ISHARES, INC.

Statement of Additional Information
Dated January 1, 2008
(as revised January 7, 2008)

This combined Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the current prospectuses (the
"Prospectuses") for the following funds of iShares, Inc. (the "Company") as such
Prospectuses may be revised or supplemented from time to time:

iShares MSCI Australia Index Fund
iShares MSCI Austria Index Fund
iShares MSCI Belgium Index Fund
iShares MSCI Brazil Index Fund
iShares MSCI Canada Index Fund
iShares MSCI Emerging Markets 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 Index Fund
iShares MSCI Netherlands Index Fund
iShares MSCI Pacific ex-Japan Index Fund
iShares MSCI Singapore Index Fund
iShares MSCI South Africa Index Fund
iShares MSCI South Korea Index Fund
iShares MSCI Spain Index Fund
iShares MSCI Sweden Index Fund
iShares MSCI Switzerland Index Fund
iShares MSCI Taiwan Index Fund
iShares MSCI United Kingdom Index Fund

The Prospectuses for the various iShares funds included in this SAI are dated
January 1, 2008. Capitalized terms used herein that are not defined have the
same meaning as in the applicable Prospectus, unless otherwise noted. The
financial statements and notes contained in the Annual Reports of the Company
for the above-listed funds for the fiscal year ended August 31, 2007 are
incorporated by reference into and are deemed to be part of this SAI. A copy of
each Prospectus and Annual Report may be obtained without charge by writing to
the Company's distributor, SEI Investments Distribution Co. ("SEI" or the
"Distributor"), at One Freedom Valley Drive, Oaks, PA 19456, calling
1-800-iShares (1-800-474-2737) or visiting iSharesETFs@barclaysglobal.com.

iShares(Reg. TM) is a registered trademark of Barclays Global Investors, N.A.
("BGI").




                              TABLE OF CONTENTS



                                         PAGE
                                        -----
                                     
General Description of the Company         1
  and its Funds
Exchange Listing and Trading               2
Investment Strategies and Risks            2
   Lack of Diversification of the          3
  Funds
   Lending Portfolio Securities            3
   Repurchase Agreements                   3
   Reverse Repurchase Agreements           3
   Currency Transactions                   4
   Short-Term Instruments and              4
  Temporary Investments
   Foreign Securities                      4
   Securities of Investment                5
  Companies and REITs
   Illiquid Securities                     5
   Futures and Options                     5
   Options on Futures Contracts            6
   Swap Agreements                         6
   Tracking Stocks                         6
   Future Developments                     6
General Considerations and Risks           6
   Risks of Derivatives                    7
   Risks of Equity Securities              7
   Risks of Futures and Options            7
  Transactions
   Risks of Swap Agreements                8
   Risks of Investing in Non-U.S.          8
  Equity Securities
   Dividend Risk                           8
Proxy Voting Policy                        8
Portfolio Holdings Information             9
Investments In Subject Equity             10
  Markets
The MSCI Indexes Generally                17
   MSCI Standard Equity Indexes           18
   MSCI Global Investable Market          19
  Indexes
Price and Exchange Rates                  20
Investment Limitations                    20
Continuous Offering                       23
Management                                24
   Directors and Officers                 24
   Committees of the Board of             28
  Directors


                                       i







                                         PAGE
                                        -----
                                     
   Remuneration of Directors              29
   Control Persons and Principal          29
  Holders of Securities
Investment Advisory,                      33
Administrative and Distribution
  Services
   Investment Adviser                     33
   Portfolio Managers                     34
   Codes of Ethics                        37
   Administrator, Custodian and           37
  Transfer Agent
   Distributor                            38
   Index Provider                         39
Brokerage Transactions                    40
Additional Information Concerning         42
  the Company
   Capital Stock                          42
   Termination of the Company or a        43
  Fund
   DTC as Securities Depository           43
  for the Shares of the Funds
Creation and Redemption of                44
  Creation Units
  Creation Units                          44
Purchase and Issuance of Creation Units   45
   General                                45
   Fund Deposit                           45
   Role of the Authorized                 45
  Participant
   Purchase Order                         46
   Timing of Submission of Purchase
    Orders                                46
   Acceptance of Purchase Order           46
   Issuance of a Creation Unit            47
   Cash Purchase Method                   47
   Purchase Transaction Fee               47
   Redemption of Creation Units           48
Regular Holidays                          51
Taxes                                     60
   Regulated Investment Company           60
  Qualifications
   Taxation of RICs                       61
   Taxation of Certain Derivatives        61
   Excise Tax                             62
   Net Capital Loss Carryforwards         62
   Funds Holding Foreign                  63
  Investments
   Federal Tax Treatment of               63
  Complex Securities
   Taxation of U.S. Shareholders          63
   Sales of Shares                        64
   Back-Up Withholding                    65
   Sections 351 and 362                   65
   Qualified Dividend Income              65
 
                                       ii






                                       PAGE
                                      -----
                                   
   Corporate Dividends Received         65
  Deduction
   Reporting                            65
   Other Taxes                          66
   Taxation of Non-U.S.                 66
  Shareholders
Financial Statements                    66
Miscellaneous Information               67
   Counsel                              67
   Independent Registered Public        67
  Accounting Firm
   Shareholder Communications to        67
  the Board

                                       iii




General Description of the Company and its Funds


The Company currently consists of more than 25 investment series or portfolios.
The Company was organized as a Maryland corporation on August 31, 1994 and is
authorized to have multiple series or portfolios. The Company is an open-end
management investment company, registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended
(the "1940 Act"). The offering of the Company's shares is registered under the
Securities Act of 1933, as amended (the "1933 Act"). This SAI relates to the
following funds (each, a "Fund" and collectively, the "Funds"):


o  ISHARES MSCI AUSTRALIA INDEX FUND

o  ISHARES MSCI AUSTRIA INDEX FUND/1/

o  ISHARES MSCI BELGIUM INDEX FUND

o  ISHARES MSCI BRAZIL INDEX FUND

o  ISHARES MSCI CANADA INDEX FUND

o  ISHARES MSCI EMERGING MARKETS INDEX FUND

o  ISHARES MSCI EMU INDEX FUND

o  ISHARES MSCI FRANCE INDEX FUND

o  ISHARES MSCI GERMANY INDEX FUND

o  ISHARES MSCI HONG KONG INDEX FUND

o  ISHARES MSCI ITALY INDEX FUND

o  ISHARES MSCI JAPAN INDEX FUND

o  ISHARES MSCI MALAYSIA INDEX FUND

o  ISHARES MSCI MEXICO INDEX FUND

o  ISHARES MSCI NETHERLANDS INDEX FUND/2/

o  ISHARES MSCI PACIFIC EX-JAPAN INDEX FUND

o  ISHARES MSCI SINGAPORE INDEX FUND

o  ISHARES MSCI SOUTH AFRICA INDEX FUND

o  ISHARES MSCI SOUTH KOREA INDEX FUND

o  ISHARES MSCI SPAIN INDEX FUND

o  ISHARES MSCI SWEDEN INDEX FUND

o  ISHARES MSCI SWITZERLAND INDEX FUND

o  ISHARES MSCI TAIWAN INDEX FUND

o  ISHARES MSCI UNITED KINGDOM INDEX FUND

/1/ At a December 7, 2007 special shareholders meeting of the iShares MSCI
    Austria Index Fund, a proposal to change the Underlying Index of the Fund
    from the MSCI Austria Index to the MSCI Austria Investable Market Index was
    approved in response to MSCI's combination of its standard and small cap
    indexes to form investable market indexes.  Shareholders of the Fund also
    approved a proposal to change the Fund's investment objective from a
    "fundamental" investment policy to a "non-fundamental" investment policy. In
    the future the investment objective and underlying index of the Fund may be
    changed without shareholder approval.

/2/ At a December 7, 2007 special shareholders meeting of the iShares MSCI
    Netherlands Index Fund, a proposal to change the Underlying Index of the
    Fund from the MSCI Netherlands Index to the MSCI Netherlands Investable
    Market Index was approved in response to MSCI's combination of its standard
    and small cap indexes to form investable market indexes.  Shareholders of
    the Fund also approved a proposal to change the Fund's investment objective
    from a "fundamental" investment policy to a "non-fundamental" investment
    policy. In the future the investment objective and underlying index of the
    Fund may be changed without shareholder approval.


The investment objective of each Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of a specified benchmark index (each an "Underlying Index")
representing publicly traded equity secuties of companies in a particular
country or region. Each Fund is managed by Barclays Global Fund Advisors
("BGFA" or the "Investment Adviser"), a subsidiary of BGI.


Each Fund offers and issues shares at their net asset value per share ("NAV")
only in aggregations of a specified number of shares (each, a "Creation Unit"
securities included in its Underlying Index (the "Deposit Securities"), together
with the deposit of a specified cash payment (the "Cash Component"). The shares
of the Funds are listed and traded on national securities exchanges such as the
American Stock Exchange, the Chicago Board Options Exchange or NYSE Arca, Inc.
("NYSE Arca") (each a listing exchange). Shares trade in the secondary market
and elsewhere at market prices that may be at, above or below NAV. Shares are
redeemable only in Creation Units, and, generally, in exchange for portfolio
securities and a specified cash payment. Creation Units typically are a
specified number of shares, generally 40,000 to 600,000 shares or multiples
thereof, depending on the Fund.


The Company reserves the right to offer a "cash" option for creations and
redemptions of shares. Shares may be issued in advance of receipt of Deposit
Securities subject to various conditions including a requirement to maintain on
deposit with the Company cash at least equal to 110%, which BGFA may change
from time to time, of the market value of the missing Deposit Securities.


                                       1




See the CREATION AND REDEMPTION OF CREATION UNITS section of this SAI. In each
instance of such cash creations or redemptions, transaction fees may be imposed
that will be higher that the transaction fees associated with in-kind creations
or redemptions. In all cases, such conditions and fees will be limited in
accordance with the requirements of the SEC applicable to management investment
companies offering redeemable securities.



Exchange Listing and Trading

A discussion of exchange listing and trading matters associated with an
investment in each Fund is contained in the SHAREHOLDER INFORMATION section of
the Fund's Prospectus. The discussion below supplements, and should be read in
conjunction with, that section of the applicable Prospectus.


Shares of each Fund are listed on NYSE Arca (the a "Listing Exchange") and
trade throughout the day on the Listing Exchange and other secondary markets. In
addition, certain Funds may be traded on certain foreign exchanges. There can be
no assurance that the requirements of a Listing Exchange for maintaining the
listing of shares of any Fund will continue to be met. Although listing
requirements vary among exchanges, a Listing Exchange may, but is not required
to, remove the shares of a Fund from listing if (i) following the initial 12-
month period beginning upon the commencement of trading of a Fund, there are
fewer than 50 beneficial holders of the shares for 30 or more consecutive
trading days, (ii) the value of the Underlying Index on which a Fund is based is
no longer calculated or available, (iii) the "indicative optimized portfolio
value" ("IOPV") of a Fund is no longer calculated or available or (iv) any other
event shall occur or condition shall exist that, in the opinion of the Listing
Exchange, makes further dealings on the Listing Exchange inadvisable. A Listing
Exchange will remove the shares of a Fund from listing and trading upon
termination of the Fund.


As in the case of other publicly traded securities, when you buy or sell shares
through a broker, you will incur a brokerage commission determined by that
broker.


In order to provide additional information regarding the indicative value of
shares of the Funds, the Listing Exchange disseminates every 15 seconds through
the facilities of the Consolidated Tape Association an updated IOPV for the
Fund as calculated by an information provider or market data vendors. The
Company is not involved in or responsible for any aspect of the calculation or
dissemination of the IOPVs and makes no representation or warranty as to the
accuracy of the IOPVs.


An IOPV has an equity securities component and a cash component. The equity
securities values included in an IOPV are the values of the Deposit Securities
for a Fund. While the IOPV reflects the current market value of the Deposit
Securities required to be deposited in connection with the purchase of a
Creation Unit, it does not necessarily reflect the precise composition of the
current portfolio of securities held by the Fund at a particular point in time
because the current portfolio of the Fund may include securities that are not
part of the current Deposit Securities. Therefore, a Fund's IOPV disseminated
during the Listing Exchange trading hours should not be viewed as a real time
update of the Fund's NAV, which is calculated only once a day.


The cash component included in an IOPV consists of extimated accrued dividend
and other income, less expenses. If applicable, each IOPV also reflects changes
in currency exchange rates between the U.S. Dollar and the applicable home
foreign currency.


The Company reserves the right to adjust the share prices of Funds in the
future to maintain convenient trading ranges for investors. Any adjustments
would be accomplished through share splits or reverse share splits, which would
have no effect on the net assets of the applicable Fund.



Investment Strategies and Risks

Each Fund seeks to achieve its investment objective by investing primarily in
securities issued by companies that comprise the relevant Underlying Index and
through transactions that provide substantially similar exposure to securities
in the Underlying Index. Each Fund operates as an index fund and will not be
actively managed. Adverse performance of a security in a Fund's portfolio will
ordinarily not result in the elimination of the security from a Fund's
portfolio.


Each Fund engages in representative sampling, which is investing in a
representative sample of securities selected by BGFA to have a collective
investment profile similar to the Underlying Index. Securities selected have
aggregate investment characteristics (based on market capitalization and
industry weightings), fundamental characteristics (such as return variability,
earnings valuation


                                       2




and yield) and liquidity measures similar to those of the relevant Underlying
Index. Funds that use representative sampling generally do not hold all of the
securities that are included in the relevant Underlying Index.


LACK OF DIVERSIFICATION OF THE FUNDS.  Each Fund is a non-diversified fund. A
"non-diversified" classification means that a Fund is not limited by the 1940
Act with regard to the percentage of its assets that may be invested in the
securities of a single issuer. The securities of a particular issuer (or
securities of issuers in particular industries) may dominate the Underlying
Index of such a Fund and, consequently, the Fund's investment portfolio. This
may adversely affect the Fund's performance or subject the Fund's shares to
greater price volatility than that experienced by more diversified investment
companies.


Each Fund, however, intends to maintain the required level of diversification
and otherwise conduct its operations so as to qualify as a Registered
Investment Company ("RIC") for purposes of the U.S. Internal Revenue Code of
1986, as amended (the "IRC"), and to relieve the Fund of any liability for U.S.
federal income tax to the extent that its earnings are distributed to
shareholders. Compliance with the diversification requirements of the IRC may
limit the investment flexibility of certain Funds and may make it less likely
that such Funds will meet their investment objectives.


LENDING PORTFOLIO SECURITIES. Each Fund may lend portfolio securities to
certain creditworthy borrowers, including borrowers affiliated with BGFA. The
borrowers provide collateral that is maintained in an amount at least equal to
the current market value of the securities loaned. No securities loan shall be
made on behalf of a Fund if, as a result, the aggregate value of all securities
loans of the particular Fund exceeds one-third of the value of such Fund's
total assets (including the value of the collateral received). A Fund may
terminate a loan at any time and obtain the return of the securities loaned.
Each Fund receives the value of any interest or cash or non-cash distributions
paid on the loaned securities.


With respect to loans that are collateralized by cash, the borrower will be
entitled to receive a fee based on the amount of cash collateral. The Funds are
compensated by the difference between the amount earned on the reinvestment of
cash collateral and the fee paid to the borrower. In the case of collateral
other than cash, a Fund is compensated by a fee paid by the borrower equal to a
percentage of the market value of the loaned securities. Any cash collateral
may be reinvested in certain short-term instruments either directly on behalf
of each lending Fund or through one or more joint accounts or money market
funds, including those managed by BGFA. Securities lending involves exposure to
certain risks, including operational risk (I.E., the risk of losses resulting
from problems in the settlement and accounting process), "gap" risk (I.E., the
risk of a mismatch between the return on cash collateral reinvestments and the
fees each Fund has agreed to pay a borrower), and credit, legal, counterparty
and market risk.


In the event a borrower does not return a Fund's securities as agreed, the Fund
may experience losses if the proceeds received from liquidating the collateral
does not at least equal the value of the loaned security at the time the
collateral is liquidated plus the transaction costs incurred in purchasing
replacement securities.


A Fund may pay a portion of the interest or fees earned from securities lending
to a borrower as described above and to a securities lending agent who
administers the lending program in accordance with guidelines approved by the
Company's Board of Directors (the "Board" or "Directors"). BGI acts as
securities lending agent for the Funds subject to the overall supervision of
BGFA. BGI receives a portion of the revenues generated by securities lending
activities as compensation for its services.


REPURCHASE AGREEMENTS.  Each Fund may enter into repurchase agreements with
certain counterparties. Repurchase agreements involve an agreement to purchase
financial instruments and to resell those instruments back to the same
counterparty at an agreed-upon date and price, which price reflects a rate of
interest unrelated to a coupon rate or maturity of the purchased instruments.
The value of the instruments purchased may be more or less than the price at
which the counterparty has agreed to repurchase them. As protection against the
risk that the counterparty will not fulfill its obligation, the instruments are
marked to market daily and are maintained at a value at least equal to the sale
price plus the accrued incremental amount. Delays or losses could result if the
counterparty to the repurchase agreement defaults or becomes insolvent. The
Funds will engage in repurchase agreements only with counterparties whose
creditworthiness has been reviewed and found to be satisfactory by BGFA.


REVERSE REPURCHASE AGREEMENTS.  Each Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to
repurchase the securities at an agreed-upon price, date and interest payment
and have the characteristics of borrowing. Generally, the effect of such
transactions is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases the Fund is able to keep some of the interest
income associated with those securities. Such transactions are advantageous
only if the Fund has an opportunity to earn a rate of interest on the cash
derived from these transactions that is greater than the interest cost of
obtaining the same amount of cash. Opportunities to realize earnings from the
use of the proceeds equal to or greater than the interest required to be paid
may not always be available and each Fund intends to use the reverse repurchase
technique only when BGFA believes it will be


                                       3




advantageous to the Fund. The use of reverse repurchase agreements may
exaggerate any interim increase or decrease in the value of each Fund's assets.
The Fund's exposure to reverse repurchase agreements will be covered by
securities having a value equal to or greater than such commitments. Each Fund
maintains liquid assets in connection with reverse repurchase agreements. Under
the 1940 Act, reverse repurchase agreements are considered borrowings.


CURRENCY TRANSACTIONS.  The Funds do not expect to engage in currency
transactions for the purpose of hedging against declines in the value of the
Funds' assets that are denominated in a foreign currency. A Fund may enter into
foreign currency forward and foreign currency futures contracts to facilitate
local securities settlements or to protect against currency exposure in
connection with its distributions to shareholders, but may not enter into such
contracts for speculative purposes.


A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency futures contract is a contract involving an obligation to
deliver or acquire the specified amount of a specific currency, at a specified
price and at a specified future time. Futures contracts may be settled on a net
cash payment basis rather than by the sale and delivery of the underlying
currency.


Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly
volatile, highly specialized and highly technical. Significant changes,
including changes in liquidity prices, can occur in such markets within very
short periods of time, often within minutes. Foreign exchange trading risks
include, but are not limited to, exchange rate risk, maturity gap, interest
rate risk, and potential interference by foreign governments through regulation
of local exchange markets, foreign investment or particular transactions in
foreign currency. If BGFA utilizes foreign exchange transactions at an
inappropriate time or judges market conditions, trends or correlations
incorrectly, foreign exchange transactions may not serve their intended purpose
of improving the correlation of a Fund's return with the performance of the
Underlying Index and may lower the Fund's return. The Fund could experience
losses if the value of its currency forwards, options and futures positions
were poorly correlated with its other investments or if it could not close out
its positions because of an illiquid market. In addition, each Fund could incur
transaction costs, including trading commissions, in connection with certain
foreign currency transactions.


SHORT-TERM INSTRUMENTS AND TEMPORARY INVESTMENTS.  Each Fund may invest in
short-term instruments, including money market instruments, on an ongoing basis
to provide liquidity or for other reasons. Money market instruments are
generally short-term investments that may include but are not limited to: (i)
shares of money market funds (including those advised by BGFA or its
affiliates); (ii) obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities (including government-sponsored enterprises);
(iii) negotiable certificates of deposit ("CDs"), bankers' acceptances, fixed
time deposits and other obligations of U.S. and foreign banks (including
foreign branches) and similar institutions; (iv) commercial paper rated at the
date of purchase "Prime-1" by Moody's(Reg. TM) Investors Services, Inc.
("Moody's(Reg. TM)") or "A-1" by Standard & Poor's Rating Services, a division
of the The McGraw-Hill Companies, Inc. ("S&P(Reg. TM)"), or if unrated, of
comparable quality as determined by BGFA; (v) non-convertible corporate debt
securities (E.G., bonds and debentures) with remaining maturities at the date
of purchase of not more than 397 days and that satisfy the rating requirements
set forth in Rule 2a-7 under the 1940 Act; (vi) repurchase agreements; and
(vii) short-term U.S. dollar-denominated obligations of foreign banks
(including U.S. branches) that, in the opinion of BGFA, are of a quality
comparable to obligations of U.S. banks which may be purchased by a Fund. Any
of these instruments may be purchased on a current or a forward-settled basis.
Time deposits are non-negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates. Bankers' acceptances
are time drafts drawn on commercial banks by borrowers, usually in connection
with international transactions.


FOREIGN SECURITIES.  Each Fund may purchase publicly traded common stocks of
foreign corporations. To the extent a Fund invests in stocks of foreign
corporations, each Fund's investment in such stocks may be in the form of
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and
European Depositary Receipts ("EDRs") (collectively, "Depositary Receipts").
Depositary Receipts are receipts, typically issued by a bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation. For ADRs, the depository is typically a U.S. financial institution
and the underlying securities are issued by a foreign issuer. For other
Depositary Receipts, the depository may be a foreign or a U.S. entity, and the
underlying securities may have a foreign or a U.S. issuer. Depositary Receipts
will not necessarily be denominated in the same currency as their underlying
securities. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in
European securities markets. GDRs are tradable both in the United States and in
Europe and are designed for use throughout the world.


                                       4




To the extent a Fund invests in ADRs, such ADRs will be listed on a national
securities exchange, and to the extent a Fund invests in GDRs or EDRs, such
GDRs and EDRs will be listed on a foreign securities exchange. A Fund will not
invest in any unlisted Depository Receipt or any Depository Receipt that BGFA
deems to be illiquid or for which pricing information is not readily available.
In addition, all Depository Receipts generally must be sponsored, however a
Fund may invest in unsponsored Depository Receipts under certain limited
circumstances.


The issuers of unsponsored Depository Receipts are not obligated to disclose
material information in the United States, and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the Depository Receipts.


Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, and potential restrictions of the
flow of international capital. Foreign companies may be subject to less
governmental regulation than U.S. companies. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.


SECURITIES OF INVESTMENT COMPANIES AND REITS.  Each Fund may invest in the
securities of other investment companies (including money market funds) and
real estate investment trusts ("REITs") to the extent allowed by law. Under the
1940 Act, a Fund's investment in investment companies is limited to, subject to
certain exceptions: (i) 3% of the total outstanding voting stock of any one
investment company; (ii) 5% of the Fund's total assets with respect to any one
investment company; and (iii) 10% of the Fund's total assets with respect to
investment companies in the aggregate. To the extent allowed by law or
regulation, each Fund may invest its assets in securities of investment
companies that are money market funds, including those advised by BGFA or its
affiliates, in excess of the limits discussed above. The iShares MSCI Emerging
Markets Index Fund, in order to improve its portfolio liquidity and its ability
to track the MSCI Emerging Markets Index, may invest up to 10% of its assets in
shares of other iShares Funds that invest in securities in the MSCI Emerging
Markets Index. BGFA will not charge advisory fees on that portion of the
iShares MSCI Emerging Market Index Fund's assets invested in shares of other
iShares Funds. Other investment companies in which a Fund invests can be
expected to incur fees and expenses for operations, such as investment
addvisory and administration fees, that would be in addition to those incurred
by the Fund.


ILLIQUID SECURITIES.  Each Fund may invest up to an aggregate amount of 15% of
its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.


FUTURES AND OPTIONS.  Each Fund may enter into U.S. or foreign futures
contracts, options and options on futures contracts. These futures contracts
and options will be used to simulate investment in the respective Underlying
Index, to facilitate trading or to reduce transaction costs. Each Fund will
enter into futures contracts and options only on futures contracts that are
traded on a U.S. or foreign exchange. No Fund will use futures or options for
speculative purposes. Each Fund intends to use futures and options in
accordance with Rule 4.5 of the Commodity Exchange Act (the "CEA"). The
Company, on behalf of each Fund, has filed a notice of eligibility for
exclusion from the definition of the term "commodity pool operator" in
accordance with Rule 4.5 so that each Fund is not subject to registration or
regulation as a commodity pool operator under the CEA.


A call option gives a holder the right to purchase a specific security at a
specified price ("exercise price") within a specified period of time. A put
option gives a holder the right to sell a specific security at a specified
exercise price within a specified period of time. The initial purchaser of a
call option pays the "writer" a premium, which is paid at the time of purchase
and is retained by the writer whether or not such option is exercised. Each
Fund may purchase put options to hedge its portfolio against the risk of a
decline in the market value of securities held and may purchase call options to
hedge against an increase in the price of securities it is committed to
purchase. Each Fund may write put and call options along with a long position
in options to increase its ability to hedge against a change in the market
value of the securities it holds or is committed to purchase.


Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific instrument or index at a
specified future time and at a specified price. Stock index contracts are based
on investments that reflect the market value of common stock of the firms
included in the investments. Each Fund may enter into futures contracts to
purchase security investments when BGFA anticipates purchasing the underlying
securities and believes prices will rise before the purchase will be made. To
the extent required by law, liquid assets committed to futures contracts will
be maintained.


                                       5




OPTIONS ON FUTURES CONTRACTS.  An option on a futures contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right,
in return for the premium paid, to assume a position in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account that
represents the amount by which the market price of the futures contract exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. The potential for loss related to
the purchase of an option on a futures contract is limited to the premium paid
for the option plus transaction costs. Because the value of the option is fixed
at the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value of
the option changes daily and that change would be reflected in the NAV of each
Fund. The potential for loss related to writing call options is unlimited.


Each Fund may purchase and write put and call options on futures contracts that
are traded on a U.S. or foreign exchange as a hedge against changes in value of
its portfolio securities, or in anticipation of the purchase of securities, and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected.


Upon entering into a futures contract, a Fund will be required to deposit with
the broker an amount of cash or cash equivalents known as "initial margin,"
which is in the nature of a performance bond or good faith deposit on the
contract and is returned to each Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin," to and from the broker will be made daily as the
price of the index underlying the futures contract fluctuates, making the long
and short positions in the futures contract more or less valuable, a process
known as "marking-to-market." At any time prior to expiration of a futures
contract, each Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.


SWAP AGREEMENTS.  Swap agreements are contracts between parties in which one
party agrees to make periodic payments to the other party based on the change
in market value or level of a specified rate, index or asset. In return, the
other party agrees to make periodic payments to the first party based on the
return of a different specified rate, index or asset. Swap agreements will
usually be done on a net basis, with each Fund receiving or paying only the net
amount of the two payments. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of liquid assets having an aggregate value at least
equal to the accrued excess will be maintained by each Fund.


The use of interest-rate and index swaps is a highly specialized activity that
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. These transactions generally do not
involve the delivery of securities or other underlying assets or principal.


TRACKING STOCKS.  A tracking stock is a separate class of common stock whose
value is linked to a specific business unit or operating division within a
larger company and which is designed to "track" the performance of such
business unit or division. The tracking stock may pay dividends to shareholders
independent of the parent company. The parent company, rather than the business
unit or division, generally is the issuer of tracking stock. However, holders
of the tracking stock may not have the same rights as holders of the company's
common stock.


FUTURE DEVELOPMENTS. The Board may, in the future, authorize a Fund to invest
in securities contracts and investments other than those listed in this SAI and
in the Prospectuses, provided they are consistent with the Funds' investment
objective and do not violate any investment restrictions or policies.



General Considerations and Risks
A discussion of some of the risks associated with an investment in aqny Fund is
contained in the Prospectus applicable to such Fund.


An investment in the Funds should be made with an understanding that the value
of the Funds' portfolio securities may fluctuate in accordance with changes in
the financial condition of the issuers of the portfolio securities, the value
of preferred or common stocks in general and other factors that affect the
market.


Common stock values are subject to market fluctuations as long as the common
stock remains outstanding.


                                       6




RISKS OF DERIVATIVES. A derivative is a financial contract, the value of which
depends on, or is derived from, the value of an underlying asset such as a
security or an index. The Funds may invest in stock index futures contracts and
other derivatives. Compared to conventional securities, derivatives can be more
sensitive to changes in interest rates or to sudden fluctuations in market
prices and thus a Fund's losses may be greater if it invests in derivatives
than if it invests only in conventional securities.


RISKS OF EQUITY SECURITIES.  An investment in a Fund should be made with an
understanding that the value of the Fund's portfolio securities may fluctuate
in accordance with changes in the financial condition of the issuers of the
portfolio securities, the value of preferred or common stocks in general and
other factors that affect the market. An investment in a Fund should also be
made with an understanding of the risks inherent in an investment in equity
securities, including the risk that the financial condition of issuers may
become impaired or that the general condition of the stock market may
deteriorate (either of which may cause a decrease in the value of the portfolio
securities and thus in the value of shares of a Fund). Common stocks are
susceptible to general stock market fluctuations and to volatile increases and
decreases in value as market confidence and perceptions of their issuers
change. These investor perceptions are based on various and unpredictable
factors, including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction and global or regional political, economic or banking crises.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders generally have rights to receive
payments from the issuer inferior to the rights of creditors or holders of debt
obligations or preferred stocks. Further, unlike debt securities which
typically have a stated principal amount payable at maturity (whose value,
however, is subject to market fluctuations prior to maturity), or preferred
stocks, which typically have a liquidation preference and which may have stated
optional or mandatory redemption provisions, common stocks have neither a fixed
principal amount nor a maturity. Common stock values are subject to market
fluctuations as long as the common stock remains outstanding.


RISKS OF FUTURES AND OPTIONS TRANSACTIONS.  There are several risks
accompanying the utilization of futures contracts and options on futures
contracts. First, a position in futures contracts and options on futures
contracts may be closed only on the exchange on which the contract was made (or
a linked exchange). While each Fund plans to utilize futures contracts only if
an active market exists for such contracts, there is no guarantee that a liquid
market will exist for the contract at a specified time. Furthermore, because,
by definition, futures contracts project price levels in the future and not
current levels of valuation, market circumstances may result in a discrepancy
between the price of the stock index future and the movement in the Underlying
Index. In the event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain its required margin. In such
situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to deliver the
instruments underlying the future contracts it has sold.


The risk of loss in trading futures contracts or uncovered call options in some
strategies (E.G., selling uncovered stock index futures contracts) is
potentially unlimited. The Funds do not plan to use futures and options
contracts in this way. The risk of a futures position may still be large as
traditionally measured due to the low margin deposits required. In many cases,
a relatively small price movement in a futures contract may result in immediate
and substantial loss or gain to the investor relative to the size of a required
margin deposit. The Funds, however, intend to utilize futures and options
contracts in a manner designed to limit their risk exposure to levels
comparable to direct investment in the type of stocks in which they invest.


Utilization of futures and options on futures by a Fund involves the risk of
imperfect or even negative correlation to the Underlying Index if the index
underlying the futures contract differs from the Underlying Index. There is
also the risk of loss by a Fund of margin deposits in the event of bankruptcy
of a broker with whom a Fund has an open position in the futures contract or
option. The purchase of put or call options will be based upon predictions by
BGFA as to anticipated trends, which predictions could prove to be incorrect.


Because the futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in the
futures market could result in price fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum amount by
which the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting each Fund to substantial losses. In the event of
adverse price movements, each Fund would be required to make daily cash
payments of variation margin.


                                       7




Although each Fund intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time.


RISKS OF SWAP AGREEMENTS.  The risk of loss with respect to swaps generally is
limited to the net amount of payments that a Fund is contractually obligated to
make. Swap agreements are subject to the risk that the swap counterparty will
default on its obligations. If such a default occurs, a Fund will have
contractual remedies pursuant to the agreements related to the transaction.
However, such remedies may be subject to bankruptcy and insolvency laws which
could affect such Fund's rights as a creditor (E.G., a Fund may not receive the
net amount of payments that it contractually is entitled to receive).


RISKS OF INVESTING IN NON-U.S. EQUITY SECURITIES.  An investment in a Fund
involves risks similar to those of investing in a broad-based portfolio of
equity securities traded on exchanges in the respective countries covered by
the individual Fund. These risks include market fluctuations caused by such
factors as economic and political developments, changes in interest rates and
perceived trends in stock prices. Investing in securities issued by companies
domiciled in countries other than the domicile of the investor and denominated
in currencies other than an investor's local currency entails certain
considerations and risks not typically encountered by the investor in making
investments in the investor's home country and in that country's currency.
These considerations include favorable or unfavorable changes in interest
rates, currency exchange rates, exchange control regulation and the costs that
may be incurred in connection with conversions between various currencies.
Investing in a Fund whose portfolio contains non-U.S. issuers involves certain
risks and considerations not typically associated with investing in the
securities of U.S. issuers. These risks include generally less liquid and less
efficient securities markets, generally greater price volatility, less publicly
available information about issuers, the imposition of withholding or other
taxes, the imposition of restrictions on the expatriation of funds or other
assets of the Fund, higher transaction and custody costs, delays and risks
attendant in settlement procedures, difficulties in enforcing contractual
obligations, lower liquidity and significantly smaller market capitalization,
different accounting and disclosure standards, lower levels of regulation of
the securities markets, more substantial government interference with the
economy, higher rates of inflation, greater social, economic, and political
uncertainty and the risk of nationalization or expropriation of assets and risk
of war.


DIVIDEND RISK.  There is no guarantee that the issuers of the stocks held by a
Fund will declare dividends in the future or that if declared, they will either
remain at current levels or increase over time.



Proxy Voting Policy

The Company has adopted, as its proxy voting policies for each Fund, the proxy
voting guidelines of BGFA, the investment adviser to each Fund. The Company has
delegated to BGFA the responsibility for voting proxies on the portfolio
securities held by each Fund. The remainder of this section discusses each
Fund's proxy voting guidelines and BGFA's role in implementing such guidelines.



BGFA votes (or refrains from voting) proxies for each Fund in a manner that
BGFA, in the exercise of its independent business judgment, concludes is in the
best economic interests of such Fund. In some cases, BGFA may determine that it
is in the best economic interests of a Fund to refrain from exercising the
Fund's proxy voting rights (such as, for example, proxies on certain non-U.S.
securities that might impose costly or time-consuming in-person voting
requirements). With regard to the relationship between securities lending and
proxy voting, BGFA's approach is also driven by our clients' economic
interests. The evaluation of the economic desirability of recalling loans
involves balancing the revenue producing value of loans against the likely
economic value of casting votes. Based on our evaluation of this relationship,
we believe that the likely economic value of casting a vote generally is less
than the securities lending income, either because the votes will not have
significant economic consequences or because the outcome of the vote would not
be affected by BGFA recalling loaned securities in order to ensure they are
voted. Periodically, BGFA analyzes the process and benefits of voting proxies
for securities on loan, and will consider whether any modification of its proxy
voting policies or procedures are necessary in light of any regulatory changes.
BGFA will normally vote on specific proxy issues in accordance with its proxy
voting guidelines. BGFA's proxy voting guidelines provide detailed guidance as
to how to vote proxies on certain important or commonly raised issues. BGFA
may, in the exercise of its business judgment, conclude that the proxy voting
guidelines do not cover the specific matter upon which a proxy vote is
requested, or that an exception to the proxy voting guidelines would be in the
best economic interests of a Fund. BGFA votes (or refrains from voting) proxies
without regard to the relationship of the issuer of the proxy (or any
shareholder of such issuer) to a Fund, a Fund's affiliates (if any), BGFA or
BGFA's affiliates, or the Distributor or the Distributor's affiliates. When
voting proxies, BGFA attempts to encourage companies to follow practices that
enhance shareholder value and increase transparency and allow the market to
place a proper value on their assets. With respect to certain specific issues:


                                       8




  o  Each Fund generally supports the board's nominees in the election of
     directors and generally supports proposals that strengthen the independence
     of boards of directors;

  o  Each Fund generally does not support proposals on social issues that lack
     a demonstrable economic benefit to the issuer and the Fund investing in
     such issuer; and

  o  Each Fund generally votes against anti-takeover proposals and proposals
     that would create additional barriers or costs to corporate transactions
     that are likely to deliver a premium to shareholders.


BGFA maintains institutional policies and procedures that are designed to
prevent any relationship between the issuer of the proxy (or any shareholder of
the issuer) and a Fund, a Fund's affiliates (if any), BGFA or BGFA's affiliates
or the Distributor or the Distributor's affiliates, from having undue influence
on BGFA's proxy voting activity. In certain instances, BGFA may determine to
engage an independent fiduciary to vote proxies as a further safeguard against
potential conflicts of interest or as otherwise required by applicable law. The
independent fiduciary may either vote such proxies or provide BGFA with
instructions as to how to vote such proxies. In the latter case, BGFA votes the
proxy in accordance with the independent fiduciary's determination.


Information with respect to how BGFA voted Fund proxies relating to portfolio
securities during the 12-month period ended August 31, 2007 is available: (i)
without charge, upon request, by calling 1-800-iShares (1-800-474-2737) or
through the Fund's website at ISHARESETFS@BARCLAYSGLOBAL.COM; and (ii) on the
SEC's website at WWW.SEC.GOV.



Portfolio Holdings Information

The Board has adopted a policy regarding the disclosure of the Funds' portfolio
holdings information that requires that such information be disclosed in a
manner that: (a) is consistent with applicable legal requirements and in the
best interests of each Fund's respective shareholders; (b) does not put the
interests of the Funds' Investment Adviser, the Funds' Distributor, or any
affiliated person of BGFA or the Distributor above those of Fund
shareholders; (c) does not advantage any current or prospective Fund
shareholders over any other current or prospective Fund shareholders, except to
the extent that certain Entities (as described below) may receive portfolio
holdings information not available to other current or prospective Fund
shareholders in connection with the dissemination of information necessary for
transactions in Creation Units, as contemplated by the iShares Exemptive Orders
and discussed below and (d) does not provide selective access to portfolio
holdings information except pursuant to the procedures outlined below and to
the extent appropriate confidentiality arrangements limiting the use of such
information are in effect. The "Entities" referred to in sub-section (c) above
are generally limited to National Securities Clearing Corporation ("NSCC")
members and subscribers to various fee-based subscription services, including
those large institutional investors (known as "Authorized Participants") that
have been authorized by the Distributor to purchase and redeem large blocks of
shares (known as Creation Units) pursuant to legal requirements, including
exemptive orders granted by the SEC pursuant to which the Funds offer and
redeem their shares ("iShares Exemptive Orders") and other institutional market
participants and entities that provide information services.


Each business day, each Fund's portfolio holdings information is provided to
the Distributor or other agent for dissemination through the facilities of the
NSCC and/or other fee-based subscription services to NSCC members and
subscribers to those other fee-based subscription services, including
Authorized Participants, and to entities that publish and/or analyze such
information in connection with the process of purchasing or redeeming Creation
Units or trading shares of Funds in the secondary market. This information
typically reflects each Fund's anticipated holdings on the following business
day.


Daily access to information concerning the Funds' portfolio holdings is
permitted (i) to certain personnel of those service providers that are involved
in portfolio management and providing administrative, operational, risk
management or other support to portfolio management, including affiliated
broker-dealers and Authorized Participants and (ii) to other personnel of BGFA
and the Funds' Distributor, administrator, custodian and fund accountant who
deal directly with or assist in, functions related to investment management,
distribution, administration, custody and fund accounting, as may be necessary
to conduct business in the ordinary course in a manner consistent with the
iShares Exemptive Orders, agreements with the Funds and the terms of the Funds'
current registration statements. In addition, each Fund discloses its portfolio
holdings and the percentages they represent of the Fund's net assets at least
monthly, but as often as each day the Fund is open for business, at
iSharesETFs@barclaysglobal.com. More information about this disclosure is
available at ISHARESETFS@BARCLAYSGLOBAL.COM.


From time to time, information concerning Fund portfolio holdings, other than
portfolio holdings information made available in connection with the
creation/redemption process, as discussed above, may also be provided to other
entities that provide additional services to the Funds, including rating or
ranking organizations, in the ordinary course of business, no earlier than one
business


                                       9




day following the date of the information. Portfolio holdings information made
available in connection with the creation/ redemption process may be provided
to other entities that provide additional services to the Funds in the ordinary
course of business after it has been disseminated to the NSCC.


Each Fund discloses its complete portfolio holdings schedule in public filings
with the SEC within 70 days after the end of each fiscal quarter, and will
provide that information to shareholders as required by federal securities laws
and regulations thereunder. A Fund may, however, voluntarily disclose all or
part of its portfolio holdings other than in connection with the
creation/redemption process, as discussed above, in advance of required filings
with the SEC, provided that such information is made generally available to all
shareholders and other interested parties in a manner that is consistent with
the above policy for disclosure of portfolio holdings information. Such
information may be made available through a publicly-available website or other
means that make the information available to all likely interested parties in a
contemporaneous manner.


The Company's Chief Compliance Officer may authorize disclosure of portfolio
holdings information pursuant to the above policy and procedures.


The Company's Board reviews the policy and procedures for disclosure of
portfolio holdings information at least annually.



Investments In Subject Equity Markets
Brief descriptions of the equity markets in which the respective Fund are
invested are provided below.

COUNTRY SPECIFIC INFORMATION


GENERAL RISK INFORMATION


In the following countries (except Canada), reporting, accounting and auditing
standards may differ substantially from U.S. standards. In general,
corporations do not provide all of the disclosure required by U.S. law and
accounting practice and such disclosure may be less timely and less frequent
than that required of U.S. corporations.


THE AUSTRALIAN EQUITY MARKETS


Trading shares has taken place in Australia since 1828. A stock market was
first formed in Melbourne in 1861, with other exchanges established in Sydney,
Brisbane, Adelaide, Hobart and Perth. The regional exchanges merged to create
the single entity-The Australian Stock Exchange (the ASX). Trading is done via
a computer link-up called "SEATS." SEATS enables all exchanges to quote uniform
prices. All the exchanges are members of the ASX and are subject to
complementary oversight by the ASX and the Australian Securities and
Investments Commission, which work together to regulate the major aspects of
stock exchange operations. The total market capitalization of the Australian
equity markets was approximately US$1.2 trillion as of September 30, 2007.


Australia's chief industries are mining, industrial and transportation
equipment, food processing, chemicals, and steel. Australia's chief imports
consist of machinery and transport equipment, computers and office machines,
telecommunication equipment and parts, crude oil and petroleum products. Its
chief exports consist of coal, gold, meat, wool, aluminum, iron ore, wheat,
machinery and transport equipment.


THE AUSTRIAN EQUITY MARKETS


Relative to international standards, the Vienna stock market is small in terms
of total capitalization and yearly turnover. The Vienna Stock Exchange (the
"VSE") was founded in 1771. Shares account for about 80% and investment fund
certificates for about 20% of total listed securities on the VSE. Certain
securities which do not have an official listing may be dealt in on the floor
of the stock exchange with permission of the management. This unlisted trading
is the main activity of the free brokers. The total market capitalization of
the Austrian equity markets was approximately US$170 billion as of September 30,
2007.


Austria's chief industries are construction, machinery, vehicles and parts,
food, chemicals, lumber and wood processing, paper and paperboard,
communications equipment, and tourism. Its chief imports consist of machinery
and equipment, motor vehicles, chemicals, metal goods, oil and oil products and
foodstuffs. Austria's chief exports consist of machinery and equipment, motor
vehicles and parts, paper and paperboard, metal goods, chemicals, iron and
steel, textiles and foodstuffs.


                                       10




THE BELGIAN EQUITY MARKETS


The Brussels Stock Exchange (the BSE) was founded by Napoleonic decree in 1801.
The BSE merged with the stock exchanges in Paris, Amsterdam and Lisbon, forming
the Euronext N.V. This is the first pan-European exchange for equities and
derivatives, with common trading and clearing of all products. The total market
capitalization of the Belgian equity markets was approximately US$350 billion
as of September 30, 2007.


Belgium's chief industries are engineering and metal products, motor vehicle
assembly, processed food and beverages, chemicals, basic metals, textiles,
glass and petroleum. Its chief imports consist of machinery and equipment,
chemicals, diamonds, pharmaceuticals, foodstuffs, transportation equipment and
oil products. Belgium's chief exports consist of machinery and equipment,
chemicals, diamonds, and metals and metal products.


THE BRAZILIAN EQUITY MARKETS


Formally established in 1845, the Rio de Janeiro exchange, or BVRJ (Bolsa de
Valores de Rio de Janeiro) is the oldest exchange in Brazil, but the Sao Paulo
exchange, called Bolsa de Valores de Sao Paulo ("BOVESPA"), is the largest and
accounts for about 90% of trading activity. The BOVESPA was founded in 1890 and
today acts as the center of integration for the nine regional stock exchanges:
All are linked with one another making it possible to settle transactions done
on one exchange using the services of the other. The SOMA (Sociedade Operadora
do Mercado de Ativos) manages the over-the-counter market organized in Brazil
through an electronic system of negotiation. Government securities, corporate
bonds, and money market instruments are traded in the open market. The Bolsa de
Mercdorias & de Futuros (the "BM&F"), in Sao Paulo, is Brazil's futures
exchange. Options on the futures also are traded, but are less liquid. BM&F is
the clearinghouse for all transactions. The financial market is regulated by
three main bodies: the National Monetary Council, or CMN (Conselho Monetario
Nacional); the Central Bank (Banco Central do Brasil), and the Securities
Commission, or CVM (Comissao de Valores Mobiliarios). The total market
capitalization of the Brazilian equity markets was approximately US$760 billion
as of September 30, 2007.


Brazil's chief industries are textiles, shoes, chemicals, cement, lumber, iron
ore, tin, steel, aircraft, motor vehicles and parts, other machinery and
equipment. Its chief imports consist of machinery, electrical and transport
equipment, chemical products and oil. Brazil's chief exports consist of
transport equipment, iron ore, soybeans, footwear, coffee and autos.


THE CANADIAN EQUITY MARKETS


In 1861, the first Canadian stock exchange, the Toronto Stock Exchange, was
officially established after nearly a decade of informal trading and became
Canada's sole exchange for trading larger equity securities. Today, there are
three stock exchanges across Canada: the Toronto Stock Exchange (the "TSX"),
the TSX Venture Exchange and the Montreal Exchange. Of these, the TSX is the
largest, accounting for almost 80% of Canadian trading volumes. Measured by the
value of shares traded, the TSX is the second largest organized securities
exchange in North America and among the ten largest in the world. The Market
Regulation Services Inc. was created in March 2002 as the independent
regulation services provider for the Canadian equity markets. The total market
capitalization of the Canadian markets was approximately US$1.7 trillion as of
September 30, 2007.


REPORTING, ACCOUNTING AND AUDITING. Canadian reporting, accounting and auditing
practices are closer to U.S. standards than those of any other foreign
jurisdiction.


Canada's chief industries are transportation equipment, chemicals, processed
and unprocessed minerals, food products, wood and paper products, fish
products, petroleum, and natural gas. Its chief imports consist of machinery
and equipment, motor vehicles and parts, crude oil, chemicals, electricity and
durable consumer goods. Canada's chief exports consist of motor vehicles and
parts, industrial machinery, aircraft, telecommunications equipment, chemicals,
plastics, fertilizers, wood pulp, timber, crude petroleum, natural gas,
electricity and aluminum.


EMERGING MARKETS COUNTRIES


The iShares MSCI Emerging Markets Index Fund invests in equity securities from
the following 25 emerging market countries: Argentina, Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan,
South Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, South Africa, Taiwan, Thailand and Turkey. Currently, South Korea,
South Africa, Taiwan, Brazil and China are the largest countries, in terms of
capitalization weight in the Index. The equity markets for South Korea, South
Africa, Taiwan, Mexico, Malaysia and Brazil are described herein.


                                       11




The total market capitalization of the combined equity markets of Argentina,
Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Jordan, South Korea, Malaysia, Mexico, Morocco, Pakistan,
Peru,


Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey was
approximately US$2.6 trillion as of September 30, 2007.


THE EMU EQUITY MARKETS


On January 1, 1999, the Economic and Monetary Union of the European Union (the
"EMU") introduced a new single currency called the Euro. The Euro has replaced
the national currencies of the following member countries: Austria, Belgium,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain. In addition, Cyprus, the Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia became members of the
EMU on May 1, 2004, but have not yet adopted the Euro as their new currency.
The MSCI EMU Index is current comprised of companies from eleven of these EMU
countries (I.E., all of the EMU countries except Luxembourg).


GENERAL BACKGROUND. The following is a general background description of the
equities market of each country included in the MSCI EMU Index for which there
is no iShares MSCI index fund:


The total market capitalization of the combined equity markets of Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands,
Portugal and Spain was approximately US$8.1 trillion as of September 30, 2007.


FINLAND. Organized securities trading has existed in Finland since the 1860s,
but it was 1912 before a formal exchange, the Helsinki Arvopaperiporssi, was
founded. As a result, alone among the world's stock exchanges, the
Arvopaperiporssi accepts as members all companies listed on its trading board
and business organizations in addition to the bankers and brokers. The brokers
and brokerage firms have undertaken to act as market makers. Mainly
medium-sized companies are traded on the over-the-counter("OTC") List. The OTC
Market is based on an agreement between a company seeking access to the share
market and a brokerage firm; both are subject to certain obligations. Finland's
chief industries are communications equipment, pulp and paper, products,
industrial machinery, metals, chemicals, textiles and shipbuilding. Its chief
imports consist of foodstuffs, petroleum and petroleum products, chemicals,
transport equipment, iron and steel, machinery, textile yarn and fabrics and
grains. Finland's chief exports consist of machinery and equipment, chemicals,
metals, timber, paper and pulp.


GREECE. The Athens Stock Exchange is a self-managed public institution,
regulated by law. Greece's chief industries are tourism, food and tobacco
processing, textiles, chemicals, metal products; mining, and petroleum. Its
chief imports consist of machinery, transport equipment, fuels, and chemicals.
Greece's chief exports consist of food and beverages, manufactured goods,
petroleum products, chemicals and textiles.


IRELAND. The Irish Stock Exchange (the "ISE"), founded in the 18th century, is
the second oldest in the world. Previously it operated as part of the
International Stock Exchange of the United Kingdom and Republic of Ireland. On
December 8, 1995, it split from the U.K. Stock Exchange to form the ISE.
Companies that were listed on both the Dublin and London exchanges may apply
for dual primary listing, under which they will be regulated to the same agreed
upon standard by both exchanges. Ireland's chief industries are food products,
brewing, textiles, clothing; chemicals, pharmaceuticals, machinery,
transportation equipment, glass and crystal and software. Its chief imports
consist of data processing equipment, other machinery and equipment, chemicals,
petroleum and petroleum products, textiles, and clothing. Ireland's chief
exports consist of machinery and equipment, computers, chemicals,
pharmaceuticals, live animals and animal products.


PORTUGAL. European Union membership marked the start of a period that has seen
dramatic growth in the scope and activity of the Portuguese stock market. The
Lisbon Stock Exchange was acquired by Euronext N.V., which also controls the
exchanges of Amsterdam, Brussels and Paris.


Portugal's chief industries are textiles and footwear, wood pulp, paper, and
cork; metalworking, oil refining, chemicals, fish canning, wine and tourism.
Its chief imports consist of machinery and transport equipment, chemicals,
petroleum, textiles, and agricultural products. Portugal's chief exports
consist of clothing and footwear, machinery, chemicals, cork and paper products
and hides.


THE FRENCH EQUITY MARKETS


GENERAL BACKGROUND. All purchases or sales of equity securities in listed
companies on any one of the French exchanges must be executed through the
Societe de Bourse.


                                       12




Although there are seven stock exchanges in France (located in Paris, Bordeaux,
Lille, Lyon, Marseille, Nancy and Nantes), the Euronext Paris handles more than
95% of transactions in the country. All bonds and shares, whether listed or
unlisted, must be traded on one of the seven exchanges. Trading in most of the
Paris exchange-listed stocks takes place through the computer order-driven
trading system CAC, launched in 1988. Exchange securities are denominated in
the Euro. Unless otherwise provided by a double tax treaty, dividends on French
shares are subject to a withholding tax of 25%.


France's chief industries are machinery, chemicals, automobiles, metallurgy,
aircraft, electronics, textiles, food processing, and tourism. Its chief
imports consist of machinery and equipment, vehicles, crude oil, aircraft,
plastics and chemicals. France's chief exports consist of machinery and
transportation equipment, aircraft, plastics, chemicals, pharmaceutical
products, iron and steel and beverages.


THE GERMAN EQUITY MARKETS


GENERAL BACKGROUND. Today there are eight independent stock exchanges, of which
Dusseldorf and Frankfurt account for over three-quarters of the total volume.
Frankfurt is the main exchange in Germany. Exchange securities are denominated
in the Euro. Equities may be traded in Germany in one of three markets: (i) the
official market, comprised of trading in shares which have been formally
admitted to official listing by the admissions committee of the relevant stock
exchange, based on disclosure in the listing application; (ii) the
"semi-official" unlisted market, comprised of trading in shares not in the
official listing; and (iii) the unofficial, OTC market, which is governed by
the provisions of the Civil Code and the Merchant Code and not by the
provisions of any stock exchange. There is no stamp duty in Germany, but a
nonresident capital gains tax may apply in certain circumstances. The total
market capitalization of the Germany equity markets was approximately US$1.7
trillion as of September 30, 2007.


Germany's chief industries are among the world's largest and most
technologically advanced producers of iron, steel, coal, cement, chemicals,
machinery, vehicles, machine tools, electronics, food and beverages,
shipbuilding, and textiles. Its chief imports consist of machinery, vehicles,
chemicals, foodstuffs, textiles, and metals. Germany's chief exports consist of
machinery, vehicles, chemicals, metals and manufactures, foodstuffs and
textiles.


THE HONG KONG EQUITY MARKETS


GENERAL BACKGROUND. Trading in equity securities in Hong Kong began in 1891 and
continues with the creation of the Hong Kong Exchanges and Clearing Limited
("HKEx"). Trading on the HKEx is conducted in the post trading method, matching
buyers and sellers through public outcry. Securities are denominated in the
official unit of currency, the Hong Kong Dollar. Foreign investment in Hong
Kong is generally unrestricted and regulatory oversight is administered by the
Hong Kong Securities and Futures Commission. All investors are subject to a
stamp duty and a stock exchange levy, but capital gains are tax-exempt. The
total market capitalization of the Hong Kong equity markets was approximately
US$669 billion as of September 30, 2007.


Hong Kong's chief industries are textiles, clothing, tourism, banking,
shipping, electronics, plastics, toys, watches, and clocks. Its chief imports
consist of electrical machinery and appliances, textiles, foodstuffs, transport
equipment, raw materials, semi manufactures, petroleum and plastics. Hong
Kong's chief exports consist of electrical machinery and appliances, textiles,
apparel footwear, watches and clocks, toys, plastics and precious stones.


THE ITALIAN EQUITY MARKETS


GENERAL BACKGROUND. The Italian Stock Exchange Council set up a private company,
"Borsa Italiana Spa", which is responsible for the regulation, promotion and
management of the Italian Stock Exchange, the unlisted securities market and the
Italian Derivatives Market (the "IDEM"). IDEM has exchange-listed derivatives
products and options also were introduced on single stocks, together with the
transfer of all shares to a rolling settlement basis. Access to the Italian
trading system can be obtained directly through the terminals provided to users
or indirectly through users' own front office systems (using application
programming interfaces). The total market capitalization of the Italian equity
markets was approximately US$1 trillion as of September 30, 2007.


Italy's chief industries are tourism, machinery, iron and steel, chemicals,
food processing, textiles, motor vehicles, clothing, footwear and ceramics. Its
chief imports consist of engineering products, chemicals, transport equipment,
energy products, minerals and nonferrous metals, textiles and clothing, food,
beverages and tobacco. Italy's chief exports consist of engineering products,
textiles and clothing, production machinery, motor vehicles, transport
equipment, chemicals; food, beverages and tobacco, minerals and nonferrous
metals.


THE JAPANESE EQUITY MARKETS

                                       13




GENERAL BACKGROUND. The Japanese stock market has a history of over 100 years
beginning with the establishment of the Tokyo Stock Exchange Company Ltd. in
1878. Japan now has five stock exchanges (Tokyo, Osaka, Nagoya, Fukuoka and
Sapporo). There is also an over-the-counter market. The main activity of the
regular exchange members is the buying and selling of securities on the floor
of an exchange, both for their customers and for their own account. Japan is
second only to the United States in aggregate stock market capitalization.
Securities are denominated in the official unit of currency, the Japanese Yen.
Although foreign investors play a significant role in Tokyo, the trend of the
market is set by the domestic investor. The Securities and Exchange
Surveillance Commission (SESC) was established in July 1992 within the ambit of
the


Ministry of Finance in order to ensure compliance with rules set within the
securities and financial futures markets. The total market capitalization of
the Japanese equity markets was approximately US$4.5 trillion as of September
30, 2007.


Japan's chief industries are among world's largest and technologically advanced
producers of motor vehicles, electronic equipment, machine tools, steel and
nonferrous metals, ships, chemicals, textiles, and processed foods. Its chief
imports consist of machinery and equipment, fuels, foodstuffs, chemicals,
textiles and raw materials. Japan's chief exports consist of motor vehicles,
semiconductors, office machinery and chemicals.


THE MALAYSIAN EQUITY MARKETS


GENERAL BACKGROUND. The securities industry in Malaysia dates back to the early
1930's. Kuala Lumpur and Singapore were a single exchange until 1973 when they
separated and the Kuala Lumpur Stock Exchange (the "KLSE") was formed. There is
also the Malaysia Derivatives Exchange (MDEX) which offers a wide range of
derivative products. In March of 2002 a third stock market was launched in
Malaysia, the MESDAQ. Over the years, the KLSE's close links with the Stock
Exchange of Singapore (the "SES") has rendered it very vulnerable to
developments in Singapore. Consequently, the Government decided, as a matter of
national policy, on a delisting of Malaysian incorporated companies from the
SES. A similar move was made by Singapore, resulting in the delisting of all
Singapore companies on the KLSE. There are two main stock indexes in Malaysia.
The total market capitalization of the Malaysian equity markets was
approximately US$215 billion as of September 30, 2007.


Peninsular Malaysia's main industries are rubber and oil palm processing and
manufacturing, light manufacturing industry, electronics, tin mining and
smelting, logging and processing timber. Sabah's main industries are logging,
and petroleum production. Sarawak's main industries are agriculture processing,
petroleum production and refining, and logging. Its chief imports consist of
electronics, machinery, petroleum products, plastics, vehicles, iron and steel
and iron and steel products and chemicals. Malaysia's chief exports consist of
electronic equipment, petroleum and liquefied natural gas, wood and wood
products, palm oil, rubber, textiles and chemicals.


THE MEXICAN EQUITY MARKETS


GENERAL BACKGROUND. There is only one stock exchange in Mexico, the Bolsa
Mexicana de Valores (the "BMV"), which was established in 1894 and is located
in Mexico City. The BMV is a private institution legally incorporated as a
limited company with variable capital that operates under a concession from the
Ministry of Finance and Public Credit and is governed by the Mexican Securities
Market Act. The National Banking and Securities Commission (the CNV) supervises
the BMV. The BMV operates primarily via the open outcry method. Executions on
the exchange can be done by members only. Membership of the BMV is restricted
to Casas de Bolsa brokerage houses and Especialistas Bursatiles (stock exchange
specialists). The total market capitalization of the Mexican equity markets was
approximately US$280 billion as of September 30, 2007.


Mexico's chief industries are food and beverages, tobacco, chemicals, iron and
steel, petroleum, mining, textiles, clothing, motor vehicles, consumer
durables, and tourism. Its chief imports consist of metalworking machines,
steel mill products, agricultural machinery, electrical equipment, car parts
for assembly, repair parts for motor vehicles, aircraft and aircraft parts.
Mexico's chief exports consist of manufactured goods, oil and oil products,
silver, fruits, vegetables, coffee and cotton.


THE NETHERLANDS EQUITY MARKETS


GENERAL BACKGROUND. Trading securities on the Euronext Amsterdam (formerly the
Amsterdam Stock Exchange or AEX) started at the beginning of the seventeenth
century. Since the end of World War II, the Dutch market has remained
relatively neglected, as local companies have found it more favorable to use
bank financing to meet their capital requirements. Trading in shares on the
Euronext Amsterdam may take place on the official market or on the parallel
market, which is available to medium-sized and smaller companies that cannot
yet meet the requirements demanded for the official market. The total market
capitalization of the Dutch equity markets was approximately US$652 billion as
of September 30, 2007.


                                       14




The Netherlands' chief industries are predominantly in petroleum refining,
chemicals, financial services, packaged goods and consumer electronics. Its
chief imports consist of metal and engineering products, machinery and
transport equipment, chemicals, petroleum, and food processing. The
Netherlands' chief exports consist of machinery and equipment, chemicals, fuels
and foodstuffs.


THE PACIFIC EX-JAPAN EQUITY MARKETS


The Pacific ex-Japan equity markets are comprised of the equity markets from
Australia, Hong Kong, New Zealand and
Singapore.


GENERAL BACKGROUND. The following is a general background description of the
New Zealand equity market for which there is no iShares MSCI index fund.


NEW ZEALAND. The New Zealand Stock Exchange (the "NZSE") originated in the
1870's. The Sharebrokers Act Amendment 1981 governs the operations of the NZSE.



New Zealand's chief industries are integrated telecommunication services,
construction materials, casinos and gaming, airport services, food processing,
wood and paper products, textiles, machinery, transportation equipment, banking
and insurance, tourism, and mining. Its chief imports consist of machinery and
equipment, vehicles and aircraft, petroleum, electronics, textiles, and
plastics. New Zealand's chief exports consist of dairy products, meat, wood and
wood products, fish and machinery.


THE SINGAPOREAN EQUITY MARKETS


GENERAL BACKGROUND. The Stock Exchange of Singapore (the "SES") was formed in
1973 with the separation of the joint stock exchange with Malaysia, which had
been in existence since 1930. The linkage between the SES and the KLSEB (Kuala
Lumpur Stock Exchange Bhd) remained strong as many companies in Singapore and
Malaysia jointly listed on both exchanges, until the dual listing was
terminated. SES has a tiered market, with the formation of the second
securities market, SESDAQ (Stock Exchange of Singapore Dealing and Automated
Quotation System). SESDAQ was designed to provide an avenue for small and
medium-sized companies to raise funds for expansion. In 1990, SES introduced an
OTC market known as CLOB (Central Limit Order Book), to allow investors access
to international securities listed on foreign exchanges. SES also has a direct
link with the National Association of Securities Dealers Automated Quotation
("NASDAQ") system, which was set up in March 1988 to allow traders in the Asian
time zone access to selected securities on the U.S. OTC markets. This is made
possible through a daily exchange of trading prices and volumes of the stocks
quoted on NASDAQ. The Singapore Stock Exchange is one of the most developed in
Asia and has a strong international orientation. The total market
capitalization of the Singaporean markets was approximately US$331 billion as of
September 30, 2007.


Singapore's chief industries are electronics, chemicals, financial services,
oil drilling equipment, petroleum refining, rubber processing and rubber
products, processed food and beverages, ship repair, offshore platform
construction, life sciences and entrepot trade. Its chief imports consist of
machinery and equipment, mineral fuels, chemicals, and foodstuffs. Singapore's
chief exports consist of machinery and equipment (including electronics),
consumer goods, chemicals and mineral fuels.


THE SOUTH AFRICAN EQUITY MARKETS


GENERAL BACKGROUND. The Johannesburg Stock Exchange (the "JSE"), the only stock
exchange in South Africa, was initially founded in 1887. The JSE operates an
equities market. However, many of the members of the JSE also participate in
the trading of bonds and financial futures, with traditional options traded on
an OTC basis. Introduced in November 1995, corporate limited liability
membership with ownership by non-stockbrokers was established to supplement the
present membership of partnerships, unlimited liability corporate members or
sole traders. Foreigners are allowed by the JSE to operate as member firms. The
total market capitalization of the South African equity markets was
approximately US$404 billion as of September 30, 2007.


South Africa's chief industries consist of mining (it is the world's largest
producer of platinum, gold, chromium), automobile assembly, metal working,
machinery, textile, iron and steel, chemicals, fertilizer and foodstuffs. Its
chief imports consist of machinery, foodstuffs and equipment, chemicals,
petroleum products and scientific instruments. South Africa's chief exports
consist of gold, diamonds, platinum, other metals, minerals, machinery and
equipment.


THE SOUTH KOREAN EQUITY MARKETS

                                       15




GENERAL BACKGROUND. The South Korea Stock Exchange is the only stock exchange
in South Korea. The government enacted the Securities and Exchange Law to
govern the exchange. It was later amended to impose stricter regulatory
measures on the operation of the securities market. The South Korea Securities
Settlement Corporation, since renamed the South Korea Depository Corporation
(KSD), acts as the clearing agent for the stock exchange and as the central
depository. In 1977, the South Korea Securities Computer Corporation was
established as an electronic data processing center for the securities industry
to enable members to transmit orders directly to the trading floor. The stock
market began to be opened to foreign investors in January 1992. The total
market capitalization of the South Korean equity markets was approximately
US$997 billion as of September 30, 2007.


South Korea's chief industries are electronics, financial services,
telecommunications, automobile production, chemicals, shipbuilding and repair
and steel. Its chief imports consist of machinery and equipment, oil, organic
chemicals, plastics and transport equipment. South Korea's chief exports
consist of semiconductors, wireless telecommunications equipment, motor
vehicles, computer equipment, steel, ships, and petrochemicals.


THE SPANISH EQUITY MARKETS


GENERAL BACKGROUND. The Securities Market Act (LMV) recognizes the following as
official secondary markets: stock exchanges; the public debt market organized
by the Bank of Spain; and futures and options markets. Stock exchanges in Spain
(Madrid, Bilbao, Barcelona and Valencia) are the official secondary markets
which trade shares and convertible bonds or those which grant the right of
purchase or subscription. Issuers of shares go to the stock market as the
primary market, where they formalize transactions or capital increases.
Fixed-income securities (both governmental and private sector debt) are also
traded on the stock market. Bonds, Spanish Treasury bills and debt issued by
other public administrations and organizations are traded in the public debt
market. These securities are also traded at the same time on the stock market,
which has a specific trading system for them. The Bank of Spain's Book-Entry
Office is responsible for supervising the public debt market. The total market
capitalization of the Spanish equity markets was approximately US$934 billion
as of September 30, 2007.


Spain's chief industries are textiles and apparel (including footwear), food
and beverages, metals and metal manufactures, chemicals, shipbuilding,
automobiles, machine tools, and tourism. Its chief imports consist of machinery
and equipment, fuels, chemicals, semi finished goods, foodstuffs, consumer
goods. Spain's chief exports consist of machinery, motor vehicles; foodstuffs,
other consumer goods.


THE SWEDISH EQUITY MARKETS


GENERAL BACKGROUND. Organized trading of securities in Sweden can be traced
back to 1776. Although the Stockholm Stock Exchange was founded in 1864, the
formation of a stock exchange took place in 1901. There are three different
markets for trading shares in Sweden: 1) the dominant market is the A-1 list,
for the largest and most heavily traded companies; 2) the over-the-counter
market, which is more loosely regulated than the official market and caters to
small- and medium-sized companies; and 3) the unofficial parallel market, which
deals in unlisted shares, both on and off the exchange floor. The shares most
frequently traded on this market are those which have been de-listed from other
markets and those that are only occasionally available for trading. On July 1,
1999, the Stockholm Stock Exchange and OM Stockholm merged to create the OM
Stockholm Exchange-OM Stockholmsborsen AB. In addition, the Stockholm Stock
Exchange and the Copenhagen Stock Exchange have signed an agreement covering a
common Nordic securities market, (NOREX). There are also two independent
markets for options-the Swedish Options Market (the OM) and the Swedish Options
and Futures Exchange (the SOFE), which offer calls, puts and forwards on
Swedish stocks and stock market indexes. The total market capitalization of the
Swedish equity markets was approximately US$563 billion as of September 30,
2007.


Sweden's chief industries are communications equipment, diversified financial
services, wood pulp and paper products, processed foods and industrial &
construction machinery. Its chief imports consist of machinery, petroleum and
petroleum products, chemicals, motor vehicles, iron and steel; foodstuffs and
clothing. Sweden's chief exports consist of machinery, motor vehicles, paper
products, pulp and wood, iron and steel products and chemicals.


THE SWISS EQUITY MARKETS


GENERAL BACKGROUND. There are three principal stock exchanges in Switzerland,
the largest of which is Zurich, followed by Geneva and Basle. There are three
different market segments for the trading of equities in Switzerland. The first
is the official market, the second is the semi-official market, and the third
is the unofficial market. On the official market, trading takes place among
members of the exchange on the official trading floors. Trading in the
semi-official market also takes place on the floors of


                                       16




the exchanges, but this market has traditionally been reserved for smaller
companies not yet officially accepted on the exchange. Unofficial market trades
are conducted by members and non-members alike. Typical trading on this market
involves shares with small turnover. Both listed and unlisted securities can,
however, be traded on this market.


SWX has facilities for electronic trading in Eurobonds. Repo SWX, the first
electronic market for repos with integrated clearing and settlement, was
inaugurated in June 1999. In addition, SWX launched a new market segment for
emerging- growth companies in July


1999, under the name SWX New Market. Eurex, the first trans-national
derivatives market, is a co-operative venture between the SWX Swiss Exchange
and Deutsche Borse Ag, each of which holds a 50% stake. Eurex is the largest
derivative exchange in the world. The total market capitalization of the Swiss
equity markets was approximately US$1.2 trillion as of
September 30, 2007.


Switzerland's chief industries are machinery, chemicals, watches, textiles and
precision instruments. Its chief imports consist of machinery, chemicals,
vehicles, metals, agricultural products, and textiles. Switzerland's chief
exports consist of machinery, chemicals, metals, watches and agricultural
products.


THE TAIWANESE EQUITY MARKETS


GENERAL BACKGROUND. The Taiwan Stock Exchange, located in Taipei, is the only
stock exchange in Taiwan. In the exchange's first year, there were 18 listed
companies with an average trading volume of TWD 1,647,760. By 1963, there were
23 listed companies; by 1980, there were 100; and by 2004 there were 669. As
listings steadily increased, the market remained stable for several years.
Since then, the number of brokerage firms has multiplied and limitations on
foreign investors have recently been relaxed. The total market capitalization
of the Taiwanese equity markets was approximately US$708 billion as of
September 30, 2007.


Taiwan's chief industries are electronics, petroleum refining, chemicals,
textiles, iron and steel, machinery, cement and food processing. Its chief
imports consist of machinery and electrical equipment, minerals, and precision
instruments. Taiwan's chief exports consist of machinery and electrical
equipment, metals, textiles, plastics and chemicals.


THE UNITED KINGDOM EQUITY MARKETS


GENERAL BACKGROUND. The U.K. is Europe's largest equity market in terms of
aggregate market capitalization. Trading is fully computerized under the SETS
System for FTSE-100 (and 83 other) stocks and the Stock Exchange Automated
Quotation System operates for international equities. The London Stock Exchange
has the largest volume of trading in international equities in the world. The
total market capitalization of the United Kingdom equity markets was
approximately US$3.8 trillion as of September 30, 2007.


United Kingdom's chief industries are machine tools, electric power equipment,
automation equipment, railroad equipment, shipbuilding, aircraft, motor
vehicles and parts, electronics and communications equipment, metals,
chemicals, coal, petroleum, paper and paper products, food processing,
textiles, clothing and other consumer goods. Its chief imports consist of
manufactured goods, machinery, fuels and foodstuffs. United Kingdom's chief
exports consist of manufactured goods, fuels, chemicals, food, beverages and
tobacco.



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


Local stock exchanges traditionally calculated their own indexes that were
generally not comparable with one another due to differences in the
representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI, however, applies the same
criteria and calculation methodology across all markets for all single country
standard equity indexes, developed and emerging.


                                       17




MSCI has begun implementing enhancements to the methodology of its current
indexes, the MSCI Standard Indexes and the MSCI Small Cap Indexes. MSCI is
generally expanding the number of securities included in these indexes,
eliminating industry sector classifications in favor of market capitalization
size segmentation and eliminating overlapping market capitalization size
segmentation among its indexes. These enhancement are being phased in over two
stages: 50% of the transition was completed on November 30, 2007 and the
remaining transition is expected to be completed on May 30, 2008. MSCI has also
combined its MSCI Standard Indexes and MSCI Small Cap Indexes to form the MSCI
Global Investable Market Indexes (the "MSCI GIMI"). The MSCI Global Standard
Indexes of the MSCI GIMI, which include the MSCI Global Large Cap Indexes and
MSCI Global Mid-Cap Indexes, are intended to cover all investable large and
mid-cap securities and include approximately 85% of each market's free
float-adjusted market capitalization. The MSCI Global Small Cap Indexes of the
MSCI GIMI are intended to cover all companies with a market capitalization
smaller than that of the companies in the MSCI Global Standard Indexes and
include an additional 14% coverage of each market's free-float adjusted market
capitalization.


MSCI STANDARD EQUITY INDEXES


WEIGHTING. All single-country MSCI equity indexes are free-float weighted,
I.E., companies are included in the indexes at the value of their free public
float (free float, multiplied by price). MSCI defines "free float" as total
shares excluding shares held by strategic investors and shares subject to
foreign ownership restrictions. MSCI's Standard indexes generally seek to
include 85% of the free float-adjusted market capitalization of a country's
stock market represented in each industry group, of each country.


REGIONAL WEIGHTS. Market capitalization weighting, combined with a consistent
target of 85% of free float-adjusted market capitalization, helps ensure that
each country's weight in regional and international indexes approximates its
weight in the total universe of developing and emerging markets.


SELECTION CRITERIA. MSCIs index construction process involves: (i) defining the
equity universe, (ii) adjusting the total market capitalization of all
securities in the universe for free float available to foreign investors, (iii)
classifying the universe of securities under the Global Industry Classification
Standard (the "GICS") and (iv) selecting securities for inclusion according to
MSCI's index construction rules and guidelines.


 (i)   Defining the Equity Universe. The current index construction process
   starts at the country level with the identification of all listed
   securities for that country. MSCI currently creates international equity
   country indexes for 48 countries. In general, companies and their
   respective securities are classified as belonging only to the country in
   which they are incorporated. This allows securities to be sorted distinctly
   by country. All listed equity securities and listed securities that exhibit
   characteristics of equity securities, except investment trusts, mutual
   funds and equity derivatives, are eligible for inclusion in the universe.
   Shares of non-domiciled companies generally are not eligible for inclusion
   in the universe.


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


 (iii)   Classifying Securities Under the GICS. All securities in the equity
   universe are also assigned to an industry-based hierarchy, the GICS. This
   comprehensive classification scheme provides a universal approach to
   industries worldwide and forms the basis for achieving MSCI's objective of
   broad industry representation in its indexes.


 (iv)   Selecting Securities for Index Inclusion. MSCI targets an 85% free
   float-adjusted market representation level within each industry group,
   within each country. The security selection process within each industry
   group is based on the careful analysis of: (i) each company's business
   activities and the diversification that its securities would bring to the
   index; (ii) the size (based on free float-adjusted market capitalization)
   and liquidity of the securities of the company; and (iii) the estimated
   free float for the company and its individual share classes. MSCI targets
   for inclusion the most sizable and liquid securities in an industry group.
   MSCI generally does not consider securities with inadequate liquidity, or
   securities that do not have an estimated free float greater than 15% unless
   exclusion of the security of a large company would compromise the index's
   ability to fully and fairly represent the characteristics of the underlying
   market.


FREE FLOAT. MSCI defines the free float of a security as the proportion of
shares outstanding that are deemed to be available for purchase in the public
equity markets by international investors. In practice, limitations on free
float available to international


                                       18




investors include: (i) strategic and other shareholdings not considered part of
available free float; and (ii) limits on share ownership for foreigners.


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


ADDITIONS AND DELETIONS. Potential additions to the indexes are analyzed with
respect to their industry group and sub-industry group in order to represent a
wide range of economic and business activities. In assessing deletions, it is
important that indexes represent the full investment cycle, including both bull
and bear markets. Out-of-favor industries and their securities may exhibit
declining prices, declining market capitalization, and/or declining market
capitalization, and/or declining liquidity yet not be deleted because they
continue to be good representatives of their industry group.


MSCI GLOBAL INVESTABLE MARKET INDEXES


WEIGHTING. All single-country indexes of the MSCI GIMI are free-float weighted,
I.E., companies are included in the indexes at the value of their free public
float (free float multiplied by security price). MSCI defines "free float" as
total shares excluding shares held by strategic investors and shares subject to
foreign ownership restrictions. Indexes of MSCI's GIMI generally seek to
include 99% of the free float-adjusted market capitalization of a single
country's stock market.


REGIONAL WEIGHTS. Market capitalization weighting, combined with a consistent
target of 99% of free float-adjusted market capitalization, helps ensure that
each country's weight in regional and international indexes approximates its
weight in the total universe of developing and emerging markets. A market is
equivalent to a single country except in the developed markets of Europe, where
all markets are aggregated into a single market for index construction
purposes. Individual country indiexes of the developed markets are derived from
the constituents of the MSCI GIMI Europe Index.


SELECTION CRITERIA. MSCI's index construction process involves (i) defining the
equity universe, (ii) determining the market investable equity universe for
each market, (iii) determining market capitalization size segments for each
market and (iv) applying index continuity rules for the standard index.


(i)   Defining the Equity Universe. MSCI begins with securities listed in
  countries in the MSCI Global Index Series. Of these countries, 23 are
  classified as developed markets and 25 as emerging markets. All listed
  equity securities and listed securities that exhibit characteristics of
  equity securities, except mutual funds, exchange traded funds, equity
  derivatives, limited partnerships and most investment trusts, are eligible
  for inclusion in the equity universe. REITs in some countries and certain
  income trusts in Canada are also eligible for inclusion. Each company and
  its securities (I.E., share classes) are classified in only one country,
  which allows for a distinctive sorting of each company by its respective
  country.


(ii)   Determining the Equity Universe in Each Market. The equity universe in
  any market is derived by applying investability screens to individual
  companies and securities in the equity universe of that market. Some
  investability requirements are applied at the individual security level and
  some at the overall company level, represented by the aggregation of
  individual securities of the company. As a result, the inclusion or
  exclusion of one security does not imply the automatic inclusion or
  exclusion of other securities of the same company.


(iii)   Determining Market Capitalization Size Segments for Each Market. In
  each market MSCI creates an Investable Market Index, Standard Index, Large
  Cap Index, Mid Cap Index and Small Cap Index. In order to create size
  components that can be meaningfully aggregated into composites, individual
  market size segments balance the following two objectives:

1.   Achieving global size integrity by ensuring that companies of comparable
  and relevant sizes are included in a given size segment across all markets
  in a composite index and

2.   Achieving consistent market coverage by ensuring that each market's size
  segment is represented in its proportional weight in the composite universe.


(iv)   Index Continuity Rules for the Standard Index. In order to achieve index
  continuity as well as provide some basic level of diversification within a
  market index, notwithstanding the effect of other index construction rules
  contained herein, a minimum number of five constituents will be maintained
  for a developing market Standard Index and a minimum number of three
  constituents will be maintained for an emerging market Standard Index.


                                       19




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


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


PRICE AND EXCHANGE RATES


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


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


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


CHANGES TO THE INDEXES. The MSCI indexes are maintained with the objective of
reflecting, on a timely basis, the evolution of the underlying equity markets.
In maintaining the MSCI indexes, emphasis is also placed on continuity,
replicability and minimizing turnover in the indexes. Maintaining the MSCI
Indexes involves many aspects, including: (i) additions to, and deletions from,
the Indexes; (ii) and changes in number of shares and (iii) changes in
inclusion factors as a result of updated free float estimates.


Index maintenance can be described by three broad categories of changes:

  o  Annual full country index reviews, conducted on a fixed annual timetable,
     that systematically re-assess the various dimensions of the equity
     universe for all countries;

  o  Quarterly index reviews, aimed at promptly reflecting other significant
     market events; and

  o  Ongoing event-related changes, such as mergers and acquisitions, which
     generally are rapidly implemented in the indexes as they occur.


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


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



Investment Limitations

The Board has adopted as fundamental policies the investment objectives of
the iShares MSCI Australia Index Fund, iShares MSCI Austria Index Fund, iShares
MSCI Brazil 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 Japan Index Fund, iShares MSCI Malaysia
Index Fund, iShares MSCI Netherlands Index Fund,iShares MSCI Pacific ex-Japan
Index Fund, iShares MSCI Singapore Index Fund, iShares MSCI South Korea Index
Fund, iShares Spain Index Fund, iShares Switzerland Index Fund, iShares Taiwan
Index Fund, and iShares United Kingdom Index Fund. However, the Board has
adopted as non-fundamental policies the investment objectives of all other Funds
discussed in this SAI. Therefore, each of these Funds may change its investment
objective and its Underlying Index without a


                                       20




shareholder vote. The Board has adopted as fundamental policies each Fund's
investment restrictions numbered one through nine below. The restrictions for
each Fund cannot be changed without the approval of the holders of a majority
of that Fund's outstanding voting securities. A vote of a majority of the
outstanding voting securities is defined in the 1940 Act as the lesser of (a)
67% or more of the voting securities present at a fund meeting, if the holders
of more than 50% of the outstanding voting securities are present or
represented by proxy, and (b) more than 50% of outstanding voting securities.


THE ISHARES MSCI AUSTRALIA INDEX FUND, ISHARES MSCI BRAZIL INDEX FUND, ISHARES
MSCI CANADA INDEX FUND, ISHARES MSCI GERMANY INDEX FUND, ISHARES MSCI HONG KONG
INDEX FUND, ISHARES MSCI MALAYSIA INDEX FUND, ISHARES MSCI NETHERLANDS INDEX
FUND, ISHARES MSCI PACIFIC EX-JAPAN INDEX FUND, ISHARES MSCI SINGAPORE INDEX
FUND, ISHARES MSCI SOUTH AFRICA INDEX FUND, ISHARES MSCI SOUTH KOREA INDEX
FUND, ISHARES SWITZERLAND INDEX FUND AND ISHARES TAIWAN INDEX FUND, WILL NOT:


1.   Lend any funds or other assets except through the purchase of all or a
  portion of an issue of securities or obligations of the type in which it is
  permitted to invest (including participation interests in such securities or
  obligations) and except that a Fund may lend its portfolio securities in an
  amount not to exceed 33 1/3% of the value of its total assets;


2.   Issue senior securities or borrow money, except borrowings from banks for
  temporary or emergency purposes in an amount up to 33 1/3% of the value of
  the Fund's total assets (including the amount borrowed), valued at the
  lesser of cost or market, less liabilities (not including the amount
  borrowed) valued at the time the borrowing is made, and the Fund will not
  purchase securities while borrowings in excess of 5% of the Fund's total
  assets are outstanding, provided, that for purposes of this restriction,
  short-term credits necessary for the clearance of transactions are not
  considered borrowings;


3.   Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
  secure permitted borrowings. (The deposit of underlying securities and other
  assets in escrow and collateral arrangements with respect to initial or
  variation margin for currency transactions and futures contracts will not be
  deemed to be pledges of the Fund's assets);


4.   Purchase a security (other than obligations of the U.S. government, its
  agencies or instrumentalities) if as a result 25% or more of its total
  assets would be invested in a single issuer. (This restriction applies to
  each of the iShares MSCI Singapore Index Fund and iShares MSCI South Korea
  Index Fund only);


5.   Purchase, hold or deal in real estate, or oil, gas or mineral interests or
  leases, but a Fund may purchase and sell securities that are issued by
  companies that invest or deal in such assets;


6.   Act as an underwriter of securities of other issuers, except to the extent
  the Fund may be deemed an underwriter in connection with the sale of
  securities in its portfolio;


7.   Purchase securities on margin, except for such short-term credits as are
  necessary for the clearance of transactions, except that a Fund may make
  margin deposits in connection with transactions in currencies, options,
  futures and options on futures;


8.   Sell securities short; or


9.   Invest in commodities or commodity contracts, except that a Fund may buy
  and sell currencies and forward contracts with respect thereto, and may
  transact in futures contracts on securities, stock indices and currencies
  and options on such futures contracts and make margin deposits in connection
  with such contracts.


THE ISHARES MSCI AUSTRIA INDEX FUND, ISHARES MSCI BELGIUM INDEX FUND, ISHARES
MSCI EMERGING MARKETS INDEX FUND, ISHARES MSCI EMU INDEX FUND, ISHARES MSCI
FRANCE INDEX FUND, ISHARES MSCI ITALY INDEX FUND, ISHARES MSCI JAPAN INDEX
FUND, ISHARES MSCI MEXICO INDEX FUND, ISHARES MSCI SPAIN INDEX FUND, ISHARES
MSCI SWEDEN INDEX FUND AND ISHARES MSCI UNITED KINGDOM INDEX FUND WILL NOT:


1.   Make loans, except as permitted under the 1940 Act, as amended, and as
  interpreted, modified or otherwise permitted by regulatory authority having
  jurisdiction, from time to time;


2.   Issue any senior security, except as permitted under the 1940 Act, as
  amended, and as interpreted, modified or otherwise permitted by regulatory
  authority having jurisdiction, from time to time;


3.   Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure permitted borrowings. (The deposit of

                                       21




  underlying securities and other assets in escrow and collateral arrangements
  with respect to initial or variation margin for currency transactions and
  futures contracts will not be deemed to be pledges of the Fund's assets);


4.   Purchase, hold or deal in real estate, or oil, gas or mineral interests or
  leases, but a Fund may purchase and sell securities that are issued by
  companies that invest or deal in such assets;


5.   Act as an underwriter of securities of other issuers, except to the extent
  the Fund may be deemed an underwriter in connection with the sale of
  securities in its portfolio;


6.   Purchase securities on margin, except for such short-term credits as are
  necessary for the clearance of transactions, except that a Fund may make
  margin deposits in connection with transactions in currencies, options,
  futures and options on futures;


7.   Sell securities short; or


8.   Invest in commodities or commodity contracts, except that a Fund may buy
  and sell currencies and forward contracts with respect thereto, and may
  transact in futures contracts on securities, stock indices and currencies
  and options on such futures contracts and make margin deposits in connection
  with such contracts.


INDUSTRY CONCENTRATION. Each of the iShares MSCI Singapore Index Fund and
iShares MSCI South Korea Index Fund has the following concentration policy:
With respect to the two most heavily weighted industries or groups of
industries in its benchmark MSCI Index, a 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 Fund
does not diverge by more than 10% from the respective weighting of such
industry or group of industries in its benchmark MSCI Index. An exception to
this policy is that if investment in the stock of a single issuer would account
for more than 25% of the Fund, the 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 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. A Fund may not concentrate its investments except as
discussed above. The Board has adopted this policy as fundamental, which means
that it may not be changed with respect to a Fund without the approval of the
holders of a majority of that Fund's outstanding voting securities.


As of September 30, 2007, the following Fund was concentrated (that is,
invested 25% or more of its total assets) in the specified industry:





FUND           INDUSTRY OR INDUSTRIES
- ----------     -----------------------
            
Singapore      Banks


Each of the iShares MSCI Australia Index Fund, iShares MSCI Austria Index Fund,
iShares MSCI Belgium Index Fund, iShares MSCI Brazil Index Fund, iShares MSCI
Canada Index Fund, iShares MSCI Emerging Markets 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 Index
Fund, iShares MSCI Netherlands Index Fund, iShares MSCI Pacific ex-Japan Index
Fund, iShares MSCI South Africa Index Fund, iShares MSCI Spain Index Fund,
iShares MSCI Sweden Index Fund, iShares MSCI Switzerland Index Fund, iShares
MSCI Taiwan Index Fund and iShares MSCI United Kingdom Index Fund will not
concentrate its investments (I.E., hold 25% or more of its total assets in the
stocks of a particular industry or group of industries), except that, to the
extent practicable, the 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 the Fund will comply with the
diversification requirements applicable to regulated investment companies of
the IRC, any underlying Treasury regulations or any successor provision.


As of September 30, 2007, each of the following Funds was concentrated (that
is, held 25% or more of its total assets) in the specified industries:





FUND           INDUSTRY OR INDUSTRIES
- ----------     -----------------------
            
Belgium        Banks
Hong Kong      Real Estate


                                       22







FUND          INDUSTRY OR INDUSTRIES
- ---------     -----------------------
           
Italy         Banks
Malaysia      Banks
Mexico        Telecommunications
Spain         Banks


IN ADDITION TO THE INVESTMENT LIMITATIONS ADOPTED AS FUNDAMENTAL AS SET FORTH
ABOVE, EACH FUND OBSERVES THE FOLLOWING RESTRICTIONS, WHICH MAY BE CHANGED BY
THE BOARD WITHOUT A SHAREHOLDER VOTE. A FUND WILL NOT:

1.   Invest in the securities of a company for the purpose of exercising
management or control, or in any event purchase and hold more than 10% of the
securities of a single issuer, provided that the Company may vote the
investment securities owned by each Fund in accordance with its views; or

2.   Hold illiquid assets in excess of 15% of its net assets. An illiquid asset
is any asset which may not be sold or disposed of in the ordinary course of
business within seven days at approximately the value at which the Fund has
valued the investment.


FOR PURPOSES OF THE PERCENTAGE LIMITATION ON EACH FUND'S INVESTMENTS IN
ILLIQUID SECURITIES, FOREIGN EQUITY SECURITIES, THOUGH NOT REGISTERED UNDER THE
SECURITIES ACT, ARE NOT DEEMED ILLIQUID WITH RESPECT TO EACH FUND IF THEY ARE
OTHERWISE READILY MARKETABLE. SUCH SECURITIES ORDINARILY ARE CONSIDERED TO BE
"READILY MARKETABLE" IF THEY ARE TRADED ON AN EXCHANGE OR OTHER ORGANIZED
MARKET AND ARE NOT LEGALLY RESTRICTED FROM SALE BY THE FUND. BGFA MONITORS THE
LIQUIDITY OF RESTRICTED SECURITIES IN EACH FUND'S PORTFOLIO. IN REACHING
LIQUIDITY DECISIONS, BGFA CONSIDERS THE FOLLOWING FACTORS:

1.   The frequency of trades and quotes for the security;

2.   The number of dealers wishing to purchase or sell the security and the
number of other potential purchasers;

3.   Dealer undertakings to make a market in the security; and

4.   The nature of the security and the nature of the marketplace in which it
trades (E.G., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).


If any percentage restriction described above is complied with to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or total or net assets will not constitute in a violation of
such restriction, except that certain percentage limitations will be observed
continuously in accordance with applicable law.


Each Fund has adopted a non-fundamental investment policy in accordance with
Rule 35d-1 under the 1940 Act to invest, under normal circumstances, at least
80% of the value of its net assets, plus the amount of any borrowings for
investment purposes, in securities, and in ADRs based on securities, in its
Underlying Index. Each Fund also has adopted a policy to provide its
shareholders with at least 60 days' prior written notice of any change in such
policy. If, subsequent to an investment, the 80% requirement is no longer met,
a Fund's future investments will be made in a manner that will bring the Fund
into compliance with this policy.



Continuous Offering

The method by which Creation Units are created and traded may raise certain
issues under applicable securities laws. Because new Creation Units are issued
and sold by the Funds on an ongoing basis, at any point a "distribution," as
such term is used in the 1933 Act, may occur. Broker-dealers and other persons
are cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery requirement and liability provisions of the 1933 Act.


For example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent shares and sells such shares
directly to customers, or if it chooses to couple the creation of a supply of
new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the 1933 Act must take into account all the facts and circumstances
pertaining to the activities of the broker-dealer or its client in the
particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.


                                       23




Broker-dealer firms should also note that dealers who are not "underwriters"
but are effecting transactions in shares, whether or not participating in the
distribution of shares, generally are required to deliver a prospectus. This is
because the prospectus delivery exemption in Section 4(3) of the 1933 Act is
not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act. Firms that incur a prospectus delivery obligation with respect to
shares of the Funds are reminded that, pursuant to Rule 153 under the 1933 Act,
a prospectus delivery obligation under Section 5(b)(2) of the 1933 Act owed to
an exchange member in connection with a sale on the Listing Exchange is
satisfied by the fact that the prospectus is available at the Listing Exchange
upon request. The prospectus delivery mechanism provided in Rule 153 is
available only with respect to transactions on an exchange.



Management

DIRECTORS AND OFFICERS.  The Board has responsibility for the overall
management and operations of the Company, including general supervision of the
duties performed by BGFA and other service providers. Each Director serves
until his or her successor is duly elected or appointed and qualified.


iShares, Inc., iShares Trust, Master Investment Portfolio ("MIP"), Barclays
Global Investors Funds ("BGIF") and Barclays Foundry Investment Trust ("BFIT"),
each an open-end management investment company registered under the 1940 Act,
are considered members of the same fund complex, as defined in Form N-1A under
the 1940 Act. Each Director also serves as a Trustee for iShares Trust and, as
a result, oversees a total of 147 Funds within the fund complex. In addition,
Lee T. Kranefuss serves as a Trustee for BGIF, MIP and, as a result, oversees
an additional 24 portfolios within the fund complex. The address of each
Trustee and officer, is c/o Barclays Global Investors, N.A. 45 Fremont Street,
San Francisco, CA 94105. The Board has designated George G.C. Parker as its
Lead Independent Director.


DIRECTORS AND OFFICERS





                                                         PRINCIPAL OCCUPATION(S)                   OTHER DIRECTORSHIPS
 NAME (YEAR OF BIRTH)          POSITION                  DURING THE PAST 5 YEARS                     HELD BY DIRECTOR
- ---------------------- ------------------------ ---------------------------------------- ---------------------------------------
                                                                                
INTERESTED DIRECTORS
Lee T. Kranefuss/1/    Director and             Chief Executive Officer, iShares         Trustee (since 2003) of iShares Trust;
(1961)                 Chairman (since          Intermediary Index and Market Group      Trustee (since 2001) of BGIF and
                       2003).                   of BGI (since 2005); Chief Executive     MIP; Director (since 2003) of BGI
                                                Officer of the Intermediary Investor     Cayman Prime Money Market Fund,
                                                and Exchange Traded Products             Ltd.
                                                Business of BGI (2003-2005); Director
                                                of Barclays Global Fund Advisors
                                                (since 2005); Director, President and
                                                Chief Executive Officer of Barclays
                                                Global Investors International, Inc.
                                                (since 2005); Director and Chairman
                                                of Barclays Global Investors Services
                                                (since 2005); Chief Executive Officer
                                                of the Individual Investor Business of
                                                BGI (1999-2003).
John E. Martinez/1/    Director (since 2003).   Co-Chief Executive Officer of Global     Trustee (since 2003) of iShares Trust;
(1962)                                          Index and Markets Group of BGI           Director (since 2005) of Real Estate
                                                (2001-2003); Chairman of Barclays        Equity Exchange.
                                                Global Investors Services (2000-2003).


- -------

/1/Lee T. Kranefuss and John E. Martinez are deemed to be "interested
   persons" (as defined in the 1940 Act) of the Company due to their
   affiliations with BGFA, the Funds' investment adviser, BGI, the parent
   company of BGFA, and Barclays Global Investors Services, an affiliate of
   BGFA and BGI.

                                       24




                             INDEPENDENT DIRECTORS





 NAME (YEAR OF BIRTH)          POSITION
- ---------------------- ------------------------
                    
George G.C. Parker     Director (since 2000);
(1939)                 Lead Independent
                       Director (since 2006)
Cecilia H. Herbert     Director (since 2005).
(1949)
Charles A. Hurty       Director (since 2005).
(1943)
John E. Kerrigan       Director (since 2005).
(1955)
Robert H. Silver       Director (since March
(1955)                 2007).




                                PRINCIPAL OCCUPATION(S)                     OTHER DIRECTORSHIPS
 NAME (YEAR OF BIRTH)           DURING THE PAST 5 YEARS                       HELD BY DIRECTOR
- ---------------------- ----------------------------------------- -----------------------------------------
                                                           
George G.C. Parker     Dean Witter Distinguished Professor of    Trustee (since 2002) of iShares Trust;
(1939)                 Finance, Emeritus, Stanford               Director (since 1996) of Continental
                       University: Graduate School of            Airlines, Inc.; Director (since 1995) of
                       Business (since 1994).                    Community First Financial Group;
                                                                 Director (since 1999) of Tejon Ranch
                                                                 Company; Director (since 2004) of
                                                                 Threshold Pharmaceuticals; Director
                                                                 (since 2007) of NETGEAR, Inc.
Cecilia H. Herbert     Member of Finance Council and Chair       Trustee (since 2005) of iShares Trust.
(1949)                 of Investment Committee (1994-2005)
                       Archdiocese of San Francisco; Director
                       (since 1998) and President (since
                       2007) of the Board of Directors,
                       Catholic Charities CYO; Trustee
                       (2004-2005) of Pacific Select Funds;
                       Trustee (1992-2003) of the
                       Montgomery Funds; Trustee (since
                       2005) and Chair of Finance and
                       Investment Committees (since 2006) of
                       the Thacher School.
Charles A. Hurty       Retired; Partner, KPMG, LLP (1968-        Trustee (since 2005) of iShares Trust;
(1943)                 2001).                                    Director (since 2002) of GMAM
                                                                 Absolute Return Strategy Fund (1
                                                                 portfolio); Director (since 2002) of
                                                                 Citigroup Alternative Investments
                                                                 Multi-Adviser Hedge Fund Portfolios
                                                                 LLC (1 portfolio); Director (since
                                                                 2005) of CSFB Alternative
                                                                 Investments Fund (6 portfolios).
John E. Kerrigan       Chief Investment Officer, Santa Clara     Trustee (since 2005) of iShares Trust;
(1955)                 University (since 2002); Managing         Member (since 2004) of Advisory
                       Director, Merrill Lynch (1994-2002).      Council for Commonfund Distressed
                                                                 Debt Partners II.
Robert H. Silver       President and Co-Founder of The           Trustee (since March 2007) of iShares
(1955)                 Bravitas Group, Inc. (since 2006);        Trust; Director and Member (since
                       Member, Non-Investor Advisory Board       2006) of the Audit and Compensation
                       of Russia Partners II, LP (since 2006);   Committee of EPAM Systems, Inc.
                       President and Chief Operating Officer
                       (2003-2005) and Director (1999-2005)
                       of UBS Financial Services, Inc.;
                       President and Chief Executive Officer
                       of UBS Services USA, LLC (1999-
                       2005); Managing Director, UBS
                       America, Inc. (2000-2005); Director
                       and Chairman of the YMCA of Greater
                       NYC (since 2001); Broadway Producer
                       (since 2006).



                                       25




                                   OFFICERS




                                                                PRINCIPAL OCCUPATION(S)
  NAME (YEAR OF BIRTH)              POSITION                    DURING THE PAST 5 YEARS
- -----------------------     -----------------------     ---------------------------------------
                                                  
Michael A. Latham           President (since            Head of Americas iShares (since
(1965)                         2007)                    2007); Chief Operating Officer of the
                                                        Intermediary Investor and Exchange
                                                        Traded Products Business of BGI
                                                        (2003-2007); Director and Chief
                                                        Financial Officer of Barclays Global
                                                        Investors International, Inc. (since
                                                        2005); Director of Mutual Fund
                                                        Delivery in the U.S. Individual
                                                        Investor Business of BGI (1999-2003).
Geoffrey D. Flynn           Treasurer and Chief         Director, Mutual Fund Operations, BGI
(1956)                      Financial Officer           (since 2007); President, Van Kampen
                            (since 2007)                Investors Services (2003-2007);
                                                        Managing Director, Morgan Stanley
                                                        (2002-2007); President, Morgan
                                                        Stanley Trust, FSB (2002-2007).
Eilleen M. Clavere          Secretary                   Head of Legal Administration-IIB,
(1952)                      (since 2007)                BGI (since 2006); Legal Counsel and
                                                        Vice President of Atlas Funds, Atlas
                                                        Advisers, Inc. and Atlas Securities,
                                                        Inc. (2005-2006); Counsel, Kirkpatrick
                                                        & Lockhart LLP (2001-2005).
Ira P. Shapiro (1963)       Vice President and          Associate General Counsel, BGI (since
                            Chief Legal Officer         2004); First Vice President, Merrill
                            (since 2007)                Lynch Investment Managers (1993-
                                                              2004).
Amy Schioldager             Executive Vice              Head of U.S. Indexing, BGI (since
(1962)                      President (since            2006); Head of Domestic Equity
                               2007)                    Portfolio Management, BGI (2001-
                                                              2006).
H. Michael Williams         Executive Vice              Head, Global Index and Markets
(1960)                      President (since            Group of BGI (since 2006); Global
                               2007)                    Head of Securities Lending of BGI
                                                        ( 2002-2006).
Patrick O'Connor            Vice President (since       Head of iShares Portfolio
(1967)                         2007)                    Management, BGI (since 2006); Senior
                                                        Portfolio Manager, BGI (since 1999).
Lee Sterne (1965)           Vice President (since       Senior Portfolio Manager, BGI (since
                               2007)                    2004); Portfolio Manager, BGI (2001-
                                                              2004).
Matt Tucker (1972)          Vice President (since       Head of U.S. Fixed Income Investment
                               2007)                    Solutions, BGI (since 2005); Fixed
                                                        Income Investment Strategist, BGI
                                                        (2003-2005); Fixed Income Portfolio
                                                        Manager, BGI (1997-2003).



The following table sets forth, as of December 31, 2006, the dollar range of
equity securities beneficially owned by each Director in the Funds and in other
registered investment companies overseen by the Director within the same family
of investment



                                       26




                           companies as the Company:




                                                                                                   AGGREGATE DOLLAR RANGE
                                                                                                 OF EQUITY SECURITIES IN ALL
                                                                                                   REGISTERED IINVESTMENT
                                                                                                    COMPANIES OVERSEEN BY
                                                                        DOLLAR RANGE OF EQUITY      DIRECTOR IN FAMILY OF
  NAME OF DIRECTOR                          FUND                        SECURITIES IN THE FUND      INVESTMENT COMPANIES
- -------------------- ------------------------------------------------- ------------------------ ----------------------------
                                                                                       
Lee T. Kranefuss     iShares Lehman 1-3 Year Treasury Bond Fund        $50,001-$100,000         Over $100,000
                     iShares Russell 3000 Index Fund                   Over $100,000
                     iShares iBoxx $ Investment Grade Corporate Bond   $ 10,001-$50,000
                     Fund
                     iShares Dow Jones Select Dividend Index Fund      $ 10,001-$50,000
John E. Martinez     iShares MSCI EAFE Index Fund                      Over $100,000            Over $100,000
                     iShares Russell 1000 Index Fund                   Over $100,000
                     iShares Russell 1000 Value Index Fund             Over $100,000
                     iShares Russell 2000 Index Fund                   Over $100,000
                     iShares S&P 500 Index Fund                        Over $100,000
George G.C. Parker   iShares Dow Jones Select Dividend Index Fund      Over $100,000            Over $100,000
                     iShares FTSE/Xinhua China 25 Index Fund           Over $100,000
                     iShares iBoxx $ Investment Grade                  Over $100,000
                     Corporate Bond Fund
                     iShares Lehman 1-3 Year Treasury Bond Fund        $ 1-$10,000
                     iShares MSCI EAFE Index Fund                      Over $100,000
                     iShares MSCI Emerging Markets Index Fund          Over $100,000
                     iShares MSCI Mexico Index Fund                    Over $100,000
                     iShares Russell 1000 Value Index Fund             Over $100,000
                     iShares Russell 2000 Index Fund                   $50,001-$100,000
                     iShares Russell 2000 Value Index Fund             Over $100,000
                     iShares S&P 100 Index Fund                        Over $100,000
                     iShares S&P 500 Index Fund                        Over $100,000
                     iShares S&P 500 Growth Index Fund                 $ 10,001-$50,000
                     iShares S&P 500 Value Index Fund                  Over $100,000
                     iShares S&P Midcap 400 Value Index Fund           Over $100,000
                     iShares S&P Global 100 Index Fund                 $ 10,001-$50,000
Cecilia H. Herbert   iShares MSCI Hong Kong Index Fund                 $ 10,001-$50,000         Over $100,000
                     iShares MSCI Japan Index Fund                     $ 10,001-$50,000
                     iShares Dow Jones Consumer Goods Sector Index     $ 10,001-$50,000
                     Fund
                     iShares FTSE/Xinhua China 25 Index Fund           $  10,001-50,000
                     iShares S&P 500 Index Fund                        Over $100,000


                                       27






                                                                                                       AGGREGATE DOLLAR RANGE
                                                                                                     OF EQUITY SECURITIES IN ALL
                                                                                                       REGISTERED IINVESTMENT
                                                                                                        COMPANIES OVERSEEN BY
                                                                          DOLLAR RANGE OF EQUITY        DIRECTOR IN FAMILY OF
 NAME OF DIRECTOR                           FUND                          SECURITIES IN THE FUND        INVESTMENT COMPANIES
- ------------------   -------------------------------------------------   ------------------------   ----------------------------
                                                                                           
Charles A. Hurty     iShares S&P 500 Index Fund                          $10,001-$50,000            Over $100,000
                     iShares FTSE/Xinhua China 25 Index Fund             $10,001-$50,000
                     iShares Dow Jones Financial Sector Index Fund       $10,001-$50,000
                     iShares Dow Jones U.S. Energy Sector Index Fund     $10,001-$50,000
                     iShares Dow Jones U.S. Technology Sector Index      $10,001-$50,000
                     Fund
                     iShares MSCI EAFE Index Fund                        $10,001-$50,000
                     iShares MSCI Japan Index Fund                       $10,001-$50,000
John E. Kerrigan     iShares Russell 1000 Index Fund                     Over $100,000              Over $100,000
                     iShares MSCI Japan Index Fund                       Over $100,000
                     iShares MSCI Pacific ex-Japan Index Fund            Over $100,000
                     iShares MSCI EAFE Index Fund                        Over $100,000
Robert H. Silver     iShares Russell 2000 Index Fund                     Over $100,000              Over $100,000
                     iShares MSCI EAFE Index Fund                        $10,001-$50,000



As of December 31, 2006, none of the Directors who are not interested persons
(as defined in the 1940 Act) of the Company ("Independent Directors") or their
immediate family members owned beneficially or of record any securities of BGFA
(the Funds' investment adviser), the Distributor or any person controlling,
controlled by or under control with BGFA or the Distributor.


COMMITTEES OF THE BOARD OF DIRECTORS.


Each Independent Director serves on the Audit Committee and the Nominating and
Governance Committee of the Board. The purposes of the Audit Committee are to
assist the Board (i) in its oversight of the Company's accounting and financial
reporting principles and policies and related controls and procedures
maintained by or on behalf of the Company; (ii) in its oversight of the
Company's financial statements and the independent audit thereof; (iii) in
selecting, evaluating and, where deemed appropriate, replacing the independent
accountants (or nominating the independent accountants to be proposed for
shareholder approval in any proxy statement); (iv) in evaluating the
independence of the independent accountants; (v) in complying with legal and
regulatory requirements that relate to the Company's accounting and financial
reporting, internal controls and independent audits; and (vi) to assume such
other responsibilities as may be delegated by the Board. The Audit Committee
met four times during the calendar year ended December 31, 2006.


The Nominating and Governance Committee nominates individuals for Independent
Director membership on the Board. The Nominating and Governance Committee
functions include, but are not limited to, the following: (i) reviewing the
qualifications of any person properly identified or nominated to serve as an
Independent Director; (ii) recommending to the Board and current Independent
Directors the nominee(s) for appointment as an Independent Director by the
Board and current Independent Directors and/or for election as Independent
Directors by shareholders to fill any vacancy for a position of Independent
Director(s) on the Board; (iii) recommending to the Board and current
Independent Directors the size and composition of the Board and Board
committees and whether they comply with applicable laws and regulations; (iv)
recommending a current Independent Director to the Board and current
Independent Directors to serve as Lead Independent Director; (v) periodic
review of the Board's retirement policy; and (vi) recommending an appropriate
level of compensation for the Independent Directors for their services as
Directors and members or chairpersons of committees of the Board. The
Nominating and Governance Committee is not required to consider nominees for
the Board who are recommended by shareholders. However, individual shareholder
nominees may be considered if


                                       28




the Nominating and Governance Committee deems it appropriate. Prior to
September 13, 2006, the Nominating and Governance Committee was known as the
Nominating Committee. The Nominating Committee met three times during the
calendar year ended December 31, 2006.


REMUNERATION OF DIRECTORS.  The Company pays each Independent Director and John
Martinez, an Interested Director, an annual fee of $75,000 for meetings of the
Board attended by the Director; also the Company pays Charles Hurty an annual
fee of $20,000 for service as the chairperson of the Board's Audit Committee
and George G. C. Parker an annual fee of $25,000 for service as the Board's
Lead Independent Director. During the period January 1, 2006 through December
31, 2006, the Company paid each Independent Director and John Martinez, an
Interested Director, an annual fee of $60,000 for meetings of the Board
attended by the Director; the Company also paid Charles Hurty an annual fee of
$12,500 for service as the chairperson of the Board's Audit Committee and
George G. C. Parker an annual fee of $25,000 for service as the Board's Lead
Independent Director. The Company also reimburses each Director for travel and
other out-of-pocket expenses incurred by him/her in connection with attending
Board and Committee meetings.


The table below sets forth the total compensation paid to each Interested
Director for the calendar year ended December 31, 2006:




                                                          PENSION OR
                                    AGGREGATE             RETIREMENT                                         TOTAL
                                  COMPENSATION       BENEFITS ACCRUED AS       ESTIMATED ANNUAL          COMPENSATION
                                    FROM THE           PART OF COMPANY           BENEFITS UPON          FROM THE FUNDS
 NAME OF INTERESTED DIRECTOR         COMPANY             EXPENSES/1/             RETIREMENT/1/        AND FUND COMPLEX/2/
- ----------------------------     --------------     ---------------------     ------------------     --------------------
                                                                                         
Lee T. Kranefuss/3/                  $     0            Not Applicable          Not Applicable             $      0
John E. Martinez                     $60,000            Not Applicable          Not Applicable             $120,000


- -------


/1/No Director or officer is entitled to any pension or retirement benefits
from the Company.
/2/ Includes compensation for service on the Board of Trustees of iShares
Trust.
/3/Lee Kranefuss was not compensated by the Funds due to his employment with
   BGI during the time period reflected in the table.


The table below sets forth the total compensation paid to each Independent
Director for the calendar year ended December 31, 2006:




                                    AGGREGATE              PENSION OR                                       TOTAL
                                  COMPENSATION   RETIREMENT BENEFITS ACCRUED AS   ESTIMATED ANNUAL      COMPENSATION
                                    FROM THE             PART OF COMPANY            BENEFITS UPON      FROM THE FUNDS
 NAME OF INDEPENDENT DIRECTOR/1/     COMPANY               EXPENSES/2/              RETIREMENT/2/    AND FUND COMPLEX/3/
- -------------------------------- -------------- -------------------------------- ------------------ --------------------
                                                                                        
Richard K. Lyons/4/                  $50,869             Not Applicable            Not Applicable        $154,413/5/
George G.C. Parker                   $85,000             Not Applicable            Not Applicable        $   170,000
W. Allen Reed/6/                     $36,250             Not Applicable            Not Applicable        $    72,500
Cecilia H. Herbert                   $60,000             Not Applicable            Not Applicable        $   120,000
Charles A. Hurty                     $66,250             Not Applicable            Not Applicable        $   132,500
John E. Kerrigan                     $60,000             Not Applicable            Not Applicable        $   120,000


- -------

/1/Compensation is not shown for Robert H. Silver because he was appointed
to serve as Independent Director of the Company effective March 9, 2007.
2No Director or officer is entitled to any pension or retirement benefits
from the Company.
/3/ Includes compensation for service on the Board of Trustees of iShares
Trust.
/4/ Served as Director through November 6, 2006.
/5/ Includes compensation as Trustee for BGIF, MIP and BFIT investment
   companies with 24 funds also advised by BGFA and/or for which BGFA provides
   administration services.
/6/ Served as Director through June 30, 2006.


CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.


The Directors and officers of the Company collectively owned less than 1% of
each of the Funds' outstanding shares as of November 30, 2007.


Although the Company does not have information concerning the beneficial
ownership of shares held in the names of DTC participants, as of November 30,
2007, the name and percentage ownership of each DTC participant that owned of
record 5% or


                                       29




more of the outstanding shares of a Fund were as follows:




                                                                                 PERCENTAGE
               FUND                                    NAME                     OF OWNERSHIP
- ---------------------------------- ------------------------------------------- -------------
                                                                         
iShares MSCI Australia Index Fund  Citigroup Global Markets Inc.                    11.36%
                                   Charles Schwab & Co., Inc.                      11.04%%
                                   National Financial Services LLC                  10.38%
                                   Brown Brothers Harriman & Co.                     7.18%
iShares MSCI Austria Index Fund    Barclays Global Investors, N.A. /                18.45%
                                   Investors Bank & Trust Company
                                   National Financial Services LLC                  10.84%
                                   Charles Schwab & Co., Inc.                        8.17%
                                   Citigroup Global Markets Inc.                     6.62%
                                   Brown Brothers Harriman & Co.                     5.39%
                                   Ameritrade, Inc.                                  5.20%
                                   Citibank, N.A.                                    5.15%
iShares MSCI Belgium Index Fund    Citigroup Global Markets Inc.                    47.80%
                                   JPMorgan Chase Bank, National Association        11.65%
                                   Bear, Stearns Securities Corp.                    9.20%
iShares MSCI Brazil Index Fund     Brown Brothers Harriman & Co.                    13.66%
                                   National Financial Services LLC                   7.66%
                                   The Bank of New York                              6.04%
                                   Charles Schwab & Co., Inc.                        5.79%
                                   Citigroup Global Markets Inc.                     5.18%
                                   Citibank, N.A.                                    5.16%
iShares MSCI Canada Index Fund     Brown Brothers Harriman & Co.                    10.75%
                                   Charles Schwab & Co., Inc.                        8.12%
                                   The Bank of New York                              7.57%
                                   National Financial Services LLC                   7.39%
                                   State Street Bank and Trust Company               5.48%
iShares MSCI Emerging Markets      State Street Bank and Trust Company              10.11%
  Index Fund
                                   Charles Schwab & Co., Inc.                        7.61%
                                   Brown Brothers Harriman & Co.                     5.79%
                                   National Financial Services LLC                   5.48%
iShares MSCI EMU Index Fund        Deutsche Bank Securities Inc./Cedear             28.03%
                                   Brown Brothers Harriman & Co.                    10.97%
                                   Charles Schwab & Co., Inc.                        9.16%
                                   National Financial Services LLC                   5.63%
iShares MSCI France Index Fund     A.G. Edwards & Sons, Inc.                        13.54%
                                   Citibank, N.A.                                   12.32%
                                   Brown Brothers Harriman & Co.                     9.36%
                                   Bear, Stearns Securities Corp.                    6.95%
                                   JPMorgan Chase Bank, National Association         5.19%


                                       30







                                                                                  PERCENTAGE
                FUND                                    NAME                     OF OWNERSHIP
- ----------------------------------- ------------------------------------------- -------------
                                                                          
iShares MSCI Germany Index Fund     Brown Brothers Harriman & Co.                    12.04%
                                    State Street Bank and Trust Company               9.38%
                                    Charles Schwab & Co., Inc.                        8.33%
                                    National Financial Services LLC                   7.11%
                                    The Bank of New York                              6.70%
                                    Goldman, Sachs &Co.                               5.97%
iShares MSCI Hong Kong Index Fund   Charles Schwab & Co., Inc.                       10.45%
                                    Brown Brothers Harriman & Co.                    10.43%
                                    National Financial Services LLC                   7.04%
                                    Citibank, N.A.                                    5.64%
                                    Morgan Stanley & Co. Incorporated                 5.27%
iShares MSCI Italy Index Fund       Bear, Stearns Securities Corp.                   15.91%
                                    Citibank, N.A.                                   14.92%
                                    JPMorgan Chase Bank, National Association        11.30%
                                    Citigroup Global Markets Inc.                     6.93%
iShares MSCI Japan Index Fund       Charles Schwab & Co., Inc.                        9.13%
                                    Merrill Lynch Safekeeping                         7.07%
                                    The Bank of New York                              6.95%
                                    UBS Financial Services LLC                        6.59%
                                    Brown Brothers Harriman & Co.                     6.20%
                                    Citigroup Global Markets Inc.                     6.13%
iShares MSCI Malaysia Index Fund    Citigroup Global Markets Inc.                    16.71%
                                    Brown Brothers Harriman & Co.                    12.09%
                                    The Bank of New York                              6.66%
                                    National Financial Services LLC                   6.32%
                                    Charles Schwab & Co., Inc.                        6.26%
iShares MSCI Mexico Index Fund      Morgan Stanley & Co. Incorporated                13.19%
                                    Citibank, N.A.                                    9.43%
                                    Brown Brothers Harriman & Co.                     6.39%
                                    BNY/Standard Bank London LTD                      6.08%
                                    Barclays Global Investors, N.A. /                 5.94%
                                    Investors Bank & Trust Company
                                    Charles Schwab & Co., Inc.                        5.66%
                                    National Financial Services LLC                   5.56%
iShares MSCI Netherlands Index Fund A.G. Edwards & Sons, Inc.                        27.50%
                                    State Street Bank and Trust Company               5.23%
iShares MSCI Pacific ex-Japan       Brown Brothers Harriman & Co.                    11.42%
  Index Fund
                                    Charles Schwab & Co., Inc.                        9.06%
                                    National Financial Services LLC                   6.92%
                                    Citibank, N.A.                                    6.44%


                                       31







                                                                                   PERCENTAGE
                FUND                                    NAME                      OF OWNERSHIP
- ----------------------------------- -------------------------------------------- -------------
                                                                           
                                    The Bank of New York                              5.90%
iShares MSCI Singapore Index Fund   Charles Schwab & Co., Inc.                       12.24%
                                    Brown Brothers Harriman & Co.                    10.64%
                                    National Financial Services LLC                  10.51%
                                    Pershing LLC                                      5.67%
                                    Citibank, N.A.                                    5.07%
iShares MSCI South Africa Index     State Street Bank and Trust Company              20.51%
  Fund
                                    A.G. Edwards & Sons, Inc.                         8.57%
                                    Brown Brothers Harriman & Co.                     8.57%
                                    The Northern Trust Company                        7.80%
                                    The Bank of New York                              7.40%
                                    Mellon Trust of New England,                      5.39%
                                    National Association
iShares MSCI South Korea Index Fund The Bank of New York                             19.93%
                                    Brown Brothers Harriman & Co.                    12.25%
                                    State Street Bank and Trust Company               7.23%
                                    Charles Schwab & Co., Inc.                        5.32%
iShares MSCI Spain Index Fund       Citigroup Global Markets Inc.                    24.27%
                                    A.G. Edwards & Sons                              10.71%
                                    Brown Brothers Harriman & Co.                    10.61%
                                    The Bank of New York                              9.49%
                                    Morgan Stanley & Co. Incorporated                 6.61%
                                    National Financial Services LLC                   5.50%
iShares MSCI Sweden Index Fund      Citibank, N.A.                                   11.25%
                                    Goldman, Sachs & Co.                              8.51%
                                    National Financial Services LLC                   7.36%
                                    Brown Brothers Harriman & Co.                     6.52%
                                    Charles Schwab & Co., Inc.                        6.28%
                                    JP Morgan Chase Bank, National Association        6.03%
                                    Citigroup Global Markets Inc.                     5.12%
iShares MSCI Switzerland Index Fund Brown Brothers Harriman & Co.                    14.42%
                                    National Financial Services LLC                   9.41%
                                    Charles Schwab & Co., Inc.                        7.13%
                                    JP Morgan Chase Bank, National Association        6.62%
                                    The Bank of New York                              6.23%
iShares MSCI Taiwan Index Fund      Brown Brothers Harriman & Co.                    13.21%
                                    The Bank of New York                             10.76%
                                    Goldman, Sachs & Co.                              8.66%
                                    JP Morgan Chase Bank, National Association        7.71%
                                    Citibank, N.A.                                    5.70%


                                       32







                                                                            PERCENTAGE
               FUND                                 NAME                   OF OWNERSHIP
- ---------------------------------- -------------------------------------- -------------
                                                                    
iShares MSCI United Kingdom Index  Deutsche Bank Securities Inc./Cedear        19.48%
  Fund
                                   Brown Brothers Harriman & Co.               11.42%
                                   Bear, Stearns Securities Corp.               5.67%
                                   RBC Dominion Securities, Inc./CDS            5.61%


Investment Advisory, Administrative and Distribution Services
INVESTMENT ADVISER.
 BGFA serves as investment adviser to each Fund pursuant to an Investment
Advisory Agreement between the Company and BGFA. BGFA is a California
corporation indirectly owned by Barclays Bank PLC, and is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.


Under the Investment Advisory Agreement, BGFA, subject to the supervision of
the Company's Board and in conformity with the stated investment policies of
each Fund, manages and administers the Company and the investment of each
Fund's assets. BGFA is responsible for placing purchase and sale orders and
providing continuous supervision of the investment portfolio of each Fund


For its investment management services to the iShares MSCI Brazil Index Fund
iShares MSCI South Africa Index Fund, iShares MSCI South Korea Index Fund and
iShares MSCI Taiwan Index Fund effective September 1, 2007 and another iShares
fund in the same management fee category, BGFA is paid management fees equal to
each of those fund's allocable portion of: 0.74% per year of the aggregate net
assets of those funds less than or equal to $2 billion, plus 0.69% per year of
the aggregate net assets of those funds between $2 billion and up to $4 billion,
plus 0.64% per year of the aggregate net assets of those Funds between $4
billion and $8 billion, plus 0.57 per year of the aggregate net assets of those
Funds in excess of $8 billion; for its investment management services to the
iShares MSCI Pacific ex-Japan Index Fund, BGFA is paid management fees equal to
0.50% per year of the net assets of that Fund. For its investment management
services to the iShares MSCI Emerging Markets Index Fund and another iShares
fund in the same management fee category, BGFA is paid management fees equal to
0.75% per year of the aggregate net assets of those funds less than or equal to
$14.0 billion, plus 0.68% per year of the aggregate net assets of those funds
between $14.0 billion and up to $28.0 billion, plus 0.61% per year of the
aggregate net assets of those funds in excess of $28.0 billion. For its
investment management services,effective September 1, 2007,to the remaining
Funds and other iShares funds in the same management fee category, BGFA is paid
a fee equal to each of those fund's allocable portion of: 0.59% per year of the
aggregate net assets of those fundsless than or equal to $7.0 billion, plus
0.54% per year of the aggregate net assets of the those funds between $7.0
billion and up to $11.0 billion, plus 0.49% per year of the aggregate net assets
of those funds between $11.0 billion and up to $24.0 billion, plus 0.44% per
year of the aggregate net assets of those funds in excess of $24.0 billion.



Under the Investment Advisory Agreement, BGFA is responsible for all expenses
of the Funds, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, except interest expense taxes,
brokerage expenses, distribution fees or expenses and extraordinary expenses.
For its investment management services to each Fund, BGFA is paid a management
fee at the annual rates (as a percentage of such Fund's average net assets)
listed below:





                                                                       MANAGEMENT        MANAGEMENT        MANAGEMENT
                                                                        FEES PAID         FEES PAID        FEES PAID
                                                                       FOR FISCAL        FOR FISCAL        FOR FISCAL
                                                          FUND         YEAR ENDED        YEAR ENDED        YEAR ENDED
                                       MANAGEMENT      INCEPTION       AUGUST 31,        AUGUST 31,        AUGUST 31,
FUND                                       FEE            DATE            2007              2006              2005
- ----------------------------------    ------------    -----------    --------------    --------------    -------------
                                                                                          
iShares MSCI Australia Index Fund          0.51%       03/12/96       $  5,418,181      $ 2,886,094       $ 1,684,365
iShares MSCI Austria Index Fund            0.51%       03/12/96       $  2,601,711      $ 1,657,316       $   891,196
iShares MSCI Belgium Index Fund            0.51%       03/12/96       $  1,332,129      $   479,965       $   298,236
iShares MSCI Brazil Index Fund             0.68%       07/10/00       $ 21,514,644      $11,373,859       $ 2,897,738
iShares MSCI Canada Index Fund             0.52%       03/12/96       $  5,946,553      $ 4,487,238       $ 1,934,001
iShares MSCI Emerging Markets              0.74%       04/07/03       $114,234,720      $81,638,096       $31,573,428
  Index Fund


                                       33







                                                                        MANAGEMENT        MANAGEMENT        MANAGEMENT
                                                                         FEES PAID         FEES PAID         FEES PAID
                                                                        FOR FISCAL        FOR FISCAL        FOR FISCAL
                                                           FUND         YEAR ENDED        YEAR ENDED        YEAR ENDED
                                        MANAGEMENT      INCEPTION       AUGUST 31,        AUGUST 31,        AUGUST 31,
FUND                                        FEE            DATE            2007              2006              2005
- -----------------------------------    ------------    -----------    --------------    --------------    --------------
                                                                                           
iShares MSCI EMU Index Fund                 0.51%       07/25/00       $12,839,319       $ 6,044,452       $ 2,700,971
iShares MSCI France Index Fund              0.51%       03/12/96       $ 1,269,129       $   615,785       $   360,949
iShares MSCI Germany Index Fund             0.51%       03/12/96       $ 6,219,398       $ 3,393,583       $   966,395
iShares MSCI Hong Kong Index Fund           0.52%       03/12/96       $ 6,192,082       $ 4,007,032       $ 3,327,704
iShares MSCI Italy Index Fund               0.52%       03/12/96       $ 1,055,455       $   454,018       $   211,190
iShares MSCI Japan Index Fund               0.52%       03/12/96       $70,930,669       $67,470,595       $36,714,546
iShares MSCI Malaysia Index Fund            0.51%       03/12/96       $ 3,843,835       $ 2,225,756       $ 1,738,119
iShares MSCI Mexico Index Fund              0.51%       03/12/96       $ 6,123,156       $ 2,439,770       $ 1,265,701
iShares MSCI Netherlands Index Fund         0.51%       03/12/96       $ 1,140,068       $   475,006       $   269,795
iShares MSCI Pacific ex-Japan               0.50%       10/25/01       $14,285,783       $ 9,175,781       $ 5,536,961
  Index Fund
iShares MSCI Singapore Index Fund           0.51%       03/21/96       $ 7,038,174       $ 2,583,523       $ 1,132,585
iShares MSCI South Africa Index             0.68%       02/03/03       $ 2,554,012       $ 2,039,466       $   959,383
  Fund
iShares MSCI South Korea Index Fund         0.68%       05/09/00       $12,507,997       $10,213,486       $ 3,815,173
iShares MSCI Spain Index Fund               0.51%       03/12/96       $ 2,757,796       $   564,200       $   343,145
iShares MSCI Sweden Index Fund              0.51%       03/12/96       $ 2,071,508       $   601,452       $   315,269
iShares MSCI Switzerland Index Fund         0.51%       03/12/96       $ 1,413,051       $   743,036       $   330,809
iShares MSCI Taiwan Index Fund              0.68%       06/20/00       $15,295,138       $11,442,524       $ 5,030,229
iShares MSCI United Kingdom Index           0.51%       03/12/96       $ 5,507,753       $ 3,483,995       $ 2,930,931
  Fund


The Investment Advisory Agreement with respect to each Fund continues in effect
for two years from its effective date, and thereafter is subject to annual
approval by (i) the Board or (ii) vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, provided that in either
event such continuance also is approved by a majority of the Board who are not
interested persons (as defined in the 1940 Act) of the Fund, by a vote cast in
person at a meeting called for the purpose of voting on such approval.

The Investment Advisory Agreement with respect to each Fund are terminable
without penalty, on 60 days' notice, by the Board or by a vote of the holders
of a majority (as defined in the 1940 Act) of the applicable Fund's outstanding
voting securities. The Investment Advisory Agreement is also terminable upon 60
days' notice by BGFA and will terminate automatically in the event of its
assignment (as defined in the 1940 Act).


Current interpretations of federal banking laws and regulations (i) may
prohibit Barclays Bank PLC, BGI and BGFA from controlling or underwriting the
shares of the Company but (ii) do not prohibit Barclays Bank PLC or BGFA
generally from acting as an investment adviser, administrator, transfer agent
or custodian to the Funds or from purchasing iShares as agent for and upon the
order of a customer.


BGFA believes that it may perform advisory and related services for the Company
without violating applicable banking laws or regulations. However, the legal
requirements and interpretations about the permissible activities of banks and
their affiliates may change in the future. These changes could prevent BGFA
from continuing to perform services for the Company. If this happens, the Board
would consider selecting other qualified firms. Any new investment advisory
agreement would be subject to shareholder approval.


If current restrictions on bank activities with mutual funds were relaxed, BGFA
or its affiliates would consider performing additional services for the
Company. BGFA cannot predict whether these changes will be enacted, or the
terms under which BGFA or its affiliates might offer to provide additional
services.


PORTFOLIO MANAGERS.  The individuals named as Portfolio Managers in a Fund's
prospectus were also primarily responsible for the day-to-day management of
certain types of other iShares Funds and certain other portfolios and/or
accounts in addtion to the Funds, as indicated in the tables below as of
October 31, 2007:


                                       34






DIANE HSIUNG
TYPES OF ACCOUNTS                           NUMBER              TOTAL ASSETS
- ----------------------------------     ----------------     -------------------
                                                      
Registered Investment Companies               24             $311,024,000,000
Other Pooled Investment Vehicles               1             $    235,000,000
Other Accounts                                 5             $  1,365,000,000
Accounts with Incentive-Based Fee             N/A                   N/A
  Arrangements






GREG SAVAGE
TYPES OF ACCOUNTS                           NUMBER              TOTAL ASSETS
- ----------------------------------     ----------------     -------------------
                                                      
Registered Investment Companies               124            $311,024,000,000
Other Pooled Investment Vehicles                1            $    235,000,000
Other Accounts                                  6            $  1,365,000,000
Accounts with Incentive-Based Fee             N/A                   N/A
  Arrangements



Each of the portfolios or accounts for which the Portfolio Managers are
primarily responsible for the day-to-day management seeks to track the rate of
return, risk profile and other characteristics of independent third-party
indexes by either replicating the same combination of securities that compose
those indexes or through a representative sampling of the securities that
constitute those indexes based on objective criteria and data. The Portfolio
Managers are required to manage each portfolio or account to meet those
objectives. Pursuant to BGI and BGFA policy, investment opportunities are
allocated equitably among the Funds and other portfolios and accounts. For
example, under certain circumstances, an investment opportunity may be
restricted due to limited supply on the market, legal constraints or other
factors, in which event the investment opportunity will be allocated equitably
among those portfolios and accounts, including the Funds seeking such
investment opportunity. As a consequence, from time to time the Funds may
receive a smaller allocation of an investment opportunity than they would have
if the Portfolio Managers and BGFA and its affiliates did not manage other
portfolios or accounts.

Like the Funds, the other portfolios or accounts managed by the Portfolio
Managers generally pay an asset-based fee to BGFA or BGI, as applicable, for
its advisory services. One or more of those other portfolios or accounts,
however, may pay BGI an incentive-based fee in lieu of, or in addition to, an
asset-based fee for its advisory services. A portfolio or account with an
incentive-based fee would pay BGI a portion of that portfolio's or account's
gains, or would pay BGI more for its services than would otherwise be the case
if BGI meets or exceeds specified performance targets. By their very nature,
incentive-based fee arrangements could present an incentive for BGI to devote
greater resources, and allocate more investment opportunities, to the
portfolios or accounts that have those fee arrangements, relative to other
portfolios or accounts, in order to earn larger fees. Although BGI has an
obligation to allocate resources and opportunities equitably among portfolios
and accounts and intends to do so, shareholders of the Funds should be aware
that, as with any group of portfolios and accounts managed by an investment
adviser and/or its affiliates pursuant to varying fee arrangements, including
incentive-based fee arrangements, there is the potential for a
conflict-of-interest that may result in the Portfolio Manager's favoring those
portfolios or accounts with incentive-based fee arrangements.


The below table reflects, for each Portfolio Manager, the number of portfolios
or accounts of the types enumerated in the above table and the aggregate of
total assets in those portfolios or accounts with respect to which the
investment management fees for those portfolios or accounts are based on the
performance of those portfolios or accounts, as of October 31, 2007:





DIANE HSIUNG
                                            NUMBER OF OTHER
                                             ACCOUNTS WITH               AGGREGATE
TYPES OF ACCOUNTS                      PERFORMANCE FEES MANAGED       OF TOTAL ASSETS
- ---------------------------------     --------------------------     ----------------
                                                               
Registered Investment Companies                  N/A                       N/A
Other Pooled Investment Vehicles                 N/A                       N/A
Other Accounts                                   N/A                       N/A

                                       35







GREG SAVAGE
                                            NUMBER OF OTHER
                                             ACCOUNTS WITH               AGGREGATE
TYPES OF ACCOUNTS                      PERFORMANCE FEES MANAGED       OF TOTAL ASSETS
- ---------------------------------     --------------------------     ----------------
                                                               
Registered Investment Companies                  N/A                       N/A
Other Pooled Investment Vehicles                 N/A                       N/A
Other Accounts                                   N/A                       N/A


As of October 31, 2007, with respect to all Funds and other portfolios and/or
accounts managed by the Portfolio Managers, on behalf of BGFA, the Portfolio
Managers receive a salary and are eligible to receive an annual bonus. Each
Portfolio Manager's salary is a fixed amount generally determined annually
based on a number of factors, including, but not limited to, the Portfolio
Manager's title, scope of responsibilities, experience and knowledge. The
Portfolio Manager's bonus is a discretionary amount determined annually based
on the overall profitability of the various BGI companies worldwide, the
performance of the Portfolio Manager's business unit, and an assessment of the
Portfolio Manager's individual performance. The Portfolio Manager's salary and
annual bonus are paid in cash. In addition, a Portfolio Manager may be paid a
signing bonus or other amounts in connection with initiation of employment with
BGFA. If a Portfolio Manager satisfied the requirements for being part of a
"select group of management or highly compensated employees (within the meaning
of ERISA Section 401(a))" as so specified under the terms of BGI's Compensation
Deferral Plan, the Portfolio Manager may elect to defer a portion of his or her
bonus under that Plan.

Portfolio Managers may be selected, on a fully discretionary basis, for awards
under BGI's Compensation Enhancement Plan ("CEP"). Under the CEP, these awards
are determined annually, and vest after two years. At the option of the CEP
administrators, the award may be "notionally invested" in funds managed by BGI,
which means that the final award amount may be increased or decreased according
to the performance of the BGI-managed funds over the two-year period. If the
award is not notionally invested, the original award amount is paid once
vested.


A Portfolio Manager may be granted options to purchase shares in Barclays
Global Investors UK Holdings Limited ("BGI UK Holdings"), a company organized
under the laws of England and Wales that directly or indirectly owns all of the
Barclays Global Investors companies worldwide, which options vest in three
equal installments over three years and are generally exercisable during
prescribed exercise windows. Shares purchased must generally be held 355 days
prior to sale. For such purposes, the value of BGI UK Holdings is based on its
fair value as determined by an independent public accounting firm.


As of October 31, 2007, the Portfolio Managers beneficially owned shares of the
Funds in the amounts reflected in the following tables:




DIANE HSIUNG
                                                                            DOLLAR RANGE
                                       --------------------------------------------------------------------------------------
                                                                  $10,001       $50,001      $100,001      $500,001      OVER
                                        NONE      $1 TO $10K      TO $50K      TO $100K      TO $500K       TO $1M       $1M
FUND                                   ------    ------------    ---------    ----------    ----------    ----------    -----
                                                                                                   
iShares MSCI Australia Index Fund         X
iShares MSCI Austria Index Fund                                     X
iShares MSCI Belgium Index Fund           X
iShares MSCI Brazil Index Fund            X
iShares MSCI Canada Index Fund            X
iShares MSCI Emerging Markets             X
  Index Fund
iShares MSCI EMU Index Fund               X
iShares MSCI France Index Fund            X
iShares MSCI Germany Index Fund           X
iShares MSCI Hong Kong Index Fund         X
iShares MSCI Italy Index Fund             X
iShares MSCI Japan Index Fund             X
iShares MSCI Malaysia Index Fund          X
iShares MSCI Mexico Index Fund            X
iShares MSCI Netherlands Index Fund       X
iShares MSCI Pacific ex-Japan             X
  Index Fund



                                       36







DIANE HSIUNG
                                                                            DOLLAR RANGE
                                       --------------------------------------------------------------------------------------
                                                                  $10,001       $50,001      $100,001      $500,001      OVER
                                        NONE      $1 TO $10K      TO $50K      TO $100K      TO $500K       TO $1M       $1M
FUND                                   ------    ------------    ---------    ----------    ----------    ----------    -----
                                                                                                   
iShares MSCI Singapore Index Fund         X
iShares MSCI South Africa Index           X
  Fund
iShares MSCI South Korea Index Fund                    X
iShares MSCI Spain Index Fund             X
iShares MSCI Sweden Index Fund            X
iShares MSCI Switzerland Index Fund       X
iShares MSCI Taiwan Index Fund            X
iShares MSCI United Kingdom Index         X
  Fund





GREG SAVAGE
                                                                            DOLLAR RANGE
                                       --------------------------------------------------------------------------------------
                                                                  $10,001       $50,001      $100,001      $500,001      OVER
                                        NONE      $1 TO $10K      TO $50K      TO $100K      TO $500K       TO $1M       $1M
FUND                                   ------    ------------    ---------    ----------    ----------    ----------    -----
                                                                                                   
iShares MSCI Australia Index Fund         X
iShares MSCI Austria Index Fund           X
iShares MSCI Belgium Index Fund           X
iShares MSCI Brazil Index Fund            X
iShares MSCI Canada Index Fund                         X
iShares MSCI Emerging Markets                                        X
  Index Fund
iShares MSCI EMU Index Fund               X
iShares MSCI France Index Fund            X
iShares MSCI Germany Index Fund           X
iShares MSCI Hong Kong Index Fund         X
iShares MSCI Italy Index Fund             X
iShares MSCI Japan Index Fund             X
iShares MSCI Malaysia Index Fund          X
iShares MSCI Mexico Index Fund            X
iShares MSCI Netherlands Index Fund       X
iShares MSCI Pacific ex-Japan             X
  Index Fund
iShares MSCI Singapore Index Fund         X
iShares MSCI South Africa Index           X
  Fund
iShares MSCI South Korea Index Fund       X
iShares MSCI Spain Index Fund             X
iShares MSCI Sweden Index Fund            X
iShares MSCI Switzerland Index Fund       X
iShares MSCI Taiwan Index Fund            X
iShares MSCI United Kingdom Index         X
  Fund


CODES OF ETHICS.  The Company, BGFA and the Distributor have adopted Codes of
Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permit
personnel subject to the Codes of Ethics to invest in securities, subject to
certain limitations, including securities that may be purchased or held by the
Funds. The Codes of Ethics are on public file with, and are available from, the
SEC.

ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT.  State Street Bank and Trust
Company ("State Street") serves as administrator, custodian and transfer agent
for the Funds. State Street's principal address is 200 Clarendon Street,
Boston, MA 02116. Pursuant to an Administration Agreement with the Company,
State Street provides necessary administrative, legal, tax, accounting
services, and financial reporting for the maintenance and operations of the
Company and each Fund. In addition, State Street makes available the office
space, equipment, personnel and facilities required to provide such services.
Pursuant to a Custodian Agreement with the Company, State Street maintains in
separate accounts cash, securities and other assets of the Company and


                                       37




each Fund, keeps all necessary accounts and records and provides other
services. State Street is required, upon the order of the Company, to deliver
securities held by State Street and to make payments for securities purchased
by the Company for each Fund. Also, pursuant to a Delegation Agreement with the
Trust, State Street is authorized to appoint certain foreign custodians or
foreign custody managers for Fund investments outside the United States.
Pursuant to a Transfer Agency and Service Agreement with the Company, State
Street acts as a transfer agent for each Fund's authorized and issued shares of
beneficial interest, and as dividend disbursing agent of the Company. As
compensation for these services, State Street receives certain out-of-pocket
costs, transaction fees and asset-based fees which are accrued daily and paid
monthly by the iShares MSCI Singapore Index Fund directly and by BGFA from its
management fee for all Funds other than iShares MSCI Singapore Index Fund.


The following table sets forth the administration, transfer agency and
custodian expenses of each Fund for the periods noted below:





                                                             CUSTODY,               CUSTODY,               CUSTODY,
                                                          ADMINISTRATION,        ADMINISTRATION,       ADMINISTRATION,
                                                          TRANSFER AGENCY        TRANSFER AGENCY       TRANSFER AGENCY
                                                             EXPENSES               EXPENSES               EXPENSES
                                                            PAID DURING            PAID DURING           PAID DURING
                                            FUND            FISCAL YEAR            FISCAL YEAR           FISCAL YEAR
                                         INCEPTION       ENDED AUGUST 31,       ENDED AUGUST 31,       ENDED AUGUST 31,
FUND                                        DATE               2007                   2006                   2005
- -----------------------------------     -----------     ------------------     ------------------     -----------------
                                                                                          
iShares MSCI Australia Index Fund        03/12/96           $  266,529             $  150,869             $  124,478
iShares MSCI Austria Index Fund          03/12/96           $  161,631             $  112,148             $   69,922
iShares MSCI Belgium Index Fund          03/12/96           $   60,170             $   27,553             $   23,452
iShares MSCI Brazil Index Fund           07/10/00           $5,102,401             $2,905,664             $  701,615
iShares MSCI Canada Index Fund           03/12/96           $  135,281             $  123,094             $   75,004
iShares MSCI Emerging Markets            04/07/03           $5,707,078             $4,669,932             $2,182,043
  Index Fund
iShares MSCI EMU Index Fund              07/25/00           $  508,751             $  273,106             $  174,024
iShares MSCI France Index Fund           03/12/96           $   72,818             $   53,830             $   35,604
iShares MSCI Germany Index Fund          03/12/96           $  168,144             $  103,850             $   43,872
iShares MSCI Hong Kong Index Fund        03/12/96           $  188,508             $  129,584             $  153,483
iShares MSCI Italy Index Fund            03/12/96           $   46,124             $   23,520             $   17,473
iShares MSCI Japan Index Fund            03/12/96           $1,047,176             $1,289,942             $1,065,863
iShares MSCI Malaysia Index Fund         03/12/96           $  577,302             $  324,031             $  272,377
iShares MSCI Mexico Index Fund           03/12/96           $  652,627             $  264,467             $  144,004
iShares MSCI Netherlands Index Fund      03/12/96           $   42,313             $   22,455             $   18,363
iShares MSCI Pacific ex-Japan            10/25/01           $  711,922             $  485,576             $  381,149
  Index Fund
iShares MSCI Singapore Index Fund        03/12/96           $  753,276             $  273,375             $  156,637
iShares MSCI South Africa Index          02/03/03           $  181,744             $  161,664             $   87,883
  Fund
iShares MSCI South Korea Index Fund      05/09/00           $1,485,700             $1,228,569             $  481,920
iShares MSCI Spain Index Fund            03/12/96           $  116,348             $   30,141             $   22,805
iShares MSCI Sweden Index Fund           03/12/96           $   94,767             $   39,219             $   27,529
iShares MSCI Switzerland Index Fund      03/12/96           $   63,264             $   38,265             $   22,281
iShares MSCI Taiwan Index Fund           06/20/00           $2,523,403             $1,880,480             $  833,718
iShares MSCI United Kingdom Index        03/12/96           $  105,612             $   84,541             $   96,550
  Fund


DISTRIBUTOR.  The Distributor's principal address is One Freedom Valley Drive,
Oaks, PA 19456. The Distributor has entered into a Distribution Agreement with
the Company pursuant to which it distributes shares of each Fund. The
Distribution Agreement will continue for two years from its effective date and
is renewable annually. Shares are continuously offered for sale by the Funds
through the Distributor only in Creation Units, as described in the applicable
Prospectus and below in the CREATION AND REDEMPTION OF CREATION UNITS section.
Shares in less than Creation Units are not distributed by the Distributor. The
Distributor will deliver the applicable Prospectus and, upon request, the SAI
to persons purchasing Creation Units and will maintain records of both orders
placed with it and confirmations of acceptance furnished by it. The Distributor
is a broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and a member of the Financial Industry Regulatory
Authority ("FINRA").


                                       38




The Distribution Agreement for each Fund provides that it may be terminated at
any time, without the payment of any penalty, on at least 60-days' prior
written notice to the other party following (i) the vote of a majority of the
Independent Directors, or (ii) the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the relevant Fund. The Distribution
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).


The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of Fund shares. Such Soliciting Dealers may also be Authorized Participants (as
defined below), Depository Trust Company ("DTC") participants (as defined
below) and/or Investor Services Organizations.


BGFA or BGI may, from time to time and from its own resources, pay, defray or
absorb costs relating to distribution, including payments out of its own
resources to the Distributor, or to otherwise promote the sale of shares.


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




                                                         COMPENSATION       COMPENSATION       COMPENSATION
                                                          PAID DURING        PAID DURING       PAID DURING
                                                          FISCAL YEAR        FISCAL YEAR       FISCAL YEAR
                                            FUND             ENDED              ENDED             ENDED
                                         INCEPTION        AUGUST 31,         AUGUST 31,         AUGUST 31,
FUND                                        DATE             2007               2006               2005
- -----------------------------------     -----------     --------------     --------------     -------------
                                                                                  
iShares MSCI Australia Index Fund        03/12/96           $50,592            $38,571           $37,659
iShares MSCI Austria Index Fund          03/12/96           $50,592            $38,571           $37,659
iShares MSCI Belgium Index Fund          03/12/96           $50,592            $38,571           $37,659
iShares MSCI Brazil Index Fund           07/10/00           $50,592            $38,571           $37,659
iShares MSCI Canada Index Fund           03/12/96           $50,592            $38,571           $37,659
iShares MSCI Emerging Markets            04/07/03           $50,592            $38,571           $37,659
  Index Fund
iShares MSCI EMU Index Fund              07/25/00           $50,592            $38,571           $37,659
iShares MSCI France Index Fund           03/12/96           $50,592            $38,571           $37,659
iShares MSCI Germany Index Fund          03/12/96           $50,592            $38,571           $37,659
iShares MSCI Hong Kong Index Fund        03/12/96           $50,592            $38,571           $37,659
iShares MSCI Italy Index Fund            03/12/96           $50,592            $38,571           $37,659
iShares MSCI Japan Index Fund            03/12/96           $50,592            $38,571           $37,659
iShares MSCI Malaysia Index Fund         03/12/96           $50,592            $38,571           $37,659
iShares MSCI Mexico Index Fund           03/12/96           $50,592            $38,571           $37,659
iShares MSCI Netherlands Index Fund      03/12/96           $50,592            $38,571           $37,659
iShares MSCI Pacific ex-Japan            10/25/01           $50,592            $38,571           $37,659
  Index Fund
iShares MSCI Singapore Index Fund        03/12/96           $50,592            $38,571           $37,659
iShares MSCI South Africa Index          02/03/03           $50,592            $38,571           $37,659
  Fund
iShares MSCI South Korea Index Fund      05/09/00           $50,592            $38,571           $37,659
iShares MSCI Spain Index Fund            03/12/96           $50,592            $38,571           $37,659
iShares MSCI Sweden Index Fund           03/12/96           $50,592            $38,571           $37,659
iShares MSCI Switzerland Index Fund      03/12/96           $50,592            $38,571           $37,659
iShares MSCI Taiwan Index Fund           06/20/00           $50,592            $38,571           $37,659
iShares MSCI United Kingdom Index        03/12/96           $50,592            $38,571           $37,659
  Fund


INDEX PROVIDER. Each Fund is based upon a particular index compiled by MSCI.
MSCI is not affiliated with the Funds or with BGI or BGI's affiliates. Each
Fund is entitled to use its Underlying Index pursuant to a sub-licensing
agreement with BGI, which in turn has a licensing agreement with MSCI. BGI has
provided the applicable sub-licenses to the Funds without charge.


                                       39




Brokerage Transactions
BGFA assumes general supervision over placing orders on behalf of each Fund for
the purchase and sale of portfolio securities. In selecting brokers or dealers
for any transaction in portfolio securities, BGFA's policy is to make such
selection based on factors deemed relevant, including but not limited to, the
breadth of the market in the security, the price of the security, the
reasonableness of the commission or mark-up or mark-down, if any, execution
capability, settlement capability, back office efficiency and the financial
condition of the broker or dealer, both for the specific transaction and on a
continuing basis. The overall reasonableness of brokerage commissions paid is
evaluated by BGFA based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. Brokers may also be selected because of their ability to
handle special or difficult executions, such as may be involved in large block
trades, less liquid securities, broad distributions, or other circumstances.
BGFA does not consider the provision or value of research, products or services
a broker or dealer may provide, if any, as a factor in the selection of a
broker or dealer or the determination of the reasonableness of commissions paid
in connection with portfolio transactions. The Company has adopted policies and
procedures that prohibit the consideration of sales of a Fund's shares as a
factor in the selection of a broker or a dealer to execute its portfolio
transactions.


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




                                                            COMMISSIONS            COMMISSIONS           COMMISSIONS
                                                            PAID DURING            PAID DURING           PAID DURING
                                            FUND            FISCAL YEAR            FISCAL YEAR           FISCAL YEAR
                                         INCEPTION       ENDED AUGUST 31,       ENDED AUGUST 31,       ENDED AUGUST 31,
FUND                                        DATE               2007                   2006                   2005
- -----------------------------------     -----------     ------------------     ------------------     -----------------
                                                                                          
iShares MSCI Australia Index Fund        03/12/96           $  150,264             $   44,501              $ 50,149
iShares MSCI Austria Index Fund          03/12/96           $  224,572             $  114,016              $ 42,998
iShares MSCI Belgium Index Fund          03/12/96           $   72,646             $   31,534              $ 13,256
iShares MSCI Brazil Index Fund           07/10/00           $  626,251             $  408,983              $115,463
iShares MSCI Canada Index Fund           03/12/96           $  251,510             $  113,719              $ 52,554
iShares MSCI Emerging Markets            04/07/03           $2,129,900             $2,250,437              $893,470
  Index Fund
iShares MSCI EMU Index Fund              07/25/00           $  129,208             $   97,602              $ 24,066
iShares MSCI France Index Fund           03/12/96           $   13,158             $    9,883              $  2,487
iShares MSCI Germany Index Fund          03/12/96           $   52,232             $   27,122              $  7,753
iShares MSCI Hong Kong Index Fund        03/12/96           $   70,338             $   28,227              $ 23,840
iShares MSCI Italy Index Fund            03/12/96           $   33,919             $   13,882              $  4,837
iShares MSCI Japan Index Fund            03/12/96           $  249,884             $  287,796              $118,468
iShares MSCI Malaysia Index Fund         03/12/96           $  365,787             $   68,670              $ 41,354
iShares MSCI Mexico Index Fund           03/12/96           $  324,446             $  100,531              $ 41,173
iShares MSCI Netherlands Index Fund      03/12/96           $   33,790             $   20,106              $  4,875
iShares MSCI Pacific ex-Japan            10/25/01           $  489,046             $  174,011              $209,879
  Index Fund
iShares MSCI Singapore Index Fund        03/12/96           $  260,531             $   75,315              $ 33,920
iShares MSCI South Africa Index          02/03/03           $   92,616             $   47,934              $ 43,582
  Fund
iShares MSCI South Korea Index Fund      05/09/00           $  124,150             $  368,333              $ 66,985
iShares MSCI Spain Index Fund            03/12/96           $   82,292             $   11,832              $  7,477
iShares MSCI Sweden Index Fund           03/12/96           $   57,105             $   19,186              $  4,724
iShares MSCI Switzerland Index Fund      03/12/96           $   22,495             $   22,527              $  5,080
iShares MSCI Taiwan Index Fund           06/20/00           $  463,491             $  338,064              $100,258
iShares MSCI United Kingdom Index        03/12/96           $   77,455             $   37,167              $ 27,149
  Fund


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


                                       40







                                  FISCAL                                       MARKET VALUE
FUND                             YEAR END  ISSUER                              OF INVESTMENT
- ------------------------------- ---------- ---------------------------------- --------------
                                                                     
MSCI EMU Index Fund               8/31     Deutsche Bank AG                    $40,321,971
                                           Societe Generale                     37,390,879
MSCI France Index Fund            8/31     Societe Generale                     19,260,227
MSCI Germany Index Fund           8/31     Deutsche Bank AG                     91,429,233
MSCI Switzerland Index Fund       8/31     UBS AG                               29,748,534
                                           Credit Suisse Group                  14,891,448
MSCI United Kingdom Index Fund    8/31     HSBC Holdings PLC                    76,978,886
                                           Royal Bank of Scotland Group PLC     39,823,099


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


None of the Funds paid any brokerage commissions to Barclays Global Investor
Services, an affiliate of BGFA, and a subsidiary of BGI, during the fiscal year
ended August 31, 2007.


The Funds' purchase and sale orders for securities may be combined with those
of other investment companies, clients or accounts that BGFA manages or advises
and for which it has brokerage placement authority. If purchases or sales of
portfolio securities of the Funds and one or more other accounts managed or
advised by BGFA are considered at or about the same time, transactions in such
securities are allocated among the Fund and the other accounts in a manner
deemed equitable to all by BGFA. In some cases, this procedure could have a
detrimental effect on the price or volume of the security as far as the Funds
are concerned. However, in other cases, it is possible that the ability to
participate in volume transactions and to negotiate lower transaction costs
will be beneficial to the Fund. BGFA may deal, trade and invest for its own
account in the types of securities in which the Funds may invest. BGFA may,
from time to time, effect trades on behalf of and for the account of the Funds
with brokers or dealers that are affiliated with BGFA, in conformity with the
1940 Act and SEC rules and regulations. Under these provisions, any commissions
paid to affiliated brokers or dealers must be reasonable and fair compared to
the commissions charged by other brokers or dealers in comparable transactions.
The Funds will not deal with affiliates in principal transactions unless
permitted by applicable SEC rule or regulation or by SEC exemptive order.


Portfolio turnover may vary from year to year, as well as within a year. High
turnover rates are likely to result in comparatively greater brokerage
expenses. The portfolio turnover rate for each Fund is expected to be under
50%. The overall reasonableness of brokerage commissions is evaluated by BGFA
based upon its knowledge of available information as to the general level of
commissions paid by the other institutional investors for comparable services.


The table below sets forth the portfolio turnover rates of each Fund for the
periods noted:





                                          FISCAL YEAR           FISCAL YEAR
                                             ENDED                 ENDED
FUND                                    AUGUST 31, 2007       AUGUST 31, 2006
- ----------------------------------     -----------------     ----------------
                                                       
iShares MSCI Australia Index Fund              10%                   7%
iShares MSCI Austria Index Fund                21%                  32%
iShares MSCI Belgium Index Fund                12%                  10%
iShares MSCI Brazil Index Fund                 22%                  15%
iShares MSCI Canada Index Fund                  8%                  20%
iShares MSCI Emerging Markets                   5%                  12%
  Index Fund
iShares MSCI EMU Index Fund                     5%                   8%
iShares MSCI France Index Fund                  6%                  10%
iShares MSCI Germany Index Fund                 4%                  12%
iShares MSCI Hong Kong Index Fund               9%                  10%
iShares MSCI Italy Index Fund                  16%                  15%
iShares MSCI Japan Index Fund                   3%                   8%
iShares MSCI Malaysia Index Fund               87%                  60%



                                       41







                                           FISCAL YEAR           FISCAL YEAR
                                              ENDED                 ENDED
FUND                                     AUGUST 31, 2007       AUGUST 31, 2006
- -----------------------------------     -----------------     ----------------
                                                        
iShares MSCI Mexico Index Fund                  14%                  12%
iShares MSCI Netherlands Index Fund              8%                  17%
iShares MSCI Pacific ex-Japan                   11%                   8%
  Index Fund
iShares MSCI Singapore Index Fund                8%                   6%
iShares MSCI South Africa Index                  8%                   7%
  Fund
iShares MSCI South Korea Index Fund             20%                  47%
iShares MSCI Spain Index Fund                   12%                   6%
iShares MSCI Sweden Index Fund                   7%                  14%
iShares MSCI Switzerland Index Fund              5%                  11%
iShares MSCI Taiwan Index Fund                  35%                  29%
iShares MSCI United Kingdom Index                8%                  10%
  Fund


Additional Information Concerning the Company

CAPITAL STOCK.  The Company currently is comprised of 24 series that issue
shares of common stock, par value $0.001 per share, referred to herein as the
Funds. Each Fund has been issued as a separate class of capital stock. In
addition to the 24 Funds listed above, the Company has authorized for issuance,
but is not currently offering for sale to the public, four additional series of
shares of common stock. The Board may designate additional series of common
stock and classify shares of a particular series into one or more classes of
that series. The Amended and Restated Articles of Incorporation confers upon the
Board of Directors the power to establish the number of shares which constitute
a Creation Units or by resolution, restrict the redemption right to Creation
Units.


Each share issued by a Fund has a PRO RATA interest in the assets of that Fund.
The Company is currently authorized to issue
10.9 billion shares of common stock. The following number of shares is
currently authorized for each Fund: the iShares MSCI Australia Index Fund,
127.8 million shares; the iShares MSCI Austria Index Fund, 19.8 million shares;
the iShares MSCI Belgium Index Fund, 136.2 million shares; the iShares MSCI
Brazil Index Fund, 500 million shares; the iShares MSCI Canada Index Fund,
340.2 million shares; the iShares MSCI Emerging Markets Index Fund, 500 million
shares; the iShares MSCI EMU Index Fund, 500 million shares; the iShares MSCI
France Index Fund, 340.2 million shares; the iShares MSCI Germany Index Fund,
382.2 million shares; the iShares MSCI Hong Kong Index Fund, 191.4 million
shares; the iShares MSCI Italy Index Fund, 63.6 million shares; the iShares
MSCI Japan Index Fund, 2,124.6 million shares; the iShares MSCI Malaysia Index
Fund, 127.8 million shares; the iShares MSCI Mexico Index Fund, 255 million
shares; the iShares MSCI Netherlands Index Fund, 255 million shares; the
iShares MSCI Pacific ex-Japan Index Fund, 500 million shares; the iShares MSCI
Singapore Index Fund, 191.4 million shares; the iShares MSCI South Africa Index
Fund, 200 million shares; the iShares MSCI South Korea Index Fund, 200 million
shares; the iShares MSCI Spain Index Fund, 127.8 million shares; the iShares
MSCI Sweden Index Fund, 63.6 million shares; the iShares MSCI Switzerland Index
Fund, 318.625 million shares; the iShares MSCI Taiwan Index Fund, 200 million
shares; and the iShares MSCI United Kingdom Index Fund, 943.2 million shares.
Fractional shares will not be issued. Shares have no preemptive, exchange,
subscription or conversion rights and are freely transferable. Each share is
entitled to participate equally in dividends and distributions declared by the
Board with respect to the relevant Fund, and in the net distributable assets of
such Fund on liquidation. Shareholders are entitled to require the Company to
redeem Creation Units of their shares. The Articles of Incorporation confers
upon the Board the power, by resolution, to alter the number of shares
constituting a Creation Unit or to specify that shares of common stock of the
Company may be individually redeemable.


Each share has one vote with respect to matters upon which a stockholder vote
is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder and the Maryland General Corporation Law; stockholders
have no cumulative voting rights with respect to their shares. Shares of all
Funds vote together as a single class except that, if the matter being voted on
affects only a particular Fund, or, if a matter affects a particular Fund
differently from other Funds, that Fund will vote separately on such matter.


Shareholders may make inquiries by writing to the Company, SEI Investments
Distribution Co., One Freedom Valley Drive, Oaks, PA 19456.


                                       42




Under Maryland law, the Company is not required to hold an annual meeting of
stockholders unless required to do so under the 1940 Act. The policy of the
Company is not to hold an annual meeting of stockholders unless required to do
so under the 1940 Act. All shares (regardless of the Fund) have noncumulative
voting rights for the Board. Under Maryland law, Directors of the Company may
be removed by vote of the stockholders.


Following the creation of the initial of shares of a Fund and immediately prior
to the commencement of trading in such Fund's shares, a holder of shares may be
a "control person" of the Fund, as defined in the 1940 Act. A Fund cannot
predict the length of time for which one or more stockholders may remain a
control person of the Fund.


Absent an applicable exemption or other relief from the SEC or its staff,
beneficial owners of more than 5% of the shares of a Fund may be subject to the
reporting provisions of Section 13 of the 1934 Act and the SEC's rules
promulgating thereunder. In addition, absent an applicable exemption or other
relief from the SEC staff, officers and Directors of a Fund and beneficial
owners of 10% of the shares of a Fund ("Insiders") may be subject to the
insider reporting, short-swing profit and short sale provisions of Section 16
of the 1934 Act and the SEC's rules promulgated thereunder. Beneficial owners
and Insiders should consult with their own legal counsel concerning their
obligations under Sections 13 and 16 of the 1934 Act.


TERMINATION OF THE COMPANY OR A FUND.  The Company or a Fund may be terminated
by a majority vote of the Board or the affirmative vote of a supermajority of
the holders of the Company or such Fund entitled to vote on termination.
Although the shares are not automatically redeemable upon the occurrence of any
specific event, the Company's organizational documents provide that the Board
will have the unrestricted power to alter the number of shares in a Creation
Unit. In the event of a termination of the Company or a Fund, the Board, in its
sole discretion, could determine to permit the shares to be redeemable in
aggregations smaller than Creation Units or to be individually redeemable. In
such circumstance, the Company may make redemptions in-kind, for cash, or for a
combination of cash or securities.


DTC AS SECURITIES DEPOSITORY FOR THE SHARES OF THE FUNDS.  Shares of each Fund
are represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.


DTC, a limited-purpose trust company, was created to hold securities of its
participants ("DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities'
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the NYSE, the AMEX and the FINRA.
Access to the DTC system is also available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly ("Indirect
Participants").


Beneficial ownership of shares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and
Indirect Participants. Ownership of beneficial interests in shares (owners of
such beneficial interests are referred to herein as "Beneficial Owners") is
shown on, and the transfer of ownership is effected only through, records
maintained by DTC (with respect to DTC Participants) and on the records of DTC
Participants (with respect to Indirect Participants and Beneficial Owners that
are not DTC Participants). Beneficial Owners will receive from or through the
DTC Participant a written confirmation relating to their purchase of shares.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability of certain investors to acquire beneficial
interests in shares.


Conveyance of all notices, statements and other communications to Beneficial
Owners is effected as follows. Pursuant to the Depositary Agreement between the
Company and DTC, DTC is required to make available to the Company, upon request
and for a fee to be charged to the Company, a listing of the shares of each
Fund held by each DTC Participant. The Company shall inquire of each such DTC
Participant as to the number of Beneficial Owners holding shares, directly or
indirectly, through such DTC Participant. The Company shall provide each such
DTC Participant with copies of such notice, statement or other communication,
in such form, number and at such place as such DTC Participant may reasonably
request, in order that such notice, statement or communication may be
transmitted by such DTC Participant, directly or indirectly, to such Beneficial
Owners. In addition, the Company shall pay to each such DTC Participant a fair
and reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.


Share distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all shares of the Funds. DTC or its nominee, upon receipt
of any such distributions, shall credit immediately DTC Participants' accounts
with payments in amounts


                                       43




proportionate to their respective beneficial interests in shares of each Fund
as shown on the records of DTC or its nominee. Payments by DTC Participants to
Indirect Participants and Beneficial Owners of shares held through such DTC
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in a "street name," and will be the responsibility of such
DTC Participants.


The Company has no responsibility or liability for any aspect of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such shares, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests, or
for any other aspect of the relationship between DTC and the DTC Participants
or the relationship between such DTC Participants and the Indirect Participants
and Beneficial Owners owning through such DTC Participants. DTC may decide to
discontinue providing its service with respect to shares of the Funds at any
time by giving reasonable notice to the Company and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Company shall take action to find a replacement for DTC to
perform its functions at a comparable cost.



Creation and Redemption of Creation Units
CREATION UNITS. The Company issues and redeems shares of each Fund only in
Creation Units. The following table sets forth the number of iShares of a Fund
that constitute a Creation Unit for such Fund and the value of such Creation
Unit as of September 30, 2007:





                                                              VALUE PER
                                           SHARES PER          CREATION
FUND                                     CREATION UNIT       UNIT ($U.S.)
- -----------------------------------     ---------------     -------------
                                                      
iShares MSCI Australia Index Fund           200,000          $ 6,346,000
iShares MSCI Austria Index Fund             100,000          $ 3,765,000
iShares MSCI Belgium Index Fund              40,000          $ 1,058,800
iShares MSCI Brazil Index Fund               50,000          $ 3,700,500
iShares MSCI Canada Index Fund              100,000          $ 3,278,000
iShares MSCI Emerging Markets               150,000          $22,407,000
  Index Fund
iShares MSCI EMU Index Fund                  50,000          $ 6,043,000
iShares MSCI France Index Fund              200,000          $ 7,680,000
iShares MSCI Germany Index Fund             300,000          $10,368,000
iShares MSCI Hong Kong Index Fund            75,000          $ 1,581,000
iShares MSCI Italy Index Fund               150,000          $ 5,226,000
iShares MSCI Japan Index Fund               600,000          $ 8,634,000
iShares MSCI Malaysia Index Fund             75,000          $   892,500
iShares MSCI Mexico Index Fund              100,000          $ 5,827,000
iShares MSCI Netherlands Index Fund          50,000          $ 1,601,000
iShares MSCI Pacific ex-Japan               100,000          $16,588,000
  Index Fund
iShares MSCI Singapore Index Fund           100,000          $ 1,483,000
iShares MSCI South Africa Index              50,000          $ 6,642,000
  Fund
iShares MSCI South Korea Index Fund          50,000          $ 3,418,000
iShares MSCI Spain Index Fund                75,000          $ 4,560,750
iShares MSCI Sweden Index Fund               75,000          $ 2,772,000
iShares MSCI Switzerland Index Fund         125,000          $ 3,352,500
iShares MSCI Taiwan Index Fund              200,000          $ 3,390,000
iShares MSCI United Kingdom Index           200,000          $ 5,120,000
  Fund


The Board reserves the right to declare a split or a consolidation in the
number of shares outstanding of any Fund of the Company, and to make a
corresponding change in the number of shares constituting a Creation Unit, in
the event that the per share price in the secondary market rises (or declines)
to an amount that falls outside the range deemed desirable by the Board.


                                       44




PURCHASE AND ISSUANCE OF CREATION UNITS


GENERAL.  The Company issues and sells shares of each Fund only in Creation
Units on a continuous basis through the Distributor, without a sales load, at
the Fund's NAV next determined after receipt, on any Business Day (as defined
herein), of an order in proper form.


A "Business Day" with respect to each Fund is any day on which the Listing
Exchange is open for business. As of the date of this SAI, each Listing
Exchange observes the following holidays, as observed: New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.


FUND DEPOSIT.  The consideration for purchase of a Creation Unit of a Fund
(except for the iShares MSCI Brazil Index Fund, iShares MSCI Malaysia Index
Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund,
which are currently offered in their iShares Creation Units solely for cash)
generally consists of the in-kind deposit of a designated portfolio of equity
securities (the "Deposit Securities") constituting an optimized representation
of the Fund's benchmark foreign securities index and an amount of cash computed
as described below (the "Cash Component"). Together, the Deposit Securities and
the Cash Component constitute the "Fund Deposit," which represents the minimum
initial and subsequent investment amount for shares of any Fund of the Company.
The Cash Component is an amount equal to the difference between (x) the net
asset value (per Creation Unit) of the Fund and (y) the "Deposit Amount" which
is the market value (per Creation Unit) of the securities deposited with the
Company. The Cash Component serves to function of compensate for any
differences between the NAV per Creation Unit and the Deposit Amount. Payment
of any stamp duty or other similar fees and expenses payable upon transfer of
beneficial ownership of the Deposit Securities shall be the sole responsibility
of the Authorized Participant that purchased the Creation Unit.


BGFA makes available through the National Securities Clearing Corporation
("NSCC") on each Business Day, prior to the opening of business on the
applicable Listing Exchange, the list of names and the required number of
shares of each Deposit Security to be included in the current Fund Deposit
(based on information at the end of the previous Business Day) for each Fund.
Such Fund Deposit is applicable, subject to any adjustments as described below,
in order to effect purchases of Creation Units of iShares of a given Fund until
such time as the next-announced Fund Deposit composition is made available.


The identity and number of shares of the Deposit Securities pursuant to changes
in composition of the Fund's portfolio and changes as rebalancing adjustments
and corporate action events are reflected from time to time by BGFA with a view
to the investment objective of the Fund. The composition of the Deposit
Securities may also change in response to adjustments to the weighting or
composition of the securities constituting the relevant securities index.


In addition, the Company reserves the right to permit or require the
substitution of a "cash in lieu" amount to be added to the Cash Component to
replace any Deposit Security that may not be available in sufficient quantity
for delivery or that may not be eligible for transfer through the systems of
DTC of the Clearing Process (discussed below). The Company also reserves the
right to permit or require a "cash in lieu" amount where the delivery of the
Deposit Security by the Authorized Participant (as described below) would be
restricted under applicable securities laws or where the delivery of the
Deposit Security to the Authorized Participant would result in the disposition
of the Deposit Security by the Authorized Participant becoming restricted under
applicable securities laws, or in certain other situations. The adjustments
described above will reflect changes, known to BGFA on the date of announcement
to be in effect by the time of delivery of the Fund Deposit, in the composition
of the subject index being tracked by the relevant Fund, or resulting from
stock splits and other corporate actions.


In addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Fund Deposit, on each Business Day, the Cash
Component effective through and including the previous Business Day, per
outstanding Creation Unit of each Fund, will be made available.


ROLE OF THE AUTHORIZED PARTICIPANT.  Creation Units of shares may be purchased
only by or through a DTC Participant that has entered into an Authorized
Participant Agreement with the Distributor (an "Authorized Participant"). Such
Authorized Participant will agree, pursuant to the terms of such Authorized
Participant Agreement and on behalf of itself or any investor on whose behalf
it will act, to certain conditions, including that such Authorized Participant
will make available in advance of each purchase of iShares an amount of cash
sufficient to pay the Cash Component, once the NAV of a Creation Unit is next
determined after receipt of the purchase order in proper form, together with
the transaction fee described below. The Authorized Participant may require the
investor to enter into an agreement with such Authorized Participant with
respect to certain matters, including payment of the Cash Component. Investors
who are not Authorized Participants must make appropriate arrangements with an
Authorized Participant. Investors should be aware that their particular broker
may not be a DTC Participant or may not have executed an Authorized Participant
Agreement and that orders to purchase Creation Units may have to be placed by
the investor's broker


                                       45




through an Authorized Participant. As a result, purchase orders placed through
an Authorized Participant may result in additional charges to such investor.
The Company does not expect to enter into an Authorized Participant Agreement
with more than a small number of DTC Participants that have international
capabilities. A list of current Authorized Participants may be obtained from
the Distributor.


PURCHASE ORDER.  To initiate an order for a Creation Unit, the Authorized
Participant must submit to the Distributor an irrevocable order to purchase
shares of a Fund. The Distributor will notify BGFA and the Custodian of such
order. The Custodian will then provide such information to the appropriate
subcustodian. For each Fund, the Custodian shall cause the subcustodian to
maintain an account into which the Authorized Participant shall deliver, on
behalf of itself or the party on whose behalf it is acting, the securities
included in the designated Fund Deposit (or the cash value of all or a part of
such securities, in the case of a permitted or required cash purchase or "cash
in lieu" amount), with any appropriate adjustments as advised by the Company.
Deposit Securities must be delivered to an account maintained at the applicable
local subcustodian. Those placing orders to purchase Creation Units through an
Authorized Participant should allow sufficient time to permit proper submission
of the purchase order to the Distributor by the cut-off time on such Business
Day.


The Authorized Participant must also make available on or before the
contractual settlement date, by means satisfactory to the Company, immediately
available or same day funds estimated by the Company to be sufficient to pay
the Cash Component next determined after acceptance of the purchase order,
together with the applicable purchase transaction fee. Any excess funds will be
returned following settlement of the issue of the Creation Unit. Those placing
orders should ascertain the applicable deadline for cash transfers by
contacting the operations department of the broker or depositary institution
effectuating the transfer of the Cash Component. This deadline is likely to be
significantly earlier than the closing time of the regular trading session on
the applicable Listing Exchange.


Investors should be aware that an Authorized Participant may require orders for
purchases of shares placed with it to be in the particular form required by the
individual Authorized Participant.


TIMING OF SUBMISSION OF PURCHASE ORDERS. For most Funds, an Authorized
Participant must submit an irrevocable purchase before 4:00 p.m., Eastern time
on any Business Day in order to receive that day's NAV. An Authorized
Participant must submit an irrevocable order to purchase shares of the iShares
MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI
Taiwan Index Fund by 11:59 p.m., Eastern time on any Business Day in order to
receive the next Business Day's NAV. Orders to purchase shares of the iShares
MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund or iShares MSCI
Taiwan Index Fund that are submitted on the Business Day immediately preceding a
holiday or a day (other than a weekend) when the equity markets in the relevant
foreign market are closed will not be accepted. An Authorized Participant must
submit an irrevocable order to purchase shares of the iShares MSCI Brazil Index
Fund before 3:00 p.m., Eastern time on any Business Day in order to receive that
day's NAV. In addition, orders to purchase shares of the MSCI Brazil Index Fund
will not be accepted on any day when the Brazilian markets are closed. An
Authorized Participant must submit an irrevocable request to redeem shares of
the iShares MSCI Emerging Markets Index Fund by 5:00 p.m., Eastern time (or by
one hour after the close of the Listing Exchange, if earlier) on any Business
Day in order to receive the next Business Day's NAV.  Orders to redeem shares of
the Fund that are submitted on the Business Day immediately preceding a holiday
or day (other than a weekend) when the equity markets in Brazil, Malaysia, South
Korea and Taiwan are closed will not be accepted. The Distributor in its
discretion may permit the submission of such orders and requests by or through
an Authorized Participant at any time (including on days on which the Listing
Exchange is not open for business) via communication through the facilities of
the Distributor's proprietary website maintained for this purpose. Purchase
orders and redemption requests, if accepted by the Company, will be processed
based on the NAV next determined after such acceptance in accordance with the
Company's standard cut-off times as provided in the Authorized Participant
Agreement and disclosed in this SAI.


ACCEPTANCE OF PURCHASE ORDER.  Subject to the conditions that (i) an
irrevocable purchase order has been submitted by the Authorized Participant
(either on its own or another investor's behalf) and (ii) arrangements
satisfactory to the Company are in place for payment of the Cash Component and
any other cash amounts which may be due, the Company will accept the order,
subject to its right (and the right of the Distributor and BGFA) to reject any
order until acceptance.


Once the Company has accepted an order, upon next determination of the NAV of
the shares, the Company will confirm the issuance of a Creation Unit, against
receipt of payment, at such NAV. The Distributor will then transmit a
confirmation of acceptance to the Authorized Participant that placed the order.



The Company reserves the absolute right to reject or revoke acceptance of a
purchase order transmitted to it by the Distributor in respect of any Fund if
(a) the purchaser or group of purchasers, upon obtaining the shares ordered,
would own 80% or more of the currently outstanding shares of any Fund; (b) the
Deposit Securities delivered are not as specified by BGFA, as described above;
(c) acceptance of the Deposit Securities would have certain adverse tax
consequences to the Fund; (d) the acceptance of the Fund Deposit would, in the
opinion of counsel, be unlawful; (e) the acceptance of the Fund Deposit would
otherwise, in the discretion of the Company or BGFA, have an adverse effect on
the Company or the rights of beneficial owners; or (f) in the event that


                                       46




circumstances outside the control of the Company, the Distributor and BGFA make
it impracticable to process purchase orders. The Company shall notify a
prospective purchaser of its rejection of the order of such person. The Company
and the Distributor are under no duty, however, to give notification of any
defects or irregularities in the delivery of Portfolio Deposits nor shall
either of them incur any liability for the failure to give any such
notification.


ISSUANCE OF A CREATION UNIT.  Except as provided herein, a Creation Unit will
not be issued until the transfer of good title to the Company of the Deposit
Securities and the payment of the Cash Component have been completed. When the
subcustodian has confirmed to the Custodian that the required securities
included in the Fund Deposit (or the cash value thereof) have been delivered to
the account of the relevant subcustodian or subcustodians, the Distributor and
the Adviser shall be notified of such delivery and the Company will issue and
cause the delivery of the Creation Unit. Creation Units typically are issued on
a "T+3 basis" (I.E., three Business Days after trade date). However, as
discussed in Appendix A, each Fund reserves the right to settle Creation Unit
transactions on a basis other than T+3 in order to accommodate foreign market
holiday schedules, to account for different treatment among foreign and U.S.
markets of dividend record dates and ex-dividend dates (I.E., the last day the
holder of a security can sell the security and still receive dividends payable
on the security), and in certain other circumstances.


To the extent contemplated by an Authorized Participant's agreement with the
Distributor, the Company will issue Creation Units to such Authorized
Participant notwithstanding the fact that the corresponding Portfolio Deposits
have not been received in part or in whole, in reliance on the undertaking of
the Authorized Participant to deliver the missing Deposit Securities as soon as
possible, which undertaking shall be secured by such Authorized Participant's
delivery and maintenance of collateral having a value at least equal to 110%,
which BGFA may change from time to time, of the value of the missing Deposit
Securities in accordance with the Company's then-effective procedures. The only
collateral that is acceptable to the Company is cash in U.S. Dollars or an
irrevocable letter of credit in form, and drawn on a bank, that is satisfactory
to the Company. The cash collateral posted by the Authorized Participant may be
invested at the risk of the Authorized Participant, and income, if any, on
invested cash co llateral will be paid to that Authorized Participant.
Information concerning the Company's current procedures for collateralization
of missing Deposit Securities is available from the Distributor. The Authorized
Participant Agreement will permit the Company to buy the missing Deposit
Securities at any time and will subject the Authorized Participant to liability
for any shortfall between the cost to the Company of purchasing such securities
and the cash collateral or the amount that may be drawn under any letter of
credit.


In certain cases, Authorized Participants will create and redeem Creation Units
of the same trade date. In these instances, the Company reserves the right to
settle these transactions on a net basis. All questions as to the number of
shares of each security in the Deposit Securities and the validity, form,
eligibility and acceptance for deposit of any securities to be delivered shall
be determined by the Company, and the Company's determination shall be final
and binding.


CASH PURCHASE METHOD.  Although the Company does not ordinarily permit cash
purchases of Creation Units, when cash purchases of Creation Units are available
or specified for a Fund (Creation Units of the iShares MSCI Brazil Index Fund,
iShares MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund and
iShares MSCI Taiwan Index Fund are currently offered only for cash and Creation
Units of the iShares MSCI Emerging Markets Index Fund are currently offered
partially for cash), they will be effected in essentially the same manner as in-
kind purchases thereof. In the case of a cash purchase, the investor must pay
the cash equivalent of the Deposit Securities it would otherwise be required to
provide through an in-kind purchase, plus the same Cash Component required to be
paid by an in-kind purchaser. In addition, to offset the Company's brokerage and
other transaction costs associated with using the cash to purchase the requisite
Deposit Securities, the investor will be required to pay a fixed purchase
transaction fee, plus an additional variable charge for cash purchases, which is
expressed as a percentage of the value of the Deposit Securities. The
transaction fees for in-kind and cash purchases of Creation Units are described
below.


PURCHASE TRANSACTION FEE.  A purchase transaction fee payable to the Company is
imposed to compensate the Company for the transfer and other transaction costs
of a Fund associated with the issuance of Creation Units. Purchasers of
Creation Units for cash are required to pay an additional variable charge to
compensate the relevant Fund for brokerage and market impact expenses relating
to investing in portfolios securities. Where the Company permits an in-kind
purchaser to substitute cash in lieu of depositing a portion of the Deposit
Securities, the purchaser will be assessed the additional variable charge for
cash purchases on the "cash in lieu" portion of its investment. Purchasers of
Creation Units are responsible for the costs of transferring the securities
constituting the Deposit Securities to the account of the Company. The purchase
transaction fees for in-kind purchases and cash purchases (when available) are
listed in the table below. This table is subject to revision from time to time.
Investors are also responsible for payment of the costs of transferring the
Deposit Securities to the Company:


                                       47






                                                              MAXIMUM ADDITIONAL
                                           IN-KIND AND        VARIABLE CHARGE FOR
FUND                                     CASH PURCHASES         CASH PURCHASES*
- -----------------------------------     ----------------     --------------------
                                                       
iShares MSCI Australia Index Fund            $2,400                   0.60%
iShares MSCI Austria Index Fund              $  600                   0.67%
iShares MSCI Belgium Index Fund              $  700                   0.30%
iShares MSCI Brazil Index Fund               $2,400                      **
iShares MSCI Canada Index Fund               $1,900                   0.30%
iShares MSCI Emerging Markets                $7,700                      **
  Index Fund
iShares MSCI EMU Index Fund                  $8,000                   1.05%
iShares MSCI France Index Fund               $2,900                   0.25%
iShares MSCI Germany Index Fund              $1,500                   0.25%
iShares MSCI Hong Kong Index Fund            $2,000                   0.60%
iShares MSCI Italy Index Fund                $1,400                   0.30%
iShares MSCI Japan Index Fund                $5,000                   0.15%
iShares MSCI Malaysia Index Fund             $5,000                      **
iShares MSCI Mexico Index Fund               $1,400                   0.50%
iShares MSCI Netherlands Index Fund          $1,000                   0.25%
iShares MSCI Pacific ex-Japan                $6,000                   1.80%
  Index Fund
iShares MSCI Singapore Index Fund            $2,000                   1.60%
iShares MSCI South Africa Index              $1,200                   0.75%
  Fund
iShares MSCI South Korea Index Fund          $4,000                      **
iShares MSCI Spain Index Fund                $1,500                   0.25%
iShares MSCI Sweden Index Fund               $1,300                   0.30%
iShares MSCI Switzerland Index Fund          $1,500                   0.40%
iShares MSCI Taiwan Index Fund               $4,500                      **
iShares MSCI United Kingdom Index            $3,500                   0.25%
  Fund


- -------
*As a percentage of the value of amount invested.
** The maximum additional variable charge for cash purchases will be a
percentage of the value of the Deposit Securities, which will not exceed 3.00%.


REDEMPTION OF CREATION UNITS.  Shares of a Fund may be redeemed only in
Creation Units at their NAV next determined after receipt of a redemption
request in proper form by the Distributor and only on a Business Day. The
Company will not redeem shares in amounts less than Creation Units. Beneficial
owners also may sell shares in the secondary market but must accumulate enough
iShares to constitute a Creation Unit in order to have such shares redeemed by
the Company. There can be no assurance, however, that there will be sufficient
liquidity in the public trading market at any time to permit assembly of a
Creation Unit of iShares. Investors should expect to incur brokerage and other
costs in connection with assembling a sufficient number of iShares to
constitute a redeemable Creation Unit.


With respect to each Fund (other than the iShares MSCI Brazil Index Fund,
iShares MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund and
iShares MSCI Taiwan Index Fund, which currently redeem Creation Units of
iShares solely for cash) BGFA makes available through the NSCC prior to the
opening of business on the Listing Exchange on each Business Day, the Portfolio
Securities that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form (as defined below)
on that day. Unless cash redemptions are available or specified for a Fund, the
redemption proceeds for a Creation Unit generally consist of Deposit Securities
- -as announced by BGFA through the NSCC on the Business Day of the request for
redemption- plus cash in an amount equal to the difference between the NAV of
the shares being redeemed, as next determined after a receipt of a request in
proper form, and the value of the Deposit Securities, less the redemption
transaction fee described below. Notwithstanding the foregoing, a resident
Australian or New Zealand holder is entitled only to receive cash upon its
redemption of Creation Units.


A redemption transaction fee payable to the Company is imposed to offset
transfer and other transaction costs that may be incurred by the relevant Fund,
including market impact expenses relating to disposing of portfolio securities.
The redemption transaction fee for redemptions in kind and for cash and the
additional variable charge for cash redemptions (when cash redemptions are
available or specified) are listed in the table below. Investors will also bear
the costs of transferring the Portfolio Deposit from the Company to their
account or on their order. Investors who use the services of a broker or other
such


                                       48




             intermediary may be charged a fee for such services:




                                                                MAXIMUM ADDITIONAL
                                            IN-KIND AND         VARIABLE CHARGE FOR
FUND                                     CASH REDEMPTIONS        CASH REDEMPTIONS*
- -----------------------------------     ------------------     --------------------
                                                         
iShares MSCI Australia Index Fund             $2,400                    0.60%
iShares MSCI Austria Index Fund               $  600                    0.67%
iShares MSCI Belgium Index Fund               $  700                    0.30%
iShares MSCI Brazil Index Fund                $2,400                       **
iShares MSCI Canada Index Fund                $1,900                    0.30%
iShares MSCI Emerging Markets                 $7,700                       **
  Index Fund
iShares MSCI EMU Index Fund                   $8,000                    1.05%
iShares MSCI France Index Fund                $2,900                    0.25%
iShares MSCI Germany Index Fund               $1,500                    0.25%
iShares MSCI Hong Kong Index Fund             $2,000                    0.60%
iShares MSCI Italy Index Fund                 $1,400                    0.30%
iShares MSCI Japan Index Fund                 $5,000                    0.40%
iShares MSCI Malaysia Index Fund              $5,000                       **
iShares MSCI Mexico Index Fund                $1,400                    0.50%
iShares MSCI Netherlands Index Fund           $1,000                    0.25%
iShares MSCI Pacific ex-Japan                 $6,000                    1.50%
  Index Fund
iShares MSCI Singapore Index Fund             $2,000                    1.30%
iShares MSCI South Africa Index               $1,200                    0.75%
  Fund
iShares MSCI South Korea Index Fund           $4,000                       **
iShares MSCI Spain Index Fund                 $1,500                    0.45%
iShares MSCI Sweden Index Fund                $1,300                    0.30%
iShares MSCI Switzerland Index Fund           $1,500                    0.40%
iShares MSCI Taiwan Index Fund                $4,500                       **
iShares MSCI United Kingdom Index             $3,500                    0.75%
  Fund


- -------
*As a percentage of the value of amount invested.
** The maximum additional variable charge for cash redemptions will be a
percentage of the value of the Deposit Securities, which will not exceed 2.00%.


Redemption requests in respect of Creation Units of any Fund must be submitted
to the Distributor by or through an Authorized Participant. For most Funds, an
Authorized Participant must submit an irrevocable redemption request before 4:00
p.m., Eastern time on any Business Day in order to receive that day's NAV. An
Authorized Participant must submit an irrevocable request to redeem shares of
the iShares MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund and
iShares MSCI Taiwan Index Fund by 11:59 p.m., Eastern time on any Business Day
in order to receive the next Business Day's NAV. Orders to redeem shares of the
iShares MSCI Malaysia Index Fund, iShares MSCI South Korea Index Fund or iShares
MSCI Taiwan Index Fund that are submitted the Business Day immediately preceding
a holiday or a day (other than a weekend) that the equity markets in the
relevant foreign market are closed will not be accepted. An Authorized
Participant must submit an irrevocable request to redeem shares of the iShares
MSCI Brazil Index Fund before 3:00 p.m., Eastern time in order to receive that
day's NAV. In addition, orders to redeem shares of the MSCI Brazil Index Fund
will not be accepted on any day when the Brazilian markets are closed. An
Authorized Participant must submit an irrevocable request to redeem shares of
the iShares MSCI Emerging Markets Index Fund by 5:00 p.m., Eastern time (or by
one hour after the close of the Listing Exchange, if earlier) on any Business
Day in order to receive the next Business Day's NAV.  Orders to redeem shares of
the Fund that are submitted on the Business Day immediately preceding a holiday
or day (other than a weekend) when the equity markets in Brazil, Malaysia, South
Korea and Taiwan are closed will not be accepted. Investors other than through
Authorized Participants are responsible for making arrangements for a redemption
request to be made through an Authorized Participant. The Distributor will
provide a list of current Authorized Participants upon request.


The Authorized Participant must transmit the request for redemption, in the
form required by the Company, to the Distributor in accordance with procedures
set forth in the Authorized Participant Agreement. Investors should be aware
that their particular broker may not have executed an Authorized Participant
Agreement, and that, therefore, requests to redeem Creation Units may have to
be placed by the investor's broker through an Authorized Participant who has
executed an Authorized Participant Agreement. At any given time there will be
only a limited number of broker-dealers that have executed an Authorized
Participant Agreement. Investors making a redemption request should be aware
that such request must be in the form specified by such Authorized Participant.
Investors making a request to redeem Creation Units should allow sufficient
time to permit proper submission of the request by an Authorized Participant
and transfer of the shares to the Company's Transfer Agent; such investors


                                       49




should allow for the additional time that may be required to effect redemptions
through their banks, brokers or other financial intermediaries if such
intermediaries are not Authorized Participants.


A redemption request is considered to be in "proper form" if (i) an Authorized
Participant has transferred or caused to be transferred to the Company's
Transfer Agent the Creation Unit of shares being redeemed through the
book-entry system of DTC so as to be effective by the Listing Exchange closing
time on any Business Day and (ii) a request in form satisfactory to the Company
is received by the Distributor from the Authorized Participant on behalf of
itself or another redeeming investor within the time periods specified above.
If the Transfer Agent does not receive the investor's shares through DTC's
facilities by 10:00 a.m., Eastern time, on the Business Day next following the
day that the redemption request is received, the redemption request shall be
rejected. Investors should be aware that the deadline for such transfers of
shares through the DTC system may be significantly earlier than the close of
business on the Listing Exchange. Those making redemption requests should
ascertain the deadline applicable to transfers of shares through the DTC system
by contacting the operations department of the broker or depositary institution
effecting the transfer of the shares.


Upon receiving a redemption request, the Distributor shall notify the Company
and the Company's Transfer Agent of such redemption request. The tender of an
investor's shares for redemption and the distribution of the cash redemption
payment in respect of Creation Units redeemed will be effected through DTC and
the relevant Authorized Participant to the beneficial owner thereof as recorded
on the book-entry system of DTC or the DTC Participant through which such
investor holds, as the case may be, or by such other means specified by the
Authorized Participant submitting the redemption request.


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


Deliveries of redemption proceeds by the Funds generally will be made within
three Business Days (I.E., "T+3"). However, as discussed in Appendix A, each
Fund reserves the right to settle redemption transactions and deliver
redemption proceeds on a basis other than T+3 to accommodate foreign market
holiday schedules, to account for different treatment among foreign and U.S.
markets of dividend record dates and dividend ex-dates (I.E., the last date the
holder of a security can sell the security and still receive dividends payable
on the security sold), and in certain other circumstances. For each country
relating to a Fund, Appendix A hereto identifies the instances where more than
seven days would be needed to deliver redemption proceeds. Pursuant to an order
of the SEC, in respect of each Fund, the Company will make delivery of in-kind
redemption proceeds within the number of days stated in Appendix A to be the
maximum number of days necessary to deliver redemption proceeds.


If neither the redeeming Beneficial Owner nor the Authorized Participant acting
on behalf of such redeeming Beneficial Owner has appropriate arrangements to
take delivery of the Portfolio Securities in the applicable foreign
jurisdiction and it is not possible to make other such arrangements, or if it
is not possible to effect deliveries of the Portfolio Securities in such
jurisdiction, the Company may in its discretion exercise its option to redeem
such shares in cash, and the redeeming Beneficial Owner will be required to
receive its redemption proceeds in cash. In such case, the investor will
receive a cash payment equal to the net asset value of its shares based on the
NAV of shares of the relevant Fund next determined after the redemption request
is received in proper form (minus a redemption transaction fee and additional
variable charge for cash redemptions specified above, to offset the Company's
brokerage and other transaction costs associated with the disposition of
Portfolio Securities of the Fund ). Redemptions of shares for Deposit
Securities will be subject to compliance with applicable U.S. federal and state
securities laws and each Fund (whether or not it otherwise permits cash
redemptions) reserves the right to redeem Creation Units for cash to the extent
that the Fund could not lawfully deliver specific Deposit Securities upon
redemptions or could not do so without first registering the Deposit Securities
under such laws.


Although the Company does not ordinarily permit cash redemptions of Creation
Units (except that, as noted above, Creation Units of the iShares iShares MSCI
Brazil Index Fund, iShares MSCI Malaysia Index Fund, iShares MSCI South Korea
Index Fund and iShares MSCI Taiwan Index Fund may be redeemed only for cash,
and resident Australian and New Zealand holders may redeem solely for cash), in
the event that cash redemptions are permitted or required by the Company,
proceeds will be paid to the Authorized Participant redeeming shares on behalf
of the redeeming investor as soon as practicable after the date of redemption
(within seven calendar days thereafter, except for the instances listed in
Appendix A hereto where more than seven calendar days would be needed).


To the extent contemplated by an Authorized Participant's agreement with the
Distributor, in the event the Authorized Participant that has submitted a
redemption request in proper form is unable to transfer all or part of the
Creation Units of shares to be


                                       50




redeemed to the Company, at or prior to 10:00 a.m., Eastern time, on the
Listing Exchange business day after the date of submission of such redemption
request, the Distributor will nonetheless accept the redemption request in
reliance on the undertaking by the Authorized Participant to deliver the
missing shares as soon as possible, which undertaking shall be secured by the
Authorized Participant's delivery and maintenance of collateral consisting of
cash having a value at least equal to 110%, which BGFA may change from time to
time, of the value of the missing iShares in accordance with the Company's
then-effective procedures. The only collateral that is acceptable to the
Company is cash in U.S. Dollars or an irrevocable letter of credit in form, and
drawn on a bank, that is satisfactory to the Company. The Company's current
procedures for collateralization of missing shares require, among other things,
that any cash collateral shall be in the form of U.S. Dollars in immediately
available funds and shall be held by the Company's custodian and marked to
market daily, and that the fees of the Custodian and any subcustodians in
respect of the delivery, maintenance and redelivery of the cash collateral
shall be payable by the Authorized Participant. The cash collateral posted by
the Authorized Participant may be invested at the risk of the Authorized
Participant, and income, if any, on invested cash collateral will be paid to
that Authorized Participant. The Authorized Participant Agreement permits the
Company to purchase the missing shares or acquire the Portfolio Securities and
the Cash Component underlying such shares at any time and subjects the
Authorized Participant to liability for any shortfall between the cost to the
Company of purchasing such shares, Portfolio Securities or Cash Component and
the cash collateral or the amount that may be drawn under any letter of credit.



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


The right of redemption may be suspended or the date of payment postponed with
respect to any Fund (1) for any period during which the NYSE is closed (other
than customary weekend and holiday closings); (2) for any period during which
trading on the NYSE is suspended or restricted; (3) for any period during which
an emergency exists as a result of which disposal of the shares of the Fund's
portfolio securities or determination of its net asset value is not reasonably
practicable; or (4) in such other circumstance as is permitted by the SEC.


REGULAR HOLIDAYS. Each Fund generally intends to effect deliveries of Creation
Units and Portfolio Securities. Each Fund may effect deliveries of Creation
Units on a basis other than T + 3 in order to accomodate local holiday
schedules, to account for different treatment among foreign and U.S. markets of
dividend record dates and ex-dividend dates, or under certain other
circumstances. The ability of the Trust to effect in-kind creations and
redemptions within three Business Days of receipt of an order in good form is
subject, among other things, to the condition that, within the time period from
the date of the order to the date of delivery of the securities, there are no
days that are holidays in the applicable foreign market. For every occurance of
one or more intervening holidays in the applicable foreign market that are not
holidays observed in the U.S. Equity market, the redemption settlement cycle
will be extended by the number of such intervening holidays. In addition to
holidays, other unforeseeable closings in a foreign market due to emergencies
may also prevent the Company from delivering securities within normal
settlement period.


The securities delivery cycles currently practicable for transferring Portfolio
Securities to redeeming investors, coupled with foreign market holiday
schedules, will require a delivery process longer than seven calendar days for
each Fund, in certain circumstances. The holidays applicable to each Fund
during such periods are listed below, as are instances where more than seven
days will be needed to deliver redemption proceeds. Although certain holidays
may occur on different dates in subsequent years, the number of days required
to deliver redemption proceeds in any given year is not expected to exceed the
maximum number of days listed below for each Fund. The proclamation of new
holidays, the treatment by market participants of certain days as "informal
holidays" (E.G., days on which no or limited securities transactions occur, as
a result of substantially shortened trading hours), the elimination of existing
holidays, or changes in local securities delivery practices, could affect the
information set fo rth herein at some time in the future.


                       ISHARES MSCI AUSTRALIA INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Australian holidays in the calendar
                            year 2008 are as follows:


            
Jan 2    Apr 17   Oct 2
Jan 26   Apr 25   Nov 7
Mar 13   Jun 12   Dec 25
Apr 14   Aug 7    Dec 26



                                       51




REDEMPTION. The Company is not aware of a redemption request over any
Australian holiday that would result in a settlement period exceeding 7
calendar days during the calendar year 2008.


                        ISHARES MSCI AUSTRIA INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Austrian holidays in the calendar
                            year 2008 are as follows:


                  
Jan 6    May 25   Oct 26   Dec 26
Apr 14   Jun 5    Nov 1    Dec 29
Apr 17   Jun 15   Dec 8
May 1    Aug 15   Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Austrian
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                        ISHARES MSCI BELGIUM INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Belgian holidays in the calendar
                            year 2008 are as follows:



 
Apr 14
Apr 17
May 1
Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Belgian
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.


                         ISHARES MSCI BRAZIL INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Brazilian holidays in the calendar
                             year 2008 are as follows:



                  
Jan 25   Apr 21   Oct 12   Dec 29
Feb 27   May 1    Nov 2
Feb 28   Jun 15   Nov 15
Apr 14   Sep 7    Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Brazilian
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI CANADA INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Canadian holidays in the calendar
                            year 2008 are as follows:



            
Jan 2    Aug 7    Dec 25
Apr 14   Sep 4    Dec 26
May 22   Oct 9
Jul 3    Nov 13



REDEMPTION. The Company is not aware of a redemption request over any Canadian
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                    ISHARES MSCI EMERGING MARKETS INDEX FUND


REGULAR HOLIDAYS. The dates of the regular holidays in the calendar year 2008
in Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Egypt,
Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco,
Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and
Venezuela are as follows:


                                       52






                          
                   ARGENTINA
- ---------
Apr 13   Jun 19    Dec 8
Apr 14   Aug 21    Dec 25
May 1    Oct 16
May 25   Nov 6
                    MALAYSIA
- ---------
Jan 2    Feb 1     Aug 31    Dec 25
Jan 10   Feb 2     Oct 23
Jan 30   Apr 11    Oct 24
Jan 31   May 1     Oct 25
                     BRAZIL
- ---------
Jan 25   Apr 21    Oct 12    Dec 29
Feb 27   May 1     Nov 2
Feb 28   Jun 15    Nov 15
Apr 14   Sep 7     Dec 25
                     MEXICO
- ---------
Mar 21   Nov 20
Apr 13   Dec 1
Apr 14   Dec 12
May 1    Dec 25
                     CHILE
- ---------
Apr 14   Aug 15    Nov 1
May 1    Sep 18    Dec 8
Jun 12   Sep 19    Dec 25
Jun 26   Oct 9
                    MOROCCO
- ---------
Jan 11   Apr 12    Oct 24
Jan 12   May 1     Oct 25
Jan 31   Aug 14    Nov 6
Apr 11   Aug 21
                     CHINA
- ---------
Jan 2    Jan 31
Jan 26   Feb 1-3
Jan 27   May 1-5
Jan 30
                      PERU
- ---------
Apr 13   Jul 28    Dec 25
Apr 14   Aug 30
May 1    Nov 1
Jun 29   Dec 8
                    COLOMBIA
- ---------
Jan 9    May 1     July 3    Oct 16   Dec 25
Mar 20   May 29    July 20   Nov 6    Dec 29
Apr 13   Jun 19    Aug 7     Nov 13
Apr 14   Jun 26    Aug 21    Dec 8





                          
                  PHILIPPINES
- ---------
Apr 13   Oct 24    Dec 25
Apr 14   Nov 1
May 1    Nov 2
Jun 12   Nov 30
               THE CZECH REPUBLIC
- ----------------------------------------------
Apr 17   July 6    Dec 26
May 1    Sept 28
May 8    Nov 17
July 5   Dec 25
                     POLAND
- ---------
Apr 14   Jun 15    Dec 26
Apr 17   Aug 15
May 1    Nov 1
May 3    Dec 25
                     EGYPT
- ---------
Jan 1    Jan 31    Apr 25    Oct 25
Jan 9    Apr 10    May 1     Oct 26
Jan 10   Apr 23    July 23   Dec 31
Jan 11   Apr 24    Oct 24
                     RUSSIA
- ---------
Jan 2    Mar 8     May 9     Dec 11
Jan 3    May 1     Jun 12    Dec 12
Jan 9    May 2     Nov 6
Feb 23   May 8     Nov 7
                    HUNGARY
- ---------
Mar 15   Oct 23
Apr 17   Nov 1
May 1    Dec 25
Jun 5    Dec 26
                  SOUTH AFRICA
- ----------------------------------------------
Jan 2    Apr 27    Sep 25
Mar 21   May 1     Dec 25
Apr 14   Jun 16    Dec 26
Apr 17   Aug 9
                     INDIA
- ---------
Jan 26   Oct 2
Apr 14   Dec 25
May 1
Aug 15
                     TAIWAN
- ---------
Jan 26   Feb 1     May 1
Jan 27   Feb 2     May 31
Jan 30   Feb 28    Oct 6
Jan 31   Apr 5     Oct 10



                                       53






                         
                   INDONESIA
- ---------
Jan 10   Apr 14   Oct 23    Dec 25
Jan 30   May 25   Oct 24    Dec 26
Mar 30   Aug 17   Oct 25
Apr 10   Aug 21   Oct 26
                   THAILAND
- ---------
Jan 2    Apr 13   May 5     Oct 23
Feb 13   Apr 14   May 15    Dec 5
Apr 6    Apr 15   Jul 10    Dec 11
Apr 6    May 1    Aug 14
                    ISRAEL
- ---------
Mar 14   Apr 19   Aug 3
Apr 12   May 2    Sept 24
Apr 13   May 3    Oct 1
Apr 18   Jun 1    Oct 2
                    TURKEY
- ---------
Jan 9    Jan 13   Oct 24
Jan 10   May 19   Oct 25
Jan 11   Aug 30
Jan 12   Oct 23






                         
                    JORDAN
- ---------
Jan 1    Jan 12   May 25    Oct 25   Dec 31
Jan 8    Jan 30   Aug 22    Oct 26
Jan 9    Jan 31   Oct 22    Nov 14
Jan 10   Apr 11   Oct 23    Dec 25
Jan 11   May 1    Oct 24    Dec 28
                   VENEZUELA
- ---------
Jan 9    Apr 14   Jun 19    Aug 14   Dec 25
Feb 27   Apr 19   Jun 26    Oct 12
Feb 28   May 1    Jul 5     Oct 30
Apr 13   May 29   Jul 24    Dec 11




            
Jan 30   Jun 1    Oct 3
Mar 1    Jun 6    Oct 5
May 1    Jul 17   Dec 25
May 5    Aug 15



REDEMPTION. The longest redemption cycle for the iShares MSCI Emerging Markets
Index Fund is a function of the longest redemption cycles among the countries
whose stocks comprise this Fund. In the calendar year 2007, the dates of the
regular holidays affecting the following securities markets present the
worst-case redemption cycle for the iShares MSCI Emerging Markets Index Fund as
follows:




                                     REDEMPTION
                   REDEMPTION        SETTLEMENT       SETTLEMENT
                  REQUEST DATE         DATE(R)          PERIOD
                 --------------     ------------     -----------
                                            
  China          1/23/2006          2/6/2006         14
                 1/24/2006          2/7/2006         14
                 1/25/2006          2/8/2006         14
                 4/26/2006          5/8/2006         12
                 4/27/2006          5/9/2006         12
                 4/28/2006          5/10/2006        12


  Indonesia      10/18/2006         10/29/2006       11
                 10/19/2006         10/30/2006       11
                 10/22/2006         10/31/2006       9

  Jordan         1/5/2006           1/13/2006        8
                 1/6/2006           1/16/2006        10
                 10/19/2006         10/27/2006       8


                                       54







                                                  REDEMPTION
                                REDEMPTION        SETTLEMENT       SETTLEMENT
                               REQUEST DATE         DATE(R)          PERIOD
                              --------------     ------------     -----------
                                                         
                              10/20/2006         10/30/2006       10

  Malaysia                    1/25/2006          5/3/2006         9
                              1/26/2006          5/6/2006         11
                              1/27/2006          5/7/2006         11

  Turkey                      1/5/2006           1/16/2006        11
                              1/6/2006           1/17/2006        11

  South Africa                4/7/2006           4/18/2006        11
                              4/10/2006          4/19/2006        9
                              4/11/2006          4/20/2006        9
                              4/12/2006          4/21/2006        9
                              4/13/2006          4/24/2006        11
                              12/18/2006         12/27/2006       9
                              12/19/2006         12/28/2006       9
                              12/20/2006         12/31/2006       11
                              12/21/2006         1/2/2007         12
                              12/24/2006         1/3/2007         12


In the calendar year 2008, 12 calendar days would be the maximum number of
calendar days necessary to satisfy a redemption request made on the iShares
MSCI Emerging Markets Index Fund.

                          ISHARES MSCI EMU INDEX FUND


REGULAR HOLIDAYS. The dates in the calendar year 2008 on which the regular
Austrian, Belgian, Finnish, French, German, Greek, Irish, Italian, Dutch,
Portuguese and Spanish holidays affecting the relevant securities markets fall
are as follows:



                  
               AUSTRIA
- ---------
Jan 6    May 25   Oct 26   Dec 26
Apr 14   Jun 5    Nov 1    Dec 29
Apr 17   Jun 15   Dec 8
May 1    Aug 15   Dec 25
               GREECE
- ---------
Jan 6    Apr 21   Aug 15
Mar 6    Apr 24   Dec 25
Apr 14   May 1    Dec 26
Apr 17   Jun 12
               BELGIUM
- ---------
Apr 14
Apr 17
May 1
Dec 25





                  
                ITALY
- ---------
Apr 14   Dec 25
Apr 17   Dec 26
May 1
Aug 15
               FINLAND
- ---------
Jan 6    May 25   Dec 26
Apr 14   Jun 23
Apr 17   Dec 6
May 1    Dec 25
             NETHERLANDS
- ---------
Apr 14   Dec 26
Apr 17
May 1
Dec 25



                                       55







            
           FRANCE
- ---------
Apr 14   Dec 26
Apr 17
May 1
Dec 25
          PORTUGAL
- ---------
Apr 14   Dec 26
Apr 17
May 1
Dec 25






            
           GERMANY
- ---------
Apr 14   Dec 26
Apr 17
May 1
Dec 25
            SPAIN
- ---------
Jan 6    Aug 15   Dec 8
Apr 14   Oct 12   Dec 25
Apr 17   Nov 1    Dec 26
May 1    Dec 6



REDEMPTION. The longest redemption cycle for the iShares MSCI EMU Index Fund is
a function of the longest redemption cycles among the countries whose stocks
comprise this Index Fund. The Company is not aware of a redemption request over
any holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI FRANCE INDEX FUND

REGULAR HOLIDAYS. The dates of the regular French holidays in the calendar year
2008 are as follows:


      
Apr 14   Dec 26
Apr 17
May 1
Dec 25



REDEMPTION. The Company is not aware of a redemption request over any French
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                        ISHARES MSCI GERMANY INDEX FUND


REGULAR HOLIDAYS. The dates of the regular German holidays in the calendar year
                            2008 are as follows:



      
Apr 14   Dec 26
Apr 17
May 1
Dec 25



REDEMPTION. The Company is not aware of a redemption request over any German
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                       ISHARES MSCI HONG KONG INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Hong Kong holidays in the calendar
                           year 2008 are as follows:


                  
Jan 2    Apr 14   May 31   Dec 26
Jan 30   Apr 17   Oct 2
Jan 31   May 1    Oct 30
Apr 5    May 5    Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Hong Kong
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI ITALY INDEX FUND

                                       56




REGULAR HOLIDAYS. The dates of the regular Italian holidays in the calendar
year 2008 are as follows:


      
Apr 14   Dec 25
Apr 17   Dec 26
May 1
Aug 15



REDEMPTION. The Company is not aware of a redemption request over any Italian
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI JAPAN INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Japanese holidays in the calendar
                             year 2008 are as follows:



            
Jan 2    May 3    Sep 18
Jan 3    May 4    Oct 9
Jan 9    May 5    Nov 3
Mar 21   Jul 17   Nov 23



REDEMPTION. A redemption request over the following dates would result in a
settlement period exceeding 7 calendar days (examples are based on the day
particular holidays fall in the calendar year 2007):


                               
  Redemption        Redemption       Settlement Period
  Request Date      Settlement
                    Date(R)
  4/28/2006         5/8/2006         10
  5/1/2006          5/9/2006         8
  5/2/2006          5/10/2006        8



In the calendar year 2008, 11 calendar days would be the maximum number of
calendar days necessary to satisfy a redemption request made on the iShares
MSCI Japan Index Fund.

                        ISHARES MSCI MALAYSIA INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Malaysian holidays in the calendar
                            year 2008 are as follows:


                  
Jan 2    Feb 1    Aug 31   Dec 25
Jan 10   Feb 2    Oct 23
Jan 30   Apr 11   Oct 24
Jan 31   May 1    Oct 25



REDEMPTION. A redemption request over the following dates would result in a
settlement period exceeding 7 calendar days (examples are based on the day
particular holidays fall in the calendar year 2003):


                               
  Redemption        Redemption       Settlement Period
  Request Date      Settlement
                    Date(R)
  1/25/2006         5/3/2006         9
  1/26/2006         5/6/2006         11
  1/27/2006         5/7/2006         11



In the calendar year 2008, 10 calendar days would be the maximum number of
calendar days necessary to satisfy a redemption request made on the iShares
MSCI Malaysia Index Fund.

                         ISHARES MSCI MEXICO INDEX FUND

                                       57




REGULAR HOLIDAYS. The dates of the regular Mexican holidays in the calendar
year 2008 are as follows:



      
Mar 21   Nov 20
Apr 13   Dec 1
Apr 14   Dec 12
May 1    Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Mexican
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                      ISHARES MSCI NETHERLANDS INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Netherlands holidays in the calendar
                           year 2008 are as follows:



      
Apr 14   Dec 26
Apr 17
May 1
Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Dutch
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                    ISHARES MSCI PACIFIC EX-JAPAN INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Australian, Hong Kong, New Zealand
and Singaporean holidays in the calendar year 2007 are as follows:




                  
              AUSTRALIA
- ---------
Jan 2    Apr 17   Oct 2
Jan 26   Apr 25   Nov 7
Mar 13   Jun 12   Dec 25
Apr 14   Aug 7    Dec 26
             NEW ZEALAND
- -----------------------------------
Jan 2    Apr 17   Dec 25
Jan 3    Apr 25   Dec 26
Feb 6    Jun 5
Apr 14   Oct 23





                  
              HONG KONG
- -----------------------------------
Jan 2    Apr 14   May 31   Dec 26
Jan 30   Apr 17   Oct 2
Jan 31   May 1    Oct 30
Apr 5    May 5    Dec 25
              SINGAPORE
- ---------
Jan 2    Apr 14   Dec 25
Jan 10   May 1
Jan 30   Aug 9
Jan 31   Oct 24



REDEMPTION. The Company is not aware of a redemption request over any
Australian, Hong Kong, New Zealand or Singaporean holiday that would result in
a settlement period exceeding 7 calendar days during the calendar year 2008.

                       ISHARES MSCI SINGAPORE INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Singaporean holidays in the calendar
                            year 2008 are as follows:



            
Jan 2    Apr 14   Dec 25
Jan 10   May 1
Jan 30   Aug 9
Jan 31   Oct 24



REDEMPTION. The Company is not aware of a redemption request over any
Singaporean holiday that would result in a settlement period exceeding 7
calendar days during the calendar year 2008.

                      ISHARES MSCI SOUTH AFRICA INDEX FUND

                                       58




REGULAR HOLIDAYS. The dates of the regular South African holidays in the
calendar year 2008 are as follows:



            
Jan 2    Apr 27   Sep 25
Mar 21   May 1    Dec 25
Apr 14   Jun 16   Dec 26
Apr 17   Aug 9



REDEMPTION. A redemption request over the following dates would result in a
settlement period exceeding 7 calendar days (examples are based on the day
particular holidays fall in the calendar year 2004):


                                     
  Redemption Request      Redemption       Settlement Period
  Date                    Settlement
                          Date(R)
  4/7/2006                4/18/2006        11
  4/10/2006               4/19/2006        9
  4/11/2006               4/20/2006        9
  4/12/2006               4/21/2006        9
  4/13/2006               4/24/2006        11
  12/18/2006              12/27/2006       9
  12/19/2006              12/28/2006       9
  12/20/2006              12/31/2006       11
  12/21/2006              1/2/2007         12
  12/24/2006              1/3/2007         12



In the calendar year 2008, 12 calendar days would be the maximum number of
calendar days necessary to satisfy a redemption request made on the iShares
MSCI South Africa Index Fund.

                      ISHARES MSCI SOUTH KOREA INDEX FUND


REGULAR HOLIDAYS. The dates of the regular South Korean holidays in the
                           calendar year 2008 are as follows:



            
Jan 30   Jun 1    Oct 3
Mar 1    Jun 6    Oct 5
May 1    Jul 17   Dec 25
May 5    Aug 15



REDEMPTION. The Company is not aware of a redemption request over any South
Korean holiday that would result in a settlement period exceeding 7 calendar
days during the calendar year 2008.

                         ISHARES MSCI SPAIN INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Spanish holidays in the calendar
                             year 2008 are as follows:



            
Jan 6    Aug 15   Dec 8
Apr 14   Oct 12   Dec 25
Apr 17   Nov 1    Dec 26
May 1    Dec 6



REDEMPTION. The Company is not aware of a redemption request over any Spanish
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI SWEDEN INDEX FUND

                                       59




REGULAR HOLIDAYS. The dates of the regular Swedish holidays in the calendar
year 2008 are as follows:


            
Jan 6    May 25   Dec 26
Apr 14   Jun 5
Apr 17   Jun 23
May 1    Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Swedish
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                      ISHARES MSCI SWITZERLAND INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Swiss holidays in the calendar year
                           2008 are as follows:



            
Jan 2    May 25   Dec 26
Apr 14   Jun 5
Apr 17   Aug 1
May 1    Dec 25



REDEMPTION. The Company is not aware of a redemption request over any Swiss
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                         ISHARES MSCI TAIWAN INDEX FUND


REGULAR HOLIDAYS. The dates of the regular Taiwanese holidays in the calendar
                            year 2008 are as follows:



            
Jan 26   Feb 1    May 1
Jan 27   Feb 2    May 31
Jan 30   Feb 28   Oct 6
Jan 31   Apr 5    Oct 10



REDEMPTION. The Company is not aware of a redemption request over any Taiwanese
holiday that would result in a settlement period exceeding 7 calendar days
during the calendar year 2008.

                     ISHARES MSCI UNITED KINGDOM INDEX FUND


REGULAR HOLIDAYS. The dates of the regular United Kingdom holidays in the
                         calendar year 2008 are as follows:



      
Jan 2    May 29
Apr 14   Aug 28
Apr 17   Dec 25
May 1    Dec 26



REDEMPTION. The Company is not aware of a redemption request over any United
Kingdom holiday that would result in a settlement period exceeding 7 calendar
days during the calendar year 2008.


Taxes

REGULATED INVESTMENT COMPANY QUALIFICATIONS. Each Fund intends to qualify for
and to elect treatment as a separate RIC under Subchapter M of the IRC. To
qualify for treatment as a RIC, each Fund must annually distribute at least 90%
of its investment company taxable income (which includes dividends, interest
and net short-term capital gains) and meet several other requirements. Among
such other requirements are the following: (i) at least 90% of each Fund's
annual gross income must be derived from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies, and net income derived from
an interest in a qualified publicly traded


                                       60




partnership; and (ii) at the close of each quarter of the Fund's taxable year,
(a) at least 50% of the market value of each Fund's total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with such other securities limited for
purposes of this calculation in respect of any one issuer to an amount not
greater than 5% of the value of the Fund's assets and not greater than 10% of
the outstanding voting securities of such issuer, and (b) not more than 25% of
the value of its total assets may be invested in the securities of any one
issuer, or of two or more issuers of which 20% or more of the voting securities
are held by the Fund and that are engaged in the same or similar trades or
businesses or related trades or businesses (other than U.S. government
securities or the securities of other RIC) or the securities of one or more
qualified publicly traded partnerships.  A Fund's investments in partnerships,
including in qualified publicly traded partnerships, may result in that Fund
being subject to state, local, or foreign income, franchise or withholding tax
liabilities.


TAXATION OF RICS. As a RIC, a Fund will not be subject to U.S. federal income
tax on the portion of its taxable investment income and capital gains that it
distributes to its shareholders, provided that it satisfies the minimum
distribution requirement. To satisfy the minimum distribution requirement, a
Fund must distribute to its shareholders at least the sum of (i) 90% of its
"investment company taxable income" (I.E., income other than its net realized
long-term capital gain over its net realized short-term capital loss), plus or
minus certain adjustments, and (ii) 90% of its net tax-exempt income for the
taxable year. A Fund will be subject to income tax at regular corporation rates
on any taxable income or gains that it does not distribute to its shareholders.
If a Fund fails to qualify for any taxable year as a RIC, all of its taxable
income will be subject to tax at regular corporate income tax rates without any
deduction for distributions to shareholders, and such distributions generally
will be taxable to shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. In such event,
distributions to individuals should be eligible to be treated as qualified
dividend income and distributions to corporate shareholders generally should be
eligible for the dividends-received deduction. Although each Fund intends to
distribute substantially all of its net investment income and its capital gains
for each taxable year, each Fund will be subject to U.S. federal income
taxation to the extent any such income or gains are not distributed. If a Fund
fails to qualify as a RIC in any year, it must pay out its earnings and profits
accumulated in that year in order to qualify again as a RIC. If a Fund fails to
qualify as a RIC for a period greater than two taxable years, the Fund may be
required to recognize any net built-in gains with respect to certain of its
assets (I.E., the excess of the aggregate gains, including items of income,
over aggregate losses that would have been realized with respect to such assets
if the Fund had been liquidated) if it qualifies as a RIC in a subsequent year.



TAXATION OF CERTAIN DERIVATIVES.   A Fund's transactions in zero coupon
securities, foreign currencies, forward contracts, options and futures
contracts (including options and futures contracts on foreign currencies), to
the extent permitted, will be subject to special provisions of the Code
(including provisions relating to "hedging transactions" and "straddles") that,
among other things, may affect the character of gains and losses realized by
the Fund (I.E., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Fund and defer Fund losses. These rules
could therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require the Fund to mark-to-market
certain types of the positions in its portfolio (I.E., treat them as if they
were closed out at the end of each year) and (b) may cause the Fund to
recognize income without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements for
avoiding income and excise taxes. Each Fund will monitor its transactions, will
make the appropriate tax elections and will make the appropriate entries in its
books and records when it acquires any foreign currency, forward contract,
futures contract or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a RIC.


A Fund's investment in so-called "section 1256 contracts," such as regulated
futures contracts, most foreign currency forward contracts traded in the
interbank market and options on most stock indices, are subject to special tax
rules. All section 1256 contracts held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain
or loss on those positions will be included in the Fund's income as if each
position had been sold for its fair market value at the end of the taxable
year. The resulting gain or loss will be combined with any gain or loss
realized by the Fund from positions in section 1256 contracts closed during the
taxable year. Provided such positions were held as capital assets and were not
part of a "hedging transaction" nor part of a "straddle," 60% of the resulting
net gain or loss will be treated as long-term capital gain or loss, and 40% of
such net gain or loss will be treated as short-term capital gain or loss,
regardless of the period of time the positions were actually held by the Fund.


As a result of entering into swap contracts, a Fund may make or receive
periodic net payments. A Fund may also make or receive a payment when a swap is
terminated prior to maturity through an assignment of the swap or other closing
transaction. Periodic net payments will generally constitute ordinary income or
deductions, while termination of a swap will generally result in capital gain
or loss (which will be a long-term capital gain or loss if the Fund has been a
party to the swap for more than one year). The tax treatment of many types of
credit default swaps is uncertain.


                                       61




EXCISE TAX. A Fund will be subject to a 4% excise tax on certain undistributed
income if it does not distribute to its shareholders in each calendar year at
least 98% of its ordinary income for the calendar year plus 98% of its capital
gain net income for the twelve months ended October 31 of such year. Each Fund
intends to declare and distribute dividends and distributions in the amounts
and at the times necessary to avoid the application of this 4% excise tax.


NET CAPITAL LOSS CARRYFORWARDS.  Net capital loss carryforwards may be applied
against any net realized capital gains in each succeeding year, or until their
respective expiration dates, whichever occurs first.  The following Funds had
tax basis net capital loss carryforwards as of August 31, 2007, the tax
year-end for the Funds listed:




                             EXPIRING      EXPIRING      EXPIRING      EXPIRING
FUND                           2008          2009          2010          2011
- -------------------------- ------------ ------------- ------------- -------------
                                                        
iShares MSCI Australia      $  71,019    $1,971,994    $ 3,625,203   $   650,082
 Index Fund
iShares MSCI Austria          491,457       336,553      1,291,324       370,948
 Index Fund
iShares MSCI Belgium                -        59,876      1,677,678       117,767
 Index Fund
iShares MSCI Brazil                 -                                          -
 Index Fund
iShares MSCI Canada                 -             -              -             -
 Index Fund
iShares MSCI Emerging               -             -              -             -
 Markets Index Fund
iShares MSCI EMU                    -             -              -             -
 Index Fund
iShares MSCI France                 -             -      2,436,748       236,944
 Index Fund
iShares MSCI Germany                -             -      8,697,227     5,469,732
 Index Fund
iShares MSCI Hong                   -             -      4,971,970     2,870,602
 Kong Index Fund
iShares MSCI Italy Index            -             -      2,648,775       848,408
 Fund
iShares MSCI Japan                  -     2,959,030     62,572,173     3,621,148
 Index Fund
iShares MSCI Malaysia               -             -      9,819,029     2,898,105
 Index Fund
iShares MSCI Mexico                 -             -         47,326     2,329,290
 Index Fund
iShares MSCI                        -        60,885      3,222,792     1,497,810
 Netherlands Index
 Fund
iShares MSCI Pacific                -             -              -             -
 ex-Japan Index Fund
iShares MSCI Singapore              -             -      1,934,119     4,428,316
 Index Fund
iShares MSCI South                  -             -              -             -
 Africa Index Fund
iShares MSCI South                  -       556,540        666,642       504,041
 Korea Index Fund
iShares MSCI Spain                  -             -        163,675       678,910
 Index Fund
IShares MSCI Sweden                 -             -        713,472     1,577,551
 Index Fund
iShares MSCI                        -             -      2,247,442     1,018,305
 Switzerland Index
 Fund
iShares MSCI Taiwan                 -             -     12,532,361     8,689,663
 Index Fund
iShares MSCI United                 -             -        856,798     6,448,554
 Kingdom Index Fund




                              EXPIRING      EXPIRING       EXPIRING       EXPIRING
FUND                            2012          2013           2014           2015           TOTAL
- -------------------------- ------------- -------------- -------------- -------------- ---------------
                                                                       
iShares MSCI Australia      $   596,240   $    384,424   $          -   $      7,066   $   7,306,028
 Index Fund
iShares MSCI Austria            855,364              -              -      9,795,917      13,141,563
 Index Fund
iShares MSCI Belgium            175,781         33,969              -              -       2,065,071
 Index Fund
iShares MSCI Brazil                                  -
 Index Fund
iShares MSCI Canada                   -      2,931,648              -      5,363,291       8,294,939
 Index Fund
iShares MSCI Emerging           840,778     20,296,564     11,239,258     29,973,301      62,349,901
 Markets Index Fund
iShares MSCI EMU              2,876,857      1,873,963              -              -       4,750,820
 Index Fund
iShares MSCI France           2,400,550              -              -        158,472       5,232,714
 Index Fund
iShares MSCI Germany          8,656,712      2,241,687              -      4,227,713      29,293,071
 Index Fund
iShares MSCI Hong             2,330,414        468,716        425,440      2,899,247      13,966,389
 Kong Index Fund
iShares MSCI Italy Index        541,980        527,327              -              -       4,566,490
 Fund
iShares MSCI Japan            5,594,562      8,733,802     68,122,871     27,817,841     179,421,427
 Index Fund
iShares MSCI Malaysia           775,477      6,820,474      1,543,708      3,424,287      25,281,080
 Index Fund
iShares MSCI Mexico           3,136,171         12,912        632,766              -       6,158,465
 Index Fund
iShares MSCI                  2,241,687        129,137        403,525        260,715       8,056,039
 Netherlands Index
 Fund
iShares MSCI Pacific                  -              -              -              -               -
 ex-Japan Index Fund
iShares MSCI Singapore        4,256,421      2,558,348              -              -      13,177,204
 Index Fund
iShares MSCI South              527,613              -        260,738      1,607,845       2,396,196
 Africa Index Fund
iShares MSCI South            3,363,449     11,590,303      3,172,573     38,097,223      57,950,771
 Korea Index Fund
iShares MSCI Spain            1,582,094              -              -              -       2,424,679
 Index Fund
IShares MSCI Sweden           1,149,514              -        107,613              -       3,548,150
 Index Fund
iShares MSCI                  2,149,171        354,252              -              -       5,769,170
 Switzerland Index
 Fund
iShares MSCI Taiwan           9,129,874     12,022,719     14,435,986     64,999,586     121,810,189
 Index Fund
iShares MSCI United           4,272,059      1,517,783      7,063,063              -      20,158,257
 Kingdom Index Fund


                                       62




FUNDS HOLDING FOREIGN INVESTMENTS.  Each Fund may be subject to foreign income
taxes withheld at the source. Each Fund that is permitted to do so will elect
to "pass through" to its investors the amount of foreign income taxes paid by
the Fund provided that the investor held the shares of the Fund, and the Fund
held the security, on the dividend settlement date and for at least fifteen
additional days immediately before and/or thereafter, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor's PRO RATA share of the Fund's foreign income taxes, and (ii)
either deduct (in calculating U.S. taxable income) or credit (in calculating
U.S. federal income tax) the investor's PRO RATA share of the Fund's foreign
income taxes. A foreign person who invests in a Fund that elects to "pass
through" its foreign taxes may be treated as receiving additional dividend
income subject to U.S. withholding tax. A foreign tax credit may not exceed the
investor's U.S. federal income tax otherwise payable with respect to the
investor's foreign source income. For this purpose, each shareholder must treat
as foreign source gross income (i) his proportionate share of foreign taxes
paid by the Fund and (ii) the portion of any dividend paid by the Fund that
represents income derived from foreign sources; the Fund's gain from the sale
of securities will generally be treated as U.S. source income. Certain
limitations will be imposed to the extent to which the foreign tax credit may
be claimed.


If any Fund owns shares in certain foreign investment entities, referred to as
"passive foreign investment companies," the Fund will be subject to one of the
following special tax regimes: (i) the Fund is liable for U.S. federal income
tax, and an additional charge in the nature of interest, on a portion of any
"excess distribution" from such foreign entity or any gain from the disposition
of such shares, even if the entire distribution or gain is paid out by the Fund
as a dividend to its shareholders; (ii) if the Fund were able and elected to
treat a passive foreign investment company as a "qualified electing fund," the
Fund would be required each year to include in income, and distribute to
shareholders in accordance with the distribution requirements set forth above,
the Fund's PRO RATA share of the ordinary earnings and net capital gains of the
passive foreign investment company, whether or not such earnings or gains are
distributed to the Fund; or (iii) the Fund may be entitled to mark-to-market
annually the shares of the passive foreign investment company, and, in such
event, would be required to distribute to shareholders any such mark-to-market
gains in accordance with the distribution requirements set forth above.


FEDERAL TAX TREATMENT OF COMPLEX SECURITIES.  Funds may invest in complex
securities. These investments may be subject to numerous special and complex
tax rules. These rules could affect whether gains and losses recognized by a
Fund are treated as ordinary income or capital gain, accelerate the recognition
of income to a Fund and/or defer a Fund's ability to recognize losses. In turn,
these rules may affect the amount, timing or character of the income
distributed to you by the Fund.


Each Fund is required, for federal income tax purposes, to mark-to-market and
recognize as income for each taxable year its net unrealized gains and losses
on certain futures and options contracts (referred to as "Section 1256
contracts") as of the end of the year as well as those actually realized during
the year. Gain or loss from futures and options contracts on broad-based
investments required to be marked-to-market will be 60% long-term and 40%
short-term capital gain or loss. Application of this rule may alter the timing
and character of distributions to shareholders. A Fund may be required to defer
the recognition of losses on futures contracts, option contracts and swaps to
the extent of any unrecognized gains on offsetting positions held by the Fund.


It is anticipated that any net gain realized from the closing out of futures or
options contracts will be considered qualifying income for purposes of the 90%
requirement for a Fund to qualify as a RIC.


As a result of entering into swap contracts, a Fund may make or receive
periodic net payments. A Fund may also make or receive a payment when a swap is
terminated prior to maturity through an assignment of the swap or other closing
transaction. Periodic net payments will generally constitute ordinary income or
deductions, while termination of a swap will generally result in capital gain
or loss (which will be a long-term capital gain or loss if the Fund has been a
party to the swap for more than one year). Estimated income or loss from
non-periodic contingent payments may be recognized on a current basis. The tax
treatments of many types of credit default swaps are uncertain.


Each Fund intends to distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on futures or options transactions.
Such distributions are combined with distributions of capital gains realized on
a Fund's other investments and shareholders are advised on the nature of the
distributions.


TAXATION OF U.S. SHAREHOLDERS.  Dividends and other distributions by a Fund are
generally treated under the IRC as received by the shareholders at the time the
dividend or distribution is made. However, any dividend or distribution
declared by a Fund in October, November or December of any calendar year and
payable to shareholders of record on a specified date in such a month


                                       63




shall be deemed to have been received by each shareholder on December 31 of
such calendar year and to have been paid by the Fund not later than such
December 31, provided such dividend is actually paid by the Fund during January
of the following calendar year.


Each Fund intends to distribute annually to its shareholders substantially all
of its investment company taxable income, and any net realized long-term
capital gains in excess of net realized short-term capital losses (including
any capital loss carryovers). However, if a Fund retains for investment an
amount equal to all or a portion of its net long-term capital gains in excess
of its net short-term capital losses (including any capital loss carryovers),
it will be subject to a corporate tax (currently at a maximum rate of 35%) on
the amount retained. In that event, the Fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who (a)
will be required to include in income for U.S. federal income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed
amount, (b) will be entitled to credit their proportionate shares of the 35%
tax paid by the Fund on the undistributed amount against their U.S. federal
income tax liabilities, if any, and to claim refunds to the extent their
credits exceed their liabilities, if any, and (c) will be entitled to increase
their tax basis, for U.S. federal income tax purposes, in their shares by an
amount equal to 65% of the amount of undistributed capital gains included in
the shareholder's income. Organizations or persons not subject to U.S. federal
income tax on such capital gains will be entitled to a refund of their PRO RATA
share of such taxes paid by the Fund upon filing appropriate returns or claims
for refund with the Internal Revenue Service (the "IRS").


Distributions of net realized long-term capital gains, if any, that a Fund
designates as capital gains dividends are taxable as long-term capital gains,
whether paid in cash or in shares and regardless of how long a shareholder has
held shares of the Fund. All other dividends of a Fund (including dividends
from short-term capital gains) from its current and accumulated earnings and
profits ("regular dividends") are generally subject to tax as ordinary income,
subject to the discussions of qualified dividend income below.


If an individual receives a regular dividend qualifying for the long-term
capital gains rates and such dividend constitutes an "extraordinary dividend,"
and the individual subsequently recognizes a loss on the sale or exchange of
stock in respect of which the extraordinary dividend was paid, then the loss
will be long-term capital loss to the extent of such extraordinary dividend. An
"extraordinary dividend" on common stock for this purpose is generally a
dividend (i) in an amount greater than or equal to 10% of the taxpayer's tax
basis (or trading value) in a share of stock, aggregating dividends with
ex-dividend dates within an 85-day period or (ii) in an amount greater than 20%
of the taxpayer's tax basis (or trading value) in a share of stock, aggregating
dividends with ex-dividend dates within a 365-day period.


Distributions in excess of a Fund's current and accumulated earnings and
profits will, as to each shareholder, be treated as a tax-free return of
capital to the extent of a shareholder's basis in the shares of the Fund, and
as a capital gain thereafter (if the shareholder holds such shares of the Fund
as capital assets). Shareholders receiving dividends or distributions in the
form of additional shares should be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares received equal to such amount.
Dividends paid by a Fund that are attributable to dividends received by a Fund
from domestic corporations may qualify for the federal dividends-received
deduction for corporations.


Investors considering buying shares just prior to a dividend or capital gain
distribution should be aware that, although the price of shares just purchased
at that time may reflect the amount of the forthcoming distribution, such
dividend or distribution may nevertheless be taxable to them. If a Fund is the
holder of record of any stock on the record date for any dividends payable with
respect to such stock, such dividends will be included in the Fund's gross
income not as of the date received but as of the later of (a) the date such
stock became ex-dividend with respect to such dividends (I.E., the date on
which a buyer of the stock would not be entitled to receive the declared, but
unpaid, dividends) or (b) the date a Fund acquired such stock. Accordingly, in
order to satisfy its income distribution requirements, a Fund may be required
to pay dividends based on anticipated earnings, and shareholders may receive
dividends in an earlier year than would otherwise be the case.


SALES OF SHARES.  Upon the sale or exchange of his shares, a shareholder will
realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. A redemption of shares by a Fund will be
treated as a sale for this purpose. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains
distributions in the Fund, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of the shares. In such a case, the basis
of the shares


                                       64




acquired will be increased to reflect the disallowed loss. Any loss realized by
a shareholder on the sale of the Fund share held by the shareholder for six
months or less will be treated for U.S. federal income tax purposes as a
long-term capital loss to the extent of any distributions or deemed
distributions of long-term capital gains received by the shareholder with
respect to such share.


If a shareholder incurs a sales charge in acquiring shares of a Fund, disposes
of those shares within 90 days and then acquires shares in a mutual fund for
which the otherwise applicable sales charge is reduced by reason of a
reinvestment right (E.G., an exchange privilege), the original sales charge
will not be taken into account in computing gain/loss on the original shares to
the extent the subsequent sales charge is reduced. Instead, the disregarded
portion of the original sales charge will be added to the tax basis of the
newly acquired shares. Furthermore, the same rule also applies to a disposition
of the newly acquired shares made within 90 days of the second acquisition.
This provision prevents a shareholder from immediately deducting the sales
charge by shifting his or her investment within a family of mutual funds.


BACK-UP WITHHOLDING.  In certain cases, a Fund will be required to withhold at
the applicable withholding rate, currently 28%, and remit to the U.S. Treasury
such amounts withheld from any distributions paid to a shareholder who: (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
back-up withholding by the IRS; (3) has failed to certify to a Fund that such
shareholder is not subject to back-up withholding; or (4) has not certified
that such shareholder is a U.S. person (including a U.S. resident alien).
Back-up withholding is not an additional tax and any amount withheld may be
credited against a shareholder's U.S. federal income tax liability.


SECTIONS 351 AND 362.  The Company on behalf of each Fund has the right to
reject an order for a purchase of shares of the Fund if the purchaser (or group
of purchasers) would, upon obtaining the shares so ordered, own 80% or more of
the outstanding shares of a given Fund and if, pursuant to Sections 351 and 362
of the IRC, that Fund would have a basis in the securities different from the
market value of such securities on the date of deposit. If a Fund's basis in
such securities on the date of deposit was less than market value on such date,
the Fund, upon disposition of the securities, would recognize more taxable gain
or less taxable loss than if its basis in the securities had been equal to
market value. It is not anticipated that the Company will exercise the right of
rejection except in a case where the Company determines that accepting the
order could result in material adverse tax consequences to a Fund or its
shareholders. The Company also has the right to require information necessary
to determine beneficial share ownership for purposes of the 80% determination.


QUALIFIED DIVIDEND INCOME.  Distributions by each Fund of investment company
taxable income, whether received in cash or shares, will be taxable either as
ordinary income or as qualified dividend income, eligible for the reduced
maximum rate to individuals of 15% (5% for individuals in lower tax brackets)
to the extent each Fund receives qualified dividend income on the securities it
holds and the Fund designates the distribution as qualified dividend income.
Qualified dividend income is, in general, dividend income from taxable domestic
corporations and certain foreign corporations (E.G., foreign corporations
incorporated in a possession of the United States or in certain countries with
a comprehensive tax treaty with the United States, or the stock of which is
readily tradable on an established securities market in the United States).
Substitute dividend payments received with respect to securities lent out are
not qualified dividend income. A dividend will not be treated as qualified
dividend income to the extent that (i) the shareholder has not held the shares
on which the dividend was paid for more than 60 days during the 121-day period
that begins on the date that is 60 days before the date on which the shares
become ex dividend with respect to such dividend (and each Fund also satisfies
those holding period requirements with respect to the securities it holds that
paid the dividends distributed to the shareholder), (ii) the shareholder is
under an obligation (whether pursuant to a short sale or otherwise) to make
related payments with respect to substantially similar or related property, or
(iii) the shareholder elects to treat such dividend as investment income under
Section 163(d)(4)(B) of the IRC. Absent further legislation, the maximum 15%
rate on qualified dividend income will not apply to dividends received in
taxable years beginning after December 31, 2010. Capital gain distributions
consisting of each Fund's net capital gains will be taxable as long-term
capital gains.


CORPORATE DIVIDENDS RECEIVED DEDUCTION.  A Fund's dividends that are paid to
its corporate shareholders and are attributable to qualifying dividends it
received from U.S. domestic corporations may be eligible, in the hands of such
shareholders, for the corporate dividends received deduction, subject to
certain holding period requirements and debt financing limitations.


REPORTING.  If a shareholder recognizes a loss with respect to a Fund's shares
of $2 million or more for an individual shareholder or $10 million or more for
a corporate shareholder, the shareholder must file with the Internal Revenue
Service ("IRS") a disclosure statement on Form 8886. Direct shareholders of
portfolio securities are in many cases exempted from this reporting
requirement, but under current guidance, shareholders of a regulated investment
company are not exempted. The fact that a loss is


                                       65




reportable under these regulations does not affect the legal determination of
whether the taxpayer's treatment of the loss is proper. Shareholders should
consult their tax advisors to determine the applicability of these regulations
in light of their individual circumstances.


OTHER TAXES.  Dividends, distributions and redemption proceeds may also be
subject to additional state, local and foreign taxes depending on each
shareholder's particular situation.


TAXATION OF NON-U.S. SHAREHOLDERS.  Dividends paid by a Fund to non-U.S.
shareholders are generally subject to withholding tax at a 30% rate or a
reduced rate specified by an applicable income tax treaty to the extent derived
from investment income and short-term capital gains. In order to obtain a
reduced rate of withholding, a non-U.S. shareholder will be required to provide
an IRS Form W-8BEN certifying its entitlement to benefits under a treaty. The
withholding tax does not apply to regular dividends paid to a non-U.S.
shareholder who provides a Form W-8ECI, certifying that the dividends are
effectively connected with the non-U.S. shareholder's conduct of a trade or
business within the United States. Instead, the effectively connected dividends
will be subject to regular U.S. income tax as if the non-U.S. shareholder were
a U.S. shareholder. A non-U.S. corporation receiving effectively connected
dividends may also be subject to additional "branch profits tax" imposed at a
rate of 30% (or lower treaty rate). A non-U.S. shareholder who fails to provide
an IRS Form W-8BEN or other applicable form may be subject to backup
withholding at the appropriate rate.


In general, United States federal withholding tax will not apply to any gain or
income realized by a non-U.S. shareholder in respect of any distributions of
net long-term capital gains over net short-term capital losses, exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.


For taxable years beginning before January 1, 2008, properly-designated
dividends are generally exempt from United States federal withholding tax where
they: (i) are paid in respect of a Fund's "qualified net interest income"
(generally, a Fund's U.S. source interest income, other than certain contingent
interest and interest from obligations of a corporation or partnership in which
the Fund is at least a 10% shareholder, reduced by expenses that are allocable
to such income); or (ii) are paid in respect of a Fund's "qualified short-term
capital gains" (generally, the excess of a Fund's net short-term capital gain
over the Fund's long-term capital loss for such taxable year). However,
depending on its circumstances, a Fund may designate all, some or none of its
potentially eligible dividends as such qualified net interest income or as
qualified short-term capital gains, and/or treat such dividends, in whole or in
part, as ineligible for this exemption from withholding. In order to qualify
for this exemption from withholding, a non-U.S. shareholder will need to comply
with applicable certification requirements relating to its non-U.S. status
(including, in general, furnishing an IRS Form W-8BEN or substitute Form). In
the case of shares held through an intermediary, the intermediary may withhold
even if a Fund designates the payment as qualified net interest income or
qualified short-term capital gain. Non-U.S. shareholders should contact their
intermediaries with respect to the application of these rules to their
accounts.


A distribution from a Fund to foreign shareholders who have held more than 5%
of the Fund at any time during the one-year period ending on the date of
distribution is treated as real property gain subject to 35% withholding tax
and treated as income effectively connected to a U.S. trade or business with
certain tax filing requirements applicable, if such distribution is
attributable to a distribution of real property gain received by the Fund from
a REIT and if 50% or more of the value of the Fund's assets are invested in
REITs and other U.S. real property holding corporations. A distribution paid
prior to 2008 attributable to a Fund's sale of a REIT or other U.S. real
property holding company will also be treated as real property gain if 50% or
more of the value of the Fund's assets are invested in REITs and other U.S.
real property holding corporations and if the foreign shareholder has held more
than 5% of a class of stock at any time during the one-year period ending on
the date of the distribution. Restrictions apply regarding wash sale and
substitute payment transactions.


The foregoing discussion is a summary only and is not intended as a substitute
for careful tax planning. Purchasers of shares should consult their own tax
advisers as to the tax consequences of investing in such shares, including
under state, local and foreign tax laws. Finally, the foregoing discussion is
based on applicable provisions of the IRC, regulations, judicial authority and
administrative interpretations in effect on the date of this SAI. Changes in
applicable authority could materially affect the conclusions discussed above,
and such changes often occur.


Financial Statements

Each Fund's audited Financial Statements, including the Financial Highlights,
appearing in the Annual Report to Shareholders and the report therein of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
are hereby incorporated by reference in this SAI. The applicable Annual Report
to Shareholders is delivered with this SAI to shareholders requesting this SAI.



                                       66




Miscellaneous Information

COUNSEL. Willkie Farr & Gallagher LLP, located at 787 Seventh Avenue, New York,
NY 10019, is counsel to the Company.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. PricewaterhouseCoopers LLP,
located at Three Embarcadero Center, San Francisco, CA 94111, serves as the
independent registered public accounting firm of the Company, audits the Funds'
financial statements and may perform other services.


SHAREHOLDER COMMUNICATIONS TO THE BOARD.  Shareholders may make inquiries by
writing to the Company, c/o the Distributor, One Freedom Valley Drive, Oaks, PA
19456.   The Board has established a process for shareholders to communicate
with the Board. Shareholders may contact the Board by mail. Correspondence
should be addressed to iShares Board of Directors, c/o Barclays Global
Investors, N.A. - Mutual Fund Administration, 45 Fremont Street, San Francisco,
CA 94105. Shareholders' communications to the Board should include the
following information: (a) the name and address of the shareholder; (b) the
number of shares owned by the shareholder; (c) the Fund(s) of which the
shareholder owns shares; and (d) if these shares are owned indirectly through a
broker, financial intermediary or other record owner, the name of the broker,
financial intermediary or other record owner. All correspondence received as
set forth above shall be reviewed by the Secretary of the Company and reported
to the Board.


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