0001021408-01-507703.txt : 20011010
0001021408-01-507703.hdr.sgml : 20011010
ACCESSION NUMBER: 0001021408-01-507703
CONFORMED SUBMISSION TYPE: PRES14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011219
FILED AS OF DATE: 20011004
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISHARES INC
CENTRAL INDEX KEY: 0000930667
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 510396525
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: PRES14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 811-09102
FILM NUMBER: 1752108
BUSINESS ADDRESS:
STREET 1: 400 BELLEVUE PKWAY
CITY: WILMINGTON
STATE: DE
ZIP: 19809
BUSINESS PHONE: 800-810-93
FORMER COMPANY:
FORMER CONFORMED NAME: FOREIGN FUND INC
DATE OF NAME CHANGE: 19950524
FORMER COMPANY:
FORMER CONFORMED NAME: WEBS INDEX FUND INC
DATE OF NAME CHANGE: 19970211
PRES14A
1
dpres14a.txt
PRELIMINARY PROXY STATEMENT
As filed with the Securities and Exchange Commission
on October 4, 2001
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box: [_]
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
iSHARES, INC.
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(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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iSHARES, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 15, 2001
To the Shareholders of iShares, Inc.:
A special meeting of the shareholders of iShares, Inc. (the "Company") will be
held on December 19, 2001 at 1:00 p.m. (Eastern Time) at the offices of the
Company's administrator and transfer agent, PFPC Inc., at 400 Bellevue Parkway,
Wilmington, Delaware 19809, for the following purposes:
(1) To elect six Directors to the Board of Directors of the Company, each of
whom will serve until his respective successor is elected and qualified
(all shareholders);
(2) To approve an amended advisory agreement with Barclays Global Fund Advisors
(all shareholders);
(3) To approve a change to the Company's fundamental investment policy to
permit each Index Fund to invest 25% or more of its total assets in a
single issuer (all shareholders);
(4) To approve a change to the Company's fundamental investment policy with
respect to industry concentration (all shareholders);
(5) To approve a change of the iShares MSCI Japan Index Fund from diversified
to non-diversified (holders of the iShares MSCI Japan Index Fund only);
(6) To approve a change of the iShares MSCI United Kingdom Index Fund from
diversified to non-diversified (holders of the iShares MSCI United Kingdom
Index Fund only); and
(7) To transact such other business as may properly come before the special
meeting or any adjournment thereof (all shareholders).
These proposals are discussed in the Proxy Statement attached to this Notice.
Each shareholder is invited to attend the special meeting in person.
Shareholders of record at the close of business on September 26, 2001 have the
right to vote at the special meeting. IF YOU CANNOT BE PRESENT AT THE SPECIAL
MEETING, WE URGE YOU TO FILL IN, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY SO
THAT THE SPECIAL MEETING MAY BE HELD AND A MAXIMUM NUMBER OF SHARES MAY BE
VOTED. WE ALSO ENCOURAGE YOU TO VOTE BY TELEPHONE OR THROUGH THE INTERNET.
HOLDERS OF AT LEAST ONE-THIRD OF THE OUTSTANDING SHARES OF EACH INDEX FUND OR
THE COMPANY, AS THE CASE MAY BE, ARE REQUIRED TO BE PRESENT IN PERSON OR BY
PROXY IN ORDER TO HAVE A QUORUM FOR SUCH FUND OR THE COMPANY AT THE SPECIAL
MEETING.
TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY
OR VOTE OVER THE TELEPHONE OR THROUGH THE INTERNET PROMPTLY NO MATTER HOW MANY
SHARES YOU OWN. IF YOU OWN SHARES IN MORE THAN ONE INDEX FUND, THERE IS A
SEPARATE PROXY CARD FOR EACH INDEX FUND YOU OWN. IT IS ESSENTIAL THAT YOU VOTE
EACH ENCLOSED PROXY.
Proxies may be voted by touchtone telephone by calling 1-800-454-8683 or through
the Internet at www.proxyvote.com. Voting by telephone or through the Internet
will reduce the time and costs associated with the proxy solicitation. When the
Company records proxies by telephone or through the Internet, it will use
procedures designed to (i) authenticate shareholders' identities, (ii) allow
shareholders to authorize the voting of their shares in accordance with their
instructions, and (iii) confirm that their instructions have been properly
recorded. Shareholders voting via the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the shareholder.
We understand that the Internet voting procedures that have been made available
to you are consistent with the requirements of applicable law.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSALS 1, 2, 3
AND 4 AND THAT THE SHAREHOLDERS OF THE UNITED KINGDOM AND JAPAN INDEX FUND VOTE
IN FAVOR OF PROPOSALS 5 AND 6, RESPECTIVELY.
By Order of the Board of Directors,
R. Sheldon Johnson
Secretary
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY TELEPHONE OR THROUGH
THE INTERNET OR MARK, SIGN, DATE AND
RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
October 15, 2001
iShares, Inc.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(800) iShares (474-2737)
Dear Shareholder:
A Special Meeting of Shareholders of iShares, Inc. will to be held at the
offices of iShares, Inc.'s administrator and fund accounting agent, PFPC, Inc.,
at 400 Bellevue Parkway, Wilmington, Delaware 19809 on Wednesday, December 19,
2001 at 1:00 p.m., Eastern Time. The enclosed Notice of Special Meeting and
Proxy Statement describes the election of Directors overseeing the Index Funds
in which you are invested, the approval of an amendment to the advisory contract
and other matters involving your Index Fund's fundamental investment policies.
Shareholders of the iShares MSCI Japan Index Fund and iShares MSCI United
Kingdom Index Fund are also being asked to consider the change of those Index
Funds from diversified to non-diversified. Please review and consider these
proposals carefully.
The Company's Board of Directors has reviewed and approved the nominees and
believes their election to be in the best interest of shareholders. The Board
has also reviewed and approved the other proposals to be voted on by
shareholders. Accordingly, the Board recommends that you vote in favor of each
nominee and in favor of each of the other proposals.
We encourage you to read the attached Proxy Statement in full. By way of
introduction, following this letter we have included questions and answers
regarding this proxy. The information is designed to help you cast your vote as
a shareholder of one or more of the Index Funds, and is being provided as a
supplement to, and not a substitute for, your proxy materials, which we urge you
to review carefully.
Whether or not you plan to attend the special meeting, please sign and return
the enclosed proxy card in the postage prepaid envelope provided or vote by
telephone or through the Internet. We realize that this Proxy Statement will
take time to read, but your vote is very important.
Please call our proxy solicitor, Georgeson Shareholder Communications Inc. at 1-
888-895-1826 if you have any questions. Your vote is important to us, no matter
how many shares you own.
Thank you for your support.
Sincerely,
Nathan Most
Chairman
QUESTIONS AND ANSWERS
YOUR VOTE IS VERY IMPORTANT
Q. What am I being asked to vote on at the upcoming special shareholder
meeting on December 19, 2001?
A. You are being asked to consider the following proposals:
1. The election of six Directors;
2. The approval of an amended Advisory Agreement;
3. The approval of a change to the fundamental investment policy with
respect to the purchase of securities of a single issuer; and
4. The approval of a change to the fundamental investment policy with
respect to the concentration policy.
Please note that if you are a shareholder of the iShares MSCI Japan Index
Fund or iShares MSCI United Kingdom Fund, you are also being asked to
consider the change of your Index Fund from diversified to non-diversified.
More information about each of these proposals is contained in the attached
proxy statement, which we encourage you to read carefully.
Q. I am a small investor. Why should I bother to vote?
A. Your vote makes a difference. If numerous shareholders just like you fail
to vote, the Company may not receive enough votes to go forward with its
meeting. If this happens, we will need to solicit votes again.
Q. Who are the nominees to be my Directors?
A. They are: Nathan Most, Richard K. Lyons, George G. C. Parker, John B.
Carroll, Garrett F. Bouton and W. Allen Reed. Biographical information for
the nominees is included in the attached proxy statement under Proposal 1.
Q. Why are amendments to the Advisory Agreement being proposed?
A. The amendments to the Advisory Agreement are being proposed in order to
more closely align the Company's advisory agreement, and in particular the
fee structure, with the advisory agreement and fee structure of another
exchange traded fund advised by the Advisor. The change to the fee
structure will not affect the amount of advisory fees received by the
Advisor from any Index Fund. The Board concluded that uniformity of fee
structures of advisory agreements was desirable and that the proposed fee
structure would be simpler for shareholders to understand. More
information on the proposed amendments is included in the attached proxy
statement under Proposal 2. The Advisory Agreement, as proposed to be
amended, is also included as Appendix A to the attached proxy statement.
Q. Why is the Index Funds' fundamental investment policy limiting investments
in a single issuer to 25% being proposed to be eliminated?
A. The fundamental investment policy is being proposed to be eliminated
because the Board believes that the restriction can cause frequent
adjustments to an Index Fund's portfolio that adversely affect tracking and
result in the incurrence of unnecessary transaction costs and taxable gains
that
would otherwise not have to be realized. More information about the
elimination of the fundamental investment restriction regarding investments
in a single issuer is included in the attached proxy statement under
Proposal 3.
Q. Why is the Index Funds' industry concentration policy being proposed to be
changed?
A. The concentration policy is proposed to be amended to make a conforming
change in light of the proposed elimination of each Index Fund's
fundamental investment policy regarding investments in a single issuer and
to simplify it. The Board believes, based upon the Advisor's experience
and recommendation, that an absolute cap on the percentage of an Index
Fund's assets that can be invested in a single industry as a result of a
single stock may result in frequent rebalancings of the Index Fund's
portfolio which can adversely affect tracking, costs and the realization of
capital gains. More information regarding the proposed change to the Index
Funds' industry concentration policy is included in the attached proxy
statement under Proposal 4.
Q. Why are shareholders of each of the iShares MSCI Japan Index Fund and the
iShares MSCI United Kingdom Index Fund being asked to vote on changing
their fund from diversified to non-diversified?
A. The proposed change from diversified to non-diversified is being proposed
because the Board believes that the change will allow each fund to better
track its benchmark index. The benchmark index of the iShares MSCI United
Kingdom Fund is currently non-diversified and the Advisor believes that the
benchmark index of the iShares MSCI Japan Fund may become non-diversified
in the future. More information about the proposed changes from
diversified to non-diversified is included in the attached proxy statement
under Proposals 5 and 6.
Q. How do the Board members recommend that I vote?
A. After careful consideration, the Board of Directors, including those who
are not affiliated with the Company or the Advisor, recommend that you vote
in favor of the proposed nominees for election as Directors and in favor of
the other proposals you are considering.
Q. Who gets to vote?
A. Any person who owned shares of an Index Fund on the "record date," which
was the close of business on Wednesday, September 26, 2001 - even if you
later sold your shares. You may cast one vote for each share you owned on
the record date.
Q. How can I vote?
A. You can vote your shares (i) by mail, using the enclosed proxy card, (ii)
by touchtone telephone, by calling 1-800-454-8683, (iii) through the
Internet at www.proxyvote.com, or (iv) in person at the special meeting.
However you decide to vote, please take the time to read the full text of
the proxy statement before your vote.
Q. Who should I call if I have any questions about voting?
A. You can call our proxy solicitor, Georgeson Shareholder Communications Inc.
at 1-888-895-1826.
2
PROXY STATEMENT
iSHARES, INC.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(800) iShares (474-2737)
_______________________________
SPECIAL MEETING OF SHAREHOLDERS
December 19, 2001
________________________________
This Proxy Statement is furnished in connection with the solicitation of proxies
by or on behalf of the Board of Directors of iShares, Inc. (the "Company") for
use at the Company's special meeting of shareholders to be held at the offices
of the Company's administrator and fund accounting agent, PFPC Inc., at 400
Bellevue Parkway, Wilmington, Delaware 19809, on December 19, 2001 at 1:00 p.m.
(Eastern Time). The special meeting and any adjournment thereof are
collectively referred to in this Proxy Statement as the "Meeting". The shares
of each series of the Company (each an "Index Fund" and collectively the "Index
Funds") are referred to in this Proxy Statement as "Shares".
The Board of Directors of the Company has fixed the close of business on
September 26, 2001 as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Meeting and at any postponement or
adjournment thereof. The Company has engaged Georgeson Shareholder
Communications Inc., 17 State Street, New York, New York 10004, to assist in
soliciting proxies for the Meeting. The anticipated cost of the solicitation is
expected to be approximately $114,000. It is expected that the solicitation of
proxies will be primarily by mail, but may include communications by telephone,
telegraph, facsimile, e-mail or personal interview. The Company will bear all
proxy solicitation costs. Any shareholder giving a proxy may revoke it at any
time before it is exercised by submitting to the Company a written notice of
revocation or a subsequently executed proxy or by attending the Meeting and
electing to vote in person. This Proxy Statement, the Notice of Special Meeting
and the enclosed proxy card (the "Proxy") are expected to be distributed to
shareholders of each Index Fund on or about October [19], 2001.
A Proxy is enclosed with respect to your Shares. The Proxy should be completed
in full with respect to the matters affecting your Shares. If you own shares in
more than one Index Fund, there is a separate Proxy for each Index Fund you own.
Each Share is entitled to one vote.
If your Proxy is executed properly and returned the Shares represented by it
will be voted at the Meeting in accordance with your instructions on the Proxy.
If, however, no instructions are specified, the Shares will be voted `FOR' each
proposal. If you do not expect to be present at the Meeting and wish your
Shares to be voted, please date and sign the enclosed Proxy and mail it in the
enclosed reply envelope.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT SEMI-ANNUAL
REPORT AND ANNUAL REPORT TO SHAREHOLDERS TO ANY SHAREHOLDER UPON REQUEST. THE
COMPANY'S SEMI-ANNUAL REPORT AND ANNUAL REPORT TO SHAREHOLDERS MAY BE OBTAINED
FROM THE COMPANY BY SENDING A WRITTEN REQUEST TO THE COMPANY AT THE ADDRESS
PROVIDED ABOVE, OR BY CALLING (800) iShares (474-2737).
PROPOSALS TO BE VOTED ON
Proposal Voting Shareholders Board Recommendation
-------- ------------------- --------------------
1. Election of Six Directors Each Index Fund Recommends to vote "for"
2. Approval of Amendment to the Advisory Agreement Each Index Fund Recommends to vote "for"
3. Approval of Change to the Fundamental Investment
Policy with Respect to the Purchase of Securities
of a Single Issuer Each Index Fund Recommends to vote "for"
4. Approval of Change to the Fundamental Investment
Policy with Respect to the Concentration Policy Each Index Fund Recommends to vote "for"
5. Approval of Change of iShares MSCI Japan Index iShares MSCI Japan
Fund From Diversified to Non-Diversified Index Fund Recommends to vote "for"
6. Approval of Change of iShares MSCI United Kingdom iShares MSCI United
Index Fund From Diversified to Non-Diversified Kingdom Index Fund Recommends to vote "for"
2
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and avoid the time and expense involved in validating your vote if you fail to
sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on
the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signatures
------------ ----------------
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
3
PROPOSAL 1: ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS
Shareholders will vote at the Meeting to elect six Directors to the Board of
Directors of the Company. Each Director so elected will hold office until the
next meeting of shareholders and until his successor is elected and qualifies,
or until his term as Director is terminated as provided in the Company's
governing documents. Normally, there will be no annual meeting of shareholders
to elect Directors of the Company, except as required by the Investment Company
Act of 1940 (the "1940 Act").
The Board of Directors is currently comprised of five individuals: Nathan Most,
John B. Carroll, W. Allen Reed, Timothy A. Hultquist and Lloyd N. Morrisett.
Messrs. Hultquist and Morrisett are not standing for re-election. The Board of
Directors has nominated Messrs. Most, Carroll and Reed, and Garrett F. Bouton,
Richard K. Lyons and George G.C. Parker for election as Directors at the
Meeting. These individuals were selected by the Company's Nominating Committee,
upon the recommendation of Barclays Global Fund Advisors, the Company's
investment advisor ("BGFA" or the "Advisor"), and, upon the recommendation of
the Nominating Committee, by the Board of Directors. The Nominating Committee
is comprised of those Directors who are not "interested persons" of the Company,
as that term is defined in the 1940 Act. Messrs. Most, Lyons and Parker
currently serve as Trustees of iShares Trust, another open-end registered
investment company advised by BGFA. Messrs. Carroll and Reed, current members
of the Board of Directors, have been nominated as Trustees of iShares Trust to
serve with Messrs. Most, Lyons and Parker. The shareholders of iShares Trust
are scheduled to vote on the election of trustees at a special meeting that will
be held on November 15, 2001. If so elected to the Boards of both funds, the
individuals nominated for election would oversee 68 separate portfolios in the
iShares Fund Complex, which currently consists of 21 Index Funds of the Company
and 47 series of iShares Trust. BGFA believes, and the Board of Directors has
agreed, that shareholder interests can more effectively be represented by having
the same individuals serve on the Boards of both BGFA-advised exchange traded
funds. BGFA also advised the Nominating Committee and the Board that this
arrangement should provide certain administrative efficiencies and potential
cost savings for BGFA.
The proxies named in the enclosed form of proxy will vote for the election of
these nominees unless you withhold authority to vote for any of them in your
proxy. The persons named above as nominees for election have consented to be
named in this Proxy Statement and to serve as Directors if elected. The Board
of Directors has no reason to believe that any nominee will become unavailable
for election, but if that should occur before the Meeting, proxies will be voted
for such other person or persons as the Board of Directors may recommend.
The Directors, nominees for Director and Officers of the Company are listed
below, together with their ages, respective positions and a brief statement of
their principal occupations during the past five years. As of September [26],
2001, the executive officers and Directors of the Company, as a group
beneficially owned less than [1%] of the outstanding shares of each Index Fund.
Directors and Officers of the Company
-------------------------------------
Principal Occupations
Name, Address and Age Position with the Company and During the Past Five Years and Other
Length of Time Served Directorships
--------------------------------------------------------------------------------------------------------------------
Nathan Most * Director, President and Consultant to various companies including the
P.O. Box 193 Chairman of the Board since Advisor; Senior Vice President (retired) (from
Burlingame, CA 94011-0193 1996, Nominee for Director 1992 to 1996) of the American Stock Exchange,
Age 87 Inc.; President and CEO (retired) (from 1982 to
1996) of AMEX Commodities Corporation.
John B. Carroll Director since 1996, Nominee Director of Common Fund Institutional Funds and
520 Main Street for Director J.P. Morgan Private Equity Fund; Retired Vice
Ridgefield, CT 06877 President of Investment Management (from
4
Principal Occupations
Name, Address and Age Position with the Company and During the Past Five Years and Other
Length of Time Served Directorships
--------------------------------------------------------------------------------------------------------------------
Age 66 1984-2000) of GTE (Verizon) Corporation; former
President of GTE (Verizon) Investment
Management Corporation (1984 to 1997); Advisory
Board member of Ibbotson Assoc. (since 1998);
former Trustee and Member of the Executive
Committee (since 1991) of The Common Fund, a
non-profit organization; Member of the
Investment Committee (since 1988) of the TWA
Pilots Annuity Trust Fund; former Vice Chairman
and Executive Committee Member (since 1992) of
the Committee on Investment of Employee Benefit
Assets of the Financial Executive Institute;
and Member (since 1986) of the Pension
Advisory Committee of the New York Stock
Exchange.
W. Allen Reed Director since 1996, Nominee President, CEO and Director (since 1994) of
President for Director General Motors Asset Management Corporation;
General Motors Investment Chairman and CEO of the GM Trust Co.; Corporate
Management Corp. Vice President of General Motors Corporation;
767 Fifth Avenue Director (from 1995 to 1998) of Taubman
New York, NY 10153 Centers, Inc. (a real estate investment trust);
Age 54 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 of Temple
Inland Industries (since 2000); Member (since
2001) of the Pension Managers Advisory
Committee of the New York Stock Exchange;
Member (since 1995) of the New York State
Retirement System Advisory Board; Chairman
(since 1995) of the Investment Advisory
Committee of Howard Hughes Medical Institute.
Richard K. Lyons Nominee for Director Professor, University of California, Berkeley:
350 Barrows Hall Haas School of Business (since 1993); Member,
Haas School of Business Council on Foreign Relations; Consultant: IMF
UC Berkeley World Bank, Federal Reserve Bank, European
Berkeley, CA 94720 Commission and United Nations; Board of
Age 39 Directors: Matthews International Funds.
5
Principal Occupations
Name, Address and Age Position with the Company and During the Past Five Years and Other
Length of Time Served Directorships
-------------------------------------------------------------------------------------------------------------------
George G.C. Parker Nominee for Director Associate Dean for Academic Affairs, Director
Graduate School of Business of MBA Program, Professor, Stanford University:
Stanford University Graduate School of Business (since 1988);
521 Memorial Way formerly, Director of Executive Education,
Room K301 Stanford Business School (1979-1988); Board of
Stanford, CA 94305 Directors: Affinity Group, Bailard, Biehl and
Age 60 Kaiser, Inc., California Casualty Group of
Insurance Companies, Continental Airlines,
Inc., Community First Financial Group,
Dresdner/RCM Mutual Funds, H. Warshow & Sons,
Inc.
Garrett F. Bouton * Nominee for Director Global Chief Executive of Barclays Global
Barclays Global Investors Investors, N.A. for the Individual Investor
45 Fremont Street Markets and Regional Chief Executive Officer -
San Francisco, CA 94105 Canada, Australia & Southeast Asia; member of
Age 56 Barclays Global Investors, N.A.'s Global
Management Committee; Chairman of the Advisor;
Director of Barclays Global Investors, N.A. and
several affiliates; Chief Executive Officer of
ARBI Assets prior to 1996.
Timothy A. Hultquist Director since 1996 Advisory Director (since 1995) of Morgan
Advisory Director Stanley & Co. Incorporated; Chairman (since
Morgan Stanley & Co., 1994) and Trustee (since 1985) of the Board of
Incorporated Trustees of Macalester College; Treasurer and
1221 Avenue of the Americas Trustee (since 1995) of Russell Sage
30th Floor Foundation; Member (since 1994) of Wilmer Eye
New York, NY 10020 Institute Advisory Counsel at Johns Hopkins
Age 51 University Hospital; President (since 1992) of
the Hultquist Foundation; Chairman, Council of
Board Chairmen of Independent Colleges.
Lloyd N. Morrisett Director since 1996 President (retired) of The John and Mary R.
Children's Television Workshop Markle Foundation (from 1969 to 1998); Chairman
One Lincoln Plaza, 4th Floor (since 1970) of the Children's Television
New York, NY 10023 Workshop; Chairman (since 1998) and Director
Age 71 (since 1994) of Infonautics Corporation;
Trustee (since 1996) of RAND; Director (since
1976) of Haskins Laboratories, Inc.; Director
(1990 - January 1997) of the Multimedia
Corporation; Director (since 1992) of
Classroom, Inc.; Director (since 1995) of Smith
College Center for the Study of Social and
Political Change; Director (since 1998) of
Public Agenda Foundation; Member of Board of
Overseers (from 1995 to 1998) of Dartmouth
School of Medicine; Member (since 1968) of the
Council on Foreign Relations; and Member (since
1970) of the American Association for the
6
Principal Occupations
Name, Address and Age Position with the Company and During the Past Five Years and Other
Length of Time Served Directorships
-------------------------------------------------------------------------------------------------------------------
Advancement of Science.
Stephen M. Wynne Treasurer since 1996 Executive Vice President with PFPC Inc.
Executive Vice President (Delaware), and Director of PFPC Worldwide,
PFPC Inc. PFPC Inc., PFPC Trust Company, PFPC
400 Bellevue Parkway Corporation, PFPC International Ltd. (Dublin)
Wilmington, DE 19809 and PFPC International (Cayman) Ltd.: Member of
Age 46 Professional and Academic Advisory Boards of
Widener University's School of Business
Administration and Accounting and Taxation
Department.
R. Sheldon Johnson Secretary since 1996 Managing Director, Global Equity Derivatives,
Managing Director Morgan Stanley & Co. Incorporated (since 1988).
Morgan Stanley & Co.,
Incorporated
1585 Broadway
New York, NY 10036
Age 53
* Mr. Most is an "interested" Director, as defined in the 1940 Act, by reason
of his position as President of the Company. If elected, Mr. Bouton will be an
"interested" Director by reason of his affiliation with the Advisor.
During the fiscal year ended August 31, 2001, there were four regular meetings
and one special meeting of the Board of Directors.
The Company has a Nominating Committee, comprised of Messrs. Carroll, Hultquist,
Morrisett and Reed. The Nominating Committee is responsible for the selection
and nomination of candidates to serve as Directors. During the fiscal year
ended August 31, 2001, there was one meeting of the Nominating Committee. The
Nominating Committee will not consider nominees recommended by shareholders.
The Company has an Audit Committee, comprised of Messrs. Carroll, Hultquist,
Morrisett and Reed. The Audit Committee makes recommendations to the Board of
Directors with respect to the engagement of independent auditors and reviews
with the independent auditors the plan and results of the audit engagement and
matters having a material effect on the Company's financial operations. During
the fiscal year ended August 31, 2001, there were two meetings of the Audit
Committee.
The Company has a Pricing Committee, comprised of Messrs. Carroll, Hultquist,
Morrisett and Reed. The Pricing Committee determines the fair value of
portfolio securities of the Company between Board meetings, as necessary.
However, the Advisor normally determines the fair value of securities for which
there are no market quotations pursuant to procedures approved by the Board, and
such valuations are reviewed by the Board at its regular meetings. During the
fiscal year ended August 31, 2001, there were no meetings of the Pricing
Committee.
If Messrs. Bouton, Lyons and Parker are elected to serve as Directors, the Board
of Directors is expected to reconstitute each of the Committees shortly after
the Meeting. It is anticipated that Messrs. Lyons and Parker will join Messrs.
Reed and Carroll as members of the Audit, Nominating and Pricing Committees.
7
The table below sets forth the compensation earned by the Directors of the
Company for the fiscal year ended August 31, 2001. No officer of the Company is
entitled to any compensation, and no officer or Director is entitled to any
pension or retirement benefits, from the Company. As of August 31, 2001, the
Fund Complex consisted of the Company and iShares Trust.
Total
Pension or Compensation
Retirement from Company
Aggregate Benefits Accrued Estimated Annual and Fund
Name of Person Compensation as Part of Fund Benefits Upon Complex Paid to
And Position from Company Expenses Retirement Directors
------------------------------------------------------------------------------------------------------------------------
Nathan Most, * $67,500 None None $ 121,500**
Director, President
and Chairman of the
Board
John B. Carroll, $45,000 None None $ 45,000
Director
W. Allen Reed, $45,000 None None $ 45,000
Director
Timothy A. $45,000 None None $ 45,000
Hultquist, Director
Lloyd N. Morrisett, $45,000 None None $ 45,000
Director
* Mr. Most is an "interested" Director, as defined in the 1940 Act, by reason
of his position as President of the Company.
** Mr. Most received $54,000 as Trustee of iShares Trust.
Independent Accountants
On April 24, 2001, the Board of Directors, upon the recommendation of the Audit
Committee, selected PricewaterhouseCoopers LLP as independent auditors for the
Company for the fiscal year ended August 31, 2001. Ernst & Young LLP was the
independent auditor for the Company for the fiscal year ended August 31, 2000
and resigned on April 10, 2001. Ernst & Young LLP's report on the financial
statements for the past two years did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope, or accounting principles. During the past two fiscal years, there have
not been any disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. It is anticipated that PricewaterhouseCoopers LLP will provide the
same level of service to the Company as was provided by Ernst & Young LLP.
PricewaterhouseCoopers LLP has advised the Company that, to the best of its
knowledge and belief, as of the record date, no PricewaterhouseCoopers LLP
professional had any direct or material indirect ownership interest in the
Company inconsistent with independent professional standards pertaining to
accountants. It is expected that representatives of PricewaterhouseCoopers LLP
and Ernst & Young LLP will not be present at the Meeting, but will be available
by telephone to answer any questions that may arise. In reliance on Rule 32a-4
under the 1940 Act, the Company is not seeking shareholder ratification of the
selection of PricewaterhouseCoopers LLP as independent auditors.
8
The following table shows the aggregate fees PricewaterhouseCoopers LLP billed
to the Company, the Company's Advisor and affiliates of the Advisor that provide
services to the Company for its professional services rendered for the fiscal
year ended August 31, 2001. The Audit Committee has considered whether the
provision of services, of the type listed below under Financial Information
Systems Design and Implementation Fees and All Other Fees, is compatible with
maintaining the independent auditor's independence.
Company Advisor and Affiliates that
Provide Services to the Company
-----------------------------------------------------------------------------------------------------------
Audit Fees $231,000 *
Financial Information Systems
Design and Implementation Fees $0 $0
All Other Fees $136,500 $5,984,650
* Audit Fees billed to the Advisor and Affiliates that Provide Services to the
Company are included under the caption "All Other Fees."
REQUIRED VOTE
In the election of Directors to the Board of Directors of the Company, the
candidates receiving a plurality of votes cast at the Meeting in person or by
proxy by all shareholders voting as a single class, if a quorum is present, will
be elected.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
PROPOSAL 2. APPROVAL OF AMENDMENT TO THE COMPANY'S ADVISORY AGREEMENT
At a September 25, 2001 Special Meeting of the Board of Directors of the
Company, the Board considered and approved, and recommended to shareholders for
their approval, an amendment to the Advisory Agreement, dated as of May 8, 2000
(the "Current Advisory Agreement"), between the Company and BGFA. The Current
Advisory Agreement was last submitted to shareholders at a special meeting of
shareholders held on May 5, 2000 for their approval of certain amendments to the
agreement. A copy of the Advisory Agreement, as proposed to be amended, is
attached to this Proxy Statement as Appendix A and is marked to show changes
from the Current Advisory Agreement, other than stylistic changes and changes
reflecting the current names of the Index Funds (the "Proposed Advisory
Agreement"). The amendments do not change any of the terms of the Current
Advisory Agreement, except for the fee arrangements described below and certain
stylistic changes. According to the terms of both the Proposed and Current
Advisory Agreements, the Advisor, subject to the supervision of the Board and in
conformity with the stated investment policies of each Index Fund, manages the
investments of each Index Fund's assets. At a July 24, 2001 Board meeting, the
Board approved the addition of the iShares MSCI Pacific Ex-Japan Index Fund to
the Company. This Index Fund has not yet commenced operations. Appendix B sets
forth the amount of fees paid to the Advisor, on behalf of each Index Fund, for
the fiscal year ended August 31, 2001.
The Proposed Amendment
Under the Current Advisory Agreement, the Company pays the Advisor an annual
gross investment advisory fee as set forth on Schedule A to Appendix A, less the
aggregate of an Index Fund's fees and expenses, other than (i) expenses of the
Index Fund incurred in connection with the execution of portfolio securities
transactions on behalf of such Index Fund, (ii) expenses incurred in connection
with any distribution plan adopted by the Company in compliance with Rule 12b-1
under the 1940 Act, (iii) litigation expenses, (iv) taxes (including, but not
limited to, income, excise, transfer and withholding taxes), (v) any cost or
expense that a majority of the Directors of the Company who are not "interested
persons" (as defined in the 1940 Act) deems to be an extraordinary expense, and
(vi) the advisory fee payable to the Advisor thereunder. The Current
9
Advisory Agreement also provides that the Advisor shall reimburse the Company to
the extent that the expenses of any Index Fund (after subtracting the expenses
set forth in the preceding sentence) exceed the amount set forth in Schedule A
to Appendix B with respect to such Index Fund. Under the Proposed Advisory
Agreement, the Company will pay the Advisor the entire gross advisory fee set
forth on Schedule A to Appendix A, which is the same amount as under the Current
Advisory Agreement. The Advisor will pay all expenses incurred by the Company,
other than the expenses enumerated above. It should be noted that the net
expenses of each Index Fund will be the same under both the Current and the
Proposed Advisory Agreements. However, the presentation of the Company's
expenses will change if the Proposed Advisory Agreement is approved. Unless one
of the special categories of expenses referred to above is relevant to an Index
Series, it will have only two expense lines - advisory fees and Rule 12b-1 fees
(rather than separate expense lines for non-advisory expenses as at present).
Reasons for the Board of Directors Recommendation
After carefully considering the information presented to them, the Board of
Directors, including the Directors who are not "interested persons" as defined
in the 1940 Act, determined that the amendments were in the best interests of
the Company and each Index Fund, and voted to approve and recommend the Proposed
Advisory Agreement to shareholders. The amendments were recommended by the
Board in order to more closely align the Company's Advisory Agreement, and in
particular the fee structure, with the advisory agreement between the Advisor
and iShares Trust, another exchange traded fund advised by the Advisor. The
Board concluded that uniformity of fee structures of advisory agreements was
desirable and that the proposed fee structure would be simpler for shareholders
to understand. The Board noted that under the Proposed Advisory Agreement, it
would be theoretically possible for the Company to be liable to pay expenses to
service providers in the event of the insolvency of BGFA. The Board does not
believe this to be a material risk. The Board also noted that the proposed
changes to the Advisory Agreement will not affect the net expenses of any Index
Fund or the net fees payable to the Advisor by any Index Fund.
Affiliated Brokerage
For the fiscal year ended August 31, 2001, the Company paid $1,411,523 in
aggregate brokerage commissions. During that fiscal year, certain portfolio
transactions were executed through Morgan Stanley & Co. Incorporated ("MS&Co."),
an affiliated broker of the Company due to the Company Secretary's position as a
Managing Director of MS&Co. As a percentage of aggregate brokerage commissions
paid during the fiscal year, MS&Co. received 14.3% of the aggregate dollar
amount ($201,691).
Additional Information About the Advisor
The Advisor is a California corporation and a wholly owned subsidiary of
Barclays Global Investors, N.A. ("BGI") located at 45 Fremont Street, San
Francisco, California, 94105, which in turn is wholly owned indirectly by
Barclays Bank PLC located at 54 Lombard Street, London, EC3P3AH, United Kingdom.
The Advisor is registered as an investment advisor under the Investment Advisers
Act of 1940. As of May 31, 2001, the Advisor and its affiliates managed assets
aggregating in excess of $785 billion. The directors and principal executive
officers and their positions with the Advisor are set forth below:
Name Principal Occupation
----------------------------------------------------------------------------------------------------
Garrett Bouton Chairman of BGFA and Director of BGI
Patricia C. Dunn Director of BGFA and Chairman and Director of BGI
Alison Davis Officer of BGFA and Chief Financial Officer of BGI
Andrea M. Zulberti Director of BGFA and Chief Administrative Officer of BGI
Joanne T. Medero Secretary
Theda R. Haber Assistant Secretary
Terri L. Slane Assistant Secretary
10
The Advisor also acts as investment advisor or sub-advisor for a number of
investment companies and portfolios, including three international equity index
funds. Information concerning the following international equity index funds
that have investment objectives similar to those of certain Index Funds, each of
which is either advised or sub-advised by the Advisor, is set forth below:
Advisor's Role Net Assets as
in Management of August 31,
Fund and Portfolio of Fund and 2001 Contractual Advisory/Sub-Advisory Fee
Names Portfolios Arrangement
----------------------------------------------------------------------------------------------------------------------
MIP Advisor $ 93,642,246 0.25% of net assets (Advisor responsible for payment
International Index Fund of most expenses of Fund)
----------------------------------------------------------------------------------------------------------------------
iShares S&P Global 100 Advisor $ 46,216,000 0.40% of Fund's assets (Advisor responsible for
Index Fund payment of most expenses of Fund)
----------------------------------------------------------------------------------------------------------------------
iShares S&P Europe 350 Advisor $178,003,000 0.60% of Fund's assets (Advisor responsible for
Index Fund payment of most expenses of Fund)
----------------------------------------------------------------------------------------------------------------------
iShares S&P / TSE 60 Advisor $ 6,681,000 0.50% of Fund's assets (Advisor responsible for
Index Fund payment of most expenses of Fund)
----------------------------------------------------------------------------------------------------------------------
iShares MSCI EAFE Index Advisor $272,888,000 0.35% of Fund's assets (Advisor responsible for
Fund payment of most expenses of Fund)
E*Trade Sub-Advisor $ 9,787,700 0.20% of net assets of first $200 million; plus
Global Titan Index Fund 0.15% of net assets of the next $300 million; plus
0.12% of net assets thereafter ($75,000 per year
minimum)
State Farm Sub-Advisor $164,591,955 0.35% of net assets of first $50 million; plus 0.30%
International Equity Fund of net assets of next $50 million; plus 0.20% of net
assets thereafter; minus the fund's custody fees
REQUIRED VOTE
The approval of Proposal 2 in respect of an Index Fund requires the affirmative
vote of a majority of the shares of the Index Fund, as defined in the 1940 Act,
outstanding and entitled to vote at the Meeting. Under the 1940 Act, this means
(i) 67% or more of the voting securities of the Index Fund present at the
Meeting, in person or by proxy, or (ii) more than 50% of the outstanding voting
securities of the Index Fund (a "1940 Act Majority"). In the event that
Proposal 2 does not receive the required vote from the shareholders of any Index
Fund, the Current Advisory Agreement will continue in effect with respect to
such Index Fund, and the Board of Directors will consider other actions that may
be taken, including such proposals as may be recommended by the Advisor.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2.
PROPOSAL 3: APPROVAL OF CHANGE TO THE FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN A SINGLE ISSUER
Each Index Fund currently has a fundamental investment policy stating that it
will not purchase a security (other than obligations of the United States
Government, its agencies and instrumentalities) if as a result 25% or more of
its total assets would be invested in a single issuer. The Board has approved
removal of this fundamental policy, subject to shareholder approval, because the
restriction can cause frequent adjustments to an Index Fund's portfolio that
adversely affect tracking and result in the incurrence of unnecessary
11
transaction costs and the realization of taxable gains that would otherwise not
have to be realized. The benchmark indices of several of the Index Funds (e.g.,
----
Sweden and Brazil as of August 31, 2001) have greater than 25% weightings in the
securities of one issuer and the benchmark indices of a number of other Index
Funds have had such weightings in the past or may do so in the future. In order
to qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), an Index Fund must generally ensure that, as of
each fiscal quarter end, no more than 25% of its total assets are invested in
the securities of any one issuer. The current fundamental policy requires that
each Index Fund comply with the 25% restriction every day instead of only at
fiscal quarter ends, resulting in an unnecessary burden on managing the Index
Funds. In light of the Code requirement, BGFA does not expect an Index Fund's
investment in the securities of a single issuer to exceed 25% as of each fiscal
quarter end.
REQUIRED VOTE
The approval of Proposal 3 in respect of an Index Fund requires a 1940 Act
Majority of the shares of the Index Fund, outstanding and entitled to vote at
the Meeting. In the event that Proposal 3 does not receive the required vote
from the shareholders of any Index Fund, the current fundamental investment
policy will continue in effect with respect to such Index Fund, and the Board of
Directors will consider other actions that may be taken, including such
proposals as may be recommended by the Advisor.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 3.
PROPOSAL 4: APPROVAL OF CHANGE TO INDUSTRY CONCENTRATION POLICY
The current industry concentration policy of each Index Fund is that:
With respect to the two most heavily weighted industries or groups of
industries in its benchmark MSCI Index, an Index Fund will invest in
securities (consistent with its investment objective and other investment
policies) so that the weighting of each such industry or group of
industries in the Index Fund does not diverge by more than 10% from the
respective weighting of such industry or group of industries in its
benchmark MSCI Index. An exception to this policy is that if an investment
in the stock of a single issuer would account for more than 25% of the
Index Fund's assets, that Index Fund will invest less than 25% of its net
assets in such stock and will reallocate the excess to stock(s) in the same
industry or group of industries, and/or to stock(s) in another industry or
group of industries, in its benchmark MSCI Index. Each Index Fund will
evaluate these industry weightings at least weekly, and at the time of
evaluation will adjust its portfolio composition to the extent necessary to
maintain compliance with the above policy. An Index Fund may not
concentrate its investments except as discussed above.
In light of the proposed elimination, discussed in Proposal 4, of the
fundamental policy limiting the investment of an Index Fund in a single issuer
(other than obligations of the United States Government, its agencies and
instrumentalities) to 25% of the Index Fund's total assets, the Board of
Directors has approved, and recommends to shareholders for their approval, a
simplified concentration policy as follows:
No Index Fund will 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, to the extent practicable, an Index Fund will
concentrate to approximately the same extent that its benchmark MSCI Index
concentrates in the stocks of such particular industry or group of
industries, provided that each Index Fund will comply with the
--------
diversification requirements applicable to regulated investment companies
of the Internal Revenue Code, any underlying Treasury regulations or any
successor provision.
The proposed change would permit an Index Fund to invest more than 25% of its
assets in a single issuer, subject to its general need (in order to qualify as a
regulated investment company as defined in Subchapter M of the Code) to ensure
that investments in a single issuer do not exceed 25% of its total assets as of
any fiscal quarter end. The Advisor recommended this change to the Board based
on its experience that having an
12
absolute cap on the percentage that may be invested in a single issuer was
resulting in the need to rebalance certain Index Funds' portfolios far more
frequently than required in order to comply with the Code requirements. Such
frequent rebalancings can adversely affect tracking, costs, and the realization
of capital gains.
In addition, the Advisor recommended, and the Board agreed, that it would be in
the Company's best interests to have a simpler concentration policy that would
be more readily understood by shareholders. It should be noted that, in certain
cases, it may not be practicable for an Index Fund to concentrate to the same
extent as its benchmark Morgan Stanley Capital International ("MSCI") Index
because a single stock has a greater than 25% weighting in the benchmark index
and is the only stock in the relevant industry in such index. Concentration in
that stock would cause the Index Fund to violate the Code diversification
requirements noted above. This is no different than the situation under the
Index Funds' current concentration policies.
REQUIRED VOTE
The approval of Proposal 4 in respect of an Index Fund requires a 1940 Act
Majority of the shares of the Index Fund, outstanding and entitled to vote at
the Meeting. In the event that Proposal 4 does not receive the required vote
from the shareholders of any Index Fund, the current fundamental investment
policy will continue in effect with respect to such Index Fund, and the Board of
Directors will consider other actions that may be taken, including such
proposals as may be recommended by the Advisor.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 4.
PROPOSALS TO CHANGE EACH OF THE JAPAN AND UNITED KINGDOM INDEX FUNDS FROM
DIVERSIFIED TO NON-DIVERSIFIED
The iShares MSCI Japan Index Fund and the iShares MSCI United Kingdom Index Fund
are diversified open-end investment companies for purposes of the 1940 Act.
Under the 1940 Act, a "diversified company" must meet the following
requirements: at least 75% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other
investment companies, and other securities limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the total assets of
such company and to not more than 10% of the outstanding voting securities of
such issuer. At the Meeting, shareholders of the iShares MSCI Japan Index Fund
and iShares MSCI United Kingdom Index Fund will be asked to approve a proposal
to change each of these Index Funds from a diversified company to a non-
diversified company. A non-diversified company is not limited by the 1940 Act
with regard to the portion of its assets that may be invested in the securities
of a single issuer.
The investment return of a non-diversified fund typically is dependent upon the
performance of a smaller number of securities than is the investment return of a
diversified fund of comparable size. A non-diversified fund typically provides
less stable investment returns than a diversified fund. Change to non-
diversified status would provide greater discretion to the Advisor to enter into
more concentrated positions with respect to individual investments. Each Index
Fund, regardless of whether classified as 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 Code, in order to relieve it of any liability for Federal income tax to
the extent that its earnings are distributed to shareholders. To so qualify,
each Index Fund must, among other things, diversify its holdings so that, at the
end of each quarter of its taxable year, the following two conditions are met:
(a) at least 50% of the value of the Index Fund's assets is represented by cash,
U.S. government securities, securities of other regulated investment companies
and other securities with respect to which the Index Fund's investment is
limited, in respect of any one issuer, to an amount not greater than 5% of the
Index Fund's total assets and 10% of the outstanding voting securities of such
issuer and (b) not more than 25% of the value of the Index Fund's assets is
invested in securities of any one issuer (other than U.S. government securities
or securities of other regulated investment companies). As discussed below, the
provisional MSCI United Kingdom Index is currently non-diversified, and the
Advisor believes that the provisional MSCI Japan Index may become non-
diversified in the future. Under the 1940 Act and the
13
regulations thereunder, if a fund that is classified as "non-diversified" for
purposes of the 1940 Act is in fact diversified for such purposes for a three
year period, it will revert to "diversified" status automatically.
These proposals were submitted to shareholders of both Index Funds at a meeting
held in May 2000. However, because the required votes were not obtained, they
were not approved. Accordingly, the Board of Directors is resubmitting these
proposals to shareholders of the iShares MSCI Japan Index Fund and the iShares
MSCI United Kingdom Index Fund.
PROPOSAL 5: APPROVAL OF CHANGE OF iSHARES MSCI JAPAN INDEX FUND FROM DIVERSIFIED
TO NON-DIVERSIFIED
(Applies Only to Holders of Shares of the iShares MSCI Japan Index Fund)
The Advisor proposed, and the Board of Directors has approved and recommended to
shareholders of the iShares MSCI Japan Index Fund, the proposed change to a non-
diversified company in light of potential changes in the Japanese securities
markets and in the provisional MSCI Japan Index, which is the iShares MSCI Japan
Index Fund's benchmark. The proposed change will increase the iShares MSCI
Japan Index Fund's investment flexibility and is expected to improve its ability
to track the provisional MSCI Japan Index, should that index become non-
diversified in the next three years.
While the iShares MSCI Japan Index Fund uses a portfolio sampling technique and
does not normally invest in all of the securities in the provisional MSCI Japan
Index, it typically holds a representative subset of those securities. The
Advisor and the Directors believe that it is appropriate for shareholders to
vote on this matter at the upcoming Meeting to avoid the possible expense and
distraction of holding another Special Meeting of Shareholders of the iShares
MSCI Japan Index Fund in the near term in the event the benchmark index becomes
non-diversified. The Advisor does not expect to cause the iShares MSCI Japan
Index Fund to invest in a non-diversified portfolio if the benchmark index does
not become non-diversified. As noted above, the iShares MSCI Japan Index Fund
will revert to "diversified" status three years after the proposed change if it
continues to be operated as a diversified company throughout such period.
REQUIRED VOTE
The approval of Proposal 5 requires the affirmative vote of the holders of a
1940 Act Majority of the iShares MSCI Japan Index Fund. In the event that
Proposal 5 does not receive the affirmative vote of a 1940 Act Majority of the
iShares MSCI Japan Index Fund, the Board of Directors will consider other
actions that may be taken, including such proposals as may be recommended by the
Advisor.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE iSHARES MSCI JAPAN
INDEX FUND VOTE "FOR" PROPOSAL 5.
PROPOSAL 6: APPROVAL OF CHANGE OF THE iSHARES MSCI UNITED KINGDOM INDEX FUND
FROM DIVERSIFIED TO NON-DIVERSIFIED
(Applies Only to Holders of Shares of the iShares MSCI United Kingdom Index
Fund)
The Advisor proposed, and the Board of Directors has approved and recommended to
shareholders of the iShares MSCI United Kingdom Index Fund, the proposed change
to a non-diversified company in light of recent changes in the British
securities markets and in the provisional MSCI United Kingdom Index, which is
the iShares MSCI United Kingdom Index Fund's benchmark. The proposed change
will increase the iShares MSCI United Kingdom Index Fund's investment
flexibility and is expected to improve its ability to track the provisional MSCI
United Kingdom Index, which is currently non-diversified. The requirement that
the iShares MSCI United Kingdom Index Fund operate as a diversified company has
made it more difficult for the iShares MSCI United Kingdom Index Fund to track
closely the performance of its benchmark index. While the iShares MSCI United
Kingdom Index Series uses a portfolio sampling technique and does not normally
invest in all
14
of the securities in the provisional MSCI United Kingdom Index, it typically
holds a representative subset of those securities, including significant
positions in securities that have index weightings of more than 5%. As a result
of developments in the British securities markets since the inception of the
iShares MSCI United Kingdom Index Fund, particularly the creation by merger of
BPAmoco p.l.c., Vodafone AirTouch PLC, Glaxosmithkline plc and Astra Zeneca plc,
the number of companies in the benchmark index with a weighting of greater than
5% has increased to four, having an aggregate index weighting of 33.77% (as of
August 31, 2001) from two having a total weight of 10.36% (as of March 7, 1996).
The Advisor believes that there is a material risk that the benchmark index will
become even more non-diversified in the future.
REQUIRED VOTE
The approval of Proposal 6 requires the affirmative vote of a 1940 Act Majority
of the iShares MSCI United Kingdom Index Fund. In the event that Proposal 6
does not receive the affirmative vote of a 1940 Act Majority of the iShares MSCI
United Kingdom Index Fund, the Board of Directors will consider other actions
that may be taken, including such proposals as may be recommended by the
Advisor.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE iSHARES MSCI UNITED
KINGDOM INDEX FUND VOTE "FOR" PROPOSAL 6.
VOTING INFORMATION
RECORD DATE. Only shareholders of record at the close of business on September
26, 2001, will be entitled to vote at the Meeting. On that date, the number of
outstanding Shares were as follows:
Series Number of Shares Outstanding
------ ----------------------------
Australia 6,400,000
Austria 1,400,030
Belgium 840,030
Brazil (Free) 1,250,000
Canada 2,400,000
EAFE 2,400,000
EMU 1,600,000
France 3,000,000
Germany 7,800,000
Hong Kong 5,926,000
Italy 1,950,000
Japan 60,600,000
Malaysia (Free) 18,825,030
Mexico (Free) 3,000,030
Netherlands 1,300,000
Singapore (Free) 14,300,000
South Korea 2,850,000
15
Series Number of Shares Outstanding
------ ----------------------------
Spain 1,275,000
Sweden 825,000
Switzerland 2,501,000
Taiwan 12,500,000
United Kingdom 7,801,000
QUORUM. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
any of the proposals are not received, the persons named as proxies, or their
substitutes, may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. If a quorum is not present, or in the event a quorum is
present at the Meeting but sufficient vote to approve the proposals are not
received, the persons named as proxies will vote those proxies which they are
entitled to vote FOR the proposal in favor of any adjournment, and will vote
those proxies required to be voted AGAINST the proposal against any adjournment.
A quorum is constituted with respect to an Index Fund or the Company, as the
case may be, by the presence in person or by proxy of the holders of more than
one-third of the outstanding voting securities of such Index Fund or the
Company, as the case may be. A quorum must be present at the meeting with
respect to the Company or an Index Fund with respect to each proposal to be
acted upon for the Company or such Index Fund. For example, a quorum must be
present for the iShares MSCI Japan Index Fund for a vote to be held for that
Index Fund with respect to Proposals 2, 3, 4 and 5. Properly executed proxies
may be returned with instructions to abstain from voting or to withhold
authority to vote (an "abstention") or to represent a broker "non-vote" (which
is a proxy from a broker or nominee indicating that the broker or nominee has
not received instructions from the beneficial owner or other person entitled to
vote shares on a particular matter with respect to which the broker or nominee
does not have the discretionary power to vote). Shares represented by broker
non-votes are treated as being present for purposes of determining a quorum. A
vote cast does not include an abstention or the failure to vote for or against
any proposal. Therefore, for purposes of determining the affirmative vote of a
"1940 Act Majority" or a "majority of the outstanding shares" in respect of
Proposals 2, 3, 4, 5 and 6, an abstention or the failure to vote, including a
broker non-vote, although counted toward the determination of a quorum, will be
the equivalent of a vote against the proposal. However, in the case of Proposal
1, abstentions and broker non-votes will be counted toward the determination of
a quorum, but will have no effect on the approval of the Proposal because
Proposal 1 requires a plurality of the votes cast and abstentions and broker
non-votes will not be considered as votes cast.
ANNUAL MEETINGS. Consistent with its By-laws and Maryland law the Company does
not presently intend to hold annual meetings of shareholders except as required
by the 1940 Act or other applicable law.
OTHER SHAREHOLDER INFORMATION
As of September 14, 2001, the name, address and percentage ownership of each
participant in The Depository Trust Company ("DTC Participant") that owned of
record 5% or more of the outstanding shares of each Index Fund were as follows:
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Australia Chase Manhattan Bank 52.77%
One Chase Manhattan Plaza
New York, NY 10081
16
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Deutsche Bank 6.44%
130 Liberty Street
New York, NY 10005
Bank of New York 5.94%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 5.63%
59 Wall Street
New York, NY 10005
Austria Merrill Lynch Pierce Fenner & Smith Inc. 27.36%
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Salomon Smith Barney Inc. 13.72%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Citibank/Private Banking 6.67%
One Court Square, 22/nd/ Floor
Long Island City, NY 11120
Brown Bros. Harriman & Co. 5.86%
59 Wall Street
New York, NY 10005
Swiss American Securities, Inc. 5.29%
12 E. 49/th/ Street
New York, NY 10017
Wilmington Trust Co. 5.09%
Rodney Square North
Wilmington, DE 19890
Chase Manhattan Bank 5.02%
One Chase Manhattan Plaza
New York, NY 10081
Morgan Stanley & Co. 5.01%
One Pierrepont Plaza
Brooklyn, NY 11201
Belgium Merrill Lynch Pierce Fenner & Smith Inc. 21.78%
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Spear, Leeds & Kellogg 7.73%
120 Broadway, 5/th/ Floor
New York, NY 10006
17
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Salomon Smith Barney Inc. 7.72%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Morgan Stanley & Co. 7.26%
One Pierrepont Plaza
Brooklyn, NY 11201
Citibank/Private Banking 6.89%
One Court Square, 22/nd/ Floor
Long Island City, NY 11120
Bank of New York 5.75%
One Wall Street
New York, NY 10286
Brazil (Free) Brown Bros. Harriman & Co. 22.24%
59 Wall Street
New York, NY 10005
State Street Bank & Trust 19.96%
1776 Heritage Drive
Quincy, MA 02171
Merrill Lynch Pierce Fenner & Smith Inc. 18.61%
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Morgan Stanley & Co. 12.26%
One Pierrepont Plaza
Brooklyn, NY 11201
Boston Safe Deposit & Trust Co. 8.03%
One Caboat Road
Medford, MA 02155
Canada Merrill Lynch Pierce Fenner & Smith Inc. 25.01%
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Salomon Smith Barney Inc. 14.99%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Charles Schwab & Co., Inc. 9.91%
Newport Financial Center
111 Pavonia Avenue East, 3/rd/ Floor
Jersey City, NJ 07310
18
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
EMU Merrill Lynch Pierce Fenner & Smith Safekeeping 28.66%
101 Hudson Street
Jersey City, NJ 07302
Salomon Smith Barney Inc. 13.21%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Brown Bros. Harriman & Co. 8.78%
59 Wall Street
New York, NY 10005
Bank of New York 8.74%
One Wall Street
New York, NY 10286
Morgan Stanley & Co. 7.97%
One Pierrepont Plaza
Brooklyn, NY 11201
Swiss American Securities, Inc. 5.58%
12 E. 49/th/ Street
New York, NY 1017
Charles Schwab & Co., Inc. 5.46%
Newport Financial Center
111 Pavonia Avenue East, 3rd Floor
Jersey City, NJ 07310
France State Street Bank & Trust Company 17.04%
1776 Heritage Drive
Quincy, MA 02171
Merrill Lynch Pierce Fenner & Smith Safekeeping 10.08%
101 Hudson Street
Jersey City, NJ 07302
Bank of New York 8.48%
One Wall Street
New York, NY 10286
Citibank, N.A. 7.38%
1410 Westshore Blvd.
Tampa, FL 33607
Brown Bros. Harriman & Co. 6.62%
59 Wall Street
New York, NY 10005
Germany State Street Bank & Trust Company 10.01%
1776 Heritage Drive
Quincy, MA 02171
19
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Schwab (Charles) & Co., Inc. 6.65%
Newport Financial Center
111 Pavonia Avenue East, 3/rd/ Floor
Jersey City, NJ 07310
Witter (Dean) Reynolds, Inc. 6.26%
5 World Trade Center, 5th Floor
New York, NY 10048
Brown Bros. Harriman & Co. 5.68%
59 Wall Street
New York, NY 10005
Bank of New York 5.66%
One Wall Street
New York, NY 10286
Merrill Lynch Pierce Fenner & Smith Safekeeping 5.43%
101 Hudson Street
Jersey City, NJ 07302
Hong Kong Salomon Smith Barney Inc. 10.40%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Bank of New York 8.85%
One Wall Street
New York, NY 10286
Charles Schwab & Co., Inc. 6.48%
Newport Financial Center
111 Pavonia Avenue East, 3rd Floor
Jersey City, NJ 07310
Morgan Stanley & Co. 6.46%
One Pierrepont Plaza
Brooklyn, NY 11201
Merrill Lynch Pierce Fenner & Smith Safekeeping 5.77%
101 Hudson Street
Jersey City, NJ 07302
Italy Brown Bros. Harriman & Co. 20.25%
59 Wall Street
New York, NY 10005
Merrill Lynch Pierce Fenner & Smith Safekeeping 15.52%
101 Hudson Street
Jersey City, NJ 07302
State Street Bank & Trust Company 7.78%
1776 Heritage Drive
Quincy, MA 02171
20
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Morgan Stanley & Co. 6.57%
One Pierrepont Plaza
Brooklyn, NY 11201
Japan Morgan Stanley & Co. 8.21%
One Pierrepont Plaza
Brooklyn, NY 11201
Brown Bros. Harriman & Co. 7.42%
59 Wall Street
New York, NY 10005
State Street Bank & Trust Company 7.15%
1776 Heritage Drive
Quincy, MA 02171
Bank of New York 7.08%
One Wall Street
New York, NY 10286
Northern Trust 6.95%
801 S. Canal Street
Chicago, IL 60607
Swiss American Securities, Inc. 6.18%
12 E. 49/th/ Street
New York, NY 10017
Malaysia (Free) State Street Bank & Trust Company 28.71%
1776 Heritage Drive
Quincy, MA 02171
Bank of New York 15.11%
One Wall Street
New York, NY 10286
Salomon Smith Barney Inc. 6.61%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Citibank, N.A. 5.77%
1410 Westshore Blvd.
Tampa, FL 33607
Mexico (Free) Bank of Nova Scotia 16.67%
Taxable Account CDS
One Liberty Plaza
New York, NY 10006
State Street Bank & Trust Company 11.48%
1776 Heritage Drive
Quincy, MA 02171
21
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Salomon Smith Barney Inc. 7.13%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
Morgan Stanley & Co. 5.32%
One Pierrepont Plaza
Brooklyn, NY 11201
Schwab (Charles) & Co., Inc. 5.21%
Newport Financial Center
111 Pavonia Avenue East, 3/rd/ Floor
Jersey City, NJ 07310
Netherlands Merrill Lynch Pierce Fenner & Smith Safekeeping 17.95%
101 Hudson Street
Jersey City, NJ 07302
State Street Bank & Trust Company 13.51%
1776 Heritage Drive
Quincy, MA 02171
Bank of New York 9.73%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 9.71%
59 Wall Street
New York, NY 10005
Citibank, N.A. 8.08%
1410 Westshore Blvd.
Tampa, FL 33607
Singapore (Free) Morgan Stanley & Co. 27.69%
One Pierrepont Plaza
Brooklyn, NY 11201
Chase Manhattan Bank 8.94%
One Chase Manhattan Plaza
New York, NY 10081
Merrill Lynch Pierce Fenner & Smith Safekeeping 5.59%
101 Hudson Street
Jersey City, NJ 07302
Salomon Smith Barney Inc. 5.45%
333 West 34/th/ Street, 3/rd/ Floor
New York, NY 10001
South Korea Boston Safe Deposit & Trust Co. 39.87%
One Cabot Road
Medford, MA 02155
22
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Brown Bros. Harriman & Co. 12.41%
59 Wall Street
New York, NY 10005
Merrill Lynch Pierce Fenner & Smith Safekeeping 7.57%
101 Hudson Street
Jersey City, NJ 07302
Citibank, N.A. 6.23%
1410 Westshore Blvd.
Tampa, FL 33607
Hong Kong Securities Clearing Company, Limited 5.55%
[Insert Address]
Spain Merrill Lynch Pierce Fenner & Smith Safekeeping 19.07%
101 Hudson Street
Jersey City, NJ 07302
Brown Bros. Harriman & Co. 12.57%
59 Wall Street
New York, NY 10005
Morgan Stanley & Co. 9.64%
One Pierrepont Plaza
Brooklyn, NY 11201
Citibank, N.A. 5.42%
1410 Westshore Blvd.
Tampa, FL 33607
Spear, Leeds & Kellogg 5.37%
120 Broadway, 5/th/ Floor
New York, NY 10006
Sweden Merrill Lynch Pierce Fenner & Smith Safekeeping 21.85%
101 Hudson Street
Jersey City, NJ 07302
Bank of New York 9.16%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 8.19%
59 Wall Street
New York, NY 10005
Spear, Leeds & Kellogg 8.04%
120 Broadway, 5/th/ Floor
New York, NY 10006
23
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Switzerland Brown Bros. Harriman & Co. 12.60%
59 Wall Street
New York, NY 10005
Bank of New York 12.20%
One Wall Street
New York, NY 10286
State Street Bank & Trust Company 9.41%
1776 Heritage Drive
Quincy, MA 02171
Merrill Lynch Pierce Fenner & Smith Safekeeping 9.10%
101 Hudson Street
Jersey City, NJ 07302
Citibank, N.A. 7.75%
1410 Westshore Blvd.
Tampa, FL 33607
Morgan Stanley & Co. 6.67%
One Pierrepont Plaza
Brooklyn, NY 11201
Swiss American Securities, Inc. 5.63%
12 E. 49/th/ Street
New York, NY 10017
Taiwan Northern Trust Co. 36.43%
801 S. Canal Street
Chicago, IL 60607
Citibank, N.A. 9.91%
1410 Westshore Blvd.
Tampa, FL 33607
Chase Manhattan Bank 8.22%
One Chase Manhattan Plaza
New York, NY 10081
Dresdner Securities (USA) Inc. 5.89%
75 Wall Street
New York, NY 1005
Boston Safe Deposit & Trust Co. 5.88%
One Cabot Road
Medford, MA 02155
Bank of New York 5.59%
One Wall Street
New York, NY 10286
State Street Bank & Trust 5.52%
1776 Heritage Drive
Quincy, MA 02171
24
iShares MSCI Index Fund Name and Address Percentage of Ownership
----------------------- ---------------- -----------------------
Brown Bros. Harriman & Co. 5.38%
59 Wall Street
New York, NY 10005
United Kingdom Bank of New York 12.49%
One Wall Street
New York, NY 10286
Citibank, N.A. 12.00%
1410 Westshore Blvd.
Tampa, FL 33607
State Street Bank & Trust Company 10.68%
1776 Heritage Drive
Quincy, MA 02171
Brown Bros. Harriman & Co. 10.38%
59 Wall Street
New York, NY 10005
The Company does not have information concerning the beneficial ownership of the
Index Funds held in the names of such DTC Participants.
INFORMATION ABOUT THE ADVISOR, ADMINISTRATOR AND TRANSFER AGENT,
SUB-ADMINISTRATOR AND DISTRIBUTOR
Barclays Global Fund Advisors serves as the Company's investment advisor. BGFA
is located at 45 Fremont Street, San Francisco, California 94105.
PFPC Inc. serves as the Company's administrator and transfer agent. The
administrator and transfer agent is located at 400 Bellevue Parkway, Wilmington,
Delaware 19809.
Morgan Stanley & Co. Incorporated serves as the Company's sub-administrator. The
sub-administrator is located at 1585 Broadway, New York, New York 10036.
SEI Investments Distribution Co. serves as the Company's distributor. The
distributor is located at One Freedom Valley Drive, Oaks, Pennsylvania 19456.
SHAREHOLDER PROPOSALS
A shareholder proposal intended to be represented at any meeting of the Company
hereafter called must be received by the Company within a reasonable time before
the solicitation relating thereto is made in order to be included in the notice
of meeting, proxy statement and form of proxy relating to such meeting. As noted
above, it is not anticipated that shareholder meetings will be held on an annual
basis. The submission by a shareholder of a proposal for inclusion in the proxy
statement does not guarantee that it will be included. Shareholder proposals are
subject to certain regulations under federal law.
25
OTHER MATTERS
No business other than the matters described above is expected to come before
the Meeting with respect to the Company. Should any other matter requiring a
vote of shareholders arise, the persons named in the enclosed Proxy will vote
thereon according to their best judgment in the interests of the Company, or the
Index Fund, as the case may be, except that they will vote Proxies for or
against any proposed adjournment of the Meeting as discussed under "Voting
Information Quorum" -- above.
Dated: October 15, 2001
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE OR TO VOTE OVER THE TELEPHONE OR THROUGH THE
INTERNET. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
26
APPENDIX A *
------------
ADVISORY AGREEMENT
AGREEMENT made as of the __th day of _________, 2001 between Barclays Global
Fund Advisors, a corporation organized under the laws of the State of California
(the "Advisor"), and iShares, Inc., a Maryland corporation (the "Company").
WHEREAS, the Advisor is engaged principally in the business of rendering
investment management services and is registered as an investment advisor under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company engages in the business of an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Company is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Company intends to offer shares representing interests in each of
the separate portfolios identified on Schedule A hereto (each, a "Fund"); and
WHEREAS, the Company desires to appoint the Advisor to serve as the investment
advisor with respect to each Fund; and
WHEREAS, the Company may, from time to time, offer shares representing interests
in one or more additional portfolios (each, an "Additional Fund"); and
WHEREAS, the Company may desire to appoint the Advisor as the investment advisor
with respect to one or more Additional Fund;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. APPOINTMENT OF ADVISOR
a. Fund. The Company hereby appoints the Advisor to act as investment
----
advisor for the Fund listed on Schedule A for the period and on the
terms herein set forth. The Advisor accepts such appointment and agrees
to render the services herein set forth, for the compensation herein
provided.
b. Additional Fund. In the event the Company desires to retain the Advisor
---------------
to render investment advisory services hereunder with respect to any
Additional Fund, it shall so notify the Advisor in writing, indicating
the advisory fee to be payable with respect to the Additional Fund. If
the Advisor is willing to render such services for such fee and on the
terms provided for herein, it shall so notify the Company in writing,
whereupon such Additional Fund shall become a Fund hereunder.
2. DUTIES OF THE ADVISOR
The Advisor shall be responsible for the general management of the
Company's affairs. The Advisor, at its own expense (subject to the overall
supervision and review of the Board of Directors of the Company), shall (i)
furnish continuously an investment program for each Fund in compliance with
that Fund's investment objective and policies, as set forth in the then-
current prospectus and statement
_______________________
* Marked to show changes (other than stylistic changes and changes reflecting
the current names of the Index Funds) between the Current Advisory Agreement and
the Proposed Advisory Agreement.
A-1
of additional information for such Fund contained in the Company's
Registration Statement on Form N-1A, as such prospectus and statement of
additional information is amended or supplemented from time to time, (ii)
determine what investments shall be purchased, held, sold or exchanged for
each Fund and what portion, if any, of the assets of each Fund shall be
held uninvested, (iii) make changes on behalf of the Company in the
investments for each Fund and (iv) provide the Company with records
concerning the Advisor's activities that the Company is required to
maintain and render reports to the Company's officers and Board of
Directors concerning the Advisor's discharge of the foregoing
responsibilities. The Advisor shall furnish to the Company all office
facilities, equipment, services and executive and administrative personnel
necessary for managing the investment program of the Company for each Fund.
3. ALLOCATION OF EXPENSES
Subject to Section 4 below, the Company shall be responsible for and pay
all expenses for Company operations and activities.
4. ADVISORY FEE
For the services to be provided by the Advisor hereunder with respect to
each Fund, the Company shall pay to the Advisor an annual gross investment
advisory fee equal to the amount set forth on Schedule A attached hereto.
[*DELETION:; provided, however, that the fee paid to the Adviser with
respect to each Series shall be reduced by the aggregate of such Series'
fees and expenses, other than]. [**ADDITION: THE ADVISOR AGREES TO PAY ALL
------------------------------------------
EXPENSES INCURRED BY THE COMPANY EXCEPT FOR] (i) expenses of the Fund
--------------------------------------------
incurred in connection with the execution of portfolio securities
transactions on behalf of such Fund, (ii) expenses incurred in connection
with any distribution plan adopted by the Company in compliance with Rule
12b-1 under the 1940 Act, (iii) litigation expenses, (iv) taxes (including,
but not limited to, income, excise, transfer and withholding taxes), (v)
any cost or expense that a majority of the Directors of the Company who are
not "interested persons" (as defined in the 1940 Act) deems to be an
extraordinary expense and (vi) the advisory fee payable to the Advisor
hereunder [*DELELTION: ; and provided, further, that the Adviser shall
reimburse the Company to the extent that the expenses of any Series (other
than the expenses set forth in the foregoing proviso) except the amount set
forth in Schedule A with respect to such Series.]
Schedule A shall be amended from time to time to reflect the addition
and/or termination of any Fund as a Fund hereunder and to reflect any
change in the advisory fees payable with respect to any Fund duly approved
in accordance with Section 7(b) hereunder. All fees payable hereunder
shall be accrued daily and paid as soon as practicable after the last day
of each calendar quarter.
In the case of commencement or termination of this Agreement with respect
to any Fund during any calendar quarter, the fee with respect to such Fund
for that quarter shall be reduced proportionately based upon the number of
calendar days during which it is in effect, and the fee shall be computed
upon the average daily net assets of such Fund for the days during which it
is in effect.
5. PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment of the
assets of the Company, the Advisor, acting by its own officers, directors
or employees, is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Company. In executing
portfolio transactions and selecting brokers or dealers, if any, the
Advisor will use its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall terms available for
any transaction, the Advisor shall consider all factors it deems relevant,
including the breadth of the market in and the price of the security, the
financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any (for the specific transaction
and on a continuing basis). In evaluating the best overall terms
available, and in selecting the broker or dealer, if any, to execute a
particular transaction, the Advisor may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the 1934
Act) provided to any Fund of the Company. The Advisor may pay to a broker
or dealer who provides such brokerage and research
A-2
services a commission for executing a portfolio transaction which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the Advisor
determines in good faith that such commission was reasonable in relation to
the value of the brokerage and research services provided. The Company
acknowledges that any such research may be useful to the Advisor in
connection with other accounts managed by it.
6. LIABILITY OF ADVISOR
Neither the Advisor nor its officers, directors, employees, agents or
controlling persons or assigns shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Company or its shareholders
in connection with the matters to which this Agreement relates; provided,
however, that no provision of this Agreement shall be deemed to protect the
Advisor against any liability to the Company or its shareholders to which
it might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations and duties under this Agreement.
7. DURATION AND TERMINATION OF THIS AGREEMENT
a. Duration. This Agreement shall become effective with respect to each
--------
Fund on the date hereof and, with respect to any Additional Fund, on
the date specified in the written notice received by the Company from
the Advisor in accordance with paragraph 1(b) hereof that the Advisor
is willing to serve as Advisor with respect to such Fund. Unless
terminated as herein provided, this Agreement shall remain in full
force and effect for two years from the date hereof with respect to
each Fund and, with respect to each Additional Fund, for [*DELETION:
one year] [**ADDITION: TWO YEARS] from the date on which such Fund
becomes a fund hereunder. Subsequent to such initial periods of
effectiveness, this Agreement shall continue in full force and effect
for periods of one year thereafter with respect to each Fund so long
as such continuance with respect to such Fund is approved at least
annually (i) by either the Directors of the Company or by vote of a
majority of the outstanding voting securities (as defined in the 1940
Act) of such Fund, and (ii), in either event, by the vote of a
majority of the Directors of the Company who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of
voting on such approval.
b. Amendment. Any amendment to this Agreement shall become effective with
---------
respect to a Fund upon approval of the Advisor and of a majority of
Directors who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting such approval and
a majority of the outstanding voting securities (as defined in the
1940 Act) of that Fund.
c. Termination. This Agreement may be terminated with respect to any Fund
-----------
at any time, without payment of any penalty, by vote of the Directors
or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund, or by the Advisor, in each case
on sixty (60) days' prior written notice to the other party; provided,
that a shorter notice period shall be permitted for a Fund in the
event its shares are no longer listed on a national securities
exchange.
d. Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its "assignment" (as defined in
the 1940 Act).
e. Approval, Amendment or Termination by a Fund. Any approval, amendment
--------------------------------------------
or termination of this Agreement by the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of any
Fund shall be effective to continue, amend or terminate this Agreement
with respect to any such Fund notwithstanding (i) that such action has
not been approved by the holders of a majority of the outstanding
voting securities of any other Fund affected thereby, and (ii) that
such action has not been approved by the vote of a majority
A-3
of the outstanding voting securities of the Company, unless such
action shall be required by any applicable law or otherwise.
8. SERVICES NOT EXCLUSIVE
The services of the Advisor to the Company hereunder are not to be deemed
exclusive, and the Advisor shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
9. MISCELLANEOUS
a. "iShares" Name. The Company shall, at the request of the Advisor, stop
-------------
all use of the "iShares" name in the event that the Advisor or its
affiliates is no longer the Company's investment advisor.
b. Notice. Any notice under this Agreement shall be in writing, addressed
------
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt
of such notices.
c. Severability. If any provision of this Agreement shall be held or made
------------
invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
d. Applicable Law. This Agreement shall be construed in accordance with
--------------
and governed by the laws of New York.
e. Execution by Counterpart. This Agreement may be executed in any number
------------------------
of counterparts, all of which together shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first set forth above.
iSHARES, INC.
By:______________________________
Name:
Title:
BARCLAYS GLOBAL FUND ADVISORS
By:_____________________________
Name:
Title:
A-4
Schedule A
Advisory Fee *for the Category I Funds:
0.59% per annum of the aggregate net assets of the Category I Funds less than or
equal to $7.0 billion plus 0.54% per annum of the aggregate net assets of the
Category I Funds between $7.0 billion and $11.0 billion plus 0.49% per annum of
the aggregate net assets of the Category I Funds in excess of $11.0 billion
Category I Funds:
iShares MSCI Australia Index Fund
iShares MSCI Austria Index Fund
iShares MSCI Belgium Index Fund
iShares MSCI Canada Index Fund
iShares MSCI EMU Index Fund
iShares MSCI France Index Fund
iShares MSCI Germany Index Fund
iShares MSCI Hong Kong Index Fund
iShares MSCI Italy Index Fund
iShares MSCI Japan Index Fund
iShares MSCI Malaysia Index Fund
iShares MSCI Mexico (Free) Index Fund
iShares MSCI Netherlands Index Fund
iShares MSCI Singapore (Free) Index Fund
iShares MSCI Spain Index Fund
iShares MSCI Sweden Index Fund
iShares MSCI Switzerland Index Fund
iShares MSCI United Kingdom Index Fund
iShares MSCI USA Index Fund
Advisory Fee *for Category II Funds:
0.74% per annum of the aggregate net assets of the Category II Funds less than
or equal to $2 billion plus 0.69% per annum of the aggregate net assets of the
Category II Funds between $2 billion and $4 billion plus 0.64% per annum of the
aggregate net assets of the Category II Funds greater than $4 billion
Category II Funds:
iShares MSCI Brazil Index Fund
iShares MSCI Greece Index Fund
iShares MSCI Indonesia Index Fund
iShares MSCI Korea Index Fund
iShares MSCI Portugal Index Fund
iShares MSCI South Africa Index Fund
iShares MSCI Thailand Index Fund
iShares MSCI Taiwan Index Fund
iShares MSCI Turkey Index Fund
Advisory Fee *for Category III Funds:
0.05% per annum of the aggregate net assets of the Category III Funds
Category III Funds
iShares MSCI Pacific Ex-Japan Index Fund
[*DELETION: *Pursuant to Section 4 of this Advisory Agreement, the fee rates for
a Series set forth in this Schedule A will be reduced, possibly to zero, by
certain expenses of the Series.]
A-5
APPENDIX B
----------
Fees paid and accrued to the Advisor by each Index Fund for the fiscal year
ended August 31, 2001:
iShares Inc. Index Fund Fees Paid
----------------------- ---------
iShares MSCI Australia Index Fund 110,792
iShares MSCI Austria Index Fund 5,467
iShares MSCI Belgium Index Fund 10,014
iShares MSCI Brazil (Free) Index Fund 21,816
iShares MSCI Canada Index Fund 16,003
iShares MSCI EMU Index Fund 118,486
iShares MSCI France Index Fund 172,989
iShares MSCI Germany Index Fund 399,227
iShares MSCI Hong Kong Index Fund 150,301
iShares MSCI Italy Index Fund 83,658
iShares MSCI Japan Index Fund 1,973,473
iShares MSCI Malaysia (Free) Index Fund 174,979
iShares MSCI Mexico (Free) Index Fund 36,844
iShares MSCI Netherlands Index Fund 65,589
iShares MSCI Singapore (Free) Index Fund 149,055
iShares MSCI South Korea Index Fund 34,343
iShares MSCI Spain Index Fund 62,534
iShares MSCI Sweden Index Fund 18,562
iShares MSCI Switzerland Index Fund 70,856
iShares MSCI Taiwan Index Fund 180,363
iShares MSCI United Kingdom Index Fund 425,264
B-1
VOTE THIS PROXY CARD TODAY!
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iSHARES, INC.
WILMINGTON, DELAWARE 19809
This proxy is solicited by the Board of Directors of iShares, Inc. (the
"Company") for use at a special meeting of shareholders of the Company to be
held on December 19, 2001 at 1:00 p.m. (Eastern Time) in the offices of the
Company's administrator, accounting agent and transfer agent, PFPC Inc., at 400
Bellevue Parkway, Wilmington, Delaware 19809.
Please fold and detach card at perforation before mailing.
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iSHARES MSCI [NAME] INDEX FUND OF iSHARES, INC.
The undersigned hereby appoints R. Sheldon Johnson and John P. Falco, and each
of them, attorneys and proxies of the undersigned each with the power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the above-referenced Special Meeting of Shareholders, and at any adjournment or
adjournments thereof, casting votes according to the number of shares of the
iShares [NAME] MSCI Index Fund which the undersigned may be entitled to vote
with respect to the proposals set forth on the reverse side, in accordance with
the specification indicated, if any, and with all the powers which the
undersigned would possess if personally present, hereby revoking any prior proxy
to vote at such Special Meeting, and hereby ratifying and confirming all that
said attorneys and proxies, or each of them, may lawfully do by virtue hereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE COMPANY AND THE PROXY STATEMENT DATED OCTOBER 15, 2001.
/ /2001
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Signature Title (if applicable) Date
/ /2001
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Signature Title (if applicable) Date
Please sign above exactly as name(s) appear(s) hereon. Corporate or partnership
proxies should be signed in full corporate or partnership name by an authorized
officer. Each joint owner should sign personally. When signing as a fiduciary,
please give full title as such.
Please fold and detach card at perforation before mailing.
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PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW USING BLUE OR BLACK INK. DO
NOT USE RED INK OR PENCIL.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted in favor of each proposal.
PROPOSALS FOR AGAINST ABSTAIN SHARES VOTED
--------- --- ------- ------- ------------
1. Election of Directors [_] [_] [_] ______________
a) Nathan Most [_] [_] [_] ______________
b) John B. Carroll [_] [_] [_] ______________
c) Garrett F. Bouton [_] [_] [_] ______________
d) W. Allen Reed [_] [_] [_] ______________
e) Richard K Lyons [_] [_] [_] ______________
f) George G.C. Parker [_] [_] [_] ______________
2. To approve an amendment to the advisory agreement [_] [_] [_] ______________
with Barclays Global Fund Advisors
3. To approve a change to the Company's fundamental
investment policy to permit each Index Fund to invest
25% or more of its total assets in a single issuer [_] [_] [_] ______________
4. To approve a change to the Company's fundamental
investment policy with respect to industry concentration [_] [_] [_] ______________
5. To approve a change of the iShares MSCI Japan Index
Fund from diversified to non-diversified (holders of
the iShares Japan Index Fund only); [_] [_] [_] ______________
6. To approve a change of the iShares MSCI United
Kingdom Index Fund from diversified to non-diversified
(holders of the iShares United Kingdom Index Fund only); [_] [_] [_] ______________
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Special Meeting or any adjournment thereof.