: 6/12/2000.

i Shares

page 40

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$1,000 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 September 1, 2003 was $4,604,000. An investor who holds Creation
Units and wishes to redeem at NAV would also pay a standard redemption fee of
$1,000 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 $4,604,000 and a 5% return each year, and
assuming that the Fund's operating expenses remain the same, the total costs
would be $30,226 if the Creation Unit is redeemed after one year, $90,457 if
the Creation Unit is redeemed after three years, $156,106 if the Creation Unit
is redeemed after five years, and $347,233 if the Creation Unit is redeemed
after ten 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.

iShares Dow Jones U.S. Financial Services Index Fund

page 41

<PAGE>

iShares Dow Jones U.S. Real Estate
Index Fund

Cusip: 464287739
Trading Symbol: IYR
Underlying Index: Dow Jones U.S. Real Estate Index

Investment Objective

The iShares Dow Jones U.S. Real Estate Index Fund seeks investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones U.S. Real Estate Index (the "Index").

Principal Investment Strategy

The Index measures the performance of the real estate sector of the U.S. equity
market. Component companies include hotel and resort companies and real estate
investment trusts ("REITs") that invest in apartments, office and retail
properties. The Fund uses a Representative Sampling strategy to try to track
the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
real estate, which comprised 100% of its market capitalization (based on the
composition of 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 Fund

. Investment in the real estate sector is subject to many of the same risks
associated with the direct ownership of real estate such as:

. Adverse changes in national, state or local real estate conditions (such
as oversupply of or reduced demand for space and changes in market rental
rates);

. Obsolescence of properties;

. Changes in the availability, cost and terms of mortgage funds; and

. The impact of environmental laws.

. A REIT that fails to comply with federal tax requirements affecting REITs
would be subject to federal income taxation.

. The federal tax requirement that a REIT distribute substantially all of its
net income to its shareholders could result in a REIT having insufficient
capital for future expenditures.

. Transactions between REITs and their affiliates may be subject to conflicts
of interest, which may adversely affect shareholders.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 42

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]
2001 10.87
2002 3.04

--------
1 The Fund's total return for the six months ended June 30, 2003 was 12.83%.
The best calendar quarter return during the period shown above was 10.98% in
the 2nd quarter of 2001; the worst was -9.07% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes 3.04% 10.82%
Return After Taxes on Distributions/2/ 0.64% 8.36%
Return After Taxes on Distributions and Sale of Fund Shares/2/ 1.90% 7.52%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) 3.63% 11.33%
</TABLE>
--------
1 Inception date: 6/12/2000.

iShares Dow Jones U.S. Real Estate Index Fund

page 43

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$61 $192 $335 $750
</TABLE>

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
$500 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
September 1, 2003 was $4,494,000. An investor who holds Creation Units and
wishes to redeem at NAV would also pay a standard redemption fee of $500 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 $4,494,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $28,554 if
the Creation Unit is redeemed after one year, $87,353 if the Creation Unit is
redeemed after three years, $151,440 if the Creation Unit is redeemed after
five years, and $338,020 if the Creation Unit is redeemed after ten 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.

i Shares

page 44

<PAGE>

iShares Dow Jones Select Dividend
Index Fund

Cusip: 464287168
Trading Symbol: DVY
Underlying Index: Dow Jones Select Dividend Index

Investment Objective

The iShares Dow Jones Select Dividend Index Fund seeks investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Dow Jones Select Dividend Index (the "Index"). The Fund's
investment objective may be changed without shareholder approval.

Principal Investment Strategy

The Index measures the performance of a selected group of equity securities
issued by companies that have provided relatively high dividend yields on a
consistent basis over time. The Index is comprised of fifty of the highest
dividend-yielding securities (excluding REITs) in the Dow Jones U.S. Total
Market Index, a broad-based index representative of the total market for U.S.
equity securities. To be included in the Index, the securities (i) must have
had a positive dividend-per-share growth rate for each of the last five years
(i.e., paid higher dividends each year); (ii) must have an average five-year
dividend payout ratio of 60% or less; and (iii) must have an annual average
daily dollar trading volume of more than $1.5 million. "Dividend payout ratio"
reflects the percentage of a company's earnings paid out as dividends. A ratio
of 60% would mean that a company paid out approximately 60% of its earnings as
dividends. A company with a lower dividend payout ratio has more earnings to
support dividends, and adjustments or changes in the level of earnings are
therefore less likely to significantly affect the level of dividends paid.
Positive dividend growth rate is a measure of dividend consistency, since it
provides some indication of a company's ability to continue to pay dividends.
The Index is reconstituted annually. The Fund uses a Replication 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 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.

iShares Dow Jones Select Dividend Index Fund

page 45

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.40%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

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.

<TABLE>
<S> <C>
1 Year 3 Years
$41 $128
</TABLE>

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
$250 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
November 1, 2003 was $2,500,000. An investor who holds Creation Units and
wishes to redeem them at NAV would also pay a standard redemption fee of $250
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 $2,500,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $10,729 if
the Creation Unit is redeemed after one year, and $32,620 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.

i Shares

page 46

<PAGE>

iShares Dow Jones Transportation Average Index Fund

Cusip: 464287192
Trading Symbol: IYT
Underlying Index: Dow Jones Transportation Average Index

Investment Objective

The iShares Dow Jones Transportation Average Index Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Dow Jones Transportation Average Index (the "Index").
The Fund's investment objective may be changed without shareholder approval.

Principal Investment Strategy

The Index measures the performance of the transportation sector of the U.S.
equity market. Component companies include airlines, industrial transportation
companies and general industrial services companies. The Fund uses a
Representative Sampling strategy to try to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated. As
of the close of business on September 1, 2003, the Index was concentrated in
air freight and trucking, which comprised 26.90% and 26.40%, respectively, of
its market capitalization (based on the composition of 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 Fund

. The stock prices of companies in the transportation sector are affected by
both supply and demand for their specific product or service for that sector.

. Government regulation, world events and economic conditions affect the
performance of companies in the transportation sector.

. The success of companies in the transportation sector may depend heavily on
consumer spending and disposable household income.

. Companies in the transportation sector could be adversely affected by
commodity price volatility, exchange rates, import controls and increased
competition.

. Companies in the transportation sector may be adversely affected by
depletion of resources, technology developments, labor relations, and
government regulations.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

Performance Information

iShares Dow Jones Transportation Average Index Fund

page 47

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.60%
-------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

Example

This Example is intended to help you compare the cost of investing in the
iShares of the Fund with the cost of investing in other funds.

<TABLE>
<S> <C>
1 Year 3 Years
$61 $192
</TABLE>

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
$200 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
September 1, 2003 was $2,500,000. An investor who holds Creation Units and
wishes to redeem them at NAV would also pay a standard redemption fee of $200
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 $2,500,000 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $15,729 if
the Creation Unit is redeemed after one year, and $48,439 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.

i Shares

page 48

<PAGE>

Description of iShares Cohen & Steers Index Fund

. iShares Cohen & Steers Realty Majors Index Fund

"Cohen & Steers" is a trademark and "Cohen & Steers Realty Majors Index(R)" is
a registered trademark of Cohen & Steers Capital Management, Inc. ("Cohen &
Steers"), and both such trademarks have been licensed for use for certain
purposes by BGI. The iShares Cohen & Steers Realty Majors Index Fund is not
sponsored, endorsed, sold or promoted by Cohen & Steers, and Cohen & Steers
makes no representation regarding the advisability of investing in iShares.

iShares Cohen & Steers Index Fund

page 49

<PAGE>

iShares Cohen & Steers Realty Majors Index Fund

Cusip: 464287564
Trading Symbol: ICF
Underlying Index: Cohen & Steers Realty Majors Index

Investment Objective

The iShares Cohen & Steers Realty Majors Index Fund seeks investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Cohen & Steers Realty Majors Index (the "Index").

Principal Investment Strategy

The Index consists of selected Real Estate Investment Trusts ("REITs"). The
objective of the Index is to represent relatively large and liquid REITs that
may benefit from future consolidation and securitization of the U.S. real
estate industry. REITs are selected for inclusion in the Index based on a
rigorous review of several factors, including management, portfolio quality,
and sector and geographic diversification. The REITs selected for inclusion in
the Index must meet minimum market capitalization and liquidity requirements.
The Index is weighted according to the total market value of each REIT's
outstanding shares and is adjusted quarterly so that no REIT represents more
than 8% of the index. The Fund uses a Representative Sampling strategy to try
to track the Index.

The Fund will concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so concentrated.
Within the REIT market, the Index is diversified across property sectors that
represent the current market. Because the Index will always be concentrated in
real estate, which comprises 100% of its market capitalization (based on the
composition of the Index), the Fund will always be concentrated in real estate.

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 Fund

. Investment in REITs is subject to many of the same risks associated with the
direct ownership of real estate such as:

. Adverse changes in national, state or local real estate conditions (such
as oversupply of or reduced demand for space and changes in market rental
rates);

. Obsolescence of properties;

. Changes in the availability, cost and terms of mortgage funds; and

. The impact of environmental laws.

. A REIT that fails to comply with federal tax requirements affecting REITs
would be subject to federal income taxation.

. The federal tax requirement that a REIT distribute substantially all of its
net income to its shareholders could result in a REIT having insufficient
capital for future expenditures.

. Transactions between REITs and their affiliates may be subject to conflicts
of interest, which may adversely affect shareholders.

. The stocks in the Index may underperform fixed income investments and stock
market investments that track other markets, segments and sectors.

i Shares

page 50

<PAGE>

Performance Information

Annual Total Returns as of December 31, 2002/1/

[CHART]

2002 2.98%
--------
1 The Fund's total return for the six months ended June 30, 2003 was 13.33%.
The best calendar quarter return during the period shown above was 7.88% in
the 1st quarter of 2002; the worst was -8.82% in the 3rd quarter of 2002.

Average Annual Total Returns
(for the periods ended December 31, 2002)

<TABLE>
<CAPTION>
Since Fund
One Year Inception/1/
-------- -----------
<S> <C> <C>
Fund:
Return Before Taxes 2.98% 7.37%
Return After Taxes on Distributions/2/ 0.50% 4.91%
Return After Taxes on Distributions and Sale of Fund Shares/2/ 1.86% 4.72%
Index (Index returns do not reflect deductions for fees, expenses, or taxes) 3.27% 7.68%
</TABLE>
--------
1 Inception date: 1/29/2001.

iShares Cohen & Steers Realty Majors Index Fund

page 51

<PAGE>

Fees and Expenses

Most investors will buy and sell shares of the Fund through brokers.

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.*

<TABLE>
<S> <C>
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 0.35%
Distribution and Service (12b-1) Fees None
Other Expenses*** None
----------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.35%/#/
----------------------------------------------------------------------------------------------------
</TABLE>

* You will incur customary brokerage commissions when buying or selling
shares of the Fund.

** Expressed as a percentage of average net assets.

/#/ Includes voluntary reimbursement from BGFA. If such reimbursement had
not been made, the total annual fund operating expenses would have
been 0.36%.

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.

<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$36 $113 $197 $443
</TABLE>

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
$250 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
September 1, 2003 was $4,824,500. An investor who holds Creation Units and
wishes to redeem them at NAV would also pay a standard redemption fee of $250
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 $4,824,500 and a 5% return each year, and assuming that the
Fund's operating expenses remain the same, the total costs would be $17,777 if
the Creation Unit is redeemed after one year, $54,780 if the Creation Unit is
redeemed after three years, $95,304 if the Creation Unit is redeemed after five
years, and $214,296 if the Creation Unit is redeemed after ten 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.

i Shares

page 52

<PAGE>

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.

For the fiscal year ended April 30, 2003, BGFA received fees from each Fund
based on a percentage of each Fund's average daily net assets, as shown in the
following table.

<TABLE>
<CAPTION>
iShares Index Fund Management Fee
------------------ --------------
<S> <C>
iShares Dow Jones U.S. Total Market Index Fund 0.20%
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. Healthcare Sector Index Fund 0.60%
iShares Dow Jones U.S. Industrial Sector 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. Utilities Sector Index Fund 0.60%
iShares Dow Jones U.S. Financial Services Index Fund 0.60%
iShares Dow Jones U.S. Real Estate Index Fund 0.60%
iShares Dow Jones Select Dividend Index Fund 0.40%*
iShares Dow Jones Transportation Average Index Fund 0.60%*
iShares Cohen & Steers Realty Majors Index Fund 0.35%
</TABLE>
--------
* Because the Fund was not in operation at the end of the fiscal year, this
percentage reflects the rate at which BGFA will be paid.

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 November 30, 2003,
BGI and its affiliates, including BGFA, provided investment advisory services
for assets in excess of $1 trillion. 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.

iShares Management

page 53

<PAGE>

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 other shares of
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 trading symbols listed for each Fund in the Description
of iShares Funds section.

The iShares Dow Jones Select Dividend Index Fund is listed on the New York
Stock Exchange. The other iShares Funds included in this Prospectus are listed
on the American Stock Exchange. Each national securities exchange on which
iShares are listed 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. The 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 is 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.

i Shares

page 54

<PAGE>

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 that the national securities
exchange on which the Fund is listed 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
distribute their 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:

. A Fund makes distributions, and

. You sell iShares.

Taxes on Distributions

Distributions paid out of a Fund's net investment income (other than qualified
dividend income), including distributions out of the 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 the 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.

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

If you are a resident or a citizen of the United States, by law, back-up
withholding will apply to your distributions and proceeds if you have not
provided a taxpayer identification number or social security number and made
other required certifications.

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.

iShares Shareholder Information

page 55

<PAGE>

The foregoing discussion summarizes some of the consequences under current
federal tax law of an investment in the 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 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, each of which consists of 50,000 iShares or multiples thereof,
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.

i Shares

page 56

<PAGE>

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 standard creation and
redemption transaction fees for creations and redemptions through DTC 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 September
1, 2003 (except for the iShares Dow Jones Select Dividend Index Fund), the
approximate value of one Creation Unit per Fund, including the creation
transaction fee.

<TABLE>
<CAPTION>
Approximate Standard Maximum
Value of a Creation/ Creation/
Creation Unit Redemption Redemption
as of September 1, Transaction Transaction
Name of Fund 2003 Fee Fee
------------ ------------------ ----------- -----------
<S> <C> <C> <C>
iShares Dow Jones U.S. Total Market Index Fund $2,390,500 $8,000 $32,000
iShares Dow Jones U.S. Basic Materials Sector Index Fund $1,963,500 $ 500 $ 2,000
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund $2,610,500 $1,500 $ 6,000
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index
Fund $2,163,000 $ 500 $ 2,000
iShares Dow Jones U.S. Energy Sector Index Fund $2,200,000 $ 500 $ 2,000
iShares Dow Jones U.S. Financial Sector Index Fund $3,954,000 $1,500 $ 6,000
iShares Dow Jones U.S. Healthcare Sector Index Fund $2,631,500 $ 750 $ 3,000
iShares Dow Jones U.S. Industrial Sector Index Fund $2,208,500 $1,500 $ 6,000
iShares Dow Jones U.S. Technology Sector Index Fund $2,174,000 $1,250 $ 5,000
iShares Dow Jones U.S. Telecommunications Sector Index
Fund $ 986,500 $ 250 $ 1,000
iShares Dow Jones U.S. Utilities Sector Index Fund $2,591,000 $ 500 $ 2,000
iShares Dow Jones U.S. Financial Services Index Fund $4,604,000 $1,000 $ 4,000
iShares Dow Jones U.S. Real Estate Index Fund $4,494,000 $ 500 $ 2,000
iShares Dow Jones Select Dividend Index Fund* $2,500,000 $ 250 $ 1,000
iShares Dow Jones Transportation Average Index Fund $2,500,000 $ 200 $ 800
iShares Cohen & Steers Realty Majors Index Fund $4,824,500 $ 250 $ 1,000
</TABLE>
--------
* The approximate value of a Creation Unit for the iShares Dow Jones Select
Dividend Index Fund is as of November 1, 2003.

iShares Shareholder Information

page 57

<PAGE>

Legal Proceedings

The Trust has reached a settlement in an action in the U.S. District Court for
the Northern District of Illinois. In the action, a company named Mopex, Inc.
and a company named Realtimemutualfunds.com alleged that the actions of the
Trust and others infringed a patent held by Mopex, and that the parties engaged
in a "conspiracy" amongst themselves to infringe the patent. The patent itself
was found to be invalid in a related action to which the Trust was not a party.
In the settlement, the plaintiffs' claims and allegations were dismissed with
prejudice, and neither the Trust nor any other defendant will pay any
compensation to the plaintiffs.

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

The financial highlights tables are intended to help investors understand each
Fund's financial performance. Certain information reflects financial results
for a single share of a Fund. The total returns in the tables represent the
rate that an investor would have earned (or lost) on an investment in a given
Fund, assuming reinvestment of all dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP whose report is
included along with the Funds' financial statements in the Annual Report
(available upon request). Financial highlights for the iShares Dow Jones Select
Dividend Index Fund and the iShares Dow Jones Transportation Average Index Fund
are not presented, as those Funds had not commenced operations as of April 30,
2003.

i Shares

page 58

<PAGE>

iShares Trust
Financial Highlights

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Total Market U.S. Basic Materials Sector
Index Fund Index Fund
--------------------------------- ------------------------------
Period from Period from
Jun. 12, Jun. 12,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 50.47 $ 57.93 $ 67.15 $ 39.99 $ 39.24 $36.04
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 0.63 0.57 0.42 0.70 0.55 0.55
Net realized and unrealized
gain (loss) (7.66) (7.46) (9.27) (5.62) 0.73 3.25
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (7.03) (6.89) (8.85) (4.92) 1.28 3.80
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (0.61) (0.57) (0.36) (0.66) (0.53) (0.53)
Net realized gain - - (0.01) - - (0.07)
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (0.61) (0.57) (0.37) (0.66) (0.53) (0.60)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 42.83 $ 50.47 $ 57.93 $ 34.41 $ 39.99 $39.24
========== ========== =========== ========== ========== ===========
Total return (13.89)% (11.93)% (13.20)%/2/ (12.30)% 3.38 % 10.80 %/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $175,596 $121,140 $66,625 $99,779 $57,989 $9,811
Ratio of expenses to
average net assets/3/ 0.20 % 0.20 % 0.20 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income to average net
assets/3/ 1.57 % 1.15 % 0.98 % 2.10 % 1.42 % 1.77 %
Portfolio turnover rate/4/ 4 % 5 % 5 % 6 % 9 % 16 %
----------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

iShares Financial Highlights

page 59

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Consumer Cyclical Sector U.S. Consumer Non-Cyclical Sector
Index Fund Index Fund
-------------------------------- --------------------------------
Period from Period from
Jun. 12, Jun. 12,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 55.05 $ 59.88 $ 59.63 $ 47.91 $ 40.55 $ 40.83
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 0.05 0.02 0.09 0.69 0.49 0.42
Net realized and unrealized
gain (loss) (9.50) (4.80) 0.45 (8.04) 7.41 (0.39)
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (9.45) (4.78) 0.54 (7.35) 7.90 0.03
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (0.05) - (0.10) (0.60) (0.54) (0.31)
Net realized gain - - (0.19) - - -
Return of capital (0.01) (0.05) - - - -
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (0.06) (0.05) (0.29) (0.60) (0.54) (0.31)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 45.54 $ 55.05 $ 59.88 $ 39.96 $ 47.91 $ 40.55
========== ========== =========== ========== ========== ===========
Total return (17.17)% (7.98)% 0.98 %/2/ (15.40)% 19.65 % 0.06 %/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $129,776 $129,362 $29,940 $87,918 $114,974 $14,192
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income (loss) to average
net assets/3/ 0.11 % (0.05)% 0.16 % 1.57 % 1.46 % 1.21 %
Portfolio turnover rate/4/ 8 % 4 % 25 % 7 % 8 % 38 %
-----------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

i Shares

page 60

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Energy Sector U.S. Financial Sector
Index Fund Index Fund
--------------------------------- ---------------------------------
Period from Period from
Jun. 12, May 22,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 48.74 $ 57.01 $ 50.79 $ 81.20 $ 81.78 $ 71.80
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 0.71 0.63 0.40 1.31 1.11 1.77
Net realized and unrealized
gain (loss) (9.56) (8.26) 6.24 (8.94) (0.61) 10.17
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (8.85) (7.63) 6.64 (7.63) 0.50 11.94
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (0.70) (0.64) (0.42) (1.28) (1.08) (1.57)
Net realized gain - - - - - (0.39)
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (0.70) (0.64) (0.42) (1.28) (1.08) (1.96)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 39.19 $ 48.74 $ 57.01 $ 72.29 $ 81.20 $ 81.78
========== ========== =========== ========== ========== ===========
Total return (18.22)% (13.34)% 13.13 %/2/ (9.33)% 0.66 % 16.69 %/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $111,684 $104,797 $54,156 $148,203 $121,796 $57,249
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income to average net
assets/3/ 1.79 % 1.32 % 0.94 % 1.94 % 1.49 % 1.46 %
Portfolio turnover rate/4/ 9 % 18 % 20 % 7 % 4 % 11 %
-------------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

iShares Financial Highlights

page 61

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Healthcare Sector U.S. Industrial Sector
Index Fund Index Fund
--------------------------------- -------------------------------
Period from Period from
Jun. 12, Jun. 12,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 56.92 $ 61.87 $ 59.53 $ 45.75 $ 53.99 $ 58.11
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 0.39 0.26 0.13 0.38 0.29 0.22
Net realized and unrealized
gain (loss) (6.13) (4.94) 2.44 (7.15) (8.23) (3.98)
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (5.74) (4.68) 2.57 (6.77) (7.94) (3.76)
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (0.38) (0.27) (0.14) (0.38) (0.30) (0.23)
Net realized gain - - (0.09) - - (0.13)
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (0.38) (0.27) (0.23) (0.38) (0.30) (0.36)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 50.80 $ 56.92 $ 61.87 $ 38.60 $ 45.75 $ 53.99
========== ========== =========== ========== ========== ===========
Total return (10.06)% (7.60)% 4.29 %/2/ (14.75)% (14.72)% (6.46)%/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $378,489 $236,233 $108,269 $81,051 $84,634 $45,891
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income to average net
assets/3/ 0.80 % 0.45 % 0.29 % 1.03 % 0.56 % 0.44 %
Portfolio turnover rate/4/ 3 % 3 % 5 % 12 % 27 % 23 %
-----------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

i Shares

page 62

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Technology Sector U.S. Telecommunications Sector
Index Fund Index Fund
--------------------------------- --------------------------------
Period from Period from
May 15, May 22,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 43.41 $ 63.42 $ 116.57 $ 22.38 $ 38.35 $ 56.81
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income
(loss) (0.05) (0.16) (0.29) 0.34 0.29 0.35
Net realized and unrealized
loss (8.02) (19.85) (52.86) (3.98) (15.98) (17.95)
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (8.07) (20.01) (53.15) (3.64) (15.69) (17.60)
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income - - - (0.31) (0.28) (0.27)
Net realized gain - - - - - (0.59)
---------- ---------- ----------- ---------- ---------- -----------
Total distributions - - - (0.31) (0.28) (0.86)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 35.34 $ 43.41 $ 63.42 $ 18.43 $ 22.38 $ 38.35
========== ========== =========== ========== ========== ===========
Total return (18.59)% (31.55)% (45.60)%/2/ (16.22)% (41.12)% (31.06)%/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $231,501 $141,073 $110,990 $126,245 $51,463 $55,603
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income (loss) to average
net assets/3/ (0.22)% (0.41)% (0.47)% 2.27 % 1.05 % 0.80 %
Portfolio turnover rate/4/ 5 % 8 % 11 % 23 % 43 % 43 %
------------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

iShares Financial Highlights

page 63

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Dow Jones
U.S. Utilities Sector U.S. Financial Services
Index Fund Index Fund
--------------------------------- -----------------------------------
Period from Period from
Jun. 12, Jun. 12,
2000/1/ 2000/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 65.75 $ 85.95 $ 69.81 $ 92.45 $ 93.67 $ 85.58
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 2.04 1.89 1.82 1.41 1.22 1.29
Net realized and unrealized
gain (loss) (16.61) (20.25) 16.19 (8.90) (1.26) 8.10
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (14.57) (18.36) 18.01 (7.49) (0.04) 9.39
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (2.07) (1.84) (1.73) (1.42) (1.18) (1.17)
Net realized gain - - (0.14) - - (0.13)
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (2.07) (1.84) (1.87) (1.42) (1.18) (1.30)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 49.11 $ 65.75 $ 85.95 $ 83.54 $ 92.45 $ 93.67
========== ========== =========== ========== ========== ===========
Total return (22.16)% (21.38)% 25.90 %/2/ (8.02)% 0.00 %/5/ 11.03 %/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $329,055 $180,818 $42,976 $116,957 $60,092 $37,467
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.60 % 0.60 % 0.60 %
Ratio of net investment
income to average net
assets/3/ 4.15 % 2.89 % 2.59 % 1.90 % 1.46 % 1.33 %
Portfolio turnover rate/4/ 12 % 8 % 11 % 8 % 3 % 5 %
---------------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

5 Rounds to less than 0.01%

i Shares

page 64

<PAGE>

iShares Trust
Financial Highlights (continued)

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
iShares Dow Jones iShares Cohen & Steers
U.S. Real Estate Realty Majors
Index Fund Index Fund
--------------------------------- -----------------------------------
Period from Period from
Jun. 12, Jan. 29,
2000/1/ 2001/1/
Year ended Year ended to Year ended Year ended to
Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30, Apr. 30,
2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 85.52 $ 77.21 $ 68.97 $ 89.68 $ 80.09 $ 79.86
---------- ---------- ----------- ---------- ---------- -----------
Income from investment
operations:
Net investment income 5.04 4.56 3.51 4.59 4.79 1.11
Net realized and unrealized
gain (loss) (6.01) 8.71 7.51 (4.32) 9.98 (0.39)
---------- ---------- ----------- ---------- ---------- -----------
Total from investment
operations (0.97) 13.27 11.02 0.27 14.77 0.72
---------- ---------- ----------- ---------- ---------- -----------
Less distributions from:
Net investment income (3.98) (4.54) (2.64) (3.76) (4.77) (0.49)
Net realized gain - - (0.14) - - -
Return of capital (0.90) (0.42) - (1.20) (0.41) -
---------- ---------- ----------- ---------- ---------- -----------
Total distributions (4.88) (4.96) (2.78) (4.96) (5.18) (0.49)
---------- ---------- ----------- ---------- ---------- -----------
Net asset value, end of period $ 79.67 $ 85.52 $ 77.21 $ 84.99 $ 89.68 $ 80.09
========== ========== =========== ========== ========== ===========
Total return (0.98)% 17.83 % 16.32 %/2/ 0.46 % 19.05 % 0.91 %/2/
========== ========== =========== ========== ========== ===========
Ratios/Supplemental data:
Net assets, end of period
(000s) $195,203 $106,905 $54,049 $267,732 $89,684 $40,047
Ratio of expenses to
average net assets/3/ 0.60 % 0.60 % 0.60 % 0.35 %/5/ 0.35 % 0.35 %
Ratio of net investment
income to average net
assets/3/ 6.40 % 5.97 % 6.37 % 6.17 %/5/ 5.80 % 6.01 %
Portfolio turnover rate/4/ 21 % 10 % 30 % 13 % 15 % 2 %
---------------------------------------------------------------------------------------------------------------
</TABLE>
1 Commencement of operations.

2 Not annualized.

3 Annualized for periods of less than one year.

4 Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.

5 Includes voluntary reimbursement from the advisor. If such reimbursement had
not been made, the ratios of expenses to average net assets and net
investment income to average net assets would have been 0.36% and 6.16%,
respectively.

iShares Financial Highlights

page 65

<PAGE>

Index Providers

Dow Jones Indexes are a part of Dow Jones & Company, which publishes The Wall
Street Journal and its international and interactive editions, Barron's and
SmartMoney magazines and other periodicals, the Dow Jones Newswires,
dowjones.com, and the Ottaway group of community newspapers. Dow Jones is
co-owner with Reuters group of Factiva, and with NBC of the CNBC television
operations in Europe and Asia. Dow Jones also provides news content to CNBC in
the U.S. The Dow Jones Indexes include the Dow Jones Industrial, Transportation
and Utility Averages, as well as the Dow Jones Global Indexes, the Dow Jones
STOXX Indexes, the Dow Jones REIT Indexes, the Dow Jones-AIG Commodity Index,
the Dow Jones Islamic Market Indexes, the Dow Jones Internet Indexes, the Dow
Jones Global Titans 50 Index, Dow Jones Sector Titans Indexes and the Dow Jones
Sustainability Group Indexes. Dow Jones is not affiliated with the iShares
Trust, BGI, BGFA, Investors Bank, the Distributor or the AMEX.

Cohen & Steers is the Index Provider for the Cohen & Steers Realty Majors
Portfolio Index. Cohen & Steers is not affiliated with the iShares Trust, BGI,
BGFA, Investors Bank, the Distributor or the AMEX. Cohen & Steers is a leading
manager of real estate securities.

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

Disclaimers

The iShares Trust is not sponsored, endorsed, sold, or promoted by Dow Jones.
Dow Jones makes no representation or warranty, express or implied, to the
owners of iShares or to any member of the public regarding the advisability of
owning or trading in iShares. Dow Jones' only relationship to the Trust, BGI
and BGFA is the licensing of certain trademarks, trade names, and service marks
of Dow Jones and of the Dow Jones Indexes, which are determined, composed, and
calculated by Dow Jones without regard to the Trust, BGI or BGFA. Dow Jones has
no obligation to take the needs of BGFA, BGI or the owners of iShares into
consideration in determining, composing, or calculating the Dow Jones Indexes.
Dow Jones is not responsible for and has not participated in the determination
or the timing of, prices, or quantities of iShares to be listed or in the
determination or calculation of the equation by which iShares are to be
converted into cash. Dow Jones has no obligation or liability in connection
with the administration of the Trust or the marketing or trading of iShares.
Dow Jones does not guarantee the accuracy and/or the completeness of the Dow
Jones Indexes or any data included therein and Dow Jones shall have no
liability for any errors, omissions, or interruptions therein. Dow Jones makes
no warranty, express or implied, as to the results to be obtained by BGI and
BGFA, owners of iShares, or any other person or entity from the use of the Dow
Jones Indexes or any data included therein. Dow Jones makes no express or
implied warranties, and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the Dow Jones
Indexes or any data included therein. Without limiting any of the foregoing, in
no event shall Dow Jones have any liability for any lost profits or indirect,
punitive, special, or consequential damages, even if notified of the
possibility thereof. There are no third party beneficiaries of any agreements
or arrangements between Dow Jones and BGI and BGFA.

The iShares Trust is not sponsored, endorsed, sold or promoted by Cohen &
Steers. Cohen & Steers makes no representation or warranty, express or implied,
to the owners of iShares or any member of the public regarding the advisability
of investing in securities generally or in the iShares Cohen & Steers Realty
Majors Index Fund particularly or the ability of the Cohen & Steers Realty
Majors Index to track general stock market performance. Cohen & Steers' only
relationship to the Trust, BGI and BGFA is the licensing of certain trademarks
and trade names of Cohen & Steers and of the Cohen & Steers Realty Majors Index
which is determined, composed and calculated by Cohen & Steers without regard
to the Trust, BGI, BGFA or the iShares Cohen & Steers Realty Majors Index Fund.
Cohen & Steers has no obligation to take the needs of BGFA,

i Shares

page 66

<PAGE>

BGI or the owners of iShares into consideration in determining, composing or
calculating the Cohen & Steers Realty Majors Index. Cohen & Steers is not
responsible for and has not participated in the determination of the prices and
amount of the iShares Cohen & Steers Realty Majors Index Fund or the timing of
the issuance or sale of the iShares Cohen & Steers Realty Majors Index Fund or
in the determination or calculation of the equation by which iShares of the
iShares Cohen & Steers Realty Majors Index Fund are to be converted into cash.
Cohen & Steers has no obligation or liability in connection with the
administration, marketing, or trading of the iShares Cohen & Steers Realty
Majors Index Fund. Cohen & Steers does not guarantee the accuracy and/or the
completeness of the Cohen & Steers Realty Majors Index or any data included
therein and Cohen & Steers shall have no liability for any errors, omissions,
or interruptions therein. Cohen & Steers makes no warranty, express or implied,
as to results to be obtained by BGI, owners of iShares of the iShares Cohen &
Steers Realty Majors Index Fund, or any other person or entity from the use of
the Cohen & Steers Realty Majors Index or any data included therein. Cohen &
Steers 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 Cohen & Steers Realty Majors Index or any data included therein.
Without limiting any of the foregoing, in no event shall Cohen & Steers have
any liability for any special, punitive, indirect, or consequential damages
(including lost profits) resulting from the use of the Cohen & Steers Realty
Majors Index or any data included therein, even if notified of the possibility
of such damages.

iShares are not sponsored, endorsed or promoted by the NYSE. The NYSE makes no
representation or warranty, express or implied, to the owners of the iShares of
any Fund or any member of the public regarding the ability of a Fund to track
the total return performance of any Underlying Index or the ability of any
Underlying Index identified herein to track stock market performance. The
Underlying Indices identified herein are determined, composed and calculated by
Dow Jones or Cohen & Steers without regard to any Fund. The NYSE is not
responsible for, nor has it participated in, the determination of the
compilation or the calculation of any Underlying Index, nor in the
determination of the timing of, prices of, or quantities of the iShares of any
Fund to be issued, nor in the determination or calculation of the equation by
which the iShares are redeemable. The NYSE has no obligation or liability to
owners of the iShares of any Fund in connection with the administration,
marketing or trading of the iShares of the Fund.

The NYSE does not guarantee the accuracy and/or the completeness of any
Underlying Index or any data included therein. The NYSE makes no warranty,
express or implied, as to results to be obtained by the iShares Trust on behalf
of its Funds as licensee, licensee's customers and counterparties, owners of
the iShares, or any other person or entity from the use of the subject indices
or any data included therein in connection with the rights licensed as
described herein or for any other use. The NYSE makes no express or implied
warranties, and hereby expressly disclaims all warranties of merchantability or
fitness for a particular purpose with respect to any Underlying Index or any
data included therein. Without limiting any of the foregoing, in no event shall
the NYSE have any liability for any direct, indirect, special, punitive,
consequential or any other damages (including lost profits) even if notified of
the possibility of such damages.

iShares are not sponsored, endorsed or promoted by the AMEX. The AMEX makes no
representation or warranty, express or implied, to the owners of the iShares of
any Fund or any member of the public regarding the ability of a Fund to track
the total return performance of any Underlying Index or the ability of any
Underlying Index identified herein to track stock market performance. The
Underlying Indices identified herein are determined, composed and calculated by
Dow Jones or Cohen & Steers without regard to any Fund. The AMEX is not
responsible for, nor has it participated in, the determination of the
compilation or the calculation of any Underlying Index, nor in the
determination of the timing of, prices of, or quantities of the iShares of any
Fund to be issued, nor in the determination or calculation of the equation by
which the iShares are redeemable. The AMEX has no obligation or liability to
owners of the iShares of any Fund in connection with the administration,
marketing or trading of the iShares of the Fund.

iShares Disclaimers

page 67

<PAGE>

The AMEX does not guarantee the accuracy and/or the completeness of any
Underlying Index or any data included therein. The AMEX makes no warranty,
express or implied, as to results to be obtained by the iShares Trust on behalf
of its Funds as licensee, licensee's customers and counterparties, owners of
the iShares, or any other person or entity from the use of the subject indices
or any data included therein in connection with the rights licensed as
described herein or for any other use. The AMEX makes no express or implied
warranties, and hereby expressly disclaims all warranties of merchantability or
fitness for a particular purpose with respect to any Underlying Index or any
data included therein. Without limiting any of the foregoing, in no event shall
the AMEX have any liability for any direct, indirect, special, punitive,
consequential or any other damages (including lost profits) even if notified of
the possibility of such damages.

BGFA does not guarantee the accuracy and/or the completeness of the Underlying
Indexes or any data included therein and BGFA shall have no liability for any
errors, omissions, or interruptions therein.

BGFA makes no warranty, express or implied, as to results to be obtained by the
Funds, owners of the iShares of any Fund, or any other person or entity from
the use of any Underlying 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 any
Underlying Index or any data included therein. Without limiting any of the
foregoing, in no event shall BGFA have any liability for any special, punitive,
direct, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.

i Shares

page 68

<PAGE>

iShares Trust

Supplemental Information

I. Premium/Discount Information

The tables that follow present information about the differences between the
daily market price on secondary markets for shares of an iShares Fund and that
Fund's net asset value. Net asset value, or "NAV", is the price per share at
which each Fund issues and redeems shares. It is calculated in accordance with
the standard formula for valuing mutual fund shares. The "Market Price" of each
iShares Fund generally is determined using the midpoint between the highest bid
and the lowest offer on the Exchange on which the iShares of such Fund is
listed for trading, as of the time that the Fund's NAV is calculated. Each
Fund's Market Price may be at, above or below its NAV. The NAV of each Fund
will fluctuate with changes in the market value of its portfolio holdings. The
Market Price of each Fund will fluctuate in accordance with changes in its NAV,
as well as market supply and demand.

Premiums or discounts are the differences (generally expressed as a percentage)
between the NAV and Market Price of a Fund on a given day, generally at the
time NAV is calculated. A premium is the amount that a Fund is trading above
the reported NAV, expressed as a percentage of the NAV. A discount is the
amount that a Fund is trading below the reported NAV, expressed as a percentage
of the NAV.

The following information shows the frequency distributions of premiums and
discounts for each of the Funds. The information shown for each Fund is for the
period from January 1, 2002 to June 30, 2003. A premium/discount table for the
iShares Dow Jones Select Dividend Index Fund and the iShares Dow Jones
Transportation Average Index Fund are not presented, as those Funds had not
commenced operations as of June 30, 2003.

Each line in the table shows the number of trading days in which the iShares
Fund traded within the premium/discount range indicated. The number of trading
days in each premium/discount range is also shown as a percentage of the total
number of trading days in the period covered by the table. All data presented
here represents past performance, which cannot be used to predict future
results.

iShares Dow Jones U.S. Total Market Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..... 4 1.06%
Between 0.5% and -0.5% 368 97.88%
Less than -0.5%....... 4 1.06%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Basic Materials Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.0%..................... 1 0.27%
Greater than 0.5% and Less than 1.0%.. 4 1.06%
Between 0.5% and -0.5%................ 366 97.34%
Less than -0.5% and Greater than -1.0% 5 1.33%
Less than -1.0%....................... - -
--- ------
376 100.00%
=== ======
</TABLE>

iShares Supplemental Information

page 69

<PAGE>

iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..................... 2 0.53%
Between 0.5% and -0.5%................ 370 98.40%
Less than -0.5% and Greater than -1.0% 3 0.80%
Less than -1.0%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..... 4 1.06%
Between 0.5% and -0.5% 369 98.14%
Less than -0.5%....... 3 0.80%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Energy Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..................... 2 0.53%
Between 0.5% and -0.5%................ 367 97.60%
Less than -0.5% and Greater than -1.0% 6 1.60%
Less than -1.0%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Financial Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.0%................... 1 0.27%
Greater than 0.5% and Less than 1.0% 3 0.80%
Between 0.5% and -0.5%.............. 369 98.13%
Less than -0.5%..................... 3 0.80%
--- ------
376 100.00%
=== ======
</TABLE>

i Shares

page 70

<PAGE>

iShares Dow Jones U.S. Healthcare Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.0%..................... - -
Greater than 0.5% and Less than 1.0%.. 5 1.33%
Between 0.5% and -0.5%................ 367 97.60%
Less than -0.5% and Greater than -1.0% 3 0.80%
Less than -1.0%....................... 1 0.27%
---- ------
376 100.00%
==== ======
</TABLE>

iShares Dow Jones U.S. Industrial Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..................... 3 0.80%
Between 0.5% and -0.5%................ 366 97.34%
Less than -0.5% and Greater than -1.0% 6 1.59%
Less than -1.0%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Technology Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.5%..................... 1 0.27%
Greater than 1.0% and Less than 1.5%.. 4 1.06%
Greater than 0.5% and Less than 1.0%.. 18 4.79%
Between 0.5% and -0.5%................ 335 89.10%
Less than -0.5% and Greater than -1.0% 14 3.72%
Less than -1.0% and Greater than -1.5% 2 0.53%
Less than -1.5%....................... 2 0.53%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Telecommunications Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.0%..................... 1 0.27%
Greater than 0.5% and Less than 1.0%.. 21 5.59%
Between 0.5% and -0.5%................ 329 87.49%
Less than -0.5% and Greater than -1.0% 19 5.05%
Less than -1.0% and Greater than -2.0% 2 0.53%
Less than -2.0% and Greater than -2.5% 3 0.80%
Less than -2.5%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Supplemental Information

page 71

<PAGE>

iShares Dow Jones U.S. Utilities Sector Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 1.0%..................... - -
Greater than 0.5% and Less than 1.0%.. 9 2.39%
Between 0.5% and -0.5%................ 360 95.75%
Less than -0.5% and Greater than -1.0% 4 1.06%
Less than -1.0%....................... 3 0.80%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Financial Services Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..................... 3 0.80%
Between 0.5% and -0.5%................ 368 97.87%
Less than -0.5% and Greater than -1.0% 4 1.06%
Less than -1.0%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Dow Jones U.S. Real Estate Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..................... 2 0.53%
Between 0.5% and -0.5%................ 369 98.14%
Less than -0.5% and Greater than -1.0% 4 1.06%
Less than -1.0%....................... 1 0.27%
--- ------
376 100.00%
=== ======
</TABLE>

iShares Cohen & Steers Realty Majors Index Fund
Period Covered: January 1, 2002 through June 30, 2003

<TABLE>
<CAPTION>
Number Percentage of
Premium/Discount Range of Days Total Days
---------------------- ------- -------------
<S> <C> <C>
Greater than 0.5%..... 2 0.53%
Between 0.5% and -0.5% 370 98.41%
Less than -0.5%....... 4 1.06%
--- ------
376 100.00%
=== ======
</TABLE>

i Shares

page 72

<PAGE>

II. Total Return Information

The tables on the following pages present information about the total return of
each Fund and its Underlying Index. The information presented for each Fund is
for the applicable period ended April 30, 2003. Total return information for
the iShares Dow Jones Select Dividend Index Fund and the iShares Dow Jones
Transportation Average Index Fund is not presented as these Funds had not
commenced operations as of April 30, 2003.

"Average annual total returns" represent the average annual change in value of
an investment over the period indicated. "Cumulative total returns" represent
the total change in value of an investment over the period indicated. A Fund's
per share net asset value or "NAV" is the value of one share of a Fund as
calculated in accordance with the standard formula for valuing mutual fund
shares. The NAV return is based on the NAV of the Fund, and the market return
is based on the market price per share of the Fund. The price used to calculate
market return ("Market Price") is determined by using the midpoint between the
highest bid and the lowest offer on the exchange on which the iShares of the
Fund are listed for trading, as of the time that the Fund's NAV is calculated.
Since Fund shares typically do not trade in the secondary market until several
days after a Fund's inception, for the period from inception to the first day
of secondary market trading in Fund shares, the NAV of the Fund is used as a
proxy for secondary market trading price to calculate market returns. Market
and NAV returns assume that dividends and capital gain distributions have been
reinvested in the Fund at Market Price and NAV, respectively. An index is a
statistical composite that tracks a specified financial market or sector.
Unlike a Fund, an index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of a Fund. Also, market returns do not
include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The returns shown in the table below do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of a
Fund will vary with changes in market conditions. Shares of a Fund may be worth
more or less than their original cost when they are redeemed or sold in the
market. Each Fund's past performance is no guarantee of future results.

iShares Dow Jones U.S. Total Market Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
----------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- -------------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- -------- -------- -------- -------- -------- --------
(13.89)% (14.08)% (13.78)% (13.49)% (13.58)% (13.36)% (34.18)% (34.36)% (33.83)%
--------------------------------------------------------------------------------
</TABLE>
* Total returns for the period since inception are calculated from the
inception date of the Fund (6/12/00).

iShares Dow Jones U.S. Basic Materials Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- --------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- ----- ------ ----- ----- ------ -----
(12.30)% (12.15)% (11.78)% 0.16% 0.14% 0.64% 0.45% 0.40% 1.84%
-------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (6/12/00).

iShares Supplemental Information

page 73

<PAGE>

iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
-------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- ----------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- ------- ------- ------- -------- -------- --------
(17.17)% (17.16)% (16.73)% (8.68)% (8.70)% (8.22)% (23.04)% (23.11)% (21.89)%
-----------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- --------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- ----- ------ ----- ----- ------ -----
(15.40)% (15.38)% (14.87)% 0.45% 0.48% 1.17% 1.29% 1.39% 3.41%
-------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Energy Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
-------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- ----------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- ------- ------- ------- -------- -------- --------
(18.22)% (18.42)% (16.30)% (7.37)% (7.40)% (6.17)% (19.82)% (19.90)% (16.75)%
-----------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Financial Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
--------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
----------------------- --------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
------- ------- ------- ----- ------ ----- ----- ------ -----
(9.33)% (9.12)% (8.79)% 2.17% 2.22% 2.79% 6.52% 6.67% 8.44%
----------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (05/22/00).

i Shares

page 74

<PAGE>

iShares Dow Jones U.S. Healthcare Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
------------------------- ----------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- ------- ------- ------- ------- -------- -------- --------
(10.06)% (10.20)% (9.60)% (4.84)% (4.88)% (4.25)% (13.35)% (13.43)% (11.75)%
----------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Industrial Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
----------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- -------------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- -------- -------- -------- -------- -------- --------
(14.75)% (14.86)% (14.34)% (12.51)% (12.55)% (13.10)% (31.99)% (32.08)% (33.25)%
--------------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Technology Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
----------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- -------------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- -------- -------- -------- -------- -------- --------
(18.59)% (18.48)% (18.12)% (33.17)% (33.14)% (32.76)% (69.68)% (69.65)% (69.11)%
--------------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (05/15/00).

iShares Dow Jones U.S. Telecommunications Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
----------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- -------------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- -------- -------- -------- -------- -------- --------
(16.22)% (15.46)% (14.09)% (30.68)% (30.49)% (26.77)% (65.99)% (65.71)% (59.99)%
--------------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (05/22/00).

iShares Supplemental Information

page 75

<PAGE>

iShares Dow Jones U.S. Utilities Sector Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
-------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
-------------------------- ----------------------- --------------------------
NAV Market Index NAV Market Index NAV Market Index
-------- -------- -------- ------- ------- ------- -------- -------- --------
(22.16)% (21.95)% (21.74)% (8.64)% (8.62)% (8.22)% (22.95)% (22.91)% (21.89)%
-----------------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Financial Services Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
--------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
----------------------- --------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
------- ------- ------- ----- ------ ----- ----- ------ -----
(8.02)% (7.93)% (7.46)% 0.73% 0.73% 1.35% 2.12% 2.13% 3.95%
----------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Dow Jones U.S. Real Estate Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
-------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
----------------------- -------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
------- ------- ------- ------ ------ ------ ------ ------ ------
(0.98)% (0.92)% (0.43)% 11.17% 11.11% 11.71% 35.73% 35.51% 37.57%
----------------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (06/12/00).

iShares Cohen & Steers Realty Majors Index Fund

<TABLE>
<CAPTION>
Average Annual Total Returns Cumulative Total Returns
---------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 4/30/03 Inception to 4/30/03* Inception to 4/30/03*
------------------ --------------------- ------------------------
NAV Market Index NAV Market Index NAV Market Index
----- ------ ----- ----- ------ ----- ------ ------ ------
0.46% 0.51% 0.77% 8.71% 8.71% 9.04% 20.69% 20.70% 21.50%
-----------------------------------------------------------------
</TABLE>

* Total returns for the period since inception are calculated from the
inception date of the Fund (01/29/01).

i Shares

page 76

<PAGE>

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.

Additional information about a Fund's investments is available in the iShares
Trust's annual and semiannual reports to shareholders. In the iShares Trust's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected a Fund's performance during
its last fiscal year.

If you have questions about the Funds or iShares or you wish to obtain the SAI,
semiannual or annual report 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 the Funds (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 the Funds 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

iShares Supplemental Information

page 77

<PAGE>

iShares are distributed by SEI Investments Distribution Co. (SEI). Barclays
Global Fund Advisors (BGFA) serves as an advisor to iShares. Barclays Global
Investors Services (BGIS) assists in the marketing of iShares. BGFA and BGIS are
subsidiaries of Barclays Global Investors, N.A., a wholly owned subsidiary of
Barclays Bank PLC, none of which is affiliated with SEI.

iShares are not sponsored, endorsed, sold or promoted by Dow Jones
& Company, Inc. or Cohen & Steers Capital Management, Inc., nor do
these companies make any representation regarding the advisability
of investing in iShares.

Investing involves risk, including possible loss of principal.

(C)2003 Barclays Global Investors. All rights reserved. iShares is a registered
trademark of Barclays Global Investors, N.A. All other trademarks, servicemarks
or registered trademarks are the property of their respective owners.

The information provided in the wrapper is not part of the prospectus.

iShares(R) Industrial strength investment tools from BARCLAYS GLOBAL INVESTORS

1 800 iSHARES (1 800 474 2737) WWW.ISHARES.COM

<PAGE>

iShares Trust

Statement of Additional Information
Dated December 1, 2003

(as revised February 3, 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:

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 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 1500 Index Fund
iShares S&P Global 100 Index Fund
iShares S&P Global Energy Sector Index Fund
iShares S&P Global Financials Sector Index Fund
iShares S&P Global Healthcare Sector Index Fund
iShares S&P Global Technology Sector Index Fund
iShares S&P Global Telecommunications Sector Index Fund
iShares S&P Europe 350 Index Fund
iShares S&P Latin America 40 Index Fund
iShares S&P/TOPIX 150 Index Fund
iShares Dow Jones U.S. Total Market 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. Healthcare Sector Index Fund
iShares Dow Jones U.S. Industrial Sector 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. Utilities Sector Index Fund
iShares Dow Jones U.S. Financial Services Index Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones Select Dividend Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Russell 3000 Index Fund
iShares Russell 3000 Growth Index Fund
iShares Russell 3000 Value Index Fund
iShares Russell 2000 Index Fund
iShares Russell 2000 Growth Index Fund
iShares Russell 2000 Value Index Fund
iShares Russell 1000 Index Fund
iShares Russell 1000 Growth Index Fund
iShares Russell 1000 Value Index Fund
iShares Russell Midcap Index Fund
iShares Russell Midcap Growth Index Fund
iShares Russell Midcap Value Index Fund
iShares Cohen & Steers Realty Majors Index Fund
iShares Nasdaq Biotechnology Index Fund
iShares Goldman Sachs Natural Resources Index Fund
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Networking Index Fund
iShares Goldman Sachs Semiconductor Index Fund
iShares Goldman Sachs Software Index Fund
iShares MSCI EAFE Index

The current Prospectus for the various iShares Funds are dated as follows: the
Goldman Sachs Series and MSCI EAFE Index Fund dated December 1, 2003, the S&P
Series and Russell Series dated August 1, 2003, (as revised January 20, 2004)
the Dow Jones Series and Cohen & Steers Series dated August 1, 2003 (as revised
February 3, 2004) and the Nasdaq Biotechnology Index Fund dated August 1, 2003
(as revised January 6, 2004). Capitalized terms used herein that are not defined
have the same meaning as in the Prospectus, unless otherwise noted. The
Financial Statements and Notes contained in the Annual Reports of the Trust for
the above listed Funds are incorporated by reference into and deemed to be part
of this Statement of Additional Information. 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.

<PAGE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
General Description of the Trust and its Funds ................................. 1
Exchange Listing and Trading ................................................... 2
Investment Strategies and Risks ................................................ 4
Lack of Diversification of Certain Funds .................................. 5
Lending Portfolio Securities .............................................. 6
Repurchase Agreements ..................................................... 7
Reverse Repurchase Agreements ............................................. 7
Currency Transactions ..................................................... 7
Money Market Instruments .................................................. 7
Foreign Securities ........................................................ 8
Investment Companies, REITs ............................................... 8
Illiquid Securities ....................................................... 8
Short-Term Instruments and Temporary Investments .......................... 8
Futures and Options ....................................................... 8
Options on Futures Contracts ......................................... 8
Swap Agreements ........................................................... 9
Future Developments .................................................. 9
General Considerations and Risks .......................................... 9
Risks of Futures and Options Transactions ................................. 10
Risks of Swap Agreements .................................................. 10
Proxy Voting Policy ............................................................ 11
Construction and Maintenance Standards for the Underlying Indices .............. 11
The S&P Indices Generally ...................................................... 11
S&P 100 Index ............................................................. 12
S&P 500 Index ............................................................. 12
S&P 500/BARRA Growth Index ................................................ 13
S&P 500/BARRA Value Index ................................................. 13
S&P MidCap 400 Index ...................................................... 13
S&P MidCap 400/BARRA Growth Index ......................................... 13
S&P MidCap 400/BARRA Value Index .......................................... 14
S&P SmallCap 600 Index .................................................... 14
S&P SmallCap 600/BARRA Growth Index ....................................... 14
S&P SmallCap 600/BARRA Value Index ........................................ 14
S&P Composite 1500 Index .................................................. 14
S&P Global 100 Index ...................................................... 15
S&P Global Energy Sector Index ............................................ 15
S&P Global Financials Sector Index ........................................ 15
S&P Global Healthcare Sector Index ........................................ 16
S&P Global Information Technology Sector Index ............................ 16
S&P Global Telecommunications Sector Index ................................ 16
S&P Europe 350 Index ...................................................... 16
S&P Latin America 40 Index ................................................ 16
S&P/TOPIX 150 Index ....................................................... 17
The Dow Jones Indexes Generally ................................................ 17
Dow Jones U.S. Total Market Index ......................................... 17
Dow Jones U.S. Basic Materials Sector Index ............................... 18
Dow Jones U.S. Consumer Cyclical Sector Index ............................. 18
Dow Jones U.S. Consumer Non-Cyclical Sector Index ......................... 18
Dow Jones U.S. Energy Sector Index ........................................ 18
Dow Jones U.S. Financial Sector Index ..................................... 19
</TABLE>

--------------------------------------------------------------------------------
page i

<PAGE>

<TABLE>
<S> <C>
Dow Jones U.S. Healthcare Sector Index .................................... 19
Dow Jones U.S. Industrial Sector Index .................................... 19
Dow Jones U.S. Technology Sector Index .................................... 19
Dow Jones U.S. Telecommunications Sector Index ............................ 20
Dow Jones U.S. Utilities Sector Index ..................................... 20
Dow Jones U.S. Financial Services Index ................................... 20
Dow Jones U.S. Real Estate Index .......................................... 20
Dow Jones Select Dividend Index ........................................... 20
Dow Jones Transportation Average Index .................................... 20
The Russell Indices Generally ................................................. 21
Russell 3000 Index ........................................................ 21
Russell 3000 Growth Index ................................................. 21
Russell 3000 Value Index .................................................. 22
Russell 2000 Index ........................................................ 22
Russell 2000 Growth Index ................................................. 22
Russell 2000 Value Index .................................................. 22
Russell 1000 Index ........................................................ 23
Russell 1000 Growth Index ................................................. 23
Russell 1000 Value Index .................................................. 23
Russell Midcap Index ...................................................... 23
Russell Midcap Growth Index ............................................... 24
Russell Midcap Value Index ................................................ 24
The Cohen & Steers Realty Majors Index Generally .............................. 24
Cohen & Steers Realty Majors Index ........................................ 25
The Nasdaq Biotechnology Index Generally ...................................... 25
Nasdaq Biotechnology Index ................................................ 26
The Goldman Sachs Indices Generally ........................................... 26
The Goldman Sachs Natural Resources Index ................................. 27
The Goldman Sachs Technology Index ........................................ 27
The Goldman Sachs Technology Industry Sector Indices Generally ............ 27
The Goldman Sachs Technology Industry Multimedia Networking Index ......... 28
The Goldman Sachs Technology Industry Semiconductor Index ................. 28
The Goldman Sachs Technology Industry Software Index ...................... 28
The MSCI Indices Generally .................................................... 29
MSCI EAFE Index ........................................................... 31
Investment Limitations ........................................................ 31
Continuous Offering ........................................................... 32
Management .................................................................... 33
Trustees and Officers ..................................................... 33
Committees of the Board of Trustees ....................................... 36
Approval of Investment Advisory Contract .................................. 37
Remuneration of Trustees and Officers ..................................... 37
Control Persons and Principal Holders of Securities ....................... 37
Investment Advisor ........................................................ 42
Code of Ethics ............................................................ 44
Administrator, Custodian and Transfer Agent ............................... 44
Distributor ............................................................... 45
Index Providers ........................................................... 46
Brokerage Transactions ........................................................ 47
Additional Information Concerning the Trust ................................... 50
Shares ...................................................................... 50
Termination of the Trust or a Fund .......................................... 50
DTC Acts as Securities Depository for the iShares ........................... 51
Creation and Redemption of Creation Unit Aggregations .......................... 51
Creation .................................................................... 51
Fund Deposit ................................................................ 52
</TABLE>

--------------------------------------------------------------------------------
page 2

<PAGE>

<TABLE>
<S> <C>
Procedures for Creation of Creation Unit Aggregations .......................... 52
Placement of Creation Orders for Domestic Funds Using the Clearing Process ..... 53
Placement of Creation Orders for Domestic Funds Outside the Clearing Process ... 53
Placement of Creation Orders for Foreign Funds ................................. 54
Acceptance of Orders for Creation Unit Aggregations ............................ 55
Creation Transaction Fee ....................................................... 55
Redemption of iShares in Creation Unit Aggregations ............................ 56
Redemption Transaction Fee ..................................................... 57
Placement of Redemption Orders for Domestic Funds Using the Clearing Process ... 58
Placement of Redemption Orders for Domestic Funds Outside the Clearing Process . 58
Placement of Redemption Orders for Foreign Funds ............................... 58
Foreign Market Hours .............................................................. 60
Regular Holidays ............................................................... 62
Settlement Periods Greater Than Seven Days for 2002 ........................... 65
Taxes ............................................................................. 65
RIC Qualifications ............................................................. 65
Taxation of RICs ............................................................... 66
Excise Tax ..................................................................... 66
Back-Up Withholding ............................................................ 66
Section 351 .................................................................... 66
Qualified Dividend Income ...................................................... 66
Corporate Dividends Received Deduction ......................................... 66
Net Capital Loss Carryforwards (Unaudited) ..................................... 66
Funds Holding Foreign Investments .............................................. 68
Federal Tax Treatment of Complex Securities .................................... 68
Determination of NAV .............................................................. 68
Dividends and Distributions ....................................................... 69
General Policies ............................................................... 69
Dividend Reinvestment Service .................................................. 69
Financial Statements .............................................................. 70
Miscellaneous Information ......................................................... 70
Counsel ................................................................... 70
Independent Auditors ...................................................... 70
</TABLE>

--------------------------------------------------------------------------------
i|Shares page iii

<PAGE>

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 business 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 following funds (each a
"Fund" and collectively the "Funds"):

[X] iShares S&P 100 Index Fund
[X] iShares S&P 500 Index Fund
[X] iShares S&P 500/BARRA Growth Index Fund
[X] iShares S&P 500/BARRA Value Index Fund
[X] iShares S&P MidCap 400 Index Fund
[X] iShares S&P MidCap400/BARRA Growth Index Fund
[X] iShares S&P MidCap400/BARRA Value Index Fund
[X] iShares S&P SmallCap 600 Index Fund
[X] iShares S&P SmallCap 600/BARRA Growth Index Fund
[X] iShares S&P SmallCap 600/BARRA Value Index Fund
[X] iShares S&P 1500 Index Fund
[X] iShares S&P Global 100 Index Fund
[X] iShares S&P Global Energy Sector Index Fund
[X] iShares S&P Global Financials Sector Index Fund
[X] iShares S&P Global Healthcare Sector Index Fund
[X] iShares S&P Global Technology Sector Index Fund
[X] iShares S&P Global Telecommunications Sector Index Fund
[X] iShares S&P Europe 350 Index Fund
[X] iShares S&P Latin America 40 Index Fund
[X] iShares S&P/TOPIX 150 Index Fund

[X] iShares Dow Jones U.S. Total Market Index Fund
[X] iShares Dow Jones U.S. Basic Materials Sector Index Fund
[X] iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund
[X] iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund
[X] iShares Dow Jones U.S. Energy Sector Index Fund
[X] iShares Dow Jones U.S. Financial Sector Index Fund
[X] iShares Dow Jones U.S. Healthcare Sector Index Fund
[X] iShares Dow Jones U.S. Industrial Sector Index Fund
[X] iShares Dow Jones U.S. Technology Sector Index Fund
[X] iShares Dow Jones U.S. Telecommunications Sector Index Fund
[X] iShares Dow Jones U.S. Utilities Sector Index Fund
[X] iShares Dow Jones U.S. Financial Services Index Fund
[X] iShares Dow Jones U.S. Real Estate Index Fund
[X] iShares Dow Jones Select Dividend Index Fund
[X] iShares Dow Jones Transportation Average Index Fund

[X] iShares Russell 3000 Index Fund
[X] iShares Russell 3000 Growth Index Fund
[X] iShares Russell 3000 Value Index Fund
[X] iShares Russell 2000 Index Fund
[X] iShares Russell 2000 Growth Index Fund
[X] iShares Russell 2000 Value Index Fund
[X] iShares Russell 1000 Index Fund
[X] iShares Russell 1000 Growth Index Fund
[X] iShares Russell 1000 Value Index Fund

________________________________________________________________________________
iShares General Description of the Trust and its Funds page 1

<PAGE>

[X] iShares Russell Midcap Index Fund
[X] iShares Russell Midcap Growth Index Fund
[X] iShares Russell Midcap Value Index Fund

[X] iShares Cohen & Steers Realty Majors Index Fund

[X] iShares Nasdaq Biotechnology Index Fund

[X] iShares Goldman Sachs Technology Index Fund
[X] iShares Goldman Sachs Networking Index Fund
[X] iShares Goldman Sachs Semiconductor Index Fund
[X] iShares Goldman Sachs Software Index Fund
[X] iShares Goldman Sachs Natural Resources Index Fund

[X] iShares MSCI EAFE Index Fund

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 (each an "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 applicable Prospectus and this SAI are listed and traded on
national securities exchanges such as the American Stock Exchange ("AMEX"), the
Chicago Board Options Exchange ("CBOE") or the New York Stock Exchange, Inc.
("NYSE"). iShares also may be listed on certain non-U.S. exchanges, such as the
Stock Exchange of Hong Kong ("SEHK"), the Singapore Exchange ("SGX"), and the
Swiss Stock Exchange ("SWX"). 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 applicable Prospectus in the
Shareholder Information section. The discussion below supplements, and should be
read in conjunction with, that section of the applicable Prospectus.

________________________________________________________________________________
page 2 i|Shares

<PAGE>

iShares of each Fund are listed on the AMEX, the NYSE or the CBOE (each, a
"Listing Exchange") and trade throughout the day on these Listing Exchanges and
other secondary markets. There can be no assurance that the requirements of a
Listing Exchange necessary to maintain the listing of iShares of any Fund will
continue to be met. A 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. A 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, brokers' 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.

________________________________________________________________________________
iShares Exchange Listing and Trading page 3

<PAGE>

Investment Strategies and Risks

Each Fund seeks to achieve its objective by investing primarily in 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.

<TABLE>
<CAPTION>
Funds that Use Replication Funds that Use Representative Sampling (continued)
-------------------------- --------------------------------------
<S> <C>
iShares S&P 500 Index Fund iShares Dow Jones U.S. Basic Materials Sector Index
iShares S&P 500/BARRA Growth Index Fund Fund
iShares S&P 500/BARRA Value Index Fund iShares Dow Jones U.S. Consumer Cyclical Sector Index
iShares S&P MidCap 400/BARRA Growth Index Fund
Fund iShares Dow Jones U.S. Consumer Non-Cyclical
iShares S&P MidCap 400/BARRA Value Index Sector Index Fund
Fund iShares Dow Jones U.S. Energy Sector Index Fund
iShares S&P SmallCap 600/BARRA Growth Index iShares Dow Jones U.S. Financial Sector Index Fund
Fund iShares Dow Jones U.S. Healthcare Sector Index
iShares S&P 100 Index Fund Fund
iShares Dow Jones U.S. Total Market Index Fund iShares Dow Jones U.S. Industrial Sector Index Fund
iShares Dow Jones Select Dividend Index Fund iShares Dow Jones U.S. Technology Sector Index
iShares Russell 3000 Index Fund Fund
iShares Russell 3000 Growth Index Fund iShares Dow Jones U.S. Telecommunications Sector Index
iShares Russell 2000 Growth Index Fund Fund
iShares Russell 1000 Index Fund iShares Dow Jones U.S. Utilities Sector Index Fund
iShares Russell 1000 Growth Index Fund iShares Dow Jones U.S. Financial Services Index
iShares Russell 1000 Value Index Fund Fund
iShares Dow Jones U.S. Real Estate Index Fund
Funds that Use Representative Sampling iShares Dow Jones Transportation Average Index Fund
-------------------------------------- iShares Russell 3000 Value Index Fund
iShares S&P SmallCap 600 Index Fund iShares Russell 2000 Index Fund
iShares S&P SmallCap 600/BARRA Value Index iShares Russell 2000 Value Index Fund
Fund iShares Russell Midcap Index Fund
iShares S&P MidCap 400 Index Fund iShares Russell Midcap Growth Index Fund
iShares S&P 1500 Index Fund iShares Russell Midcap Value Index Fund
iShares S&P Global 100 Index Fund iShares Cohen & Steers Realty Majors Index Fund
iShares S&P Global Energy Sector Index Fund iShares Nasdaq Biotechnology Index Fund
iShares S&P Global Financials Sector Index Fund iShares Goldman Sachs Technology Index Fund
iShares S&P Global Healthcare Sector Index Fund iShares Goldman Sachs Networking Index Fund
iShares S&P Global Technology Sector Index Fund iShares Goldman Sachs Semiconductor Index Fund
iShares S&P Global Telecommunications Sector Index Fund iShares Goldman Sachs Software Index Fund
iShares S&P Europe 350 Index Fund iShares Goldman Sachs Natural Resources Index Fund
iShares S&P Latin America 40 Index Fund iShares MSCI EAFE Index Fund
iShares S&P/TOPIX 150 Index Fund
</TABLE>
________________________________________________________________________________
page 4 i|Shares

<PAGE>

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 would 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 Underlying 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 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.

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.

<TABLE>
<CAPTION>
Diversified Funds Non-Diversified Funds
----------------- ---------------------
<S> <C>
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 100 Index Fund
iShares S&P MidCap 400 Index Fund iShares S&P Global 100 Index Fund
iShares S&P MidCap 400/BARRA Growth Index iShares S&P Global Energy Sector Index Fund
Fund iShares S&P Global Financials Sector Index Fund
iShares S&P MidCap 400/BARRA Value Index iShares S&P Global Healthcare Sector Index Fund
Fund iShares S&P Global Technology Sector Index Fund
iShares S&P SmallCap 600 Index Fund iShares S&P Global Telecommunications Sector
iShares S&P SmallCap 600/BARRA Growth Index Index Fund
Fund iShares S&P Latin America 40 Index Fund
iShares S&P SmallCap 600/BARRA Value Index iShares S&P/TOPIX 150 Index Fund
Fund iShares Dow Jones U.S. Basic Materials Sector Index
iShares S&P 1500 Index Fund Fund
iShares S&P Europe 350 Index Fund iShares Dow Jones U.S. Consumer Cyclical Sector
iShares Dow Jones U.S. Total Market Index Index Fund
Fund iShares Dow Jones U.S. Consumer Non-Cyclical
iShares Dow Jones Select Dividend Index Fund Sector Index Fund
iShares Russell 3000 Index Fund iShares Dow Jones U.S. Energy Sector Index Fund
iShares Russell 3000 Growth Index Fund iShares Dow Jones U.S. Financial Sector Index Fund
iShares Russell 3000 Value Index iShares Dow Jones U.S. Healthcare Sector Index
iShares Russell 2000 Index Fund Fund
iShares Russell 2000 Growth Index Fund iShares Dow Jones U.S. Industrial Sector Index
iShares Russell 2000 Value Index Fund Fund
iShares Russell 1000 Index Fund iShares Dow Jones U.S. Technology Sector Index
iShares Russell 1000 Value Index Fund Fund
iShares Russell Midcap Index Fund iShares Dow Jones U.S. Telecommunications Sector
iShares Russell Midcap Growth Index Fund Index Fund
iShares Russell Midcap Value Index Fund iShares Dow Jones U.S. Utilities Sector Index Fund

iShares Dow Jones U.S. Financial Services Index
Fund
iShares Dow Jones U.S. Real Estate Index Fund
iShares Dow Jones Transportation Average Index Fund
iShares Russell 1000 Growth Index Fund
</TABLE>

________________________________________________________________________________
iShares Investment Strategies and Risks page 5

<PAGE>

<TABLE>
<CAPTION>
Diversified Funds Non-Diversified Funds (cont.)
----------------- ---------------------
<S> <C>
iShares Cohen & Steers Realty Majors Index Fund
iShares Nasdaq Biotechnology Index Fund
iShares Goldman Sachs Technology Index Fund
iShares Goldman Sachs Networking Index Fund
iShares Goldman Sachs Semiconductor Index Fund
iShares Goldman Sachs Software Index Fund
iShares Goldman Sachs Natural Resources Index
Fund
iShares MSCI EAFE Index Fund
</TABLE>

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 percent 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 the Fund's 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 Underlying Index of such a Fund and consequently the Fund's
investment portfolio. This may adversely affect its performance or subject the
Fund's 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.

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page 6 i|Shares

<PAGE>

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 the Fund may invest include: (i)
short-term obligations issued by the

________________________________________________________________________________
iShares Investment Strategies Risks page 7

<PAGE>

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.

Foreign Securities. Each Fund may purchase publicly traded common stocks of
foreign corporations. Each Fund's investment in common stock of foreign
corporations may also be in the form of American Depository Receipts ("ADRs")
and Global Depository 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.

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.

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 which 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 respective Underlying Index, to
facilitate trading or to reduce transaction costs. Each Fund will only enter
into futures contracts and options on futures contracts that are traded on a
U.S. or foreign exchange. No Fund will use futures or options for speculative
purposes. Each Fund intends 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, each Fund
is 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 investments that reflect the market value of common stock of the firms
included in the investments. Each Fund may enter into futures contracts to
purchase security investments 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

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page 8 i|Shares

<PAGE>

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 some of the risks associated
with an investment in a Fund is contained in the applicable 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,

________________________________________________________________________________
iShares Investment Strategies Risks page 9

<PAGE>

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 Investments 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. 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 the 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 which
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).

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page 10 i|Shares

<PAGE>
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
which 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; and

. 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 which 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 Investments

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

The S&P Indices Generally

Component Selection Criteria for Domestic Investments. The Standard & Poor's
Index Committee is responsible for the overall management of the S&P Indices.
Companies (i.e., the "components") selected for the investments represent a
broad range of industry segments within the U.S. economy. The starting universe,
all U.S. publicly traded companies, is screened to eliminate ADRs, mutual funds,
limited partnerships and royalty trusts. The following criteria are then
analyzed to determine a company's eligibility for inclusion in the investments.
Ownership of a company's outstanding common shares is analyzed in order to
screen out closely held companies. The trading volume of a company's stock is
analyzed to ensure ample liquidity and efficient share pricing. Both the
financial and operating condition of a company also are analyzed.

Component Selection Criteria for International Indices. All securities
comprising 95% of the eligible investable universe in fourteen European markets
and the United Kingdom for the S&P Euro 350; 70% of the market value of the
Japanese equity market for the S&P Tokyo Stock Price Index ("TOPIX") 150; 30% of
the estimated total market capitalization for the region's largest countries for
the S&P Latin America 40, were considered for inclusion. Where there were
multiple classes of a particular equity, all classes were deemed eligible if
they met the criteria for size, liquidity and sector representation. The
securities in the universe are ranked according to Global Industry
Classification Standards ("GICS"). Generally, S&P observes a prospective
constituent's liquidity over a period of at least 6 months before consideration
for inclusion. However, it is recognized that there may be extraordinary
situations when companies should be added immediately (e.g., certain
privatizations). When a particular company dominates its home market, it may be
excluded from the index if analysis of the sectors reveals that its securities
are not as liquid as those of similar companies in other countries. The
international indices may include ADRs and GDRs.

Issue Changes. General oversight responsibility for the S&P Indices, including
overall policy guidelines and methodology, is handled by the S&P Global Index
Committee. Maintenance of component investments, including additions and
deletions to these investments, is the responsibility of separate regional index
committees composed of Standard & Poor's staff specialized in the various
regional equity markets and, in some cases with the assistance of local stock
exchanges. Public announcements of index changes as the result of committee
decisions will generally be made two business days in advance of the anticipated
effective date whenever possible, although for exceptional corporate events
announcements may be made earlier.

Index Maintenance. Maintaining the S&P Indices includes monitoring and
completing the adjustments for company additions and deletions, share changes,
stock splits, stock dividends, and stock price adjustments due to restructuring
and spin-offs. Share changes of less than 5% are only updated on a quarterly
basis on the Friday near the end of the calendar quarter.

A company will be removed from the S&P Indices as a result of
mergers/acquisitions, bankruptcy, restructuring, or if it is no longer
representative of its industry group. A company is removed from the relevant
index as close as possible to the actual date on which the event occurred. A
company can be removed from an index because it no longer meets current criteria
for inclusion and/or is no longer representative of its industry group. All
replacement companies are selected based on the above component section
criteria.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 11

<PAGE>

When calculating index weights, individual constituents' shares held by
governments, corporations, strategic partners, or other control groups are
excluded from the company's shares outstanding. Shares owned by other companies
are also excluded regardless of whether they are index constituents.

In countries with regulated environments, where a foreign investment limit
exists at the sector or company level, the constituent's weight will reflect
either the foreign investment limit or the percentage float, whichever is the
more restrictive.

Once a year, the float adjustments will be reviewed. Each company's financial
statements will be used to update the major shareholders' ownership. However,
any Investable Weight Factor (IWF) changes, equal to or greater than 5% will be
implemented as soon as reasonably possible when it results from a major
corporate action. (i.e., privatization, merger, takeover, or share offering).

Changes in the number of shares outstanding driven by corporate events such as
stock dividends, splits, and rights issues will be adjusted on the ex-date.
Share changes of 5% or greater are implemented when they occur. All share
changes of less than 5% are updated on a quarterly basis (third Friday of March,
June, September, and December or at the close of the expiration of futures
contracts). Implementation of new additions, deletions, and changes to the float
adjustment, due to corporate actions, will be made available at the close of the
third Friday in March, June, September and December. Generally, index changes,
due to rebalancing, are announced two days before the effective date by way of a
news release posted on www.spglobal.com.

Index Availability. The S&P Investments are calculated continuously and are
available from major data vendors.

S&P 100 Index

Number of Components:
100 Index Description. The S&P 100 Index measures the performance of the large-
capitalization sector of the U.S. equity market. It is a subset of the S&P 500
Index. The Index is a capitalization-weighted index representing stocks from a
broad range of industries, chosen for market size, liquidity and industry group
representation. The S&P 100 Index is a widely tracked index for blue-chip
stocks. The S&P 100 serves as the basis for the S&P 100 options contract which
trades on the CBOE. The component stocks are weighted according to the total
market value of their outstanding shares. The impact of a component's price
change is proportional to the issue's total market value, which is the share
price times the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.

S&P 500 Index

Number of Components: 500
Index Description. The Standard & Poor's 500 Index measures the performance of
the large-capitalization sector of the U.S. equity market. It serves as the
underlying index for the S&P 500/BARRA Growth and Value Index series. It is a
capitalization-weighted index from a broad range of industries chosen for market
size, liquidity and industry group representation. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price multiplied by the number of shares outstanding.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

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S&P 500/BARRA Growth Index

Number of Components: approximately 160 Index Description. The S&P 500/BARRA
Growth Index measures the performance of the large-capitalization growth sector
of the U.S. equity market. It is a subset of the S&P 500 Index and consists of
those companies with the highest price-to-book ratios within the S&P 500 Index
representing approximately 50% of the market capitalization of that index. It is
a capitalization-weighted index representing stocks from a broad range of
industries. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.

S&P 500/BARRA Value Index

Number of Components: approximately 340
Index Description. The S&P 500/BARRA Value Index measures the large-
capitalization value sector of the U.S. equity market. It is a subset of the S&P
500 Index and consists of those companies with the lowest price-to-book ratios
within the S&P 500 Index representing approximately 50% of the market
capitalization of that index. It is a capitalization-weighted index representing
stocks from a broad range of industries. The component stocks are weighted
according to the total market value of their outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price multiplied by the number of shares outstanding. The
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

S&P MidCap 400 Index

Number of Components: 400
Index Description. The S&P 400 MidCap Index measures the performance of the
mid-capitalization sector of the U.S. equity market. It serves as the underlying
index for the S&P 400/BARRA Growth and Value Index series. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price multiplied by the number of shares
outstanding. The Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events. The Index is a benchmark for performance measurement of the
mid-capitalization segment of the U.S. equity market.

S&P MidCap 400/BARRA Growth Index

Number of Components: approximately 164
Index Description. The S&P MidCap 400/BARRA Growth Index measures the
performance of the mid-capitalization growth sector of the U.S. equity market.
It is a subset of the S&P 400 Index and consists of those companies with the
highest price-to-book ratios within the S&P 400 Index representing approximately
50% of the market capitalization of that index. It is a capitalization-weighted
index representing stocks from a broad range of industries. The component stocks
are weighted according to the total market value of their outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price multiplied by the number of shares
outstanding. The Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events.

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S&P MidCap 400/BARRA Value Index

Number of Components: approximately 236

Index Description. The S&P MidCap 400/BARRA Value Index measures the performance
of the mid-capitalization value sector of the U.S. equity market. It is a subset
of the S&P 400 Index and consists of those companies with the lowest
price-to-book ratios within the S&P 400 Index representing approximately 50% of
the market capitalization of that index. It is a capitalization-weighted index
representing stocks from a broad range of industries. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price multiplied by the number of shares outstanding.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

S&P SmallCap 600 Index

Number of Components: 600

Index Description. The S&P SmallCap 600 Index measures the performance of the
small-capitalization sector of the U.S. equity market. It serves as the
underlying index for the S&P 600/BARRA Growth and Value Index series. It is a
capitalization-weighted index from a broad range of industries chosen for market
size, liquidity and industry group representation. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price multiplied by the number of shares outstanding.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

S&P SmallCap 600/BARRA Growth Index

Number of Components: approximately 224

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

S&P SmallCap 600/BARRA Value Index

Number of Components: approximately 376

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

S&P Composite 1500 Index

Number of Components: approximately 1500

Index Description. The S&P Composite 1500 Index is comprised of the S&P 500,
MidCap 400, and SmallCap 600 Indices, which together represent approximately 90%
of the total U.S. equity market. The securities in the Index are weighted based
on the total market value of their outstanding shares. Securities with higher
total market values have a larger representation in the Index. The S&P 500 Index
measures the performance of the large-capitalization sector of the U.S. equity
market. As of January 1, 2004, the S&P 500 Index included 78% of the market
capitalization of all publicly-traded U.S. equity securities. The S&P MidCap 400
Index measures the performance of the mid-capitalization sector of the U.S.
equity market. The securities in the S&P MidCap 400 Index have a market
capitalization of between $1 billion and $5 billion (which may fluctuate
depending on the overall level of the equity markets) and are selected for
liquidity and industry group representation. The S&P SmallCap 600 Index measures
the performance of publicly-traded securities in the small-capitalization sector
of the U.S. equity market.
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S&P Global 100 Index

Number of Components: 100

Index Description. The Standard & Poor's Global 100 Index is designed to measure
the performance of 100 large transnational companies that are of major
importance in the global markets. A global company is defined as a corporation
that has production facilities and/or other fixed assets in at least one foreign
country, and makes its major management decisions in a global context. The
degree to which sales are executed outside the home country is a factor in
determining a company's global reach. The market capitalization of index
constituent companies is adjusted to reflect only those shares that are
available to foreign investors. The composition of the S&P Global 100 Index is
derived from the S&P Global 1200 Index and only includes transnational
corporations under the above definition which had a minimum adjusted market
capitalization of US$5 billion. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. As of the end of the business day on June 30, 2003,
the Index was comprised of stocks of companies in the following countries:
Australia, Belgium, Canada, Finland, France, Germany, Great Britain, Italy,
Japan, Korea, Netherlands, Spain, Sweden, Switzerland and the United States.

S&P Global Energy Sector Index

Number of Components: approximately 52

Index Description. The Standard & Poor's Global Energy Sector Index is designed
to measure the performance of companies that S&P deems to be part of the energy
sector of the economy and that S&P believes are important to global markets. The
market capitalization of index constituent companies is adjusted to reflect only
those shares that are available to foreign investors. The S&P Global Energy
Sector Index is a subset of the S&P Global 1200 Index. The Index is adjusted to
reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. As of the end of the business
day on June 30, 2003, the Index was comprised of stocks of companies in the
following countries: Argentina, Australia, Austria, Brazil, Canada, France,
Great Britain, Hong Kong, Italy, Japan, Netherlands, Norway, Spain, and the
United States.

S&P Global Financials Sector Index

Number of Components: approximately 226

Index Description. The Standard & Poor's Global Financials Sector Index is
designed to measure the performance of companies that S&P deems to be part of
the financial sector of the economy and that S&P believes are important to
global markets. The market capitalization of index constituent companies is
adjusted to reflect only those shares that are available to foreign investors.
The S&P Global Financials Sector Index is a subset of the S&P Global 1200 Index.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events. As
of the end of the business day on June 30, 2003, the Index was comprised of
stocks of companies in the following countries: Argentina, Australia, Belgium,
Brazil, Canada, Chile, Denmark, France, Germany, Great Britain, Greece, Hong
Kong, Ireland, Italy, Japan, Korea, Mexico, Netherlands, Portugal, Singapore,
Spain, Sweden, Switzerland, Taiwan and the United States.

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S&P Global Healthcare Sector Index

Number of Components: approximately 74

Index Description. The Standard & Poor's Global Healthcare Sector Index is
designed to measure the performance of companies that S&P deems to be part of
the healthcare sector of the economy and that S&P believes are important to
global markets. The market capitalization of index constituent companies is
adjusted to reflect only those shares that are available to foreign investors.
The S&P Global Healthcare Sector Index is a subset of the S&P Global 1200 Index.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events. As
of the end of the business day on June 30, 2003, the Index is comprised of
stocks of companies in the following countries: Australia, Belgium, Canada,
Denmark, France, Germany, Great Britain, Ireland, Japan, Switzerland and the
United States.

S&P Global Information Technology Sector Index

Number of Components: approximately 134

Index Description. The Standard & Poor's Global Information Technology Sector
Index is designed to measure the performance of companies S&P deems to be part
of the technology sector of the economy and that S&P believes are important to
global markets. The market capitalization of index constituent companies is
adjusted to reflect only those shares that are available to foreign investors.
The S&P Global Information Technology Sector Index is a subset of the S&P Global
1200 Index. The Index is adjusted to reflect changes in capitalization resulting
from mergers, acquisitions, stock rights, substitutions and other capital
events. As of the end of the business day on June 30, 2003, the Index was
comprised of stocks of companies in the following countries: Canada, Finland,
France, Germany, Great Britain, Japan, Korea, Netherlands, Spain, Sweden, Taiwan
and the United States.

S&P Global Telecommunications Sector Index

Number of Components: approximately 48

Index Description. The Standard & Poor's Global Telecommunications Sector Index
is designed to measure the performance of companies that S&P deems to be part of
the telecommunications sector of the economy and that S&P believes are important
to global markets. The market capitalization of index constituent companies is
adjusted to reflect only those shares that are available to foreign investors.
The S&P Global Telecommunications Sector Index is a subset of the S&P Global
1200 Index. The Index is adjusted to reflect changes in capitalization resulting
from mergers, acquisitions, stock rights, substitutions and other capital
events. As of the end of the business day on June 30, 2003, the Index was
comprised of stocks of companies in the following countries: Australia, Brazil,
Canada, Denmark, France, Germany, Great Britain, Greece, Hong Kong, Italy,
Japan, Mexico, Netherlands, Portugal, Singapore, South Korea, Spain, Sweden,
Switzerland and the United States.

S&P Europe 350 Index

Number of Components: 350

Index Description. The Standard & Poor's Europe 350 Index measures the
performance of equities in the continental European region, made up of fifteen
markets: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland
and the United Kingdom. The index is a capitalization-weighted index of 350
stocks providing geographic and economic diversity over S&P's ten market
sectors, each chosen for market size, liquidity and industry group
representation. The market capitalization of index constituent companies is
adjusted to reflect only those shares which are available to foreign investors.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

S&P Latin America 40 Index

Number of Components: 40

Index Description. The S&P Latin America 40 Index is comprised of highly liquid
securities from major economic sectors of the Mexican and South American equity
markets. Companies from Mexico, Brazil, Argentina, and Chile are represented in
the index. A large number of the index constituents are ADRs, and not local
securities. The benchmark is

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constructed with the addition of a float-adjustment factor. The size of its
region mirrors its regional investable equity universe sector weights, based on
adjusted market capitalization.

S&P/TOPIX 150 Index

Number of Components: 150
Index Description. The S&P/TOPIX 150 Index includes 150 highly liquid securities
selected from each major sector of the Tokyo market. The benchmark is
constructed with the addition of a float-adjustment factor. The Index includes
75% of the market value of the Japanese equity market.

The Dow Jones Indexes Generally

Component Selection Criteria. The securities in the Dow Jones Indexes (sometimes
referred to as the "components") are rebalanced quarterly (with the exception of
the Dow Jones Select Dividend Index), to reflect changes in the marketplace. The
Dow Jones Select Dividend Index is rebalanced annually. Securities of companies
listed on a U.S. exchange (such as the NYSE, the AMEX or the NASDAQ) are
considered for inclusion in the indices, with the following general rules and
exceptions. Stocks must have a minimum trade history of 6 months on the
rebalancing date to be eligible for inclusion. Foreign issues, including ADRs
and GDRs, non-common equity issues such as preferred stocks, convertible notes,
warrants, rights, closed-end funds, trust receipts, limited liabilities
companies, royalty trusts, units, limited partnerships, over-the-counter
bulletin boards and pink sheet stocks generally are not eligible for inclusion
in the indexes. Companies that are at least 75% owned by another company and
stocks with more than 10 non-trading days in a quarter.

Issue Changes. Each index (with the exception of the Dow Jones Select Dividend
Index) is reviewed and rebalanced quarterly to maintain accurate representation
of the market segment represented by the Index. The Dow Jones Select Dividend
Index is reviewed and rebalanced annually. Securities that leave an index
between reconstitution dates are not replaced. Thus, the number of securities in
an index between rebalancing dates fluctuate according to corporate activity.
When a stock is acquired, delisted, or moves to the pink sheets or OTC bulletin
boards, the stock is deleted from the index. The only additions between
rebalancing dates are as a result of spin-offs.

Index Maintenance. Maintaining the Dow Jones Indexes includes monitoring and
completing the adjustments for additions and deletions to each Index, share
changes, stock splits, stock dividends, and stock price adjustments due to
restructuring and spin-offs. Generally each component security in an Index is
limited to a maximum market capitalization of 25% of the index weight, and sum
of the weights of all component securities greater than 5% of the index is
limited to 50% of the index total. If components fail either rule, their market
capitalization will be reduced to meet the set guidelines. The Dow Jones Select
Dividend Index, limits the weighting in the index of each component security to
no greater than 5% of the Index.

Index Availability. The Dow Jones Indexes are calculated continuously and are
available from major data vendors.

Dow Jones U.S. Total Market Index

Number of Components: approximately 1,584
Index Description. The Dow Jones U.S. Total Market Index measures the
performance of the U.S. equity broad markets. It serves as the underlying index
in the Dow Jones U.S. Large-Cap Index, Dow Jones U.S. Mid-Cap Index, Dow Jones
U.S. Small-Cap Index and the Dow Jones U.S. sector indices. The Dow Jones U.S.
Total Market Index is a capitalization-weighted index, so the impact of a
component's price change is proportional to the issue's total market value,
which is the share price times the number of shares outstanding. The Index is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. The Dow
Jones U.S. Total Market Index represents 95% of the market capitalization of
listed U.S. equities.

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Dow Jones U.S. Basic Materials Sector Index

Number of Components: approximately 67
Index Description. The Dow Jones U.S. Basic Materials Sector Index measures the
performance of the basic materials economic sector of the U.S. equity market.
The Dow Jones U.S. Basic Materials Sector Index is a subset of the Dow Jones
U.S. Total Market Index. The Dow Jones U.S. Basic Materials Sector Index is
capitalization-weighted and includes only companies in the Basic Materials
sector of the Dow Jones U.S. Total Market Index. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price multiplied by the number of shares outstanding.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

Dow Jones U.S. Consumer Cyclical Sector Index

Number of Components: approximately 276
Index Description. The Dow Jones U.S. Consumer Cyclical Sector Index measures
the performance of the consumer cyclical economic sector of the U.S. equity
market. The Dow Jones U.S. Consumer Cyclical Sector Index is a subset of the Dow
Jones U.S. Total Market Index. The Dow Jones U.S. Consumer Cyclical Sector Index
is capitalization-weighted and includes only companies in the Consumer Cyclical
sector of the Dow Jones U.S. Total Market Index. The component stocks are
weighted according to the total market value of their outstanding shares. The
impact of a component's price change is proportional to the issue's total market
value, which is the share price multiplied by the number of shares outstanding.
The Index is adjusted to reflect changes in capitalization resulting from
mergers, acquisitions, stock rights, substitutions and other capital events.

Dow Jones U.S. Consumer Non-Cyclical Sector Index

Number of Components: approximately 99
Index Description. The Dow Jones U.S. Non-Cyclical Sector Index measures the
performance of the non-cyclical economic sector of the U.S. equity market. The
Dow Jones U.S. Non-Cyclical Sector Index is a subset of the Dow Jones U.S. Total
Market Index. The Dow Jones U.S. Non-Cyclical Sector Index is
capitalization-weighted and includes only companies in the Non-Cyclical sector
of the Dow Jones U.S. Total Market Index. The component stocks are weighted
according to the total market value of their outstanding shares. The impact of a
component's price change is proportional to the issue's total market value,
which is the share price multiplied by the number of shares outstanding. The
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

Dow Jones U.S. Energy Sector Index

Number of Components: approximately 79
Index Description. The Dow Jones U.S. Energy Sector Index measures the
performance of the energy economic sector of the U.S. equity market. The Dow
Jones U.S. Energy Sector Index is a subset of the Dow Jones U.S. Total Market
Index. The component stocks are weighted according to the total market value of
their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events. The Dow Jones U.S. Energy Sector Index
represents approximately 5.5% of the market capitalization of listed U.S.
equities.

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Dow Jones U.S. Financial Sector Index

Number of Components: approximately 291
Index Description. The Dow Jones U.S. Financial Sector Index measures the
performance of the financial economic sector of the U.S. equity market. The Dow
Jones U.S. Financial Sector Index is a subset of the Dow Jones U.S. Total Market
Index. The Dow Jones U.S. Financial Sector Index is capitalization-weighted and
includes only companies in the financial sector of the Dow Jones U.S. Total
Market Index. The impact of a component's price change is proportional to the
issue's total market value, which is the share price multiplied by the number of
shares outstanding. The Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events.

Dow Jones U.S. Healthcare Sector Index

Number of Components: approximately 172
Index Description. The Dow Jones U.S. Healthcare Sector Index measures the
performance of the Healthcare economic sector of the U.S. equity market. This
Dow Jones U.S. Healthcare Sector Index is a subset of the Dow Jones U.S. Total
Market Index. The Dow Jones U.S. Healthcare Sector Index is capitalization-
weighted and includes only companies in the Healthcare Sector of the Dow Jones
U.S. Total Market Index. The component stocks are weighted according to the
total market value of their outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price multiplied by the number of shares outstanding. The Index is
adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

Dow Jones U.S. Industrial Sector Index

Number of Components: approximately 253
Index Description. The Dow Jones U.S. Industrial Sector Index measures the
performance of the Industrial economic sector of the U.S. equity market. The Dow
Jones U.S. Industrial Index is a subset of the Dow Jones U.S. Total Market
Index. The Dow Jones U.S. Industrial Sector Index is capitalization-weighted and
includes only companies in the Industrial sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total value of
their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.

Dow Jones U.S. Technology Sector Index

Number of Components: approximately 250
Index Description. The Dow Jones U.S. Technology Sector Index measures the
performance of the Technology economic sector of the U.S. equity market. The Dow
Jones U.S. Technology Sector Index is a subset of the Dow Jones U.S. Total
Market Index. The Dow Jones U.S. Technology Index is capitalization-weighted and
includes only companies in the Technology sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.
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Dow Jones U.S. Telecommunications Sector Index

Number of Components: approximately 20
Index Description. The Dow Jones U.S. Telecommunications Sector Index measures
the performance of the Telecommunications economic sector of the U.S. equity
market. The Dow Jones U.S. Telecommunications Sector Index is a subset of the
Dow Jones U.S. Total Market Index. The Dow Jones U.S. Telecommunications Sector
Index is capitalization-weighted and includes only companies in the
Telecommunications sector of the Dow Jones U.S. Total Market Index. The
component stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares outstanding. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events.

Dow Jones U.S. Utilities Sector Index

Number of Components: approximately 77
Index Description. The Dow Jones U.S. Utilities Sector Index measures the
performance of the utilities economic sector of the U.S. equity market. The Dow
Jones U.S. Utilities Sector Index is a subset of the Dow Jones U.S. Total Market
Index. The Dow Jones U.S. Utilities Sector Index is capitalization-weighted and
includes only companies in the Utilities sector of the Dow Jones U.S. Total
Market Index. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.

Dow Jones U.S. Financial Services Index

Number of Components: approximately 156
Index Description. The Dow Jones U.S. Financial Services Index measures the
performance of the financial services industry segment of the U.S. equity
market. The Dow Jones U.S. Financial Services Index is a subset of the Dow Jones
U.S. Financial Index. The Dow Jones U.S. Financial Services Index is
capitalization-weighted and includes only companies in the Banks, Savings &
Loans, Securities Brokerage and Financial Services sectors of the Dow Jones U.S.
Financial Index. The component stocks are weighted according to the total market
value of their outstanding shares. The impact of a component's price change is
proportional to the issue's total market value, which is the share price
multiplied by the number of shares outstanding. The Index is adjusted to reflect
changes in capitalization resulting from mergers, acquisitions, stock rights,
substitutions and other capital events.

Dow Jones U.S. Real Estate Index

Number of Components: approximately 73
Index Description. The Dow Jones U.S. Real Estate Index measures the performance
of the Real Estate industry of the U.S. equity market. The Dow Jones U.S. Real
Estate Index is a subset of the Dow Jones U.S. Financial Index. The Dow Jones
U.S. Real Estate Index is capitalization-weighted and includes only companies in
the Real Estate industry of the Dow Jones U.S. Financial Index. The component
stocks are weighted according to the total market value of their outstanding
shares. The impact of a component's price change is proportional to the issue's
total market value, which is the share price multiplied by the number of shares
outstanding. The Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events.

Dow Jones Select Dividend Index

Number of Components: approximately 50

Index Description. The Dow Jones Select Dividend Index measures the performance
of a selected group of equity securities issued by companies that have provided
relatively high dividend yields on a consistent basis over time. The Dow Jones
Select Dividend Index is comprised of fifty of the highest dividend-yielding
securities (excluding REITs) in the Dow Jones U.S. Total Market Index, a
broad-based index representative of the total market for U.S. equity securities.
To be included in the Index, the securities (i) must have had a positive
dividend-per-share growth rate for each of the last five years (i.e., paid
higher dividends each year); (ii) must have an average five-year dividend payout
ratio of 60% or less; and (iii) must have an annual average daily dollar trading
volume of more than $1.5 million. "Dividend payout ratio" reflects the
percentage of a company's earnings paid out as dividends. A ratio of 60% would
mean that a company paid out approximately 60% of its earnings as dividends. A
company with a lower dividend payout ratio has more earnings to support
dividends, and adjustments or changes in the level of earnings are therefore
less likely to significantly affect the level of dividends paid. Positive
dividend growth rate is a measure of dividend consistency, since it provides
some indication of a company's ability to continue to pay dividends.

Dow Jones Transportation Average Index

Number of Components: approximately 20

Index Description. The Dow Jones Transportation Average Index measures the
performance of companies from the Industrial Transportation, Airline and General
Industrial Services industries of the U.S. equity market. Companies are selected
for inclusion in the Index by the editors of The Wall Street Journal. The Index,
for practical purposes, is a subset of the Dow Jones U.S. Total Market Index.
The component stocks are weighted based on the price of the component
securities, with the highest priced securities generally having higher weighting
in the Index. The Index is adjusted to reflect changes in capitalization
resulting from mergers, acquisitions, stock rights, substitutions and other
capital events.
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The Russell Indices Generally

Component Selection Criteria. The securities in the Russell Indices (sometimes
referred to as the "components") are reconstituted annually after the close on
June 30 (or the last business day of June), to reflect changes in the
marketplace. The starting universe for the Russell 3000 Index, all U.S. exchange
and NASDAQ listed companies, is ranked by decreasing total market
capitalization. The Russell 2000 Index and the Russell 1000 Index are subsets of
the Russell 3000 Index. All companies listed on a U.S. exchange or the NASDAQ
are considered for inclusion in the investments with the following rules and
exceptions. Stocks must trade at or above $1.00 on May 31 to be eligible for
inclusion. Only one class of security is allowed into the investments, however,
special cases may exist if it is determined that each class acts independent of
the other. Stocks incorporated in other countries are excluded. Also excluded
are preferred and convertible preferred stock, participating preferred stock,
redeemable shares, warrants and rights, trust receipts, royalty trusts, limited
liability companies, OTC bulletin boards and pink sheet stocks, mutual funds,
limited partnerships, and foreign stocks. After component selection, stocks are
weighted by their available market capitalization, which is calculated by
multiplying the primary exchange closing price by the adjusted shares. The
purpose of this adjustment is to exclude the capitalization that is not
available for purchase and is not part of the investing opportunity set.

Issue Changes. Securities that leave the Russell Indices between reconstitution
dates are not replaced. Thus, the number of securities in the investments over
the year will fluctuate according to corporate activity. When a stock is
acquired, delisted, reincorporated outside of the U.S. or moves to the pink
sheets or OTC bulletin boards, the stock is deleted from the relevant
investments. When acquisitions or mergers take place, the stock's capitalization
moves to the acquiring stock, hence, mergers have no effect on index total
capitalization if the acquiring stock is part of the index. The only additions
between reconstitution dates are as a result of spin-offs.

Index Maintenance. Maintaining the Russell Indices includes monitoring and
completing the adjustments for company additions and deletions, share changes,
stock splits, stock dividends, and stock price adjustments due to restructuring
and spin-offs. In addition, significant float adjustments due to outstanding
share capital changes actions are made month-end. The divisor is adjusted for
all changes in company market value to leave the value of the investments
unaffected. All divisor adjustments are made after the close of trading and
after the calculation of the closing value of the Russell Investments.

Index Availability. The Russell Indices are calculated continuously and are
available from major data vendors.

Russell 3000 Index

Number of Components: approximately 3,000
Index Description. The Russell 3000 Index measures the performance of the U.S.
equity broad market. It serves as the underlying index for Russell 3000 Growth
and Value series and the Russell 1000 and Russell 2000 Investments, as well as
each respective Growth and Value series. It is a capitalization-weighted index
of the 3000 largest companies incorporated in the U.S. and its territories.
Component companies are adjusted for available float, weighted according to the
market value of their available outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price multiplied by the number of shares available. The Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Russell 3000 Index
represents approximately 98% of the market capitalization of listed U.S.
equities and is a leading benchmark of the broad U.S. equity market.

Russell 3000 Growth Index

Number of Components: approximately 1,915
Index Description. The Russell 3000 Growth Index measures the growth sector of
the U.S. equity broad market. It is a subset of the Russell 3000 Index. It is
capitalization-weighted index and consisting of those Russell 3000 companies
with higher price-to-book ratios and higher forecasted growth and represents
approximately 51% of the total market capitalization of the Russell 3000 Index.
Component companies are adjusted for available float, weighted according to the
market value of their available outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price multiplied by the number of shares available. The Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Russell 3000 Growth Index
represents approximately 45% of the market capitalization of listed U.S.
equities.

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Russell 3000 Value Index

Number of Components: approximately 2,052
Index Description. The Russell 3000 Value Index measures the value sector of the
broad U.S. equity market. It is a subset of the Russell 3000 Index. It is a
capitalization-weighted index consisting of those Russell 3000 companies with
lower price-to-book ratios and lower forecasted growth and represents
approximately 49% of the total market capitalization of the Russell 3000 Index.
Component companies are adjusted for available float, weighted according to the
market value of their available outstanding shares. The impact of a component's
price change is proportional to the issue's total market value, which is the
share price multiplied by the number of shares available. The Index is adjusted
to reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events. The Russell 3000 Value Index
represents approximately 43% of the market capitalization of listed U.S.
equities.

Russell 2000 Index

Number of Components: approximately 1,999
Index Description. The Russell 2000 Index measures the small-capitalization
sector of the U.S. equity market. It is a subset of the Russell 3000 Index and
serves as the underlying index for the Russell 2000 Growth and Value index
series. It is a capitalization-weighted index consisting of the 2000 smallest
companies in the Russell 3000 Index. Component companies are adjusted for
available float, weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares available. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 2000 Index represents approximately 6% of
the market capitalization of listed U.S. equities and is a leading benchmark of
the U.S. small cap equity market.

Russell 2000 Growth Index

Number of Components: approximately 1,326
Index Description. The Russell 2000 Growth Index measures the
small-capitalization growth sector of the U.S. equity market. It is a subset of
the Russell 2000 Index. It is a capitalization-weighted index consisting of
those Russell 2000 companies with higher price-to-book ratios and higher
forecasted growth and represents approximately 49% of the total market
capitalization of the Russell 2000 Index. Component companies are adjusted for
available float, weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares available. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 2000 Growth Index represents approximately
3% of the market capitalization of listed U.S. equities and is a leading
benchmark of the U.S. small cap growth equity market.

Russell 2000 Value Index

Number of Components: approximately 1,314
Index Description. The Russell 2000 Value Index measures the
small-capitalization value sector of the U.S. equity market. It is a subset of
the Russell 2000 Index. It is a capitalization-weighted index consisting of
those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth and represents approximately 51% of the total market
capitalization of the Russell 2000 Index. Component companies are adjusted for
available float, weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares available. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 2000 Value Index represents approximately
3% of the market capitalization of listed U.S. equities and is a leading
benchmark of the U.S. small cap value equity market.

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Russell 1000 Index

Number of Components: approximately 1000
Index Description. The Russell 1000 Index measures the performance of the
large-capitalization sector of the U.S. equity market. It is a subset of the
Russell 3000 Index and serves as the underlying index for the Russell 1000
Growth and Value Investments, and the Russell Top 200 and MidCap series. It is a
capitalization-weighted index consisting of the 1000 largest companies in the
Russell 3000. Component companies are adjusted for available float, weighted
according to the market value of their available outstanding shares. The impact
of a component's price change is proportional to the issue's total market value,
which is the share price multiplied by the number of shares available. The Index
is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events. The Russell
1000 Index represents approximately 82% of the market capitalization of listed
U.S. equities and is a leading benchmark of the large cap U.S. market.

Russell 1000 Growth Index

Number of Components: approximately 589
Index Description. The Russell 1000 Growth Index measures the
large-capitalization growth sector of the U.S. equity market. It is a subset of
the Russell 1000 Index. It is a capitalization-weighted index consisting of
those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth and represents approximately 51% of the total market
capitalization of the Russell 1000 Index. Component companies are adjusted for
available float, weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares available. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 1000 Growth Index represents approximately
40% of the market capitalization of listed U.S. equities and is a leading
benchmark of the large cap growth U.S. market.

Russell 1000 Value Index

Number of Components: approximately 738
Index Description. The Russell 1000 Value Index measures the
large-capitalization value sector of the U.S. equity market. It is a subset of
the Russell 1000 Index. It is a capitalization-weighted index consisting of
those Russell 1000 companies with lower price-to-book ratios and lower
forecasted growth and represents approximately 49% of the total market
capitalization of the Russell 1000 Index. Component companies are adjusted for
available float, weighted according to the market value of their available
outstanding shares. The impact of a component's price change is proportional to
the issue's total market value, which is the share price multiplied by the
number of shares available. The Index is adjusted to reflect changes in
capitalization resulting from mergers, acquisitions, stock rights, substitutions
and other capital events. The Russell 1000 Value Index represents approximately
40% of the market capitalization of listed U.S. equities and is a leading
benchmark of the large cap value U.S. market.

Russell Midcap Index

Number of Components: approximately 800
Index Description. The Russell Midcap Index is a capitalization-weighted index
consisting of approximately the 800 smallest companies in the Russell 1000
Index. As in all Russell indexes, component companies are adjusted for available
float -- weighted according to the market value of their available outstanding
shares. The impact of a component's price change is proportional to the issue's
total market value, which is the share price times the number of shares
available. The Index is adjusted to reflect changes in capitalization resulting
from mergers, acquisitions, stock rights, substitutions and other capital
events. The Russell MidCap Index represents approximately 21% of the market
capitalization of listed U.S. equities and is a widely used benchmark of the
U.S. mid cap equity market.

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Russell Midcap Growth Index

Number of Components: approximately 461
Index Description. The Russell Midcap Growth Index is a capitalization-weighted
index that measures the performance of the mid-capitalization growth sector of
the U.S. equity market. It is a subset of the Russell Midcap Index, representing
approximately 43% of the total market capitalization of the Russell Midcap
Index. The Index measures the performance of those Russell Midcap Index
companies with higher price-to-book ratios and higher forecasted growth. As in
all Russell indexes, component companies are adjusted for available float --
weighted according to the market value of their available outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares available. The
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

Russell Midcap Value Index

Number of Components: approximately 599
Index Description. The Russell Midcap Value Index is a capitalization-weighted
index that measures the performance of the mid-capitalization value sector of
the U.S. equity market. It is a subset of the Russell Midcap Index, representing
approximately 57% of the total market capitalization of the Russell Midcap
Index. The Index measures the performance of those Russell Midcap Index
companies with lower price-to-book ratios and lower forecasted growth. As in all
Russell indexes, component companies are adjusted for available float --
weighted according to the market value of their available outstanding shares.
The impact of a component's price change is proportional to the issue's total
market value, which is the share price times the number of shares available. The
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

The Cohen & Steers Realty Majors Index Generally

Component Selection Criteria. An investment committee determines the securities
(i.e., the "components") of the Index. The universe of Real Estate Investment
Trusts ("REITs") is first screened for market capitalization and liquidity
requirements. To be eligible for inclusion, a REIT must have a minimum market
capitalization of $500 million and a minimum of 600,000 shares traded per month.
The Index is composed only of core property types: office, industrial,
apartments and retail. The investment committee determines the final 30
constituents based on a rigorous review process. Criteria for inclusion include:
the quality of the portfolio of property, sector and geographic diversification,
strong management, sound capital structure and a dominant position within a
property sector.

Once the final list of constituent REITs has been determined, constituent REITs
are ranked according to their respective market capitalization. Each constituent
REIT that has an index weight greater than 8% will have its weight adjusted
downwards until it equals 8%. The weight of the remaining constituent REITs will
be increased proportionately until the aggregate of all weights equals 100%. As
a result, constituents will be large and liquid without any one issue dominating
the index.

Issue Changes. The Index will be rebalanced quarterly. The weighting for each
constituent will be updated and adjustments will be made if any constituent has
a weighting over 8%. The companies will be reviewed for size and liquidity. A
REIT will be removed from the Index if its market capitalization has fallen
below $400 million or if the monthly trading volume has fallen below 500,000
shares per month. In order to prevent excessive turnover, the size and liquidity
requirements are not as stringent during rebalancings as they are for initial
inclusion.

Between rebalancing dates, mergers or bankruptcy may result in a deletion or
weighting increase. Weighting increases must be greater than 5% and will be
adjusted downwards if it results in the REIT's weight becoming greater than 8%.
In the case of a deletion, the investment committee will select a replacement
company to ensure 30 constituents at all times.

Index Maintenance. Maintaining the Index includes monitoring and completing the
adjustments for company additions and deletions, share changes, stock splits,
stock dividends, and stock price adjustments due to restructuring and spinoffs.
The Index is a total return index and therefore reflects the reinvestment of
dividends. The Index is calculated by the AMEX and distributed real time.

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Index Availability. The Cohen & Steers Realty Majors Index is calculated and
broadcast every 15 seconds over the Consolidated Tape Association's Network B
under the ticker "RMP." This information is distributed by financial data
vendors such as Bloomberg.

Cohen & Steers Realty Majors Index

Number of Components: approximately 30
Index Description. The Cohen & Steers Realty Majors Index consists of selected
REITs. The objective of the Index is to represent relatively large and liquid
REITs that may benefit from future consolidation and securitization of the U.S.
real estate industry. Within the REIT market, the Index is diversified across
property sectors that represent the current market. The Index is modified
capitalization-weighted with constituent companies having a maximum index weight
of 8%.

The Nasdaq Biotechnology Index Generally

Component Selection Criteria. To be eligible for inclusion in the Index, a
common type security (i.e., a "component") must be traded on The Nasdaq Stock
Market and meet the following criteria:

. the issuer of the security must be primarily engaged in using biomedical
research for the discovery or development of novel treatment or cures for
human disease;
. the security must be listed on the Nasdaq National Market;
. the security must have a market capitalization of at least $200 million;
. the security must have an average daily trading volume of at least 100,000
shares;
. the security must have "seasoned" on The Nasdaq Stock Market or another
recognized market for at least 6 months (generally a company is considered
to be seasoned by Nasdaq if it has been listed on a market for at least six
months; in the case of spin-offs, the operating history of the spin-off
will be considered);
. the security may not be issued by an issuer currently in bankruptcy
proceedings; and
. the issuer of the security may not have entered into a definitive agreement
or other arrangement which would result in the security no longer being
index eligible within the next six months; and the issuer of the security
may not have annual financial statements with an audit opinion which the
auditor or the company have indicated cannot be currently relied upon.

Issue Changes. The index will be subject to reexamination on a quarterly basis.
The weights of index components will be rebalanced if one or more of the
following are not met: (1) the weight of the single largest company cannot
exceed 25.0% and (2) the collective weight of those index securities whose
individual current weights are in excess of 5.0%, when added together, must be
less than or equal to 50.0%. If either one or both of these weight distribution
requirements are not met upon quarterly review, a weight rebalancing will be
performed in accordance with the following plan. First, relating to weight
distribution requirement (1) above, if the current weight of the single largest
Index Security exceeds 25.0%, then the weights of all Large Stocks will be
scaled down proportionately towards 1.0% by enough for the adjusted weight of
the single largest Index Security to be set to 20.0%. Second, relating to weight
distribution requirement (2) above, for those Index Securities whose individual
current weights or adjusted weights in accordance with the preceding step are in
excess of 5.0%, if their "collective weight" exceeds 50.0%, then the weights of
all Large Stocks will be scaled down proportionately towards 1.0% by just enough
for the "collective weight," so adjusted, to be set to 40.0%.

Semi-annual Ranking Review. The Index Securities are evaluated semi-annually
based on market data. Companies currently within the Index must meet the
maintenance criteria of $100 million in marker capitalization, a $7.50 price and
50,000 shares average daily trading volume. Index securities not meeting the
maintenance criteria are maintained in the Index provided that such security met
the maintenance criteria in the previous ranking. Securities not meeting the
maintenance criteria for two consecutive rankings are removed. Changes will
occur after the close of trading on the third Friday in May and November using
end of March and September price data and end of April and October publicly
available total shares outstanding data.

Index Maintenance. Companies in the Index are monitored every day by Nasdaq,
with respect to changes in total shares outstanding arising from secondary
offerings, stock repurchases, conversions or other corporate actions. If the
change in total shares outstanding arising from such corporate action is greater
than or equal to 5.0%, such change is ordinarily made to the Index on the
evening prior to the effective date of such corporate action or as soon as
practical thereafter. Otherwise, if the change in total shares outstanding is
less than 5%, then all such changes are accumulated and made effective at one
time on a quarterly basis

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after the close of trading on the third Friday in each of March, June, September
and December. In either case, the Index share weights for such Index Securities
are adjusted by the same percentage amount by which the total shares outstanding
have changed in such Index Securities. Ordinarily, whenever there is a change in
Index share weights or a change in a component security included in the Index,
Nasdaq adjusts the divisor to assure that there is no discontinuity in the value
of the Index, which might otherwise be caused by any such change.

Index Availability. The Nasdaq Biotechnology Index is calculated continuously
and widely disseminated to major data vendors.

Nasdaq Biotechnology Index

Number of Components: 75 Index Description. The Nasdaq Biotechnology Index
contains companies primarily engaged in biomedical research for the discovery or
development of new treatments or cures for human disease. The Index is one of
eight sub-investments of the Nasdaq Composite Index, which measures all common
stocks listed on The Nasdaq Stock Market. The Index is modified market-value
weighted, and is subject to rebalancing to ensure that the relative weightings
of the index components meet requirements for a diversified portfolio. The
market value, the last sale price multiplied by index share weights, is
calculated throughout the trading day, and is related to the total value of the
Index. On November 1, 1993, the Biotechnology Index began with a base of 200.00.

The Goldman Sachs Indices Generally

Component Selection Criteria. The starting universe for eligible securities
(i.e.,"components") of the Goldman Sachs Sector Index are companies classified
by the Goldman Sachs Investment research department as belonging to a Goldman
Sachs Sector Index industry or sector. These decisions are based on the Goldman
Sachs Investment Research Sector and Industry Classified System as supplemented
by the Bloomberg Classification, Standard Industrial Classification and Russell
Industry Classification. The stock of each constituent company must trade on
either the NYSE, the AMEX or on the Nasdaq. Foreign companies with common shares
listed on such exchanges are also eligible for inclusion in a Goldman Sachs
Sector Index. Certain ADRs that have been a traditional part of the portfolios
of U.S. institutional investors are also eligible. Limited Partnerships, and
closed-end funds are excluded. The total market capitalization of a stock
eligible for inclusion must be equal or greater than the market capitalization
limit as of the most recent rebalancing. Companies with float (i.e., holdings in
excess of 10% by an individual, corporation or family trust) below 20% are not
eligible. The annualized turnover of company shares on the relevant exchange(s)
must be 30% or more to further ensure adequate liquidity.

The index is initially capitalization weighted, based on the following formula:
number of outstanding shares of a constituent multiplied by its share price as
of the index's inception or rebalancing date. Weights are then modified so that
none exceeds a predetermined limit. If the combined weight of all the
constituents with an index weight greater than 5% in a sector index exceeds 50%,
the largest stocks in the sector will be capped using a sliding scale until the
combined weight is less than 50%.

Issue Changes. The Goldman Sachs Sector Indices are rebalanced semiannually on
the third Friday of June and December. The total market capitalization for
stocks to be added to the index must be equal to or greater than the
capitalization limit at inception of the index or as of the most recent
semiannual rebalancing date. A company's total market capitalization shall be
based on the number of its outstanding shares and its closing price on its
primary exchange as of inception or the rebalancing date. The market
capitalization limit for each index will be determined at index inception and
will be periodically revised to reflect changes in market levels. Index
constituents with capitalization below 50% of the limit as of a rebalancing date
or that fail to meet certain float and share turnover requirements shall be
removed after the close on the effective date of the rebalancing. Changes to a
company's shares outstanding that are greater than 5% will be applied to the
index when they are effective on a best-efforts basis. Changes that are less
than 5% will be applied to the index at next regularly scheduled rebalancing.

Index Maintenance. Each index is adjusted to reflect company additions and
deletions, share changes, stock splits, stock dividends, and stock price
adjustments due to restructurings and spin-offs. For changes of 5% or more in a
company's number of shares outstanding that result from a merger, acquisition or
spin-off, the index is adjusted upon the close of the consummation of such
transaction on a best-efforts basis. For share changes of 5% or more that result
from the issuance or repurchase or common shares, the index is adjusted upon the
confirmation of such issuance or repurchase on a best-efforts basis. If a
constituent company spins off a company, the parent and the spin-off will each
remain in the index as long as they each satisfy the

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component selection criteria described above, except with respect to the 30%
turnover requirement. In the event that a constituent company files for
bankruptcy, its stock will be removed from the index effective the close of that
date.

Index Availability. The Goldman Sachs Investments are calculated continuously
and are available from major data vendors.

Goldman Sachs Natural Resources Sector Index

Number of Components: approximately 116
Index Description. The Goldman Sachs Natural Resources Sector Index has been
developed by Goldman Sachs as an equity benchmark for U.S.-traded natural
resource-related stocks. The Index includes companies in the following
categories: extractive industries, energy companies, owners and operators of
timber tracts, forestry services, producers of pulp and paper, and owners of
plantations. It is a modified capitalization-weighted index: the constituent
stocks are weighted according to the total market value of their outstanding
shares, except that no constituent is weighted in excess of a predetermined
limit and the combined weight of the nine largest constituents cannot exceed 45%
at rebalancing. In this way, the impact of a component's price change on the
Index is generally proportional to the issue's total market value, but no one
stock will dominate the index. The Index value is calculated by summing up the
weight-adjusted market capitalizations for all constituent stocks and dividing
that sum by a predetermined base value. The value of the Index is adjusted to
reflect changes in capitalization resulting from mergers, acquisitions, stock
rights, substitutions and other capital events.

Goldman Sachs Technology Sector Index

Number of Components: approximately 218
Index Description. The Goldman Sachs Technology Sector Index has been developed
by Goldman Sachs as an equity benchmark for U.S.-traded technology-related
stocks. The Index includes companies that are: producers of sophisticated
computer-related devices, electronics networking and Internet services;
producers of computer and Internet software; consultants for information
technology; and providers of computer services. It is a modified
capitalization-weighted index. In a modified capitalization index, the
weightings of large issuers is capped in order to reduce the impact of a small
number of large capitalization stocks. The constituent stocks in this index are
weighted according to the total market value of their outstanding shares, except
that no constituent is weighted in excess of a predetermined limit and stocks
with a weight greater than 5% in the index cannot exceed 50% of the index. In
this way, the impact of a component's price change on the Index is generally
proportional to the issue's total market value. The Index value is calculated by
summing up the weight-adjusted market capitalizations for all constituent stocks
and dividing that sum by a predetermined base value. The index was introduced in
July 1998 with a base value of 100 as of April 30, 1998 and a capitalization
weighting limit of 7.5% as of the most recent rebalancing date. The value of the
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights, substitutions and other capital events.

The Goldman Sachs Technology Industry Subsector Investments Generally

Component Selection Criteria. The starting universe for eligible constituents of
the Goldman Sachs Subsector investments are companies classified by the Goldman
Sachs Investment Research department as belonging to a Goldman Sachs Investment
Research Sector Industry Classification System. These decisions are based on the
Goldman Sachs Investment Research Sector and Industry Classified System as
supplemented by the Bloomberg Classification, Standard Industrial Classification
and Russell Industry Classification. The stock of each constituent company must
trade on either the NYSE, the AMEX or on Nasdaq. Foreign companies with common
shares listed on such exchanges are also eligible for inclusion in a Goldman
Sachs Technology Investments. Limited Partnerships and closed-end funds are
excluded. The total market capitalization of a stock eligible for inclusion must
be equal or greater than the market capitalization limit as of the most recent
rebalancing. Companies with float below 20% are not eligible. A company's float
shall reflect all adjustments to a company's actual shares outstanding to
account for holding in excess of 10% by an individual, corporation or family
trust. The annualized turnover of company shares on the relevant exchange(s)
must be 30% or more to further ensure adequate liquidity.

Each index is initially capitalization weighted, based on the following formula:
number of outstanding shares of a constituent multiplied by its share price as
of the index's inception or rebalancing date. Weights are then modified so that
none exceeds a predetermined limit of 8.5%.

Issue Changes. The Goldman Sachs Technology Industry Sector Investments are
rebalanced semiannually on the third Friday of June and December. The total
market capitalization for stocks to be added to the index must be equal to or
greater than the

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capitalization limit at inception of the index or as of the most recent
semiannual rebalancing date. A company's total market capitalization shall be
based on the number of its outstanding shares and its closing price on its
primary exchange as of inception or the rebalancing date. The market
capitalization limit for each index will be determined at index inception and
will be periodically revised to reflect changes in market levels. Index
constituents with capitalization below 50% of the limit, less than 10% float or
less than 15% annualized share turnover as of a rebalancing date shall be
removed after the close on the effective date of the rebalancing. Changes to a
company's shares outstanding that are greater than 5% will be applied to the
index when they are effective on a best-efforts basis. Changes that are less
than 5% will be applied to the index at next regularly scheduled rebalancing.

Index Availability. The Goldman Sachs Technology Industry Sector Investments are
calculated continuously and are available from major data vendors.

Goldman Sachs Technology Industry Multimedia Networking Index

Number of Components: approximately 36
Index Description. The Goldman Sachs Technology Industry Multimedia Networking
Index has been developed by Goldman Sachs as an equity benchmark for multimedia
networking stocks. The Index includes companies that are: producers of telecom
equipment, data networking and wireless equipment. The stocks are selected from
a universe of technology stocks as categorized by the GSTI. The Goldman Sachs
Technology Industry Multimedia Networking Index is designed to minimize turnover
by; semi-annual rebalancing, open number of companies, high level for entry, low
level for removal, and bias toward leaving a stock in unless there is a strong
argument for removal. Additionally, to reflect mutual fund restrictions on stock
weights, constituents are modified-cap weighted such that each stock is no more
than 8.5% of the index at the time of rebalancing. The index was introduced in
April 1996 with a base value of 100.

Goldman Sachs Technology Industry Semiconductor Index

Number of Components: approximately 53
Index Description. The Goldman Sachs Technology Industry Semiconductor Index has
been developed by Goldman Sachs as an equity benchmark for U.S.-traded
semiconductor stocks. The Index includes companies that are producers of capital
equipment or manufacturers of wafer and chips. The stocks are selected from a
universe of technology stocks as categorized by the GSTI. The Goldman Sachs
Technology Industry Semiconductor Index is designed to minimize turnover by;
semi-annual rebalancing, open number of companies, high level for entry, low
level for removal, and bias toward leaving a stock in unless there is a strong
argument for removal. Additionally, to reflect mutual fund restrictions on stock
weights, constituents are modified-cap weighted such that each stock is no more
than 8.5% of the index at the time of rebalancing. The index was introduced in
April 1996 with a base value of 100.

Goldman Sachs Technology Industry Software Index

Number of Components: approximately 45
Index Description. The Goldman Sachs Technology Industry Software Index has been
developed by Goldman Sachs as an equity benchmark for U.S.-traded
software-related stocks. The Index includes companies that are: producers of
client/server, enterprise software, Internet software, PC and entertainment
software. The stocks are selected from a universe of technology stocks as
categorized by the GSTI. The Goldman Sachs Technology Industry Software Index is
designed to minimize turnover by; semi-annual rebalancing, open number of
companies, high level for entry, low level for removal, and bias toward leaving
a stock in unless there is a strong argument for removal. Additionally, to
reflect index mutual fund restrictions on stock weights,

________________________________________________________________________________
page 28 i|Shares

<PAGE>

constituents are modified-cap weighted such that each stock is no more than 8.5%
of the index at the time of rebalancing. The index was introduced in April 1996
with a base value of 100.

The MSCI Indices Generally

In General. The MSCI Indices were founded in 1969 by Capital International S.A.
as the first international performance benchmarks constructed to facilitate
accurate comparison of world markets. Morgan Stanley acquired rights to the
Indices in 1986. In November 1998, Morgan Stanley transferred all rights to the
MSCI Indices to Morgan Stanley Capital International Inc. ("MSCI"), a Delaware
corporation of which Morgan Stanley is the majority owner and The Capital Group
of Companies, Inc. is the minority shareholder. The MSCI Equity Indices have
covered the world's developed markets since 1969, and in 1988, MSCI commenced
coverage of the emerging markets.

Although local stock exchanges have traditionally calculated their own indices,
these are generally not comparable with one another, due to differences in the
representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all equity indices, developed and
emerging.

MSCI Equity Indices are notable for the depth and breadth of their coverage.
MSCI's standard equity indices generally seeks to have 85% of the free
float-adjusted market capitalization of a country's stock market reflected in
the MSCI Index for such country. The MSCI Equity Indices seek to balance the
inclusiveness of an "all share" index against the replicability of a "blue chip"
index.

Weighting. Effective May 31, 2002, all single-country MSCI Indices are
free-float weighted, i.e., companies are included in the indices at the value of
their free public float (free float, multiplied by price). MSCI defines "free
float" as total shares excluding shares held by strategic investors such as
governments, corporations, controlling shareholders and management, and shares
subject to foreign ownership restrictions.

Regional Weights. Market capitalization weighting, combined with a consistent
target of 85% of free float-adjusted market capitalization, helps ensure that
each country's weight in regional and international indices approximates its
weight in the total universe of developing and emerging markets. Maintaining
consistent policy among MSCI developed and emerging market indices is critical
to the calculation of certain combined developed and emerging market indices
published by MSCI.

Selection Criteria. To construct relevant and accurate equity indices for the
global institutional investor, MSCI undertakes an index construction process,
which involves: (i) defining the equity universe, (ii) adjusting the total
market capitalization of all securities in the universe for free float available
to foreign investors. (iii) classifying the universe of securities under the
Global Industry Classification Standard (the "GICS"), and (iv) selecting
securities for inclusion according to MSCI's index construction rules and
guidelines.

Defining the Universe. The index construction process starts at the country
level, with the identification of all listed securities for that country.
Currently, MSCI creates equity indices for 50 country markets globally. MSCI
classifies each company and its securities in one and only one country. This
allows securities to be sorted distinctly by their respective countries. In
general, companies and their respective securities are classified as belonging
to the country in which they are incorporated. All listed equity securities, or
listed securities that exhibit characteristics of equity securities, except
investment trusts, mutual funds and equity derivatives, are eligible for
inclusion in the universe. Shares of non-domiciled companies generally are not
eligible for inclusion in the universe.

Adjusting the Total Market Capitalization of Securities in the Universe for Free
Float. After identifying the universe of securities, MSCI calculates the free
float-adjusted market capitalization of each security in that universe using
publicly available information. The process of free float adjusting market
capitalization involves (i) defining and estimating the free float available to
foreign investors for each security, using MSCI's definition of free float, (ii)
assigning a free float-adjustment factor to each security, and (iii) calculating
the free float-adjusted market capitalization of each security.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 29

<PAGE>

Classifying Securities Under the GICS. In addition to the free float-adjustment
of market capitalization, all securities in the universe are assigned to an
industry based hierarchy that describes their business activities. To this end,
MSCI has designed, in conjunction with Standard & Poor's, the GICS. This
comprehensive classification scheme provides a universal approach to industries
worldwide and forms the basis for achieving MSCI's objective of reflecting broad
and fair industry representation in its indices.

Selecting Securities for Index Inclusion. In order to ensure a broad and fair
representation in the indices of the diversity of business activities in the
universe, MSCI follows a "bottom-up" approach to index construction, building
indices up to the industry group level. The bottom-up approach to index
construction requires a thorough analysis and understanding of the
characteristics of the universe. This analysis drives the individual security
selection decisions, which aim to reflect the overall features of the universe
in the country index. MSCI targets an 85% free float-adjusted market
representation level within each industry group, within each country. The
security selection process within each industry group is based on the careful
analysis of: (i) each company's business activities and the diversification that
its securities would bring to the index, (ii) the size (based on free
float-adjusted market capitalization) and liquidity of securities. All else
being equal, MSCI targets for inclusion the most sizable and liquid securities
in an industry group. In addition, securities that do not meet the minimum size
guidelines discussed below and/or securities with inadequate liquidity are not
considered for inclusion, (iii) the estimated free float for the company and its
individual share classes. Only securities of companies with estimated free float
greater than 15% are, in general, considered for inclusion. Exceptions to this
general rule are made only in significant cases, where not including a security
of a large company would compromise the index's ability to fully and fairly
represent the characteristics of the underlying market.

Free Float. MSCI defines the free float of a security as the proportion of
shares outstanding that are deemed to be available for purchase in the public
equity markets by international investors. In practice, limitations on free
float available to international investors include: (i) strategic and other
shareholdings not considered part of available free float and (ii) limits on
share ownership for foreigners.

Under MSCI's free float-adjustment methodology, a constituent's Inclusion Factor
is equal to its estimated free float rounded-up to the closest 5% for
constituents with free float equal to or exceeding 15%. For example, a
constituent security with a free float of 23.2% will be included in the index at
25% of its market capitalization. For securities with an a free float of less
than 15% that are included on an exceptional basis, the Estimated free float is
adjusted to the nearest 1%.

Price and Exchange Rates

Prices. The prices used to calculate the MSCI Indices are the official exchange
closing prices or those figures accepted as such. MSCI reserves the right to use
an alternative pricing source on any given day.

Exchange Rates. For the MSCI Indices, MSCI uses the FX rates published by WM
Reuters at 4:00 p.m. London time. MSCI uses WM Reuters rates for all developed
and emerging markets. Exchange rates are taken daily at 4:00 p.m. London time by
the WM Company and are sourced whenever possible from multi-contributor quotes
on Reuters. Representative rates are selected for each currency based on a
number of "snapshots" of the latest contributed quotations taken from the
Reuters service at short intervals around 4:00 p.m. WM Reuters provides closing
bid and offer rates. MSCI uses these to calculate the mid-point to 5 decimal
places.

MSCI continues to monitor exchange rates independently and may, under
exceptional circumstances, elect to use an alternative exchange rate if the WM
Reuters rate is believed not to be representative for a given currency on a
particular day.

Changes to the Indices. The MSCI Indices are maintained with the objective of
reflecting, on a timely basis, the evolution of the underlying equity markets.
In maintaining the MSCI Indices, emphasis is also placed on continuity,
replicability and minimizing turnover in the Indices. Maintaining the MSCI
Indices involves many aspects, including additions to and deletions from the
Indices and changes in number of shares and changes in Foreign Inclusion Factors
("FIFs") as a result of updated free float estimates.

________________________________________________________________________________
page 30 i|Shares

<PAGE>

Potential additions are analyzed not only with respect to their industry group,
but also with respect to their industry or sub-industry group, in order to
represent a wide range of economic and business activities. All additions are
considered in the context of MSCI's methodology, including the index constituent
eligibility rules and guidelines.

In assessing deletions, it is important to emphasize that indices must represent
the full-investment cycle, including bull as well as bear markets. Out-of-favor
industries and their securities may exhibit declining prices, declining market
capitalization, and/or declining liquidity, and yet are not deleted because they
continue to be good representatives of their industry group.

As a general policy, changes in number of shares are coordinated with changes in
FIFs to accurately reflect the investability of the underlying securities. In
addition, MSCI continuously strives to improve the quality of its free float
estimates and the related FIFs. Additional shareholder information may come from
better disclosure by companies or more stringent disclosure requirements by a
country's authorities. It may also come from MSCI's ongoing examination of new
information sources for the purpose of further enhancing free float estimates
and better understanding shareholder structures. When MSCI identifies useful
additional sources of information, it seeks to incorporate them into its free
float analysis.

Overall, index maintenance can be described by three broad categories of
implementation of changes:

. Annual full country index reviews that systematically re-assess the various
dimensions of the equity universe for all countries and are conducted on a
fixed annual timetable;
. Quarterly index reviews, aimed at promptly reflecting other significant
market events; and
. Ongoing event-related changes, such as mergers and acquisitions, which are
generally implemented in the indices rapidly as they occur.

Potential changes in the status of countries (stand-alone, emerging, developed)
follow their own separate timetables. These changes are normally implemented in
one or more phases at the regular annual full country index review and quarterly
index review dates.

The annual full country index review for all the MSCI Standard Country Indices
is carried out once every 12 months and implemented as of the close of the last
business day of May. The implementation of changes resulting from a quarterly
index review occurs on only three dates throughout the year: as of the close of
the last business day of February, August and November. Any Country Indices may
be impacted at the quarterly index review. MSCI Index additions and deletions
due to quarterly index rebalancings are announced at least two weeks in advance.

MSCI EAFE(R) Index
Number of Components: approximately 1010
Index Description. The MSCI EAFE(R) Index has been developed by MSCI and
includes stocks from Europe, Australasia and the Far East. The MSCI EAFE Index
is commonly used as a measure of international stock performance.

Calculation Methodology. The iShares MSCI EAFE Index Fund utilizes the MSCI EAFE
Index calculated with net dividends reinvested. "Net dividends" means dividends
after reduction for taxes withheld at source at the rate applicable to holders
of the underlying stock that are resident in Luxembourg. With respect to the
iShares MSCI EAFE Index Fund, such withholding rate currently differs from that
applicable to United States residents. So-called "un-franked" dividends from
Australian companies are withheld at a 30% rate to Luxembourg residents and a
15% rate to the iShares MSCI EAFE Index Fund (there is no difference in the
treatment of "franked" dividends). Austrian companies impose a 25% dividend
withholding on Luxembourg residents and an 15% rate on the iShares MSCI EAFE
Index Fund. German companies impose a 26.5% dividend withholding on Luxembourg
residents and a 10% rate on the iShares MSCI EAFE Index Fund.

The Index is calculated on a real-time basis and disseminated at regular
intervals throughout the day.

Investment Limitations

The Board has adopted as fundamental policies each Fund's investment
restrictions, numbered one through six below. The Board has adopted as
fundamental policies the investment objectives of each Fund, other than the
iShares S&P 1500 Index Fund, iShares Dow Jones Select Dividend Index Fund and
the iShares Dow Jones Transportation Average Index Fund. Each of the iShares S&P
1500 Index Fund, iShares Dow Jones Select Dividend Index Fund and the iShares
Dow Jones Transportation Average Index Fund may change its investment objective
and its Underlying Index without a shareholder vote. The investment objectives
of each Fund, other than the iShares S&P 1500 Index Fund, iShares Dow Jones
Select Dividend Index Fund and the iShares Dow Jones Transportation Average
Index Fund, and the restrictions for each Fund cannot be changed 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.

No Fund will:

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 31

<PAGE>

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).

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:

[X] The frequency of trades and quotes for the security;

[X] The number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;

[X] Dealer undertakings to make a market in the security; and

[X] The nature of the security and the nature of the marketplace in which it
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).

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

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

________________________________________________________________________________
page 32 i|Shares

<PAGE>

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 iShares Funds within the
fund complex. In addition, Lee T. Kranefuss and Richard K. Lyons 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.

Trustees and Officers

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Name (age) Address Principal Occupation(s) Other Directorships Held by
Interested Trustees Position During the Past 5 Years Trustee and Officer
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Lee T. Kranefuss (42) Interested Trustee, Chief Executive Officer of Director (since June 18, 2003) of
Barclays Global Investors Chairman, and Intermediary Investor iShares, Inc.; Board of Trustees
45 Fremont Street President (since and Exchange Traded Products for Barclays Global Investors
San Francisco, CA 94105 June 18, 2003) Business of BGI (since 2003) Funds and Master Investment
Chief Executive Officer of the Portfolio (since 2001).
Individual Investor Business
of BGI (1997-2003)

*Nathan Most (89) Interested Trustee Consultant to BGI (1998- Director (since 1996) and
PO Box 193 (since December 16, 2002), American Stock President (1996-2002) of iShares,
Burlingame, CA 94011 1999) Exchange (1996-2000) and Inc.
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 Trustee Co-CEO of Global Index and Director (since December 5, 2003)
444 Yale Avenue (since December 5, Markets Group of BGI (2001- of iShares, Inc.; Director (since
Kensington, CA 94708 2003) 2003); Chairman of Barclays November 2003) of Barclays Global
Global Investors Services Investors UK Holdings.
(2000-2003); CEO of Capital
Markets Group of BGI (1996-
2001).
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Lee Kranefuss, Nathan Most and John Martinez are deemed to be "interested
persons" (as defined in the 1940 Act) of the Trust due to their affiliations
with BGFA, the Funds' investment adviser, and BGI, the parent company of BGFA.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 33

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Name (age) address Principal Occupation(s) During Other Directorships Held by
Independent Trustees Position Past 5 Years Trustee and Officer
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John B. Carroll (68) Independent Trustee Retired Vice President of Director (since 1996) of iShares,
520 Main Street (since January 1, Investment Management (1984-2000) Inc.; Trustee and member of the
Ridgefield, CT 06877 2002) of Verizon Corporation; Advisory Executive Committee (since 1991)
Board member of Ibbotson Associates of The Common Fund Institutional
(1992-1998); former Vice Chairman Funds, a non-profit organization;
and Executive Committee Member Member of the Board of Managers
(1994-1998) of the Committee on of JP Morgan Private Equity Funds.
Investment of Employee Benefit
Assets of the Financial Executive
Institute.

Richard K. Lyons (42) Independent Trustee Professor, University of Director (since 2001) of iShares,
Haas School of Business, (since February 15, California, Berkeley: Haas School Inc.; Trustee of Master Investment
UC Berkeley 2000) of Business (since 1993); Portfolio and Barclays Global
Berkeley, CA 94720 Consultant for IMF World Bank, Investors Funds (since 2001);
Federal Reserve Bank, and Citibank Board of Trustees: Matthews Asian
N.A. (since 2000). Funds since 1995 (oversees 6
portfolios).

George C. Parker (64) Independent Trustee Dean Witter Distinguished Director (since 2001) of iShares,
Graduate School of Business (since February 15, Professor of Finance (since 1994); Inc.; Bailard, Biehl and Kaiser,
(Room K301) 2000) Associate Dean for Academic Affairs, (since 1985); California Casualty
Stanford University Director of MBA Program, and Group of Insurance Companies (since
521 Memorial Way Professor, Stanford University: 1978); Continental Airlines, Inc.
Stanford, CA 94305 Graduate School of Business (since 1996); Community First
(1993-2001). Financial Group (since 1995);
Dresdner/RCM Mutual Funds
(1994-2002); Tyon Ranch Company
(since 1999).

W. Allen Reed (56) Independent Trustee President and Chief Executive Director (since 1996) of iShares,
General Motors Investment (since January 1, Officer (since 1994) of General Inc.; Director (since 1994) of
Management Corp. 2002) Motors Investment Management General Motors Investment
767 Fifth Avenue Corporation. Management Corporation; Director
New York, NY 10153 (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.
</TABLE>

________________________________________________________________________________
page 34 i|Shares

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Name (age) address Position Principal Occupation(s) During Other Directorships Held by
Officer the Past 5 Years Trustee and Officer
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael Latham (38) Secretary, Treasurer Chief Financial Officer of the None.
Barclays Global Investors and Principal Intermediary Investors and Exchange
45 Fremont Street Financial Officer Traded Products Business of BGI
San Francisco, CA 94105 (since February 28, (since 2003), Director of Mutual Fund
2002) Delivery in the U.S. Individual
Investor Business of BGI (2000-2003);
Head of Operations, BGI Europe (1997-
2000).
</TABLE>

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 35

<PAGE>

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.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of Equity
Securities in All Registered
Investment Companies Overseen by
Dollar Range of Equity Trustee in Family of Investment
Name of Trustee Name of Index Fund Securities in the Fund Companies
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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

----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*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 Fund's investment
adviser), SEI (the Fund's 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 Trust. 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 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 Audit Committee of the
Trust met four times during the fiscal years ended March 31, 2003, April 30,
2003 and July 31, 2003.

________________________________________________________________________________
page 36 i|Shares

<PAGE>

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. The Nominating Committee does not have specific
procedures in place to consider nominees recommended by shareholders, but would
consider such nominees if submitted in accordance with Rule 14a-8 of the
Securities Exchange Act of 1934 (the "1934 Act"), in conjunction with a
shareholder meeting to consider the election of Trustees. The Nominating
Committee did not meet during the fiscal years ended March 31, 2003, April 30,
2003 and July 31, 2003.

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 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) 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 considered 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 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
retainer of $32,500. 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:

<TABLE>
<CAPTION>
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****
--------------- ----- --------- ----------- --------------------
<S> <C> <C> <C> <C>
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 C. Parker .................. $32,500 Not Applicable Not Applicable $65,500
W. Allen Reed ..................... $32,500 Not Applicable Not Applicable $65,000
</TABLE>

* No Trustee or Officer is entitled to any pension or retirement benefits
from the Trust.
** Includes compensation as Trustee for Barclays Global Investors Funds and
Master Investment Portfolio, investment companies with 25 portfolios also
advised by BGFA.
*** Served as Trustee through June 17, 2003.
****Includes compensation as Director of iShares, Inc., an investment company
with 24 investment portfolios also advised by BFGA.

Trustees and officers of the Trust collectively owned less than 1% of each of
the Fund's outstanding shares as of November 17, 2003.

Control Persons and Principal Holders of Securities. Although the Trust does not
have information concerning the beneficial ownership of iShares held in the
names of DTC participants, as of November 17, 2003, the name and percentage
ownership of each DTC participant that owned of record 5% or more of the
outstanding shares of a Fund were as follows:

<TABLE>
<CAPTION>
Percentage of
iShares Index Fund Name Ownership
------------------ ----- ---------
<S> <C> <C>
S&P 100 Merrill Lynch 14.15%
Kanaly Trust Co. 9.77%
Goldman, Sachs & Co. 8.68%
Citigroup Global Markets 7.11%
Pax Clearing Co. LLC 5.18%

S&P 500 Morgan Stanley & Co., Inc. 25.12%
Charles Schwab & Co., Inc. 12.58%
Northern Trust Company 5.19%

S&P 500/BARRA Growth State Street Bank & Trust Company 8.93%

S&P 500/BARRA Value Charles Schwab & Co., Inc. 13.55%
Merrill Lynch 11.22%
State Street Bank & Trust Company 7.46%
National Financial Services LLC 6.73%
Pershing LLC 5.98%
</TABLE>

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 37

<PAGE>

<TABLE>
<CAPTION>
Percentage of
iShares Index Fund Name Ownership
------------------ ----- ---------
<S> <C> <C>
S&P MidCap 400 Charles Schwab & Co., Inc. 16.53%
National Financial Services LLC 9.48%
Citigroup Global Markets 6.39%
Merrill Lynch 5.61%

S&P MidCap 400/BARRA Growth A.G. Edwards & Sons, Inc. 10.60%
Morgan Stanley & Co., Inc. 10.27%
Charles Schwab & Co., Inc. 6.81%
Credit Suisse First Boston LLC 7.24%
Merrill Lynch 6.04%
Lehman Brothers Inc 5.68%
Pershing LLC 5.28%
Citigroup Global Markets 5.05%

S&P MidCap 400/BARRA Value Charles Schwab & Co., Inc. 10.34%
Morgan Stanley & Co., Inc. 8.92%
National Financial Services LLC 8.01%
Merrill Lynch 7.81%
A.G. Edwards & Sons, Inc. 6.65%
Pershing LLC 5.41%

S&P SmallCap 600 Charles Schwab & Co., Inc. 10.81%
Merrill Lynch 7.26%
Citigroup Global Markets 6.86%
Lehman Brothers Inc 5.37%
National Financial Services LLC 5.11%

S&P SmallCap 600/BARRA Growth Merrill Lynch 9.23%
Morgan Stanley & Co., Inc. 9.19%
Charles Schwab & Co., Inc. 8.92%
A.G. Edwards & Sons, Inc. 7.96%
National Financial Services LLC 6.84%
Citigroup Global Markets 5.32%

S&P SmallCap 600/BARRA Value Charles Schwab & Co., Inc. 14.22%
National Financial Services LLC 9.89%
Pershing LLC 8.98%
Morgan Stanley & Co., Inc. 7.43%
A.G. Edwards & Sons, Inc. 5.12%

S&P Global 100 Merrill Lynch 15.93%
Brown Brothers Harriman & Co. 12.34%
Northern Trust Company 10.42%
Pershing LLC 8.53%
Morgan Stanley & Co., Inc. 6.84%
Charles Schwab & Co., Inc. 6.34%
National Financial Services LLC 5.48%

S&P Global Energy Sector Merrill Lynch 16.53%
Speer, Leeds & Kellogg 9.66%
Citibank, N.A. 6.85%
National Financial Services LLC 6.29%
Morgan Stanley & Co., Inc. 5.25%

S&P Global Financials Sector Speer, Leeds & Kellogg 21.56%
Citibank, N.A. 16.91%
UBS Financial Services Inc. 12.91%
Charles Schwab & Co., Inc. 9.17%
Citigroup Global Markets 7.52%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Percentage of
iShares Index Fund Name Ownership
------------------ ----- ---------
<S> <C> <C>
S&P Global Healthcare Sector Charles Schwab & Co., Inc. 18.83%
Rush & Co./Swiss American 12.67%
Merrill Lynch 10.48%
Morgan Stanley & Co., Inc. 5.45%
Citigroup Global Markets 5.27%

S&P Global Technology Sector Citigroup Global Markets 22.80%
Speer, Leeds & Kellogg 19.24%
Charles Schwab & Co., Inc. 11.97%
Merrill Lynch 5.71%

S&P Global Telecommunications Sector Speer, Leeds & Kellogg 46.50%
Charles Schwab & Co., Inc. 8.62%
Citigroup Global Markets 7.06%

S&P Euro 350 Merrill Lynch 10.06%
Citigroup Global Markets 9.41%
Charles Schwab & Co., Inc. 8.96%
Morgan Stanley & Co., Inc. 7.41%
Brown Bros. Harriman & Co. 6.77%
UBS Financial Services Inc. 5.45%

S&P Latin America 40 Morgan Stanley & Co., Inc. 10.69%
Charles Schwab & Co., Inc. 9.15%
Wells Fargo 6.31%
Merrill Lynch 5.75%
National Financial Services LLC 5.31%

S&P/TOPIX 150 Merrill Lynch 53.82%
Charles Schwab & Co., Inc. 5.10%

Dow Jones U.S. Total Market Charles Schwab & Co., Inc. 22.33%
National Financial Services LLC 12.33%
Pershing LLC 6.13%
Citigroup Global Markets 6.33%
Morgan Stanley & Co. Inc. 5.98%

Dow Jones U.S. Basic Materials Citigroup Global Markets 13.76%
Charles Schwab & Co., Inc. 11.21%
The Bank of New York 7.62%
Merrill Lynch 7.55%
UBS Financial Services Inc. 7.05%
Morgan Stanley & Co. Inc. 6.26%

Dow Jones U.S. Consumer Cyclical Citigroup Global Markets 13.36%
Morgan Stanley & Co. Inc. 9.50%
A.G. Edwards & Sons, Inc. 8.15%
Charles Schwab & Co., Inc. 7.75%
Wachovia Securities 6.43%
Merrill Lynch 5.79%

Dow Jones U.S. Consumer Non-Cyclical Merrill Lynch 9.94%
Citigroup Global Markets 9.91%
Morgan Stanley & Co., Inc. 9.89%
Brown Bros. Harriman & Co. 9.34%
UBS Financial Services 7.77%
Charles Schwab & Co., Inc. 5.90%
Wachovia Securities 5.90%
A.G. Edwards & Sons, Inc. 5.89%

Dow Jones U.S. Energy Sector Morgan Stanley & Co., Inc. 12.27%
Citigroup Global Markets 12.26%
Merrill Lynch 12.11%
Charles Schwab & Co., Inc. 10.11%
National Financial Services LLC 8.16%
UBS Financial Services Inc. 7.90%
Wachovia Securities 5.66%

Dow Jones U.S. Financial Sector Citigroup Global Markets 17.70%
Morgan Stanley & Co., Inc. 11.20%
Charles Schwab & Co., Inc. 10.75%
UBS Financial Services Inc. 9.48%
Merrill Lynch 7.21%
Wachovia Securities 6.44%
National Financial Services LLC 5.86%

Dow Jones U.S. Healthcare Sector Morgan Stanley & Co., Inc. 13.40%
Charles Schwab & Co., Inc. 10.01%
Citigroup Global Markets 8.34%
Merrill Lynch 6.97%
National Financial Services LLC 5.96%
UBS Financial Services Inc. 5.32%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Percentage of
iShares Index Fund Name Ownership
------------------ ----- ---------
<S> <C> <C>
Dow Jones U.S. Industrial Sector Citigroup Global Markets 14.91%
Morgan Stanley & Co., Inc. 11.45%
Brown Bros. Harriman & Co. 9.80%
Merrill Lynch 8.26%
Charles Schwab & Co., Inc. 7.99%
National Financial Services LLC 7.29%
UBS Financial Services Inc. 7.14%
Wachovia Securities 5.35%

Dow Jones U.S. Technology Sector Citigroup Global Markets 11.75%
Charles Schwab & Co., Inc. 10.24%
Morgan Stanley & Co., Inc. 7.10%
National Financial Services LLC 6.66%
UBS Financial Services Inc. 5.93%
Wachovia Securities 5.76%
Merrill Lynch 5.12%

Dow Jones U.S. Telecommunications
Sector Merrill Lynch 12.03%
Harris Trust & Savings Bank 11.53%
Citigroup Global Markets 9.54%
Charles Schwab & Co., Inc. 7.97%
Morgan Stanley & Co., Inc. 7.93%
Wachovia Securities 5.46%
UBS Financial Services Inc. 5.27%

Dow Jones U.S. Financial Services Citigroup Global Markets 13.47%
National Financial Services LLC 10.16%
Merrill Lynch 8.10%
Charles Schwab & Co., Inc. 7.25%
Credit Suisse First Boston LLC 6.98%
Wachovia Securities 5.55%
Morgan Stanley & Co., Inc. 5.15%

Dow Jones U.S. Real Estate Charles Schwab & Co., Inc. 9.76%
Lehman Brothers Inc. 8.06%
Merrill Lynch 7.62%
Speer, Leeds & Kellogg 7.56%
Garban Corporates, Inc. 6.26%
Morgan Stanley & Co., Inc. 6.00%
National Financial Services LLC 5.16%

Dow Jones Select Dividend Merrill Lynch 22.42%
Speer, Leeds & Kellogg 15.77%
Morgan Stanley & Co., Inc. 13.75%
Citigroup Global Markets 11.42%
Wachovia Securities 5.58%

Dow Jones Transportation Average Merrill Lynch 24.00%
Citigroup Global Markets 20.19%
Wachovia Securities 10.04%
Charles Schwab & Co., Inc. 9.42%
Goldman, Sachs & Co. 6.03%

Russell 3000 Northern Trust Company 14.36%
Charles Schwab & Co., Inc. 13.90%
National Financial Services LLC 8.64%
Merrill Lynch 8.12%
State Street Bank & Trust Co. 7.35%
Citigroup Global Markets 5.12%

Russell 3000 Growth Northern Trust Company 23.05%
Charles Schwab & Co., Inc. 11.40%
Merrill Lynch 10.17%
National Financial Services LLC 9.31%
Spear, Leeds & Kellogg 5.63%

Russell 3000 Value Charles Schwab & Co., Inc. 15.02%
Merrill Lynch 13.82%
National City Bank 11.33%
Citigroup Global Markets 8.48%
Credit Suisse First Boston LLC 6.62%
National Financial Services LLC 6.52%
Pershing LLC 6.49%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Percentage of
iShares Index Fund Name Ownership
------------------ ----- ---------
<S> <C> <C>
Russell 2000 RBC Dominion Securities Corporation 14.45%
Charles Schwab & Co., Inc. 7.68%

Russell 2000 Growth Northern Trust Company 13.45%
State Street Bank & Trust Co. 7.57%

Russell 2000 Value Charles Schwab & Co., Inc. 10.05%
Merrill Lynch 8.10%
State Street Bank & Trust Co. 7.77%
Lehman Brothers Inc 5.57%

Russell 1000 Credit Suisse First Boston LLC 51.15%
Charles Schwab & Co., Inc. 15.02%

Russell 1000 Growth Merrill Lynch 15.13%
Charles Schwab & Co., Inc. 14.31%
Citigroup Global Markets 8.54%
State Street Bank & Trust Co. 6.94%

Russell 1000 Value Deutsche Bank SE 10.95%
Charles Schwab & Co., Inc. 10.25%
State Street Bank & Trust Co. 8.95%
Citigroup Global Markets 8.80%
Merrill Lynch 6.20%

Russell Midcap State Street Bank & Trust Company 14.89%
Citigroup Global Markets 10.65%
Pershing LLC 8.32%
National Financial Services LLC 6.47%

Russell Midcap Growth Lehman Brothers Inc 11.78%
Northern Trust Company 10.10%
Merrill Lynch 7.28%
National Financial Services LLC 7.12%
Citigroup Global Markets 5.50%
Charles Schwab & Co., Inc. 5.30%

Russell Midcap Value Merrill Lynch 11.59%
Charles Schwab & Co., Inc. 7.07%
Credit Suisse First Boston LLC 6.94%
National Financial Services LLC 5.96%
UBS Financial Services 5.62%
Harris Trust & Savings Bank 5.12%

Cohen & Steers Realty Majors Charles Schwab & Co., Inc. 15.62%
Riggs National Bank 12.11%
Lehman Brothers Inc. 7.20%

Nasdaq Biotechnology Charles Schwab & Co., Inc. 14.91%
Pershing LLC 8.31%
National Financial Services LLC 7.84%
Riggs National Bank 7.18%
Lehman Brothers Inc. 7.09%
Merrill Lynch 5.48%

Goldman Sachs Technology Citigroup Global Markets 21.61%
Lehman Brothers Inc. 15.34%
State Street Bank & Trust Co. 13.33%
Charles Schwab & Co., Inc. 11.26%

Goldman Sachs Networking Wachovia Securities 11.87%
Lehman Brothers Inc 10.36%
Citigroup Global Markets 10.09%
Charles Schwab & Co., Inc. 8.65%
Garban Corporates, Inc. 8.57%
National Financial Services LLC 7.22%

Goldman Sachs Semiconductor Merrill Lynch 13.01%
Citigroup Global Markets 11.31%
Charles Schwab & Co., Inc. 10.91%
Brown Bros. Harriman & Co. 7.94%
National Financial Services LLC 6.07%
UBS Securities LLC 5.17%

Goldman Sachs Software Garban Corporates, Inc. 17.53%
Lehman Brothers Inc 10.79%
Robeco USA Brokerage Services 9.91%
Merrill Lynch 8.35%
Morgan Stanley & Co., Inc. 6.61%
Citigroup Global Markets 6.34%

Goldman Sachs Natural Resources Speer, Leeds & Kellogg 19.73%
Charles Schwab & Co., Inc. 10.63%
National Financial Services LLC 9.43%
Citigroup Global Markets 7.77%
Goldman, Sachs & Co. 7.74%
Credit Suisse First Boston LLC 7.10%
Merrill Lynch 6.03%

MSCI EAFE Northern Trust Company 12.49%
Charles Schwab & Co., Inc. 10.43%
Pershing LLC 5.77%
National Financial Services LLC 5.57%
</TABLE>

<PAGE>

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 (the
"Advisers Act"). Under the Investment Advisory Agreement, BGFA, subject to the
supervision of the Board and in conformity with the stated investment policies
of 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
reviewed and approved by the Board of Trustees with respect to the S&P 1500
Index Fund on December 5, 2003, with respect to the iShares Dow Jones
Transportation Average Index Fund and the iShares Dow Jones Select Dividend
Index Fund on September 12, 2003, and with respect to each of the other Funds
included in this SAI on June 17, 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 which 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, brokerage commissions
and other expenses connected with the execution of portfolio transactions,
distribution fees and extraordinary expenses. For its investment management
services to each Fund, BGFA is paid a management fee at the annual rates (as a
percentage of such Fund's average net assets) listed below. The following table
sets forth the management fees paid by each Fund for the periods noted below.

<TABLE>
<CAPTION>
Management Management Management
Fees Paid Fees Paid Fees Paid From
Fiscal During Full During Full Inception
Management Inception Year Fiscal Year Fiscal Year through First
Name Fee Date End Ended 2003 Ended 2002 Fiscal Year End*
---- --- ---- --- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
iShares S&P 100 Index Fund 0.20% 10/23/00 3/31 $ 338,074 $ 330,327 $ 129,813
iShares S&P 500 Index Fund 0.09% 05/15/00 3/31 3,846,690 2,901,467 1,383,992
iShares S&P 500/BARRA Growth Index Fund 0.18% 05/22/00 3/31 974,122 543,734 161,066
iShares S&P 500/BARRA Value Index Fund 0.18% 05/22/00 3/31 1,159,105 833,280 246,793
iShares S&P MidCap 400 Index Fund 0.20% 05/22/00 3/31 1,590,398 724,902 350,529
iShares S&P MidCap 400/BARRA Growth Index Fund 0.25% 07/24/00 3/31 797,655 391,698 111,350
iShares S&P MidCap 400/BARRA Value Index Fund 0.25% 07/24/00 3/31 1,409,989 560,048 72,013
iShares S&P SmallCap 600 Index Fund 0.20% 05/22/00 3/31 2,296,268 1,055,506 166,136
iShares S&P SmallCap 600/BARRA Growth Index
Fund 0.25% 07/24/00 3/31 760,915 198,704 38,901
iShares S&P SmallCap 600/BARRA Value Index Fund 0.25% 07/24/00 3/31 1,405,295 500,287 49,623
iShares S&P 1500 Index Fund* 0.20% N/A 3/31 N/A N/A N/A
iShares S&P Global 100 Index Fund 0.40% 12/05/00 3/31 187,675 256,616 138,080
iShares S&P Global Energy Sector Index Fund 0.65% 11/12/01 3/31 94,641 N/A 36,617
iShares S&P Global Financials Sector Index Fund 0.65% 11/12/01 3/31 69,315 N/A 25,560
iShares S&P Global Healthcare Sector Index Fund 0.65% 11/13/01 3/31 123,814 N/A 40,999
iShares S&P Global Technology Sector Index Fund 0.65% 11/12/01 3/31 38,802 N/A 42,442
iShares S&P Global Telecommunications Sector
Index Fund 0.65% 11/12/01 3/31 70,674 N/A 35,943
iShares S&P Europe 350 Index Fund 0.60% 07/25/00 3/31 3,018,178 1,176,579 272,425
iShares S&P Latin America 40 Index Fund 0.50% 10/25/01 3/31 43,266 N/A 15,268
iShares S&P/TOPIX 150 Index Fund 0.50% 10/23/01 3/31 117,885 N/A 68,755
iShares Dow Jones U.S. Total Market Index Fund 0.20% 06/12/00 4/30 258,924 175,899 63,502
iShares Dow Jones U.S. Basic Materials Sector
Index Fund 0.60% 06/12/00 4/30 424,542 146,380 46,758
iShares Dow Jones U.S. Consumer Cyclical
Sector Index Fund 0.60% 06/12/00 4/30 872,272 323,311 96,662
iShares Dow Jones U.S. Consumer Non-Cyclical
Sector Index Fund 0.60% 06/12/00 4/30 674,017 206,929 71,983
iShares Dow Jones U.S. Energy Sector Index Fund 0.60% 06/12/00 4/30 580,710 421,146 188,649
iShares Dow Jones U.S. Financial Sector Index
Fund 0.60% 05/22/00 4/30 773,730 489,233 443,765
iShares Dow Jones U.S. Healthcare Sector Index
Fund 0.60% 06/12/00 4/30 1,834,258 1,099,711 251,455
iShares Dow Jones U.S. Industrial Sector Index
Fund 0.60% 06/12/00 4/30 426,880 303,207 133,113
iShares Dow Jones U.S. Technology Sector Index
Fund 0.60% 05/15/00 4/30 881,116 739,702 645,093
iShares Dow Jones U.S. Telecommunications
Sector Index Fund 0.60% 05/22/00 4/30 472,776 319,221 272,197
iShares Dow Jones U.S. Utilities Sector Index
Fund 0.60% 06/12/00 4/30 1,277,275 433,942 171,300
iShares Dow Jones U.S. Financial Services
Composite Index Fund 0.60% 06/12/00 4/30 335,039 285,099 236,783
iShares Dow Jones U.S. Real Estate Index Fund 0.60% 06/12/00 4/30 852,062 464,974 162,992
iShares Dow Jones Select Dividend Index Fund 0.40% 11/03/03 4/30 N/A N/A N/A
iShares Dow Jones Transportation Average Index
Fund 0.60% 10/06/03 4/30 N/A N/A N/A
iShares Russell 3000 Index Fund 0.20% 05/22/00 3/31 2,160,932 1,891,266 305,590
iShares Russell 3000 Growth Index Fund 0.25% 07/24/00 3/31 121,224 75,137 31,897
iShares Russell 3000 Value Index Fund 0.25% 07/24/00 3/31 199,522 120,817 39,060
iShares Russell 2000 Index Fund 0.20% 05/22/00 3/31 4,932,658 3,173,356 584,950
iShares Russell 2000 Growth Index Fund 0.25% 07/24/00 3/31 1,196,733 769,356 132,435
iShares Russell 2000 Value Index Fund 0.25% 07/24/00 3/31 2,066,582 1,254,820 213,690
iShares Russell 1000 Index Fund 0.15% 05/15/00 3/31 917,963 449,693 322,915
iShares Russell 1000 Growth Index Fund 0.20% 05/22/00 3/31 1,199,426 808,826 142,570
iShares Russell 1000 Value Index Fund 0.20% 05/22/00 3/31 1,789,888 926,158 171,705
iShares Russell Midcap Index Fund 0.20% 07/17/01 3/31 205,399 N/A 45,722
iShares Russell Midcap Growth Index Fund 0.25% 07/17/01 3/31 206,460 N/A 38,286
iShares Russell Midcap Value Index Fund 0.25% 07/17/01 3/31 200,920 N/A 43,121
iShares Cohen & Steers Realty Majors Index Fund 0.35% 01/29/01 4/30 609,516 160,198 30,688
iShares Nasdaq Biotechnology Index Fund 0.50% 02/05/01 3/31 2,096,245 822,823 69,068
iShares Goldman Sachs Technology Index Fund 0.50% 03/13/01 7/31 271,592 285,562 181,622
iShares Goldman Sachs Networking Index Fund 0.50% 07/10/01 7/31 138,163 175,097 5,299
iShares Goldman Sachs Semiconductor Index Fund 0.50% 07/10/01 7/31 321,981 185,482 7,268
iShares Goldman Sachs Software Index Fund 0.50% 07/10/01 7/31 232,767 129,710 5,900
iShares Goldman Sachs Natural Resources Index
Fund 0.50% 10/22/01 7/31 155,365 N/A 97,214
iShares MSCI EAFE Index Fund 0.35% 08/14/01 7/31 8,291,473 N/A 4,766,573
</TABLE>

* Fund had not commenced operations as of the date of this SAI.

________________________________________________________________________________
page 42 i|Shares

<PAGE>

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 adviser, administrator, transfer agent or custodian to the Funds
or from purchasing iShares as agent for and upon the order of a customer.

BGFA believes that it may perform advisory and related services for the Trust
without violating applicable banking laws or regulations. However, the legal
requirements and interpretations about the permissible activities of banks and
their affiliates may

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 43

<PAGE>

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.

Codes 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 of
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. Investors Bank's 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. The following table sets forth the
administration, transfer agency and custodian expenses of each Fund for the
periods noted.

<TABLE>
<CAPTION>
Custody, Custody, Custody,
Administration, Administration, Administration,
Transfer Agency Transfer Agency Transfer Agency
Expenses Expenses Expenses Paid
Fiscal Paid During Full Paid During Full From Inception
Inception Year Fiscal Year Fiscal Year through First
Name Date End Ended 2003 Ended 2002 Fiscal Year End
---- ---- --- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
iShares S&P 100 Index Fund 10/23/00 3/31 $ 72,029 $ 75,094 $ 50,974
iShares S&P 500 Index Fund 05/15/00 3/31 1,534,062 1,160,805 1,000,047
iShares S&P 500/BARRA Growth Index Fund 05/22/00 3/31 197,972 126,557 92,870
iShares S&P 500/BARRA Value Index Fund 05/22/00 3/31 256,492 202,852 121,756
iShares S&P MidCap 400 Index Fund 05/22/00 3/31 315,742 203,285 228,371
iShares S&P MidCap 400/BARRA Growth Index Fund 07/24/00 3/31 139,661 96,111 64,524

<CAPTION>
Custody, Custody, Custody,
Administration, Administration, Administration,
Transfer Agency Transfer Agency Transfer Agency
Expenses Expenses Expenses Paid
Fiscal Paid During Full Paid During Full From Inception
Inception Year Fiscal Year Fiscal Year through First
Name Date End Ended 2003 Ended 2002 Fiscal Year End
---- ---- --- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
iShares S&P MidCap 400/BARRA Value Index Fund 07/24/00 3/31 223,716 125,954 60,615
iShares S&P SmallCap 600 Index Fund 05/22/00 3/31 494,348 302,457 131,010
iShares S&P SmallCap 600/BARRA Growth Index Fund 07/24/00 3/31 135,061 89,145 61,452
iShares S&P SmallCap 600/BARRA Value Index Fund 07/24/00 3/31 248,184 148,287 63,982
iShares S&P 1500 Index Fund* N/A 3/31 N/A N/A N/A
iShares S&P Global 100 Index Fund 12/05/00 3/31 36,356 55,639 25,880
iShares S&P Global Energy Sector Index Fund 11/12/01 3/31 19,458 N/A 11,909
iShares S&P Global Financials Sector Index Fund 11/12/01 3/31 24,276 N/A 11,220
iShares S&P Global Healthcare Sector Index Fund 11/13/01 3/31 20,067 N/A 11,564
iShares S&P Global Technology Sector Index Fund 11/12/01 3/31 19,290 N/A 12,238
iShares S&P Global Telecommunications Sector Index
Fund 11/12/01 3/31 15,191 N/A 11,678
iShares S&P Europe 350 Index Fund 07/25/00 3/31 393,795 183,420 81,685
iShares S&P Latin America 40 Index Fund 10/25/01 3/31 21,614 N/A 18,058
iShares S&P/TOPIX 150 Index Fund 10/23/01 3/31 37,624 N/A 21,171
iShares Dow Jones U.S. Total Market Index Fund 06/12/00 4/30 69,722 70,383 67,411
iShares Dow Jones U.S. Basic Materials Sector Index
Fund 06/12/00 4/30 36,336 47,456 52,985
iShares Dow Jones U.S. Consumer Cyclical Sector
Index Fund 06/12/00 4/30 64,982 52,799 57,101
iShares Dow Jones U.S. Consumer Non-Cyclical Sector
Index Fund 06/12/00 4/30 49,643 47,825 54,310
iShares Dow Jones U.S. Energy Sector Index Fund 06/12/00 4/30 43,824 50,407 52,436
iShares Dow Jones U.S. Financial Sector Index Fund 05/22/00 4/30 60,870 67,376 102,089
iShares Dow Jones U.S. Healthcare Sector Index Fund 06/12/00 4/30 120,399 78,456 53,904
iShares Dow Jones U.S. Industrial Sector Index Fund 06/12/00 4/30 38,329 49,443 56,112
iShares Dow Jones U.S. Technology Sector Index Fund 05/15/00 4/30 64,326 65,096 130,946
iShares Dow Jones U.S. Telecommunications Sector
Index Fund 05/22/00 4/30 39,773 45,829 59,761
iShares Dow Jones U.S. Utilities Sector Index Fund 06/12/00 4/30 79,806 62,455 60,151
iShares Dow Jones U.S. Financial Services Composite
Index Fund 06/12/00 4/30 32,427 54,092 62,890
iShares Dow Jones U.S. Real Estate Index Fund 06/12/00 4/30 65,076 62,948 58,648
iShares Dow Jones Select Dividend Index Fund 11/03/03 4/30 N/A N/A N/A
iShares Dow Jones Transportation Average Index
Fund 10/06/03 4/30 N/A N/A N/A
iShares Russell 3000 Index Fund 05/22/00 3/31 502,266 408,195 145,974
iShares Russell 3000 Growth Index Fund 07/24/00 3/31 41,110 64,634 46,893
iShares Russell 3000 Value Index Fund 07/24/00 3/31 68,857 72,307 51,566
iShares Russell 2000 Index Fund 05/22/00 3/31 1,031,362 741,903 378,572
iShares Russell 2000 Growth Index Fund 07/24/00 3/31 223,273 185,800 71,682
iShares Russell 2000 Value Index Fund 07/24/00 3/31 403,563 294,412 107,927
iShares Russell 1000 Index Fund 05/15/00 3/31 233,844 141,567 273,234
iShares Russell 1000 Growth Index Fund 05/22/00 3/31 226,146 171,689 72,129
iShares Russell 1000 Value Index Fund 05/22/00 3/31 340,389 204,785 90,761
iShares Russell Midcap Index Fund 07/17/01 3/31 61,191 N/A 47,875
iShares Russell Midcap Growth Index Fund 07/17/01 3/31 46,093 N/A 39,625
iShares Russell Midcap Value Index Fund 07/17/01 3/31 51,492 N/A 49,353
iShares Cohen & Steers Realty Majors Index Fund 01/29/01 4/30 67,968 48,210 14,433
iShares Nasdaq Biotechnology Index Fund 02/05/01 3/31 157,404 78,416 10,154
iShares Goldman Sachs Technology Index Fund 03/13/01 7/31 26,400 39,476 23,303
iShares Goldman Sachs Networking Index Fund 07/10/01 7/31 16,984 35,134 4,487
iShares Goldman Sachs Semiconductor Index Fund 07/10/01 7/31 28,541 34,401 4,310
iShares Goldman Sachs Software Index Fund 07/10/01 7/31 23,087 31,114 4,308
iShares Goldman Sachs Natural Resources Index Fund 10/22/01 7/31 20,274 N/A 28,580
iShares MSCI EAFE Index Fund 08/14/01 7/31 1,510,940 N/A 778,706
</TABLE>

* Fund had not commenced as of the date of this SAI.

________________________________________________________________________________
page 44 i|Shares

<PAGE>

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
applicable 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 applicable
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.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 45

<PAGE>

The following table sets forth the compensation paid by BGFA to the Distributor
for certain services, not primarily intended to result in the sale of shares,
provided to each Fund during the periods noted below.

<TABLE>
<CAPTION>
Compensation Compensation Compensation
Paid During Paid During Paid from
Full Fiscal Full Fiscal Inception
Inception Fiscal Year Year Year through First
Name Date End Ended 2003 Ended 2002 Fiscal Year End
---- ---- --- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
iShares S&P 100 Index Fund 10/23/00 3/31 $ 22,388 $ 35,756 $ 17,308
iShares S&P 500 Index Fund 05/15/00 3/31 350,270 260,563 508,254
iShares S&P 500/BARRA Growth Index Fund 05/22/00 3/31 52,794 36,425 32,977
iShares S&P 500/BARRA Value Index Fund 05/22/00 3/31 50,134 49,290 39,215
iShares S&P MidCap 400 Index Fund 05/22/00 3/31 86,439 39,586 66,343
iShares S&P MidCap 400/BARRA Growth Index Fund 07/24/00 3/31 23,159 34,827 12,676
iShares S&P MidCap 400/BARRA Value Index Fund 07/24/00 3/31 40,192 34,860 8,025
iShares S&P SmallCap 600 Index Fund 05/22/00 3/31 76,491 48,720 27,035
iShares S&P SmallCap 600/BARRA Growth Index Fund 07/24/00 3/31 23,403 34,796 4,887
iShares S&P SmallCap 600/BARRA Value Index Fund 07/24/00 3/31 36,136 34,860 5,604
iShares S&P 1500 Index Fund* N/A 3/31 N/A N/A N/A
iShares S&P Global 100 Index Fund 12/05/00 3/31 4,874 34,756 8,279
iShares S&P Global Energy Sector Index Fund 11/12/01 3/31 1,331 N/A 14,746
iShares S&P Global Financials Sector Index Fund 11/12/01 3/31 1,197 N/A 14,744
iShares S&P Global Healthcare Sector Index Fund 11/13/01 3/31 1,936 N/A 14,746
iShares S&P Global Technology Sector Index Fund 11/12/01 3/31 501 N/A 14,746
iShares S&P Global Telecommunications Sector Index Fund 11/12/01 3/31 750 N/A 14,745
iShares S&P Europe 350 Index Fund 07/25/00 3/31 28,073 34,822 11,970
iShares S&P Latin America 40 Index Fund 10/25/01 3/31 666 N/A* 17,243
iShares S&P/TOPIX 150 Index Fund 10/23/01 3/31 642 N/A* 17,251
iShares Dow Jones U.S. Total Market Index Fund 06/12/00 4/30 11,979 35,535 8,668
iShares Dow Jones U.S. Basic Materials Sector Index Fund 06/12/00 4/30 6,807 35,507 2,755
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund 06/12/00 4/30 8,853 35,528 5,277
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index
Fund 06/12/00 4/30 5,998 35,512 4,124
iShares Dow Jones U.S. Energy Sector Index Fund 06/12/00 4/30 7,619 35,527 10,420
iShares Dow Jones U.S. Financial Sector Index Fund 05/22/00 4/30 10,110 35,535 30,774
iShares Dow Jones U.S. Healthcare Sector Index Fund 06/12/00 4/30 25,820 35,593 12,014
iShares Dow Jones U.S. Industrial Sector Index Fund 06/12/00 4/30 5,529 35,515 7,860
iShares Dow Jones U.S. Technology Sector Index Fund 05/15/00 4/30 15,431 35,555 46,053
iShares Dow Jones U.S. Telecommunications Sector Index
Fund 05/22/00 4/30 8,612 35,512 17,955
iShares Dow Jones U.S. Utilities Sector Index Fund 06/12/00 4/30 22,448 35,548 9,964
iShares Dow Jones U.S. Financial Services Composite Index
Fund 06/12/00 4/30 7,979 35,514 15,104
iShares Dow Jones U.S. Real Estate Index Fund 06/12/00 4/30 13,317 35,532 8,440
iShares Dow Jones Select Dividend Index Fund 11/03/03 4/30 N/A N/A N/A
iShares Dow Jones Transportation Average Index
Fund 10/6/03 4/30 N/A N/A N/A
iShares Russell 3000 Index Fund 05/22/00 3/31 73,711 77,923 41,362
iShares Russell 3000 Growth Index Fund 07/24/00 3/31 4,295 34,756 4,109
iShares Russell 3000 Value Index Fund 07/24/00 3/31 7,331 34,763 4,864
iShares Russell 2000 Index Fund 05/22/00 3/31 127,688 126,184 97,698
iShares Russell 2000 Growth Index Fund 07/24/00 3/31 47,752 37,175 14,491
iShares Russell 2000 Value Index Fund 07/24/00 3/31 47,545 50,843 21,992
iShares Russell 1000 Index Fund 05/15/00 3/31 68,773 36,425 99,243
iShares Russell 1000 Growth Index Fund 05/22/00 3/31 68,489 44,798 23,487
iShares Russell 1000 Value Index Fund 05/22/00 3/31 73,636 46,911 26,396
iShares Russell Midcap Index Fund 07/17/01 3/31 14,497 N/A 24,751
iShares Russell Midcap Growth Index Fund 07/17/01 3/31 8,715 N/A 24,751
iShares Russell Midcap Value Index Fund 07/17/01 3/31 7,873 N/A 24,752
iShares Cohen & Steers Realty Majors Index Fund 01/29/01 4/30 18,265 35,513 2,014
iShares Nasdaq Biotechnology Index Fund 02/05/01 3/31 39,759 34,826 3,218
iShares Goldman Sachs Technology Index Fund 03/13/01 7/31 5,463 35,067 3,431
iShares Goldman Sachs Networking Index Fund 07/10/01 7/31 4,251 35,067 2,500
iShares Goldman Sachs Semiconductor Index Fund 07/10/01 7/31 5,333 35,067 2,500
iShares Goldman Sachs Software Index Fund 07/10/01 7/31 6,052 35,067 2,500
iShares Goldman Sachs Natural Resources Index Fund 10/22/01 7/31 2,743 N/A 30,067
iShares MSCI EAFE Index Fund 08/14/01 7/31 158,126 N/A 40,159
</TABLE>

* Fund had not commenced operations as of the date of this SAI.

Index Providers. Each Fund is based upon a particular index compiled by one of
the following Index Providers: Standard & Poor's (a division of the McGraw-Hill
Companies), Frank Russell Company, Dow Jones & Company, Cohen & Steers, Nasdaq,
Goldman Sachs and MSCI. None of the Index Providers is affiliated with a Fund or
with BGI or its affiliates. Each Fund is entitled to use the Underlying Index
pursuant to a sub-licensing agreement with BGI, which in turn has a licensing
agreement with the relevant Index Provider. BGI has provided the sub-licenses
without charge to any Fund.

________________________________________________________________________________
page 46 i|Shares

<PAGE>

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 table below sets forth the brokerage commissions paid by each Fund for the
periods noted. Any differences in brokerage commissions paid by a Fund from year
to year are due to increases or decreases in that Fund's assets over those
periods.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 47

<PAGE>

<TABLE>
<CAPTION>
Commissions
Paid From
Commissions Commissions Inception
Paid During Full Paid During Full through
Inception Fiscal Year Fiscal Year Fiscal Year First Fiscal
Name Date End Ended 2003 Ended 2002 Year End
---- ---- --- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
iShares Dow Jones U.S. Basic Materials Sector Index Fund 06/12/00 4/30 9,391 3,638 3,200
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund 06/12/00 4/30 15,039 3,963 7,899
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund 06/12/00 4/30 9,206 4,096 7,950
iShares Dow Jones U.S. Energy Sector Index Fund 06/12/00 4/30 13,895 16,680 11,042
iShares Dow Jones U.S. Financial Sector Index Fund 05/22/00 4/30 10,519 5,467 13,493
iShares Dow Jones U.S. Healthcare Sector Index Fund 06/12/00 4/30 11,136 4,611 3,101
iShares Dow Jones U.S. Industrial Sector Index Fund 06/12/00 4/30 6,521 23,318 10,950
iShares Dow Jones U.S. Technology Sector Index Fund 05/15/00 4/30 10,064 12,021 12,969
iShares Dow Jones U.S. Telecommunications Sector Index Fund 05/22/00 4/30 75,981 58,357 59,573
iShares Dow Jones U.S. Utilities Sector Index Fund 06/12/00 4/30 77,249 16,579 6,002
iShares Dow Jones U.S. Financial Services Index Fund 06/12/00 4/30 3,897 1,925 3,669
iShares Dow Jones U.S. Real Estate Index Fund 06/12/00 4/30 72,203 19,967 18,648
iShares Dow Jones Select Dividend Index Fund 11/03/06 4/30 N/A N/A N/A
iShares Dow Jones Transportation Average Index Fund 10/06/03 4/30 N/A N/A N/A
iShares Russell 3000 Index Fund 05/22/00 3/31 66,339 101,505 10,762
iShares Russell 3000 Growth Index Fund 07/24/00 3/31 2,932 5,112 481
iShares Russell 3000 Value Index Fund 07/24/00 3/31 7,032 11,853 2,279
iShares Russell 2000 Index Fund 05/22/00 3/31 437,267 760,213 435,597
iShares Russell 2000 Growth Index Fund 07/24/00 3/31 95,215 164,482 23,347
iShares Russell 2000 Value Index Fund 07/24/00 3/31 201,981 340,383 41,057
iShares Russell 1000 Index Fund 05/15/00 3/31 19,186 31,665 25,814
iShares Russell 1000 Growth Index Fund 05/22/00 3/31 20,912 53,986 9,375
iShares Russell 1000 Value Index Fund 05/22/00 3/31 57,468 91,295 15,263
iShares Russell Midcap Index Fund 07/17/01 3/31 8,349 N/A 4,555
iShares Russell Midcap Growth Index Fund 07/17/01 3/31 8,503 N/A 2,100
iShares Russell Midcap Value Index Fund 07/17/01 3/31 9,521 N/A 4,117
iShares Cohen & Steers Realty Majors Index Fund 01/29/01 4/30 52,718 19,119 1,391
iShares Nasdaq Biotechnology Index Fund 02/05/01 3/31 211,571 29,880 9,616
iShares Goldman Sachs Technology Index Fund 03/13/01 7/31 5,755 5,088 249
iShares Goldman Sachs Networking Index Fund 07/10/01 7/31 37,244 67,648 4,244
iShares Goldman Sachs Semiconductor Index Fund 07/10/01 7/31 14,186 4,039 0
iShares Goldman Sachs Software Index Fund 07/10/01 7/31 2,642 3,602 0
iShares Goldman Sachs Natural Resources Index Fund 10/22/01 7/31 5,467 N/A 2,758
iShares MSCI EAFE Index Fund 08/14/01 7/31 345,217 N/A 279,407
</TABLE>

* Fund had not commenced operations as of the date of this SAI.

The following table sets forth the names of the Funds' "regular broker dealers,"
as defined under the 1940 Act, which derive more than 15% of their gross
revenues from securities-related activities and in which the Funds invest,
together with the market value of each investment as of the applicable Fund's
most recently completed fiscal year.

<TABLE>
<CAPTION>
Fiscal Year Market Value of
Fund End Issuer Investment
---- --- ------ ----------
<S> <C> <C> <C>
iShares S&P 100 Index Fund 3/31 Citigroup Inc. $11,916,944
The Goldman Sachs Group Inc. 2,161,676
Merrill Lynch & Co. Inc. 2,060,599
Lehman Brothers Holdings Inc 942,191

iShares S&P 500 Index Fund 3/31 Citigroup Inc. 105,931,993
Bank of America Corp. 60,075,124
Morgan Stanley & Co. Inc. 24,864,491
The Goldman Sachs Group Inc. 19,191,480
Merrill Lynch & Co. Inc. 18,313,199
Bank of New York Co. Inc. 9,391,665
Lehman Brothers Holdings Inc 8,364,337
Charles Schwab Group Inc. 5,831,291
</TABLE>

________________________________________________________________________________
page 48 i|Shares

<PAGE>

<TABLE>
<CAPTION>
Fiscal Year Market Value of
Fund End Issuer Investment
---- --- ------ ----------
<S> <C> <C> <C>
iShares S&P 500/BARRA Value Index Fund 3/31 Citigroup Inc. 31,383,468
Bank of America Corp. 17,796,952
JP Morgan Chase Co. 8,391,514
Morgan Stanley & Co. Inc. 7,364,772
The Goldman Sachs Group Inc. 5,696,866
Merrill Lynch & Co. Inc. 5,426,077
Bank of New York Co. Inc. 2,787,200
Lehman Brothers Holdings Inc 2,485,387

iShares S&P Global 100 Index Fund 3/31 Citigroup Inc. 2,313,180
Morgan Stanley & Co. Inc. 542,116
Credit Suisse Group 264,125

iShares S&P Global Financial Sector Index Fund 3/31 Citigroup Inc. 993,538
HSBC Holdings Plc 624,183
Bank of America Corp. 561,456
Morgan Stanley & Co. Inc. 240,838
Deutsche Bank AG 151,913
Royal Bank of Canada 143,879
Credit Suisse Group 113,927
Lehman Brothers Holdings Inc 76,230
State Street Corp. 59,211

iShares S&P/TOPIX 150 Index Fund 3/31 Nomura Inc. 187,468

iShares S&P Europe 350 Index Fund 3/31 Deutsche Bank AG 2,742,281
Credit Suisse Group 2,114,826

iShares Dow Jones U.S. Total Market Index Fund 4/30 Citigroup Inc. 3,840,612
Morgan Stanley & Co. Inc. 841,166
Merrill Lynch & Co. Inc. 646,784
The Goldman Sachs Group Inc. 348,381
Prudential Financial Inc. 344,509
Lehman Brothers Holdings Inc 291,047
Charles Schwab Corp. 169,580

iShares Dow Jones U.S. Financial Sector Index Fund 4/30 Citigroup Inc. 15,252,197
JP Morgan Chase Co. 4,424,542
Morgan Stanley & Co. Inc. 3,350,343
Merrill Lynch & Co. Inc. 2,565,502
The Goldman Sachs Group Inc. 1,376,826
Prudential Financial Inc. 1,367,581
Lehman Brothers Holdings Inc 1,154,114
Charles Schwab Corp. 667,634
Jeffries Group Inc. 63,354

iShares Dow Jones U.S. Financial Services Index Fund 4/30 Citigroup Inc. 16,702,877
JP Morgan Chase Co. 4,845,127
Morgan Stanley & Co. Inc. 3,668,695
Merrill Lynch & Co. Inc. 2,810,037
The Goldman Sachs Group Inc. 1,508,133
Lehman Brothers Holdings Inc 1,263,934
Charles Schwab Corp. 730,909

iShares Russell 3000 Index Fund 3/31 JP Morgan Chase Co. 5,361,637
Morgan Stanley & Co. Inc. 4,798,467
Merrill Lynch & Co. Inc. 3,716,611
The Goldman Sachs Group Inc. 1,863,418
Prudential Financial Inc. 1,859,715
Lehman Brothers Holdings Inc 1,599,906
Charles Schwab Corp. 896,089
Jeffries Group Inc. 78,587

iShares Russell 3000 Growth Index Fund 3/31 Charles Schwab Corp. 101,080
Jeffries Group Inc. 7,298

iShares Russell 3000 Value Index Fund 3/31 Morgan Stanley & Co. Inc. 984,905
Merrill Lynch & Co. Inc. 763,790
The Goldman Sachs Group Inc. 382,269
Lehman Brothers Holdings Inc 327,962

iShares Russell 2000 Index Fund 3/31 Jeffries Group Inc. 2,069,677

iShares Russell 2000 Growth Index Fund 3/31 Jeffries Group Inc. 1,315,339

iShares Russell 2000 Value Index Fund 3/31 Jeffries Group Inc. 248,630

iShares Russell 1000 Index Fund 3/31 JP Morgan Chase Co. 5,356,042
Morgan Stanley & Co. Inc. 4,793,366
Merrill Lynch & Co. Inc. 3,709,035
The Goldman Sachs Group Inc. 1,861,511
Prudential Financial Inc. 1,856,819
Lehman Brothers Holdings Inc 1,598,924
Charles Schwab Corp. 892,832

iShares Russell 1000 Growth Index Fund 3/31 Charles Schwab Corp. 1,723,696

iShares Russell 1000 Value Index Fund 3/31 JP Morgan Chase Co. 11,888,787
Morgan Stanley & Co. Inc. 10,639,862
Merrill Lynch & Co. Inc. 8,216,057
The Goldman Sachs Group Inc. 4,139,945
Lehman Brothers Holdings Inc 3,551,279

iShares MSCI EAFE Index Fund 7/31 Deutsche Bank AG 18,197,800
Credit Suisse Group 19,139,618
UBS AG - Registered 35,869,292
</TABLE>

The Trust will not deal with affiliates in principal transactions unless
permitted by applicable SEC rule or regulation or by SEC exemptive order.

The following table sets forth the aggregate dollar amount of brokerage
commissions paid by each Fund to Barclays Global Investors Services ("BGIS"), an
affiliate of BGFA and a subsidiary of BGI, during the fiscal year ended 2003,
the percentage of each Fund's aggregate brokerage commissions paid to BGIS
during the fiscal year ended 2003, and the percentage of each Fund's aggregate
dollar amount of transactions involving the payment of commissions effected
through BGIS during the fiscal year ended 2003.

<TABLE>
<CAPTION>
Percentage of
Aggregate
Dollar Amount
Commissions of
Paid to BGIS Percentage of Transactions
During Aggregate Involving
Inception Fiscal Year Fiscal Year Brokerage Payment of
Name Date End Ended 2003 Commissions Commissions
---- ---- --- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
iShares Nasdaq Biotechnology Index Fund 02/05/01 3/31 $ 132,966 62.85% 0.12%
</TABLE>

The following table sets forth the aggregate dollar amount of brokerage
commissions paid by each Fund to BGIS during the fiscal years ended 2002 and
2001.

<TABLE>
<CAPTION>
Commissions
Commissions Paid to BGIS
Paid to BGIS From Inception
During Full through First
Inception Fiscal Year Fiscal Year Fiscal Year
Name Date End Ended 2002 End
---- ---- --- ---------- -----------
<S> <C> <C> <C> <C>
iShares S&P MidCap 400 Index Fund 05/22/00 3/31 $ 571 $ 0
iShares S&P MidCap 400/BARRA Growth Index Fund 07/24/00 3/31 432 0
iShares Russell 1000 Index Fund 05/15/00 3/31 3,878 0
iShares Russell 1000 Growth Index Fund 05/22/00 3/31 7,479 0
iShares Russell 1000 Value Index Fund 05/22/00 3/31 25,348 0
iShares Russell Midcap Value Index Fund 07/17/01 3/31 51 0
iShares Cohen & Steers Realty Majors Index Fund 01/29/01 4/30 800 0
</TABLE>

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 49

<PAGE>

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 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

________________________________________________________________________________
page 50 i|Shares

<PAGE>

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.

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.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 51

<PAGE>

A "Business Day" with respect to each Fund is any day on which the national
securities exchange on which the Fund is listed for trading (each a "Listing
Exchange") is open for business. As of the date of the applicable Prospectus,
each Listing Exchange observes the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
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
applicable Listing Exchange (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, except the iShares S&P 350 Europe Index Fund, iShares
S&P Global 100 Index Fund, iShares S&P Global Energy Sector Index Fund, iShares
S&P Global Financial Sector Index Fund, iShares S&P Global Healthcare Sector
Index Fund, iShares S&P Global Technology Sector Index Fund, iShares S&P Global
Telecommunications Sector Index Fund, iShares S&P Latin America 40 Index Fund,
iShares S&P/TOPIX 150 Index Fund and iShares MSCI EAFE Index Fund, is
hereinafter referred to as a "Domestic Fund" and each of the iShares S&P Europe
350 Index Fund, the iShares S&P Global 100 Index Fund, iShares S&P Global Energy
Sector Index Fund, iShares S&P Global Financials Sector Index Fund, iShares S&P
Global Healthcare Sector Index Fund, iShares S&P Global Technology Sector

________________________________________________________________________________
page 52 i|Shares

<PAGE>

Index Fund, iShares S&P Global Telecommunications Sector Index Fund, iShares S&P
Latin America 40 Index Fund, iShares S&P/TOPIX 150 Index Fund, and iShares MSCI
EAFE Index Fund is hereinafter referred to as a "Foreign Fund." Orders to create
Creation Unit Aggregations of the Foreign Funds cannot be placed through the
Clearing Process. 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
applicable Listing Exchange ("Closing Time") (ordinarily 4:00 pm, 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.

Those placing orders for Creation Unit Aggregations of Foreign Funds should
ascertain the applicable deadline for cash transfers by contacting the
operations department of the broker or depositary institution making the
transfer of the Cash Component. This deadline is likely to be significantly
earlier than the closing time of the regular trading session on the applicable
Listing Exchange. Investors should be aware that the Authorized Participant may
require orders for Creation Units placed with it to be in the form required by
the individual Authorized Participant, which form may not be the same as the
form of purchase order specified by the Trust that the Authorized Participant
must deliver to the Distributor.

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 Distributor. An order to
create Creation Unit Aggregations through the Clearing Process is deemed
received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than the Closing Time on such Transmittal
Date, and (ii) all other procedures set forth in the Participant Agreement are
properly followed.

Placement of Creation Orders 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 pm,
Eastern time, on the third Business Day following the Transmittal Date
("Settlement Date"). In certain cases Authorized Participants will create and
redeem 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.

________________________________________________________________________________
iShares Construction and Maintenance Standards for the Underlying Investments

page 53

<PAGE>

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 pm, Eastern time, on the Settlement 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 pm on the Settlement 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 generally will occur no later than the
Settlement Date.

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
pm, 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 pm, Eastern time, on the Settlement 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 generally will occur no later than the Settlement
Date.

Placement of Creation Orders for Foreign Funds. Fund Deposits in connection with
the Foreign Funds will not be made either through the Clearing Process or
through DTC. For each Fund, Investors Bank shall cause the sub-custodian of the
Funds to maintain an account into which the Authorized Participant shall
deliver, on behalf of itself or the party on whose behalf it is acting, the
securities included in the designated Fund Deposit (or the cash value of all or
part of such securities, in the case of a permitted or required cash purchase or
"cash in lieu" amount), with any appropriate adjustments as advised by the
Trust. Deposit Securities must be delivered to an account maintained at the
applicable local sub-custodian(s). Orders to purchase Creation Unit Aggregations
must be received by the Distributor from an Authorized Participant on its own or
another investor's behalf by the closing time of the regular trading session on
the applicable Listing Exchange on the relevant Business Day. However, when a
relevant local market is closed due to local market holidays, the local market
settlement process will not commence until the end of the local holiday period.
Settlement must occur by 2:00 pm, Eastern time, on the contractual settlement
date.
________________________________________________________________________________
page 54 i|Shares

<PAGE>

The Authorized Participant must also make available no later than 2:00 pm,
Eastern time, on the contractual settlement date, by means satisfactory to the
Trust, immediately-available or same-day funds estimated by the Trust to be
sufficient to pay the Cash Component next determined after acceptance of the
purchase order, together with the applicable purchase transaction fee. Any
excess funds will be returned following settlement of the issue of the Creation
Unit Aggregation.

To the extent contemplated by the applicable Participant Agreement, Creation
Unit Aggregations of Foreign Funds will be issued to such Authorized Participant
notwithstanding the fact that the corresponding Fund Deposits have not been
received in part or in whole, in reliance on the undertaking of the Authorized
Participant to deliver the missing Deposit Securities as soon as possible, which
undertaking shall be secured by such Authorized Participant's delivery and
maintenance of collateral consisting of cash in the form of U.S. dollars in
immediately available funds having a value (marked to market daily) at least
equal to 110%, which BGFA may change from time to time of the value of the
missing Deposit Securities. Such cash collateral must be delivered no later than
2:00 pm, Eastern time, on the contractual settlement date. The Participant
Agreement will permit the Fund to buy the missing Deposit Securities at any time
and will subject the Authorized Participant to liability for any shortfall
between the cost to the Trust of purchasing such securities and the value of the
collateral.

Acceptance of Orders for Creation Unit Aggregations. The Trust reserves the
absolute right to reject a creation order transmitted to it by the Distributor
in respect of 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 fee for each of the
Funds.

Standard Maximum
Creation Creation
Transaction Transaction
Name of Fund Fee* Fee*
------------ ---- ----
iShares S&P 100 Index Fund $ 500 $ 2,000
iShares S&P 500 Index Fund $ 2,000 $ 8,000
iShares S&P 500/BARRA Growth Index Fund $ 500 $ 2,000
iShares S&P 500/BARRA Value Index Fund $ 1,500 $ 6,000
iShares S&P MidCap 400 Index Fund $ 1,500 $ 6,000
iShares S&P MidCap 400/BARRA Growth Index Fund $ 500 $ 2,000
iShares S&P MidCap 400/BARRA Value Index Fund $ 1,250 $ 5,000
iShares S&P SmallCap 600 Index Fund $ 2,500 $10,000
iShares S&P SmallCap 600/BARRA Growth Index Fund $ 750 $ 3,000

________________________________________________________________________________
iShares Placement of Creation Orders page 55

<PAGE>

<TABLE>
<CAPTION>
Standard Maximum
Creation Creation
Transaction Transaction
Name of Fund Fee* Fee*
------------ --- ---
<S> <C> <C>
iShares S&P SmallCap 600/BARRA Value Index Fund $ 1,750 $ 7,000
iShares S&P 1500 Index Fund $ 6,000 $24,000
iShares S&P Global 100 Index Fund $ 2,000 $ 8,000
iShares S&P Global Energy Sector Index Fund $ 600 $ 2,400
iShares S&P Global Financial Sector Index Fund $ 4,200 $16,800
iShares S&P Global Healthcare Sector Index Fund $ 700 $ 2,800
iShares S&P Global Technology Sector Index Fund $ 1,400 $ 5,600
iShares S&P Global Telecommunications Sector Index Fund $ 900 $ 3,600
iShares S&P Europe 350 Index Fund $12,000 $48,000
iShares S&P Latin America 40 Index Fund $ 450 $ 1,800
iShares S&P/TOPIX 150 Index Fund $ 3,000 $12,000
iShares Dow Jones U.S. Total Market Index Fund $ 8,000 $32,000
iShares Dow Jones U.S. Basic Materials Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Energy Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Financial Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Healthcare Sector Index Fund $ 750 $ 3,000
iShares Dow Jones U.S. Industrial Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Technology Sector Index Fund $ 1,250 $ 5,000
iShares Dow Jones U.S. Telecommunications Sector Index Fund $ 250 $ 1,000
iShares Dow Jones U.S. Utilities Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Financial Services Index Fund $ 1,000 $ 4,000
iShares Dow Jones U.S. Real Estate Index Fund $ 500 $ 2,000
iShares Dow Jones Select Dividend Index Fund $ 250 $ 1,000
iShares Dow Jones Transportation Average Index Fund $ 200 $ 800
iShares Russell 3000 Index Fund $11,500 $20,000
iShares Russell 3000 Growth Index Fund $ 7,000 $28,000
iShares Russell 3000 Value Index Fund $ 8,000 $32,000
iShares Russell 2000 Index Fund $ 7,500 $30,000
iShares Russell 2000 Growth Index Fund $ 5,000 $20,000
iShares Russell 2000 Value Index Fund $ 5,000 $20,000
iShares Russell 1000 Index Fund $ 4,000 $16,000
iShares Russell 1000 Growth Index Fund $ 2,000 $ 8,000
iShares Russell 1000 Value Index Fund $ 3,000 $12,000
iShares Russell Midcap Index Fund $ 3,150 $12,600
iShares Russell Midcap Growth Index Fund $ 1,600 $ 6,400
iShares Russell Midcap Value Index Fund $ 2,300 $ 9,200
iShares Cohen & Steers Realty Majors Index Fund $ 250 $ 1,000
iShares Nasdaq Biotechnology Index Fund $ 350 $ 1,400
iShares Goldman Sachs Technology Index Fund $ 900 $ 3,600
iShares Goldman Sachs Networking Index Fund $ 200 $ 800
iShares Goldman Sachs Semiconductor Index Fund $ 250 $ 1,000
iShares Goldman Sachs Software Index Fund $ 250 $ 1,000
iShares Goldman Sachs Natural Resources Index Fund $ 500 $ 2,000
iShares MSCI EAFE Index Fund $22,000 $88,000
</TABLE>

* 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 applicable Listing Exchange (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

________________________________________________________________________________
page 56 i|Shares

<PAGE>

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 of the
Funds.

<TABLE>
<CAPTION>
Standard Maximum
Redemption Redemption
Transaction Transaction
Name of Fund Fee* Fee*
------------ ---- ----
<S> <C> <C>
iShares S&P 100 Index Fund $ 500 $ 2,000
iShares S&P 500 Index Fund $ 2,000 $ 8,000
iShares S&P 500/BARRA Growth Index Fund $ 500 $ 2,000
iShares S&P 500/BARRA Value Index Fund $ 1,500 $ 6,000
iShares S&P MidCap 400 Index Fund $ 1,500 $ 6,000
iShares S&P MidCap 400/BARRA Growth Index Fund $ 500 $ 2,000
iShares S&P MidCap 400/BARRA Value Index Fund $ 1,250 $ 5,000
iShares S&P SmallCap 600 Index Fund $ 2,500 $10,000
iShares S&P SmallCap 600/BARRA Growth Index Fund $ 750 $ 3,000
iShares S&P SmallCap 600/BARRA Value Index Fund $ 1,750 $ 7,000
iShares S&P 1500 Index Fund $ 6,000 $24,000
iShares S&P Global 100 Index Fund $ 2,000 $ 8,000
iShares S&P Global Energy Sector Index Fund $ 600 $ 2,400
iShares S&P Global Financials Sector Index Fund $ 4,200 $16,800
iShares S&P Global Healthcare Sector Index Fund $ 700 $ 2,800
iShares S&P Global Technology Sector Index Fund $ 1,400 $ 5,600
iShares S&P Global Telecommunications Sector Index Fund $ 900 $ 3,600
iShares S&P Europe 350 Index Fund $12,000 $48,000
iShares S&P Latin America 40 Index Fund $ 450 $ 1,800
iShares S&P/Topix 150 Index Fund $ 3,000 $12,000
iShares Dow Jones U.S. Total Market Index Fund $ 8,000 $32,000
iShares Dow Jones U.S. Basic Materials Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Energy Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Financial Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Healthcare Sector Index Fund $ 750 $ 3,000
iShares Dow Jones U.S. Industrial Sector Index Fund $ 1,500 $ 6,000
iShares Dow Jones U.S. Technology Sector Index Fund $ 1,250 $ 5,000
iShares Dow Jones U.S. Telecommunications Sector Index Fund $ 250 $ 1,000
iShares Dow Jones U.S. Utilities Sector Index Fund $ 500 $ 2,000
iShares Dow Jones U.S. Financial Services Index Fund $ 1,000 $ 4,000
iShares Dow Jones U.S. Real Estate Index Fund $ 500 $ 2,000
iShares Dow Jones Select Dividend Index Fund $ 250 $ 1,000
iShares Dow Jones Transportation Average Index Fund $ 200 $ 800
iShares Russell 3000 Index Fund $ 5,000 $20,000
iShares Russell 3000 Growth Index Fund $ 7,000 $28,000
iShares Russell 3000 Value Index Fund $ 8,000 $32,000
iShares Russell 2000 Index Fund $ 7,500 $30,000
iShares Russell 2000 Growth Index Fund $ 5,000 $20,000
iShares Russell 2000 Value Index Fund $ 5,000 $20,000
</TABLE>

________________________________________________________________________________
iShare Acceptance of Orders page 57

<PAGE>

<TABLE>
<CAPTION>
Standard Maximum
Redemption Redemption
Transaction Transaction
Name of Fund Fee* Fee*
------------ --- ---
<S> <C> <C>
iShares Russell 1000 Index Fund $ 4,000 $16,000
iShares Russell 1000 Growth Index Fund $ 2,000 $ 8,000
iShares Russell 1000 Value Index Fund $ 3,000 $12,000
iShares Russell Midcap Index Fund $ 3,150 $12,600
iShares Russell Midcap Growth Index Fund $ 1,600 $ 6,400
iShares Russell Midcap Value Index Fund $ 2,300 $ 9,200
iShares Cohen & Steers Realty Majors Index Fund $ 250 $ 1,000
iShares Nasdaq Biotechnology Index Fund $ 350 $ 1,400
iShares Goldman Sachs Technology Index Fund $ 900 $ 3,600
iShares Goldman Sachs Networking Index Fund $ 200 $ 800
iShares Goldman Sachs Semiconductor Index Fund $ 250 $ 1,000
iShares Goldman Sachs Software Index Fund $ 250 $ 1,000
iShares Goldman Sachs Natural Resources Index Fund $ 500 $ 2,000
iShares MSCI EAFE Index Fund $22,000 $88,000
</TABLE>

* 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
Settlement Date. 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.

Placement of Redemption Orders for Foreign Funds. Orders to redeem Creation Unit
Aggregations of Foreign Funds must be delivered through an Authorized
Participant that has executed a Participant Agreement. Investors other than
Authorized Participants are responsible for making arrangements for a redemption
request to be made through an Authorized Participant. An order to redeem
Creation Unit Aggregations of Foreign Funds 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 the 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 10:00
am, Eastern time, on the next Business Day following the Transmittal Date; and
(iii) all other procedures set forth in the Participant Agreement are properly
followed. Deliveries of Fund Securities to redeeming investors generally will be
made within three Business Days. Due to the schedule of holidays in certain
countries, however, the delivery of in-kind redemption proceeds for Foreign
Funds may take

________________________________________________________________________________
page 58 i|Shares

<PAGE>

longer than three Business Days after the day on which the redemption request is
received in proper form. In such cases, the local market settlement procedures
will not commence until the end of the local holiday periods. See below for a
list of the local holidays in the foreign countries relevant to the Foreign
Funds.

In connection with taking delivery of shares of Fund Securities upon redemption
of iShares of Foreign Funds, a redeeming Beneficial Owner or Authorized
Participant action on behalf of such Beneficial Owner must maintain appropriate
security arrangements with a qualified broker-dealer, bank or other custody
providers in each jurisdiction in which any of the Fund Securities are
customarily traded, to which account such Fund Securities will be delivered.

To the extent contemplated by an Authorized Participant's agreement, in the
event the Authorized Participant has submitted a redemption request in proper
form but is unable to transfer all or part of the Creation Unit Aggregation to
be redeemed to the Transfer Agent, on behalf of the Fund. The Distributor will
nonetheless accept the redemption request in reliance on the undertaking by the
Authorized Participant to deliver the missing iShares as soon as possible, which
undertaking shall be secured by the Authorized Participant's delivery and
maintenance of collateral consisting of cash having a value (marked to market
daily) at least equal to 105%, which BGFA may change from time to time, of the
value of the missing iShares. The current procedures for collateralization of
missing iShares require, among other things, that any cash collateral shall be
in the form of U.S. dollars in immediately-available funds and shall be held by
Investors Bank and marked to market daily, and that the fees of Investors Bank
and any sub-custodians in respect of the delivery, maintenance and redelivery of
the cash collateral shall be payable by the Authorized Participant. The
Authorized Participant's agreement will permit the Trust, on behalf of the
affected Fund, to purchase the missing iShares or acquire the Deposit Securities
and the Cash Component underlying such shares at any time and will subject the
Authorized Participant to liability for any shortfall between the cost to the
Trust of purchasing such shares, Deposit Securities or Cash Component and the
value of the collateral.

The calculation of the value of the Fund Securities and the Cash Redemption
Amount to be delivered upon redemption will be made by Investors Bank according
to the procedures set forth under Determination of NAV computed on the Business
Day on which a redemption order is deemed received by the Trust. Therefore, if a
redemption order in proper form is submitted to Investors Bank by a DTC
Participant not later than Closing Time on the Transmittal Date, and the
requisite number of iShares of the relevant Fund are delivered to Investors Bank
prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the
Cash Redemption Amount to be delivered will be determined by Investors Bank on
such Transmittal Date. If, however, a redemption order is submitted to Investors
Bank by a DTC Participant not later than the Closing Time on the Transmittal
Date but either (i) the requisite number of iShares of the relevant Fund are not
delivered by the DTC Cut-Off-Time, as described above, on such Transmittal Date,
or (ii) the redemption order is not submitted in proper form, then the
redemption order will not be deemed received as of the Transmittal Date. In such
case, the value of the Fund Securities and the Cash Redemption Amount to be
delivered will be computed on the Business Day that such order is deemed
received by the Trust, i.e., the Business Day on which the iShares of the
relevant Fund are delivered through DTC to Investors Bank by the DTC
Cut-Off-Time on such Business Day pursuant to a properly submitted redemption
order.

If it is not possible to effect deliveries of the Fund Securities, the Trust may
in its discretion exercise its option to redeem such iShares in cash, and the
redeeming Beneficial Owner will be required to receive its redemption proceeds
in cash. In addition, an investor may request a redemption in cash that the Fund
may, in its sole discretion, permit. In either case, the investor will receive a
cash payment equal to the NAV of its iShares based on the NAV of iShares of the
relevant Fund next determined after the redemption request is received in proper
form (minus a redemption transaction fee and additional charge for requested
cash redemptions specified above, to offset the Trust's brokerage and other
transaction costs associated with the disposition of Fund Securities). A Fund
may also, in its sole discretion, upon request of a shareholder, provide such
redeemer a portfolio of securities that differs from the exact composition of
the Fund Securities but does not differ in NAV.

Redemptions of iShares for Fund Securities will be subject to compliance with
applicable federal and state securities laws and each Fund (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Unit
Aggregations for cash to the extent that the Trust could not lawfully deliver
specific Fund Securities upon redemptions or could not do so without first
registering the Fund Securities under such laws. An Authorized Participant or an
investor for which it is acting subject to a legal restriction with respect to a
particular stock included in the Fund Securities applicable to the redemption of
a Creation Unit Aggregation may be paid an equivalent amount of cash. The
Authorized Participant may request the redeeming Beneficial Owner of the iShares
to complete an order form or to enter into agreements with respect to such
matters as compensating cash payment.

Because the Portfolio Securities of a Foreign Fund may trade on the relevant
exchange(s) on days that the Listing Exchange for the Foreign Fund is closed or
are otherwise not Business Days for such Foreign Fund, stockholders may not be
able to redeem their shares of such Foreign Fund, or to purchase and sell
iShares of such Foreign Fund on the Listing Exchange for the Foreign Fund, on
days when the NAV of such Foreign Fund could be significantly affected by events
in the relevant foreign markets.

________________________________________________________________________________
iShares Redemption of iShares page 59

<PAGE>

Foreign Market Hours

Argentina
Primary Exchange Trading Hours - Monday through Friday, 11:00 am to 6:00 pm

Australia
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 4:00 pm

Austria
Primary Exchange Trading Hours - Monday through Friday, 8:30 am to 5:30 pm

Belgium
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 5:25 pm

Brazil
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 1:00 pm;
2:00 pm to 4:45 pm (April to October), 11:00 am to 1:30 pm; 2:30 pm to 5:45 pm
(October to April)

Canada
Primary Exchange Trading Hours - Monday through Friday, 9:30 am to 4:00 pm

Chile
Primary Exchange Trading Hours - Monday through Friday, 9:30 am to 5:30 pm

Denmark
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 5:00 pm

Finland
Primary Exchange Trading Hours - Monday through Friday 9:00 am to 6:00 pm -
Continuous trading II 6:03 pm to 7:30 pm

France
Primary Exchange Trading Hours - Monday through Friday, 7:45 am to 9:00 am
(Pre-market), 9:00 am to 5:30 pm

Germany
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 8:00 pm

Greece
Primary Exchange Trading Hours - Monday through Friday, 11:00 am to 4:00 pm
(Pre-trading 10:30 am to 11:00 am)

Hong Kong
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 12:30
pm/2:30 pm to 4:00 pm (Pre-trading 9:30 am to 10:00 am)

Indonesia
Primary Exchange Trading Hours - Monday through Thursday, 9:30 am to 12:00
pm/1:30 pm to 4:00 pm, Friday 9:30 am to 11:30 am/2:00 pm to 4:00 pm

Ireland
Primary Exchange Trading Hours - Monday through Friday, 8:00 am to 4:30 pm

Italy
Primary Exchange Trading Hours - Monday through Friday, 8:00 am to 9:30 am
(Pre-open)/

________________________________________________________________________________
page 60 i|Shares

<PAGE>

9:30-5:40 (Trading)

Japan
Primary Exchange Trading Hours - Monday through Friday, 8:50 am to 11:00am/
12:30 pm to 3:10 pm

Malaysia
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 12:30 pm/2:30
pm to 5:00 pm

Mexico
Primary Exchange Trading Hours - Monday through Friday, 8:30 am to 3:00 pm

Netherlands
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 5:30 pm

New Zealand
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 5:00 pm

Norway
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 4:00 pm
(pre-trading 9:15 am to 10:00 am)

Philippines
Primary Exchange Trading Hours - Monday through Friday, 9:30 am to 12:00 pm

Portugal
Primary Exchange Trading Hours - Monday through Friday, (Pre-open) 7:30 am to
7:55 am / 8:00 am to 4:25 pm (Trading)

Singapore
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 12:30 pm/2:00
pm to 5:00 pm

South Africa
Primary Exchange Trading Hours - Monday through Friday, (Pre-open) 8:30 am to
9:00 am / 9:30 am to 5:00 pm (Trading)

South Korea
Primary Exchange Trading Hours - Monday through Friday, 9:30 am to 3:00 pm,
After-hours session 3:10 pm to 4:00 pm

Spain
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 5:30 pm

Sweden
Primary Exchange Trading Hours - Monday through Friday, 9:30 am to 5:30 pm

Switzerland
Primary Exchange Trading Hours - Monday through Friday, (Pre-open) 6:00 am to
10:00 am / 9:00 am to 5:30 pm (Trading)

Taiwan
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 1:30 pm,
After-hours session 2:00 pm to 2:30 pm

Thailand
Primary Exchange Trading Hours - Monday through Friday, 10:00 am to 12:30
pm/2:30 pm to 4:30 pm

United Kingdom
Primary Exchange Trading Hours - Monday through Friday, 8:00 am to 4:30 pm

________________________________________________________________________________
iShares Taxes page 61

<PAGE>

United States
Primary Exchange Trading Hours - Monday through Friday, 9:00 am to 4:00 pm
(Nasdaq) 9:30 am to 4:00 pm (each Listing Exchange)

Venezuela
Primary Exchange Trading Hours - Monday through Friday, (Pre-open) 9:00 am to
9:30 am / 9:30 am to 2:30 pm (Trading) (March to September), (Pre-open) 9:00 am
to 10:30 am / 10:30 am to 2:45 pm (Trading) (September to March)

Regular Holidays. The dates in calendar year 2004 in which the regular holidays
affecting the relevant securities markets of the below listed countries are as
follows:

Argentina Netherlands
Jan 1 May 1 Aug 16 Jan 1 May 20
Apr 5 May 25 Oct 11 Apr 9 May 31
Apr 8 Jun 21 Dec 8 Apr 12 Dec 25
Apr 9 Jul 9 Dec 25 Apr 30 Dec 26

Australia Norway
Jan 1 Apr 26 Dec 27 Jan 1 May 17 Dec 26
Jan 26 Jun 14 Dec 28 Apr 8 May 20
Apr 9 Aug 2 Apr 9 May 31
Apr 12 Oct 4 Apr 12 Dec 25

Austria Portugal
Jan 1 May 20 Oct 26 Dec 25 Jan 1 Apr 25 Oct 5 Dec 25
Jan 6 May 31 Nov 1 Dec 26 Feb 24 May 1 Nov 1
Apr 12 Jun 10 Dec 8 Apr 9 Jun 10 Dec 1
May 1 Aug 15 Dec 24 Apr 12 Aug 15 Dec 8

Belgium Singapore
Jan 1 May 31 Nov 11 Jan 1 Apr 9 Nov 14
Apr 12 Jul 21 Dec 25 Jan 22 May 1 Dec 25
May 1 Aug 15 Dec 26 Jan 23 Jun 2
May 20 Nov 1 Feb 1 Aug 9

Brazil Spain
Jan 1 Apr 21 Oct 12 Jan 1 Apr 12 Dec 6
Feb 23 May 1 Nov 2 Jan 6 May 1 Dec 8
Feb 24 Jun 10 Nov 15 Apr 8 Oct 12 Dec 25
Apr 9 Sep 7 Dec 25 Apr 9 Nov 1 Dec 26

Canada Sweden
Jan 1 Aug 2 Dec 24 Jan 1 May 1 Dec 25
Apr 9 Sep 6 Dec 27 Jan 6 May 20 Dec 26
May 24 Oct 11 Apr 9 May 31
Jul 1 Nov 11 Apr 12 Jun 25

Chile Switzerland
Jan 1 Jun 10 Sep 19 Dec 25 Jan 1 May 1 Dec 24
Apr 9 Jun 28 Oct 12 Jan 2 May 20 Dec 25
May 1 Aug 15 Nov 1 Apr 9 May 31 Dec 26
May 21 Sep 18 Dec 8 Apr 12 Aug 1

________________________________________________________________________________
page 62 i|Shares

<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Denmark Taiwan
Jan 1 May 7 Dec 24 Jan 1 Jan 24 Jun 22
Apr 8 May 20 Dec 25 Jan 21 Feb 28 Sep 28
Apr 9 May 31 Dec 26 Jan 22 Apr 5 Oct 10
Apr 12 Jun 5 Jan 23 May 1

Finland United Kingdom
Jan 1 May 1 Dec 6 Jan 1 May 31
Jan 6 May 20 Dec 24 Apr 9 Aug 30
Apr 9 Jun 25 Dec 25 Apr 12 Dec 27
Apr 12 Jun 26 Dec 26 May 3 Dec 28

France Greece
Jan 1 May 20 Nov 1 Jan 1 Apr 9 Aug 15
Apr 12 May 31 Nov 11 Jan 6 Apr 12 Oct 28
May 1 Jul 14 Dec 25 Feb 23 May 1 Dec 25
May 8 Aug 15 Mar 25 May 31 Dec 26

Germany Indonesia
Jan 1 May 20 Nov 1 Dec 31 Jan 1 Apr 29 Sep 15 Nov 23
Apr 9 May 31 Dec 24 Jan 15 May 3 Sep 23 Dec 23
Apr 12 Jun 10 Dec 25 Feb 11 May 4 Oct 11
May 1 Oct 3 Dec 26 Mar 22 May 5 Nov 3

Hong Kong New Zealand
Jan 1 Apr 5 May 1 Sep 29 Dec 26 Jan 1 Feb 6 Jun 7
Jan 22 Apr 9 May 26 Oct 1 Jan 2 Apr 9 Oct 25
Jan 23 Apr 10 Jun 22 Oct 22 Jan 19 Apr 12 Dec 27
Jan 24 Apr 12 Jul 1 Dec 25 Jan 26 Apr 25 Dec 28

Ireland Philippines
Jan 1 May 3 Dec 25 Jan 1 Jun 12 Nov 30
Mar 17 Jun 7 Dec 26 Apr 8 Aug 29 Dec 25
Apr 9 Aug 2 Apr 9 Nov 1 Dec 30
Apr 12 Oct 25 May 1 Nov 2 Dec 31

Italy South Africa
Jan 1 May 1 Dec 25 Jan 1 Apr 27 Sep 24
Jan 6 Aug 15 Dec 26 Mar 21 May 1 Dec 16
Apr 12 Nov 1 Apr 9 Jun 16 Dec 25
Apr 25 Dec 8 Apr 12 Aug 9 Dec 26

Japan Thailand
Jan 1 Feb 11 May 4 Sep 23 Dec 23 Jan 1 Apr 14 Jun 2 Oct 25
Jan 2 Mar 20 May 5 Oct 11 Dec 31 Mar 5 Apr 15 Jul 1 Dec 6
Jan 3 Apr 29 Jul 19 Nov 3 Apr 6 May 3 Aug 2 Dec 10
Jan 12 May 3 Sep 20 Nov 23 Apr 13 May 5 Aug 12 Dec 31
</TABLE>
________________________________________________________________________________
iShares Taxes page 63

<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Korea United States
Jan 1 Mar 1 May 5 Aug 15 Oct 3 Jan 1 May 31 Nov 11
Jan 21 Apr 5 May 26 Sep 27 Dec 25 Jan 19 Jul 5 Nov 25
Jan 22 Apr 15 Jun 6 Sep 28 Feb 16 Sep 6 Dec 24
Jan 23 May 1 Jul 17 Sep 29 Apr 9 Oct 11 Dec 25

Malaysia Venezuela
Jan 1 Feb 3 May 4 Nov 14 Jan 5 Apr 9 Jul 5
Jan 22 Feb 23 Jun 5 Nov 15 Feb 23 Apr 19 Jul 24
Jan 23 May 1 Aug 31 Nov 16 Feb 24 May 1 Oct 12
Feb 2 May 3 Nov 11 Dec 25 Apr 8 Jun 24 Dec 25

Mexico
Jan 1 Apr 9 Nov 2
Feb 5 May 1 Nov 20
Mar 21 May 5 Dec 12
Apr 8 Sep 16 Dec 25
</TABLE>

________________________________________________________________________________
page 64 i|Shares

<PAGE>

Settlement Periods Greater than Seven Days for Year 2004

<TABLE>
<CAPTION>
Country Trade Date Settlement # of Calendar Days
------- ---------- ---------- ------------------
<S> <C> <C> <C>
Argentina 4/2/2004 4/12/2004 10

Denmark 4/5/2004 4/13/2004 8
4/6/2004 4/15/2004 9
4/7/2004 4/16/2004 9

Indonesia 4/27/04 5/6/04 9
4/28/04 5/7/04 9
4/30/04 5/10/04 10

Japan 4/27/04 5/6/04 9
4/28/04 5/7/04 9
4/30/04 5/10/04 10

Malaysia 11/9/04 11/17/04 8
11/10/04 11/18/04 8

Norway 4/5/2004 4/13/2004 8
4/6/2004 4/15/2004 9
4/7/2004 4/16/2004 9

South Africa 4/2/2004 4/13/2004 11
4/5/2004 4/14/2004 9
4/6/2004 4/15/2004 9
4/7/2004 4/16/2004 9
4/8/2004 4/19/2004 11

Thailand 4/8/2004 4/16/2004 8
4/9/2004 4/19/2004 10
4/12/2004 4/20/2004 8
</TABLE>

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 the 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(c)(2) 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).

________________________________________________________________________________
iShares Taxes page 65

<PAGE>

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 each 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 each 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 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, that
Fund would have a basis in the securities different from the market value of
such securities on the date of deposit. The Trust also has the right to require
information necessary to determine beneficial share ownership for purposes of
the 80% determination.

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 each 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. The following
Funds had tax basis net capital loss carryforwards as of March 31, 2003, the tax
year end for the Funds listed.

________________________________________________________________________________
page 66 i|Shares

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
iShares Index Fund Expiring 2009 Expiring 2010 Expiring 2011 Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 100 $ -- $ 2,240,710 $ 3,096,741 $ 5,337,451
S&P 500 -- 16,570,119 109,148,380 125,718,499
S&P 500/BARRA Growth -- 9,841,895 24,099,560 33,941,455
S&P 500/BARRA Value -- 5,134,741 23,315,922 28,450,663
S&P MidCap 400 -- 4,458,220 4,023,734 8,481,954
S&P MidCap 400/BARRA Growth -- 11,111,322 22,971,326 34,082,648
S&P MidCap 400/BARRA Value -- 1,442,036 4,082,966 5,525,002
S&P SmallCap 600 -- 3,199,196 22,944,237 26,143,433
S&P SmallCap 600/BARRA Growth -- 4,230,989 8,134,573 12,365,562
S&P SmallCap 600/BARRA Value -- 4,241,868 12,218,694 16,460,562
S&P Global 100 -- 329,587 1,022,865 1,352,452
S&P Global Energy Sector -- -- 37,853 37,853
S&P Global Financials Sector -- -- 148,034 148,034
S&P Global Healthcare Sector -- -- 147,652 147,652
S&P Global Technology Sector -- -- 114,472 114,472
S&P Global Telecommunications Sector -- -- 505,504 505,504
S&P Europe 350 3,295 904,300 2,116,359 3,023,954
S&P Latin America 40 -- -- 29,834 29,834
S&P/TOPIX 150 -- -- 276,198 276,198
Nasdaq Biotechnology -- 2,280,865 29,163,198 31,444,063
Russell 3000 -- 21,789,321 14,801,082 36,590,403
Russell 3000 Growth -- 4,176,050 6,607,675 10,783,725
Russell 3000 Value -- 605,073 1,545,605 2,150,678
Russell 2000 -- 47,681,248 112,740,686 160,433,615
Russell 2000 Growth -- 14,797,300 71,115,684 85,912,984
Russell 2000 Value -- 6,847,139 18,124,608 24,971,747
Russell 1000 -- 12,325,552 9,763,804 22,089,356
Russell 1000 Growth -- 20,107,067 68,492,707 88,599,774
Russell 1000 Value 99,151 5,765,240 15,563,320 21,427,711
Russell Midcap -- 66,369 1,282,837 1,349,206
Russell Midcap Growth -- 40,231 10,035,874 10,076,105
Russell Midcap Value -- 30,986 477,717 508,703
</TABLE>

The following Funds had tax basis net capital loss carryforwards as of
April 30, 2003, the tax year end for the Funds listed:

The following Funds had tax basis net capital loss carryforwards as of
July 31, 2003, the tax year end for the Funds listed:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
iShares Index Fund Expiring 2010 Expiring 2011 Total
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goldman Sachs Technology $ 638,692 $ 1,579,887 $ 2,218,579
Goldman Sachs Networking 130,370 5,798,354 5,928,724
Goldman Sachs Semiconductor 175,882 472,453 648,335
Goldman Sachs Software 177,253 1,465,904 1,643,157
Goldman Sachs Natural Resources -- 371,436 371,436
MSCI EAFE 55,269 37,219,384 37,274,653
-------------------------------------------------------------------------------------------------------------
</TABLE>

________________________________________________________________________________
iShares Taxes page 67

<PAGE>

Funds Holding Foreign Investments. Each Fund, but in particular the iShares
Europe 350 Index Fund, iShares S&P Global 100, iShares S&P Latin America 40
Index Fund, iShares S&P/TOPIX 150 Index Fund, iShares S&P Global Energy Sector
Index Fund, iShares S&P Global Financials Sector Index Fund, iShares S&P Global
Healthcare Sector Index Fund, iShares S&P Global Technology Sector Index Fund,
iShares S&P Global Telecommunications Sector Index Fund, and the iShares MSCI
EAFE Index Fund, may be subject to foreign income taxes withheld at the source.
Each Fund that is permitted to do so will elect to "pass through" to its
investors the amount of foreign income taxes paid by the Fund provided that the
investor held the iShares of the Fund, and the Fund held the security, on the
dividend settlement date and for at least fifteen additional days immediately
before and/or thereafter, with the result that each investor will (i) include in
gross income, even though not actually received, the investor's pro rata share
of the Fund's foreign income taxes, and (ii) either deduct (in calculating U.S.
taxable income) or credit (in calculating U.S. federal income tax) the
investor's pro rata share of the Fund's foreign income taxes. A foreign person
who invests in a Fund that elects to "pass through" its foreign taxes may be
treated as receiving additional dividend income subject to U.S. withholding tax.
A foreign tax credit may not exceed the investor's U.S. federal income tax
otherwise payable with respect to the investor's foreign source income. For this
purpose, each shareholder must treat as foreign source gross income (i) his
proportionate share of foreign taxes paid by the Fund and (ii) the portion of
any dividend paid by the Fund that represents income derived from foreign
sources; the Fund's gain from the sale of securities will generally be treated
as U.S. source income. This foreign tax credit limitation is applied separately
to separate categories of income; dividends from the Fund will be treated as
"passive" or "financial services" income for this purpose. The effect of this
limitation may be to prevent investors from claiming as a credit the full amount
of their pro rata share of the Fund's foreign income taxes.

If any Fund owns shares in certain foreign investment entities, referred to as
"passive foreign investment companies", the Fund will be subject to one of the
following special tax regimes: (i) the Fund is liable for U.S. federal income
tax, and an additional charge in the nature of interest, on a portion of any
"excess distribution" from such foreign entity or any gain from the disposition
of such shares, even if the entire distribution or gain is paid out by the Fund
as a dividend to its shareholders; (ii) if the Fund were able and elected to
treat a passive foreign investment company as a "qualified electing fund", the
Fund would be required each year to include in income, and distribute to
shareholders in accordance with the distribution requirements set forth above,
the Fund's pro rata share of the ordinary earnings and net capital gains of the
passive foreign investment company, whether or not such earnings or gains are
distributed to the Fund; or (iii) the Fund may be entitled to mark-to-market
annually the shares of the passive foreign investment company, and, in such
event, would be required to distribute to shareholders any such mark-to-market
gains in accordance with the distribution requirements set forth above.

Federal Tax Treatment of Complex Securities. 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 the 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 the Fund.

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 investments 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 for the iShares S&P 100 Index Fund is calculated by
Investors Bank and determined as of the close of regular trading on the CBOE
(ordinarily 4:00 p.m., Eastern time) on each day that the CBOE is open for
trading. The NAV for the iShares S&P Global 100 Index Fund and the iShares Down
Jones Select Dividend 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 the NYSE is open for trading. For all other Funds listed in this
SAI, the NAV of each Fund is calculated by Investors Bank and determined as of
the close of regular trading on the AMEX (ordinarily 4:00 p.m., Eastern time) on
each day that the AMEX is open for trading.

In computing a Fund's NAV, the Fund's securities holdings are valued as
discussed below. Securities for which the primary market is a national
securities or commodities exchange or a recognized foreign securities exchange
or commodities exchange will be valued at last sale prices on the principal
exchange on which they are traded, or in the absence of any sale on the
valuation date, at latest quoted bid prices. Securities for which the primary
market is Nasdaq Stock Market, Inc. ("Nasdaq") will be valued at the Nasdaq
official closing price or, in the absence of any sale on the valuation date, at
latest quoted bid prices, which will be obtained from a reputable independent
pricing service. U.S. Government securities and all other securities for which
current over-the-counter market quotations are readily available will be valued
at latest quoted bid prices, which will be obtained from one or more reputable
independent pricing services. If quoted prices are unavailable or inaccurate,
market values will be determined based on quotes obtained from brokers, dealers
and/or based on averages of prices obtained from reputable independent pricing
services. Money market instruments and debt securities maturing in 60 days or
less will be valued at amortized cost.

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.

Securities 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 Trust's Board of Trustees has expressly delegated the authority 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.

________________________________________________________________________________
page 68 i|Shares

<PAGE>

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 make 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 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.

--------------------------------------------------------------------------------
iShares Performance and Other Information page 69

<PAGE>

Financial Statements

The Fund's audited Financial Statements, including the Financial Highlights,
appearing in the Annual Report to Shareholders and the report therein of
PricewaterhouseCoopers LLP, independent accountants, are hereby incorporated by
reference in this Statement of Additional Information. The Annual Report to
Shareholders is delivered with this Statement of Additional Information to
shareholders requesting this Statement of Additional Information.

Miscellaneous Information

Counsel. Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Avenue, N.W.,
Washington, D.C., 20004 is counsel to the Trust.

Independent Auditors. PricewaterhouseCoopers LLP, located at 333 Market Street,
San Francisco, CA 94105, serves as the independent accountants of the Trust.
They audit the Funds' financial statements and may perform other services.

________________________________________________________________________________
iShares Performance and Other Information page 70

<PAGE>

BGI-F-031-02004

</TEXT>
</DOCUMENT>