EXHIBIT (e.3)
iShares, Inc.
AUTHORIZED PARTICIPANT AGREEMENT
This Authorized Participant Agreement (the "Agreement") is entered into by
and between SEI Investments Distribution Co. (together with its affiliates,
"SEI" or the "Distributor") and _________________ (the "Participant") and is
subject to acknowledgement by PFPC Inc. ("PFPC" or the "Transfer Agent"). The
Transfer Agent serves as the transfer agent for iShares, Inc. (the "Fund"). The
Distributor, the Transfer Agent and the Participant acknowledge and agree that
the Fund shall be a third party beneficiary of this Agreement, and shall receive
the benefits contemplated by this Agreement, to the extent specified herein. The
Distributor has been retained to provide services as principal underwriter of
the Fund acting on an agency basis in connection with the sale and distribution
of shares of common stock, par value $.001 per share (sometimes referred to as
"iShares(SM)"), of the iShares MSCI Index Funds of the Fund (each, an "Index
Fund") named on Annex I hereto. As specified in the Fund's prospectus, including
the statement of additional information incorporated therein (the "Prospectus")
included as part of its registration statement, as amended, on Form N-1A (No.
33-97598), the iShares of any Index Fund offered thereby may be purchased or
redeemed only in aggregations of a specified number of iShares referred to
therein and herein as a "Creation Unit". The number of iShares presently
constituting a Creation Unit of each Index Fund is set forth in Annex I.
Creation Units of iShares may be purchased only by or through a Participant that
has entered into an Authorized Participant Agreement with the Fund and the
Distributor.
The Prospectus provides that Creation Units generally will be sold in
exchange for an in-kind deposit of a designated portfolio of equity securities
(the "Deposit Securities") and an amount of cash computed as described in the
Prospectus (the "Cash Component"), plus a purchase transaction fee as described
in the Prospectus, delivered to the Fund by the Participant for its own account
or acting on behalf of another party. Together, the Deposit Securities and the
Cash Component constitute the "Portfolio Deposit", which represents the minimum
initial and subsequent investment amount for iShares of any Index Fund of the
Fund. References to the Prospectus are to the then current Prospectus as it may
be supplemented or amended from time to time. Capitalized terms not otherwise
defined herein are used herein as defined in the Prospectus.
This Agreement is intended to set forth certain premises and the procedures
by which the Participant may purchase and/or redeem Creation Units of iShares
through the facilities of The Depository Trust Company ("DTC"). The procedures
for processing an order to purchase iShares (each a "Purchase Order") and an
order to redeem iShares (each a "Redemption Order") are described in the Fund's
Prospectus and in Annex II to this Agreement. All Purchase and Redemption Orders
must be made pursuant to the procedures set forth in Annex II. All Purchase
Orders and Redemption Orders are irrevocable.
The parties hereto in consideration of the premises and of the mutual
agreements contained herein agree as follows:
1. STATUS OF PARTICIPANT. The Participant hereby represents, covenants and
---------------------
warrants that with respect to Purchase Orders or Redemption Orders of
Creation Units of iShares of any Index Fund, it is a DTC participant. Any
change in the foregoing status of the Participant shall terminate this
Agreement and the Participant shall give prompt written notice to the
Distributor and the Fund of such change.
The Participant hereby represents and warrants that, unless the following
paragraph is applicable to it, it is registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, is qualified to act as a
broker or dealer in the states or other jurisdictions where it transacts
business, and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"), and the Participant agrees that it
will maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this
Agreement. The Participant agrees to comply with all applicable Federal
laws, the laws of the states or other jurisdictions concerned, and the
rules and regulations promulgated thereunder and with the Constitution, By-
Laws and Conduct Rules of the NASD, and that it will not offer or sell
iShares of any Index Fund of the Fund in any state or jurisdiction where
they may not lawfully be offered and/or sold.
If the Participant is offering and selling iShares of any Index Fund of the
Fund in jurisdictions outside the several states, territories and
possessions of the United States and is not otherwise required to be
registered, qualified, or a member of the NASD as set forth above, the
Participant nevertheless agrees to observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, to comply with the
full disclosure requirements of the Securities Act of 1933, as amended (the
"1933 Act") and the regulations promulgated thereunder and to conduct its
business in accordance with the spirit of the NASD Conduct Rules.
The Participant understands and acknowledges that the proposed method by
which Creation Units of iShares will be created and traded may raise
certain issues under applicable securities laws. For example, because new
Creation Units of iShares may be issued and sold by the Fund on an ongoing
basis, at any point a "distribution", as such term is used in the 1933 Act,
may occur. The Participant understands and acknowledges that some
activities on its part, depending on the circumstances, result in its being
deemed a participant in a distribution in a manner which could render it a
statutory underwriter and subject it to the prospectus delivery and
liability provisions of the 1933 Act. The Participant also understands and
acknowledges that dealers who are not "underwriters" but are effecting
transactions in iShares, whether or not participating in the distribution
of iShares, are generally required to deliver a prospectus.
2. EXECUTION OF PURCHASE ORDERS AND REDEMPTION ORDERS. All Purchase Orders or
--------------------------------------------------
Redemption Orders shall be made in accordance with the terms of the
Prospectus and the procedures described in Annex II to this Agreement. Each
party hereto agrees to comply with the provisions of such documents to the
extent applicable to it. It is contemplated that the phone lines used by
the SEI telephone representatives will be recorded, and the Participant
hereby consents to the recording of all calls with the SEI telephone
representatives. The Fund reserves the right to issue additional or other
procedures relating
2
to the manner of purchasing or redeeming Creation Units and the Participant
agrees to comply with such procedures as may be issued from time to time,
including but not limited to the iShares Cash Collateral Settlement
Procedures that are referenced in Annex II to this Agreement. The
Participant acknowledges and agrees on behalf of itself and any party for
which it is acting (whether as a customer or otherwise) that delivery of a
Purchase Order or Redemption Order shall be irrevocable, provided that the
Fund and the Distributor on behalf of the Fund reserves the right to reject
any Purchase Order until the trade is released as "good" as described in
Annex II and any Redemption Order that is not in "proper form" as defined
in the Prospectus.
With respect to any Redemption Order, the Participant also acknowledges and
agrees on behalf of itself and any party for which it is acting (whether as
a customer or otherwise) to return to the Fund any dividend, distribution
or other corporate action paid to it or to the party for which it is acting
in respect of any Deposit Security that is transferred to the Participant
or any party for which it is acting that, based on the valuation of such
Deposit Security at the time of transfer, should have been paid to the
Index Fund. With respect to any Redemption Order, the Participant also
acknowledges and agrees on behalf of itself and any party for which it is
acting (whether as a customer or otherwise) that the Fund is entitled to
reduce the amount of money or other proceeds due to the Participant or any
party for which it is acting by an amount equal to any dividend,
distribution or other corporate action to be paid to it or to the party for
which it is acting in respect of any Deposit Security that is transferred
to the Participant or any party for which it is acting that, based on the
valuation of such Deposit Security at the time of transfer, should be paid
to the Index Fund. With respect to any Purchase Order, the Fund
acknowledges and agrees to return to the Participant or any party for which
it is acting any dividend, distribution or other corporate action paid to
the Fund in respect of any Deposit Security that is transferred to the Fund
that, based on the valuation of such Deposit Security at the time of
transfer, should have been paid to the Participant or any party for which
it is acting.
3. MARKETING MATERIALS AND REPRESENTATIONS. The Participant represents,
---------------------------------------
warrants and agrees that it will not make any representations concerning
iShares other than those contained in the Fund's then current Prospectus or
in any promotional materials or sales literature furnished to the
Participant by the Distributor. The Participant agrees not to furnish or
cause to be furnished to any person or display or publish any information
or materials relating to iShares (including, without limitation,
promotional materials and sales literature, advertisements, press releases,
announcements, statements, posters, signs or other similar materials),
except such information and materials as may be furnished to the
Participant by the Distributor and such other information and materials as
may be approved in writing by the Distributor. The Participant understands
that the Fund will not be advertised or marketed as an open-end investment
company, i.e., as a mutual fund, which offers redeemable securities, and
that any advertising materials will prominently disclose that the iShares
are not redeemable units of beneficial interest in the Fund. In addition,
the Participant understands that any advertising material that addresses
redemptions of iShares, including the Fund's Prospectus, will disclose that
the owners of iShares may acquire iShares and tender iShares for redemption
to the Fund in Creation Unit aggregations only. Notwithstanding the
foregoing, the Participant may without the written approval of the
Distributor prepare and
3
circulate in the regular course of its business research reports that
include information, opinions or recommendations relating to iShares (i)
for public dissemination, provided that such research reports compare the
relative merits and benefits of iShares with other products and are not
used for purposes of marketing iShares and (ii) for internal use by the
Participant.
4. SUBCUSTODIAN ACCOUNT. The Participant understands and agrees that in the
--------------------
case of each Index Fund, the Fund has caused the Fund's custodian, The
Chase Manhattan Bank ("Custodian"), to maintain with the applicable
subcustodian for such Index Fund an account in the relevant foreign
jurisdiction to which the Participant shall deliver or cause to be
delivered in connection with the purchase of a Creation Unit the securities
and any other redemption proceeds (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) on behalf of itself or any party for which it is
acting (whether or not a customer), with any appropriate adjustments as
advised by the Fund, in accordance with the terms and conditions applicable
to such account in such jurisdiction.
5. TITLE TO SECURITIES; RESTRICTED SHARES. The Participant represents on
--------------------------------------
behalf of itself and any party for which it acts that upon delivery of a
portfolio of Deposit Securities to the Custodian and/or the relevant
subcustodian in accordance with the terms of the Prospectus, the Fund will
acquire good and unencumbered title to such securities, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any
adverse claims, including, without limitation, any restriction upon the
sale or transfer of such securities imposed by (i) any agreement or
arrangement entered into by the Participant or any party for which it is
acting in connection with a Purchase Order or (ii) any provision of the
1933 Act, and any regulations thereunder (except that portfolio securities
of issuers other than U.S. issuers shall not be required to have been
registered under the 1933 Act if exempt from such registration), or of the
applicable laws or regulations of any other applicable jurisdiction and
(iii) no such securities are "restricted securities" as such term is used
in Rule 144(a)(3)(i) promulgated under the 1933 Act.
6. CASH COMPONENT AND FEES. The Participant hereby agrees that as between the
-----------------------
Fund and itself or any party for which it acts in connection with a
Purchase Order, it will make available in same day funds for each purchase
of iShares an amount of cash sufficient to pay the Cash Component and any
other amounts of cash due to the Fund in connection with the purchase of
any Creation Unit of iShares (including the purchase transaction fee for
in-kind and cash purchases and the additional variable charge for cash
purchases (when, in the sole discretion of the Fund, cash purchases are
available or specified)) (the "Cash Amount") which shall be made to an
account maintained by the Custodian at The Chase Manhattan Bank, New York,
providing payment on or before the Contractual Settlement Date (as defined
in Annex II). The Participant hereby agrees to ensure that the Cash Amount
will be received by the Fund on or before the Contractual Settlement Date,
and in the event payment of such Cash Amount has not been made by such
Contractual Settlement Date, the Participant agrees on behalf of itself or
any party for which it acts in connection with a Purchase Order to pay the
full cash amount, plus interest, computed at such reasonable rate as may be
specified by the Fund from time to time. The Participant
4
may require its customer to enter into an agreement with the Participant
with respect to such matters. The Participant shall be liable to the
Custodian and/or the Fund for any amounts advanced by the Custodian in its
sole discretion to the Participant for payment of the amounts due and owing
for the Cash Component, the purchase transaction fee, cash collateral
discrepancies and/or the additional variable charge for cash purchases
(when, in the sole discretion of the Fund, cash purchases are available or
specified).
7. ROLE OF PARTICIPANT.
-------------------
(a) The Participant acknowledges and agrees that for all purposes of this
Agreement, the Participant will be deemed to be an independent
contractor, and will have no authority to act as agent for the Fund or
the Distributor in any matter or in any respect. The Participant
agrees to make itself and its employees available, upon request,
during normal business hours to consult with the Fund or the
Distributor or their designees concerning the performance of the
Participant's responsibilities under this Agreement.
(b) In executing this Agreement, the Participant agrees in connection with
any purchase or redemption transactions in which it acts for a
customer or for any other DTC Participant or indirect participant, or
any other Beneficial Owner, that it shall extend to any such party all
of the rights, and shall be bound by all of the obligations, of a DTC
Participant in addition to any obligations that it undertakes
hereunder or in accordance with the Prospectus.
(c) The Participant agrees to maintain records of all sales of iShares
made by or through it and to furnish copies of such records to the
Fund or the Distributor upon the request of the Fund or the
Distributor.
8. AUTHORIZED PERSONS. Concurrently with the execution of this Agreement and
------------------
as requested from time to time by the Fund and/or Distributor, the
Participant shall deliver to the Distributor and the Fund, with copies to
the Transfer Agent (referred to below) duly certified as appropriate by its
Secretary or other duly authorized official, a certificate in a form
approved by the Fund (see Annex III hereto) setting forth the names and
signatures of all persons authorized to give instructions relating to any
activity contemplated hereby or any other notice, request or instruction on
behalf of the Participant (each an "Authorized Person"). Such certificate
may be accepted and relied upon by the Distributor and the Fund as
conclusive evidence of the facts set forth therein and shall be considered
to be in full force and effect until delivery to the Distributor and the
Fund of a superseding certificate in a form approved by the Fund bearing a
subsequent date. Upon the termination or revocation of authority of such
Authorized Person by the Participant, the Participant shall give prompt
written notice of such fact to the Distributor and the Fund and such notice
shall be effective upon receipt by both the Distributor and the Fund. The
Distributor shall issue to each Participant a unique personal
identification number ("PIN Number") by which such Participant shall be
identified and instructions issued by the Participant hereunder shall be
authenticated. The PIN Number shall be kept confidential and only provided
to Authorized Persons. If after issuance, a Participant's PIN Number is
changed, the new PIN Number will become effective on a date mutually agreed
upon by the Participant and the Distributor.
5
9. REDEMPTION. The Participant understands and agrees that Redemption Orders
----------
may be submitted only on days that the American Stock Exchange LLC (the
"AMEX") is open for trading or business.
(a) The Participant represents and warrants that it will not attempt to
place a Redemption Order for the purpose of redeeming any Creation
Unit of iShares of any Index Fund unless it first (i) ascertains prior
to submitting such order that it or its customer, as the case may be,
owns outright or has full legal authority and legal and beneficial
right to tender for redemption the requisite number of iShares of the
relevant Index Fund to be redeemed and to the entire proceeds of the
redemption and that such iShares have not been loaned or pledged to
another party and are not the subject of a repurchase agreement,
securities lending agreement or any other arrangement that would
preclude the delivery of such iShares to the Transfer Agent in
accordance with the Prospectus or as otherwise required by the Fund;
and (ii) agrees to transfer all collateral to the Fund's custodial
account or iShares to the Transfer Agent's DTC account prior to 2 p.m.
on the Business Day following the day on which the Redemption Order is
placed. The Participant understands and agrees that in the event
collateral or iShares are not transferred under (ii) above, the
Redemption Order trade may be broken by the Fund and the Participant
will be solely responsible for all costs incurred by the Fund or the
Distributor related to breaking the trade. The Distributor will only
process Redemption Orders upon verification from the Transfer Agent of
the Fund's receipt of such collateral or iShares. The Participant
understands that iShares of any Index Fund may be redeemed only when
one or more Creation Units of iShares of a Beneficial Owner are held
in the account of a single Participant.
(b) In the case of a resident Australian or New Zealand holder,
notwithstanding the foregoing, the Participant understands and agrees
that such holder is only entitled to receive cash upon its redemption
of Creation Units of iShares. In the Redemption Order the Participant
will be required to confirm that an in-kind redemption request has not
been submitted on behalf of a beneficial owner who is an Australian or
New Zealand resident.
10. BENEFICIAL OWNERSHIP. The Participant represents and warrants to the
--------------------
Distributor and the Fund that (based upon the number of outstanding iShares
of such Index Fund made publicly available by the Fund) it does not, and
will not in the future, hold for the account of any single Beneficial Owner
of iShares of the relevant Index Fund 80 percent or more of the currently
outstanding iShares of such relevant Index Fund, so as to cause the Fund to
have a basis in the portfolio securities deposited with the Fund with
respect to such Index Fund different from the market value of such
portfolio securities on the date of such deposit, pursuant to section 351
of the Internal Revenue Code of 1986, as amended. The Participant agrees
that the confirmation relating to any order for one or more Creation Units
of iShares of an Index Fund shall state as follows: "Purchaser represents
and warrants that, after giving effect to the purchase of iShares to which
this confirmation relates, it will not hold 80 percent or more of the
outstanding iShares of the relevant Index Fund of the Fund and that it will
not treat such purchase as eligible for tax-free treatment under Section
351 of the Internal Revenue Code of 1986, as amended. If purchaser is a
dealer, it agrees to deliver similar
6
written confirmations to any person purchasing any of the iShares to which
this confirmation relates from it." The Fund and its Transfer Agent and
Distributor shall have the right to require information from the
Participant regarding iShares ownership of each Index Fund, and to rely
thereon to the extent necessary to make a determination regarding ownership
of 80 percent or more of the currently outstanding iShares of any Index
Fund by a Beneficial Owner as a condition to the acceptance of a deposit of
Deposit Securities.
11. INDEMNIFICATION. This paragraph shall survive the termination of this
---------------
Agreement.
(a) The Participant hereby agrees to indemnify and hold harmless the
Distributor, the Fund, the Transfer Agent, their respective
subsidiaries, affiliates, directors, officers, employees and agents,
and each person, if any, who controls such persons within the meaning
of Section 15 of the 1933 Act (each an "Indemnified Party") from and
against any loss, liability, cost and expense (including attorneys'
fees) incurred by such Indemnified Party as a result of (i) any breach
by the Participant of any provision of this Agreement that relates to
the Participant; (ii) any failure on the part of the Participant to
perform any obligations set forth in the Agreement; (iii) any failure
by the Participant to comply with applicable laws, including rules and
regulations of self-regulatory organizations; or (iv) actions of such
Indemnified Party in reliance upon any instructions issued in
accordance with Annexes II, III and IV (as each may be amended from
time to time) reasonably believed by the Distributor and/or the
Transfer Agent to be genuine and to have been given by the
Participant. The Participant and the Distributor understand and agree
that the Fund as a third party beneficiary to this Agreement is
entitled and intends to proceed directly against the Participant in
the event that the Participant fails to honor any obligations pursuant
to this Agreement that benefit the Fund. The Distributor shall not be
liable to the Participant for any damages arising out of mistakes or
errors in data provided to the Distributor, or out of mistakes or
errors by or interruptions or delays of communications with the
Indemnified Parties who are service providers to the Fund, nor is the
Distributor liable for any action, representation, or solicitation
made by the wholesalers of the Fund.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant, its respective subsidiaries, affiliates, directors,
officers, employees and agents, and each person, if any, who controls
such persons within the meaning of Section 15 of the 1933 Act (each an
"Indemnified Party") from and against any loss, liability, cost and
expense (including attorneys' fees) incurred by such Indemnified Party
as a result of (i) any breach by the Distributor of any provision of
this Agreement that relates to the Distributor; (ii) any failure on
the part of the Distributor to perform any obligations set forth in
this Agreement; (iii) any failure by the Distributor to comply with
applicable laws, including rules and regulations of self-regulatory
organizations; or (iv) actions of such Indemnified Party in reliance
upon any representations made in accordance with Annex II, III and IV
(as each may be amended from time to time) reasonably believed by the
Participant to be genuine and to have been given by the Distributor.
The Participant shall not be liable to the Distributor for any damages
arising out of mistakes or errors in data provided to the Participant,
or out of interruptions or delays of communications with the
Indemnified Parties who are service providers to the Fund,
7
nor is the Participant liable for any action, representation, or
solicitation made by the wholesaler of the Fund.
12. INFORMATION ABOUT PORTFOLIO DEPOSITS. The Participant understands that the
------------------------------------
number and names of the designated portfolio of Deposit Securities to be
included in the current Portfolio Deposit for each Index Fund will be made
available by the Distributor as such information is supplied to the
Distributor by the Fund's investment adviser each day that the AMEX is open
for trading and will also be made available by the Fund's investment
adviser on each such day through the facilities of the National Securities
Clearing Corporation.
13. ACKNOWLEDGMENT. The Participant acknowledges receipt of the Prospectus and
--------------
represents it has reviewed such documents and understands the terms
thereof.
NOTICES. Except as otherwise specifically provided in this Agreement, all
-------
notices required or permitted to be given pursuant to this Agreement shall
be given in writing and delivered by personal delivery or by postage
prepaid registered or certified United States first class mail, return
receipt requested, or by telex, telegram or facsimile or similar means of
same day delivery (with a confirming copy by mail). Unless otherwise
notified in writing, all notices to the Fund shall be at the address or
telephone, facsimile or telex numbers as follows: Attn: Vice President,
Operations, with a copy to The Chase Manhattan Bank, 2 Chase ▇▇▇▇▇▇▇▇▇-▇,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: iShares.
All notices to the Participant, the Distributor and the Transfer Agent
shall be directed to the address or telephone, facsimile or telex numbers
indicated below the signature line of such party.
15. EFFECTIVENESS, TERMINATION AND AMENDMENT. This Agreement shall become
----------------------------------------
effective in this form upon execution and delivery to the Distributor. This
Agreement may be terminated at any time by any party upon sixty days prior
written notice to the other parties and may be terminated earlier by the
Fund or the Distributor at any time in the event of a breach by the
Participant of any provision of this Agreement or the procedures described
or incorporated herein. This Agreement supersedes any prior such agreement
between or among the parties. This Agreement may be amended by the Fund or
the Distributor from time to time without the consent of any Beneficial
Owner by the following procedure: The Fund or the Distributor will mail a
copy of the amendment to the Participant and the Fund or Distributor, as
applicable. For purposes of this Agreement, mail will be deemed received by
the recipient thereof on the fifth (5/th/) Business Day following the
deposit of such mail into the U.S. Postal system. If neither the
Participant nor the other party objects in writing to the amendment within
five days after its receipt, the amendment will become part of this
Agreement in accordance with its terms.
16. GOVERNING LAW. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the State of New York. The parties irrevocably
submit to the non-exclusive jurisdiction of any New York State or United
States Federal court sitting in New York City over any suit, action or
proceeding arising out of or relating to this Agreement.
8
17. COUNTERPARTS. This Agreement may be executed in several counterparts, each
------------
of which shall be an original and all of which shall constitute but one and
the same instrument.
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year written below.
DATED: ______________
SEI INVESTMENTS DISTRIBUTION CO. _________________________
[Name of Participant]
By: _____________________________ By: _____________________________
Title: __________________________ Title: __________________________
Address: ________________________ Address: ________________________
_________________________________ _________________________________
_________________________________ _________________________________
Telephone: ______________________ Telephone: ______________________
Facsimile: ______________________ Facsimile: ______________________
ACKNOWLEDGED BY:
PFPC INC., AS TRANSFER AGENT
By: _____________________________
Title: __________________________
Address: ________________________
_________________________________
_________________________________
Telephone: ______________________
Facsimile: ______________________
10
ANNEX I
iShares, Inc.
INDEX FUNDS AND iSHARES PER CREATION UNIT
Index iShares per
Fund Creation Unit
---- -------------
The iShares MSCI Australia Index Fund 200,000
The iShares MSCI Austria Index Fund 100,000
The iShares MSCI Belgium Index Fund 40,000
The iShares MSCI Brazil (Free) Index Fund 50,000
The iShares MSCI Canada Index Fund 100,000
The iShares MSCI EMU Index Fund 50,000
The iShares MSCI France Index Fund 200,000
The iShares MSCI Germany Index Fund 300,000
The iShares MSCI Greece Index Fund* 50,000
The iShares MSCI Hong Kong Index Fund 75,000
The iShares MSCI Indonesia (Free) Index Fund* 50,000
The iShares MSCI Italy Index Fund 150,000
The iShares MSCI Japan Index Fund 600,000
The iShares MSCI Malaysia (Free) Index Fund 75,000
The iShares MSCI Mexico (Free) Index Fund 100,000
The iShares MSCI Netherlands Index Fund 50,000
The iShares MSCI Portugal Index Fund* 50,000
The iShares MSCI Singapore (Free) Index Fund 100,000
The iShares MSCI South Africa Index Fund* 50,000
The iShares MSCI South Korea Index Fund 50,000
The iShares MSCI Spain Index Fund 75,000
The iShares MSCI Sweden Index Fund 75,000
The iShares MSCI Switzerland Index Fund 125,000
The iShares MSCI Taiwan Index Fund 50,000
The iShares MSCI Thailand (Free) Index Fund* 50,000
The iShares MSCI Turkey Index Fund* 50,000
The iShares MSCI United Kingdom Index Fund 200,000
The iShares MSCI USA Index Fund 500,000
---------------
* These Index Funds may not be offered until the relevant prospectus has been
finalized.
2
ANNEX II
iShares, Inc.
PROCEDURES FOR PROCESSING
PURCHASE ORDERS AND REDEMPTION ORDERS
This Annex II to the Authorized Participant Agreement supplements the
Prospectus with respect to the procedures to be used in processing a Purchase
Order for the purchase of iShares in Creation Units of each Index Fund and a
Redemption Order for the redemption of iShares in Creation Units of each Index
Fund. Capitalized terms, unless otherwise defined in this Annex II, have the
meanings attributed to them in the Authorized Participant Agreement or the
Prospectus.
A Participant is required to have signed the Authorized Participant
Agreement. Upon execution thereof by the Distributor and acknowledgement
thereof by the Transfer Agent and in connection with the initial Purchase Order
submitted by the Participant, the Distributor will assign a PIN Number to each
Authorized Participant. This will allow a Participant through its Authorized
Person(s) to place a Purchase Order or Redemption Order with respect to the
purchase or redemption of Creation Units of iShares.
PART A
TO PLACE AN ORDER FOR
PURCHASE OR REDEMPTION
OF CREATION UNIT(S) OF iSHARES
The Participant understands and agrees that Purchase and Redemption
Orders may be submitted only on days that the American
Stock Exchange LLC (the "AMEX") is open for trading.
1. Call to Give Notice of Intent to Submit Redemption Order. To initiate an
--------------------------------------------------------
order to redeem a Creation Unit of iShares, an Authorized Person of the
Participant must give notice to the Distributor of its intent to submit a
Redemption Order to redeem iShares. Giving notice to the Distributor of an
intent to submit a Redemption Order does not constitute a Redemption Order,
which must be completed subsequently pursuant to the procedures set forth below.
2. Delivery of Creation Unit Before Submitting Redemption Order. The
------------------------------------------------------------
Participant must deliver the aggregated iShares constituting the requisite
number of Creation Units or the requisite amount of cash collateral to the
Transfer Agent prior to 2 p.m. Eastern Standard Time on the Business Day
following the day on which the Redemption Order for such Creation Units was
submitted. A Participant planning to deliver iShares for redemption on such day
should ascertain the deadlines applicable to DTC by contacting the operation
department of the broker or depository institution effectuating such transfer of
securities. These deadlines will vary and are likely to be significantly
earlier than the AMEX Closing Time.
3. Option by Participant to Deliver Cash Collateral on the Redemption Notice
-------------------------------------------------------------------------
Date in Lieu of iShares. In the event the Participant is unable to transfer all
-----------------------
or part of the Creation Units of iShares to be redeemed to the Distributor, on
behalf of the Fund, at or prior to the AMEX Closing Time on the date it provides
notice of its intent to submit a Redemption Order to redeem iShares relating to
a redemption, the Distributor will nonetheless accept the redemption request in
reliance on the undertaking by the Participant to delivery the missing iShares
as soon as possible, which undertaking shall be secured by the Participant's
delivery and maintenance of collateral consisting of cash having a value at
least equal to 125% of the value of the missing iShares. The parties hereto
agree that the delivery of such collateral shall be made in accordance with the
iShares Cash Collateral Settlement Procedures approved by the Fund's Board of
Directors, as they may be amended from time to time, which such procedures shall
be provided to the Participant by the Distributor upon request. Such Cash
Collateral Settlement Procedures contemplate, among other things, that any cash
collateral shall be in the form of U.S. dollars in immediately available funds,
that such cash collateral shall be held by the Custodian and marked to market
daily, and that the fees of the Custodian and subcustodians in respect of the
delivery, maintenance and redelivery of the cash collateral shall be payable by
the Participant. The Participant, as pledgor, hereby pledges to the Fund, as
pledgee, as security for its obligation to deliver the missing iShares as soon
as possible, and grants to the Fund, a first priority security interest in, lien
on, and right of set-off against, all such cash collateral. The parties hereto
further
agree that the Fund may purchase the missing iShares or acquire the Deposit
Securities and the Cash Component underlying such iShares at any time and the
participant agrees to accept liability for any shortfall between the cost to the
Fund of purchasing such iShares, Deposit Securities or Cash Component and the
value of the collateral, which may be used by the Fund at such time, and in such
manner, as the Fund may determine in its sole discretion.
4. Place the Purchase or Redemption Order.
--------------------------------------
(a) Telephone Orders - Telephone orders shall be placed in accordance with the
----------------
following guidelines and "Telephone Flow Process" set forth in Part B of this
Annex II.
(i) An Authorized Person for the Participant must call the SEI telephone
representative at ▇▇▇-▇▇▇-▇▇▇▇ not later than the closing time of the regular
trading session on the AMEX (the "AMEX Closing Time") (ordinarily 4:00 p.m. New
York time) with respect to its contemplated Purchase or Redemption Order.
Incoming telephone calls are queued and will be handled in the sequence
received. Calls placed before the AMEX Closing Time will be processed even if
the call is taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND
REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE AMEX CLOSING TIME WILL
NOT BE ACCEPTED.
(ii) NOTE THAT WHILE INITIATING THE TELEPHONE CALL COMMENCES THE ORDER
PROCESS, IT DOES NOT ALONE CONSTITUTE A PURCHASE OR REDEMPTION ORDER, WHICH ARE
ONLY COMPLETED AND PROCESSED WHEN THE TRADE IS RELEASED AS "GOOD" BY THE
DISTRIBUTOR AND CONFIRMED AT THE END OF THE TELEPHONE CALL. ONCE THE TRADE IS
RELEASED AS "GOOD" AND CONFIRMED BY THE PARTICIPANT, THE PARTICIPANT ASSUMES ALL
RESPONSIBILITY FOR THE TERMS OF THE TRADE.
(iii) A transaction charge will be assessed on each Purchase Order and
each Redemption Order.
(b) Internet Orders - Internet orders shall be placed in accordance with the
-------------------
following guidelines and "Internet Flow Process" set forth in Part B of this
Annex II.
(i) each Participant authorized to transact via the internet will be
issued a PIN Number to access the iShares Trading Website
("Website"). The Distributor shall not be responsible for
unauthorized access to the Website, and shall process all trades
affirmed through the system that were placed with a valid PIN
Number.
(ii) Any authorized Participant may log onto the Website at any time but
generally must submit trades by 4:00 p.m. EST to receive that day's
▇▇▇. ▇▇▇▇▇▇
▇
submitted after 4:00 p.m. EST will receive the next determined NAV
for the applicable Fund. Certain Funds may determine an NAV more
than once per trade date. It is the responsibility of the
Participant to submit trades on or before the designated times to
receive the applicable NAV.
(iii) Note that while initiating the trades on the Website commences the
order process, it does not alone constitute a purchase or redemption
order, which is only completed and which will only be processed
after the trade has been submitted by the Participant and
Affirmation of such trade has been generated by the Website. It is
the responsibility of the Participant to retain such Affirmation for
its records.
(iv) A transaction charge will be assessed on each Purchase Order and
each Redemption Order.
5. Dividends, Distributions and Other Corporate Actions.
----------------------------------------------------
(a) For a Purchase Order, it is understood that the Fund will return to
the Participant or any party for which it is acting any dividend, distribution
or other corporate action paid to the Fund in respect of any Deposit Security
that is transferred to the Fund that, based on the valuation of such Deposit
Security at the time of transfer, should have been paid to the Participant or
any party for which it is acting.
(b) For a Redemption Order, the Participant acknowledges its agreement
on behalf of itself and any party for which it is acting (whether as a customer
or otherwise) to return to the Fund any dividend, distribution or other
corporate action paid to it or to the party for which it is acting in respect of
any Deposit Security that is transferred to the Participant or any party for
which it is acting that, based on the valuation of such Deposit Security at the
time of transfer, should be paid to the Index Fund to which the Redemption Order
relates. In the Redemption Order, the Participant also acknowledges its
agreement on behalf of itself and any party for which it is acting (whether as a
customer or otherwise) that the Fund is entitled to reduce the amount of money
or other proceeds due to the Participant or any party for which it is acting by
an amount equal to any dividend, distribution or other corporate action to be
transferred to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Security at the time of transfer, should be
paid to the Index Fund to which the Redemption Order relates.
6. Processing an Order. The Distributor will accept a Purchase or Redemption
-------------------
Order as "good" and confirmed if (i) the Participant communicates by telephone
to the Distributor, prior to the AMEX Closing time, a Purchase or Redemption
Order (whether on its own behalf or on behalf of another investor), together
with all relevant information concerning the terms of such Order, and (ii) the
Participant verifies that such Purchase or Redemption Order and its terms, as
transcribed by the Distributor and repeated back to the Participant, have been
accurately communicated to the Distributor. Notwithstanding the foregoing, the
Participant acknowledges that a Purchase Order cannot be placed until the
Participant has made arrangements satisfactory to the Fund for payment of the
Cash Component and any other cash amounts which may be due.
3
In addition, the Participant and Distributor each acknowledge that a Redemption
Order can not be placed until the Participant has given notice to the
Distributor of its intent to place a Redemption Order. The Participant
understands and acknowledges that the Redemption Order trade may be broken by
the Fund, with all costs of the Fund or the Distributor related to breaking the
trade being attributed to the Participant, unless the Participant has
transferred or caused to be transferred to the Fund the Creation Unit of iShares
to be redeemed or the requisite amount of cash collateral in connection with
such Redemption Order and the Transfer Agent has verified receipt of such
Creation Unit of iShares or collateral by 2:00 p.m. New York time on the
Business Day following the day on which the Redemption Order was submitted. For
purposes of quality assurance only, the Distributor will on a best efforts basis
provide the Participant with a facsimile affirmation of the terms of the trade
and will endeavor to contact the Participant concerning such affirmation.
7. Rejecting a Purchase Order. The Distributor and/or the Fund reserve the
--------------------------
absolute right to reject or suspend a Purchase Order if (i) it appears that the
Participant or a Beneficial Owner would own 80 percent or more of all
outstanding iShares of an Index Fund as a result of acceptance of the Purchase
Order; (ii) the portfolio of Deposit Securities delivered is not as specified by
the Distributor; (iii) acceptance of the Deposit Securities would have certain
adverse tax consequences to the Index Fund; (iv) the Fund believes that the
acceptance of the Portfolio Deposit would be unlawful; (v) the acceptance of the
Portfolio Deposit would otherwise, in the discretion of the Fund or the Adviser,
have an adverse effect on the Fund or the rights of beneficial owners of
iShares; (vi) the Fund has suspended the offering of iShares of the particular
Index Fund; or (vii) in the event that circumstances outside the control of the
Fund and the Adviser make it for all practical purposes impossible to process
purchase orders. The Fund shall notify the Participant of its rejection of any
Purchase Order. The Fund is under no duty, however, to give notification of any
defects or irregularities in the delivery of Portfolio Deposits nor shall it
incur any liability for the failure to give any such notification.
8. Taking Delivery of Deposit Securities for Redemption Orders. A redeeming
-----------------------------------------------------------
Beneficial Owner or Participant acting on behalf of such Beneficial Owner must
maintain appropriate securities broker-dealer, bank or other custody
arrangements in each jurisdiction in which any of the Deposit Securities are
customarily traded, to which account such Deposit Securities will be delivered.
If neither the redeeming beneficial owner nor the Participant acting on behalf
of such redeeming Beneficial Owner has appropriate arrangements to take delivery
of the Deposit Securities in the applicable jurisdiction and it is not possible
to make other such arrangements, or if it is not possible to effect deliveries
of the Deposit Securities in such jurisdiction, the 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 net asset value of iShares of the relevant Index Fund next determined after
the Redemption Order is received in proper form (minus a redemption transaction
fee and additional variable charge for cash redemptions as specified in the
Prospectus, to offset the Fund's brokerage and other transaction costs
associated with the disposition of Deposit Securities of the Index Fund).
Redemptions of iShares for Deposit Securities will be subject to compliance with
applicable United States federal and state securities laws and each Index Fund
(whether or not it otherwise permits cash redemptions) reserves the right to
redeem Creation Units for cash to the extent that the Index Fund could not
lawfully deliver specific Deposit Securities upon redemptions or could
4
not do so without first registering the Deposit Securities under such laws.
9. Contractual Settlement for Purchase Orders. Except as provided below,
------------------------------------------
Deposit Securities must be delivered to an account maintained at the applicable
local subcustodian of the Fund on or before the Contractual Settlement Date
(defined below). The Participant must also make available on or before the
Contractual Settlement Date, by means satisfactory to the Fund, immediately
available or same day funds estimated by the Fund to be sufficient to pay the
Cash Component next determined after acceptance of the Purchase Order, together
with the applicable purchase transaction fee (as described in the Prospectus).
Any excess funds will be returned following settlement of the issue of the
Creation Unit of iShares. The "Contractual Settlement Date" is the earlier of
(i) the date upon which all of the required Deposit Securities, the Cash
Component and any other cash amounts which may be due are delivered to the Fund
and (ii) the last day for settlement on the customary settlement cycle in the
jurisdiction where the securities of the applicable Index Fund are customarily
traded.
Except as provided in the next two paragraphs, a Creation Unit of iShares
of an Index Fund will not be issued until the transfer of good title to the Fund
of the portfolio of Deposit Securities and the payment of the Cash Component and
the purchase transaction fee have been completed. When the subcustodian
confirms to the Custodian that the required securities included in the Portfolio
Deposit (or, when permitted in the sole discretion of the Fund, the cash value
thereof) have been delivered to the account of the relevant subcustodian, the
Custodian shall notify the Transfer Agent and the Adviser, and the Fund will
issue and cause the delivery of the Creation Unit of iShares. The Transfer
Agent will then transmit a confirmation of acceptance to the Participant.
The Fund may in its sole discretion permit or require the substitution of
an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash
Component to replace any Deposit Security which may not be available in
sufficient quantity for delivery or for other similar reasons. If the Adviser
notifies the Transfer Agent that a "cash in lieu" amount will be accepted, the
Transfer Agent will notify the Participant and the Participant shall deliver, on
behalf of itself or the party on whose behalf it is acting, the "cash in lieu"
amount, with any appropriate adjustments as advised by the Fund. Any excess
funds will be returned following settlement of the issue of the Creation Unit of
iShares.
In the event that a Portfolio Deposit is incomplete on the settlement date
for a Creation Unit of iShares because certain or all of the Deposit Securities
are missing, the Fund will issue a Creation Unit of iShares notwithstanding such
deficiency in reliance on the undertaking of the Participant to deliver the
missing Deposit Securities as soon as possible, which undertaking shall be
secured by such Participant's delivery and maintenance of collateral consisting
of cash having a value at least equal to 125% of the value of the missing
Deposit Securities. The parties hereto agree that the delivery of such
collateral shall be made in accordance with the iShares Cash Collateral
Settlement Procedures approved by the Fund's Board of Directors, as they may be
amended from time to time, which such procedures shall be provided to the
Participant by the Transfer Agent upon request. Such Cash Collateral Settlement
Procedures contemplate, among other things, that any cash collateral shall be in
the form of U.S. dollars in immediately available funds, that such cash
collateral shall be held by the Custodian and marked to market daily, and
5
that the fees of the Custodian and subcustodians in respect of the delivery,
maintenance and redelivery of the cash collateral shall be payable by the
Participant. The Participant, as pledgor, hereby pledges to the Fund, as
pledgee, as security for its obligation to delivery the missing Deposit
Securities as soon as possible, and grants to the Fund, a first priority
security interest in, lien on and right of set-off against, all such cash
collateral. The parties hereto further agree that the Fund may purchase the
missing Deposit Securities at any time and the Participant agrees to accept
liability for any shortfall between the cost to the Fund of purchasing such
securities and the value of the collateral, which may be sold by the Fund at
such time, and in such manner, as the Fund may determine in its sole discretion.
10. Contractual Settlement for Redemption Orders. Deliveries of redemption
--------------------------------------------
proceeds by the Index Fund relating to those countries generally will be made
within three Business Days. Due to the schedule of holidays in certain
countries, however, the delivery of in-kind redemption proceeds may take longer
than three Business Days after the day on which the Redemption Order is received
in proper form. See the Fund's statement of additional information for
instances where more than seven calendar days would be needed to deliver
redemption proceeds.
11. Cash Purchases. When, in the sole discretion of the Fund, cash purchases
--------------
of Creation Units of iShares are available or specified for an Index Fund, such
purchases shall be effected in essentially the same manner as in-kind purchases
thereof. In the case of a cash purchase, the Participant 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 Fund's brokerage and other
transaction costs associated with using the cash to purchase the requisite
Deposit Securities, the Participant must 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 of iShares are described in the
Prospectus.
12. Cash Redemptions. In the event that, in the sole discretion of the Fund,
----------------
cash redemptions are permitted or required by the Fund, proceeds will be paid to
the Participant redeeming shares on behalf of the redeeming investors as soon as
practicable after the date of redemption (within seven calendar days thereafter,
except for instances listed in the Fund's statement of additional information
where more than seven calendar days would be needed).
13. Subcustodian Accounts. Annex IV hereto contains a list of the subcustodian
---------------------
accounts of the Fund, into which the portfolio securities constituting the
portfolio of Deposit Securities of each Index Fund are to be delivered in
connection with a Purchase Order.
6
PART B
FLOW PROCESS
This Annex II supplements the Fund's Prospectus with respect to the
procedures to be used by the Distributor and Transfer Agent in processing an
order for the creation or redemption of iShares.
A Participant is required to have signed the Participant Agreement. The
Distributor will assign a personal identification number to each Authorized
Participant. This will allow a Participant through its Authorized Person(s) to
place a creation or redemption order with respect to iShares.
The Authorized Participant and Distributor shall implement the appropriate
"Flow Process" as agreed to by the parties from time to time, a form of which is
attached hereto.
7
"TELEPHONE" FLOW PROCESS
--------------------------------------------------------------------------------
ORIGINATOR ACTIVITY
---------- --------
--------------------------------------------------------------------------------
CALLER VERIFICATION AND ORDER PROCESSING
--------------------------------------------------------------------------------
1. AP calls on SEI's SEI rep greets caller.
recorded 1-888 number to
place a share creation
and/or redemption order.
These trades are to be
placed by 4:00 PM EST.
--------------------------------------------------------------------------------
2. AP identifies his name, SEI rep selects the AP from drop down box to
the Institution he pull up the account registration and list of
represents and PIN #. authorized transacters. The SEI rep verifies
that the caller is authorized to place trades on
behalf of that institution. The rep then asks
the AP for his PIN #. The rep types the number,
which will be alpha numeric into the database.
The SEI rep will read to the AP a statement
confirming that the AP will not be placing
trades that would raise their total holdings to
80% or more of each fund. The trader confirms
the rule and the rep will click "ok". The
database will then open to a trading input
screen for the rep to start entering trades
online.
--------------------------------------------------------------------------------
8
--------------------------------------------------------------------------------
3. AP tells SEI Rep that he SEI rep is checking the creation or redemption
wants to place a creation or box and then types in the fund's ticker symbols.
redemption of units in a
specific fund. The AP Procedures for Redemptions:
states the fund name and ---------------------------
ticker symbol. If the AP states to the SEI rep that he/she
intends to place a redemption order for units of
a particular fund, the SEI rep will not process
a redemption order until PFPC has verified the
receipt of iShares or collateral with respect to
such redemption request. Therefore, the AP
should advise SEI of its `Intent to Redeem'
prior to placing its redemption order. All
redemptions need to be verified by PFPC prior to
4:00 PM EST. PFPC will verify that all iShares
or collateral have been delivered to it prior to
2 p.m. Eastern Standard Time the Business Day
following the day on which the redemption
request is placed. The SEI rep will notify PFPC
via phone or email regarding an `Intent to
Redeem'. PFPC will notify SEI via telephone or
email that the redemption can be processed. The
call will be recorded. The redemption request
may be broken by the Fund or SEI if the iShares
or collateral have not been transferred to PFPC
within the time period stated above.
--------------------------------------------------------------------------------
4. AP states the number of SEI rep types in the number of units to be
units he wants to create or created or redeemed. Only redemption units that
redeem. Steps 4 and 5 have been previously verified will be taken.
continue until the AP has Steps 3 and 4 continue until the AP has
completed all transactions. completed all transactions.
--------------------------------------------------------------------------------
9
--------------------------------------------------------------------------------
5. AP states he has finished The database will summarize all trading into one
trading. online text box, which the SEI rep reads back to
the AP, asking for a verbal confirmation of the
terms of the trade. The representative reads
back the fund's ticker and name, along with
create or redeem and the amount of units. It is
the responsibility of the AP to verify that the
terms of the trade are correct. If the AP does
not confirm that the read back is correct, the
SEI rep will delete the first trade and reenter
the corrected trade. Once the AP indicates that
the terms of the trade are correct, the trade is
released as "good" and confirmed, and the AP
assumes all responsibility for the terms of the
trade. All trades placed with SEI are
irrevocable once the trade has been confirmed.
The SEI rep will give the AP a trade
confirmation batch number for all trades placed.
--------------------------------------------------------------------------------
QUALITY CONTROL / BALANCING
--------------------------------------------------------------------------------
6. The SEI rep sends to the The SEI rep sends an affirmation to the AP via a
AP a facsimile of all trades system-generated fax or email of all trades.
placed.
--------------------------------------------------------------------------------
7. The AP receives the The SEI rep will contact the AP within 15
facsimile. minutes after faxing the affirmation to verify
the trade information in the fax for quality
control purposes. Contact of the AP is done on a
"best efforts" basis. If the SEI rep cannot get
in touch with the AP, the SEI rep will contact
the AP the following day.
--------------------------------------------------------------------------------
FILE TRANSMISSION
--------------------------------------------------------------------------------
8. SEI send trade blotter After verifying that all trades have been
and trade file. approved and balancing the interface file with
the database pend file, SEI will transmit the
trade file to BGI via FTP. SEI will also fax or
email the PDF file (trade blotter) summarizing
the trades to BGI and PFPC (two places)
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
CASH COMPONENT / CONFIRMATIONS
--------------------------------------------------------------------------------
9. PFPC emails to SEI the SEI will manually enter the cash component into
final cash figures. the ETF system. The system will generate the
trade confirmations, including the cash amount,
will be emailed or faxed to AP.
--------------------------------------------------------------------------------
11
"INTERNET" FLOW PROCESS
--------------------------------------------------------------------------------
ORIGINATOR ACTIVITY
---------- --------
--------------------------------------------------------------------------------
CALLER VERIFICATION AND ORDER PROCESSING
--------------------------------------------------------------------------------
1. AP will log into the If the AP is not an authorized transacter with a
iShares Trading Website to valid PIN # the AP will be unable to access the
place a purchase and/or website.
redemption order. In-kind
country trades are to be
placed by 4:00 PM EST to
receive the current day's
trade date. Cash creation
country trades are to be
placed by 11:50.59 PM EST to
receive the current day's
trade date.
--------------------------------------------------------------------------------
2. AP will enter a PIN # in If the PIN # is not valid, the page will
the initial screen of the refresh with an error message.
website.
If the PIN # is correct, this will generate the
next page.
--------------------------------------------------------------------------------
3. The second screen will Both of these are required fields and must be
display the AP's name. The filled before the trader can continue through
trader will need to select the system. If either of these fields is not
their name from a drop down completed correctly, the page will refresh with
box. an error message.
This screen will also require If the "check here" box and the AP trader name
the trader to verify, by are valid, the system will generate the next
checking a check box that page.
any trades being placed will
not raise their total
holding to 80% or more of
the fund(s) that they are
creating.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
4. The third screen is the If the AP trader has a problem at any point
trade entry screen. he/she will have the option to logout or sign in
as a different user.
The AP trader indicates the If any of the required fields are empty the
ticker symbol, transaction page will refresh with an error message.
type, and settlement date
that he/she wants to
purchase/redeem. These are If all required fields are completed correctly
the required fields in this the system will generate the next page.
screen.
After entering this
information the AP trader
will click the "insert
trade" button. This button
creates a screen that will
list all trades that the AP
trader has entered up to
this point. The AP trader
will have the option to
delete any of these trades
before moving forward.
If all trade information is
correct and the AP trader
agrees with the trades
entered then the AP trader
will click the "continue"
button.
--------------------------------------------------------------------------------
13
----------------------------------------------------------------------------------------
QUALITY CONTROL / BALANCING
----------------------------------------------------------------------------------------
5. The fourth screen is the Once the affirmation has been submitted then the trade
"Affirmation of Trade" will be considered "irrevocable." The language noted
screen. at the bottom of the affirmation/estimated confirmation
will refer to the portfolio composition file (PCF),
This screen simply lists the this is a listing of the underlying constituents of the
trade(s) placed by the AP fund.
trader. There is no
required field(s) for
completion on this screen.
The AP trader has four
options on this screen.
He/She can logout, sign in
as a different trader, click
Go Back to revise the listed
trades, or click the
"Finish" button.
Once the "Finish" button has
been clicked the system
will automatically generate
a PDF file of the
affirmation, which can be
saved and/or printed by the
AP trader for his/her
records.
----------------------------------------------------------------------------------------
14
----------------------------------------------------------------------------------------
FILE TRANSMISSION
----------------------------------------------------------------------------------------
6. SEI will send the trade The first trade blotter and trade file will include all
blotter trades taken between 4PM EST of the previous business
day and 7:30 AM of the current business day.
and trade file to the BGI
trade ops
and international portfolio The second trade blotter and trade file will include
managers any trade activity from 7:30AM until 4PM EST for the
current business day.
between 7:30 and 8:30AM EST.
SEI will also send a second
trade
blotter and trade file at 4PM
EST.
----------------------------------------------------------------------------------------
CASH COMPONENT / CONFIRMATIONS
----------------------------------------------------------------------------------------
7. PFPC will email to SEI the SEI will manually enter the cash component into the ETF
system. The system will generate the trade
confirmations, including the cash amount and such
final cash component and NAV confirmations will be emailed or faxed to AP trader.
figures for the Asian
cross-traded funds between
11:00 AM and 12:00PM EST.
PFPC will email to SEI the
final cash component and NAV
for the remaining MSCI Funds
after 4PM EST.
----------------------------------------------------------------------------------------
15
ANNEX III
iShares, Inc.
CERTIFIED AUTHORIZED PERSON OF PARTICIPANT
The following are the names, titles and signatures of persons (each, an
"Authorized Person") authorized to give instructions relating to activity
contemplated by the Authorized Participant Agreement relating to iShares, Inc.
or any other notice, request or instruction on behalf of the Participant
pursuant to the Authorized Participant Agreement, as of _______, 200_.
Name:
Title:
Signature: _____________________________
Name:
Title:
Signature: _____________________________
Name:
Title:
Signature: ____________________________
Name:
Title:
Signature: ______________________________
Name:
Title:
Signature: _______________________________
1
Name:
Title:
Signature: _______________________________
Name:
Title:
Signature: _______________________________
The undersigned, _____________ [name], ______________ [title],
__________________ [name of Participant], does hereby certify that the persons
listed above have been duly authorized to act as Authorized Persons as of the
date hereof, pursuant to the Authorized Participant Agreement by and among
iShares, Inc., SEI Investments Distribution Co. and ________________ [name of
Participant], dated ____________, 200_ and that their signatures set forth above
are their own true and genuine signatures.
In Witness Whereof, the undersigned has hereby set his hand as of this ___ day
of _______, 200_.
____________________________
Name:
Title:
2
ANNEX IV
iShares, Inc.
FUND SUBCUSTODIAN ACCOUNTS FOR DELIVERY OF DEPOSIT SECURITIES
The subcustodian accounts into which a Participant should deposit the
securities constituting the Deposit Securities of each Index Fund are set forth
below:
iShares MSCI Australia Index Fund:
Account Name: iShares MSCI Australia Index Fund
Account Number: 17168
Cash Account Number (US$): 23511002
Other Reference Number: 6028468
iShares MSCI Austria Index Fund:
Account Name: iShares MSCI Austria Index Fund
Account Number: 17167
Cash Account Number (US$): 23510902
Other Reference Number: 6028450
iShares MSCI Belgium Index Fund:
Account Name: iShares MSCI Belgium Index Fund
Account Number: 17169
Cash Account Number (US$): 23511102
Other Reference Number: 6028492
iShares MSCI Brazil (Free) Index Fund:
1
Account Name: iShares MSCI Brazil Index Fund
Account Number: 19653
Cash Account Number (US$): 23760401
Other Reference Number: 6033427
iShares MSCI Canada Index Fund:
Account Name: iShares MSCI Canadian Index Fund
Account Number: 17170
Cash Account Number (US$): 23511202
Other Reference Number: 6028500
iShares MSCI EMU Index Fund:
Account Name: iShares MSCI EMU Index Fund
Account Number: 19652
Cash Account Number: 23760801
Other Reference Number: 6033468
iShares MSCI France Index Fund:
Account Name: iShares MSCI France Index Fund
Account Number: 18638
Cash Account Number (US$): 23547102
Other Reference Number: 6072136
iShares MSCI Germany Index Fund:
Account Name: iShares MSCI Germany Index Fund
2
Account Number: 17172
Cash Account Number (US$): 23511402
Other Reference Number: 6028526
iShares MSCI Greece Index Fund:
Account Name: iShares MSCI Greece Index Fund
Account Number:
Cash Account Number (US$):
Other Reference Number:
iShares MSCI Hong Kong Index Fund:
Account Name: iShares MSCI Hong Kong Index Fund
Account Number: 17175
Cash Account Number (US$): 23510102
Other Reference Number: 6028559
iShares MSCI Italy Index Fund
Account Name: iShares MSCI Italy Index Fund
Account Number: 17176
Cash Account Number (US$): 23510202
Other Reference Number: 6028567
iShares MSCI Japan Index Fund:
Account Name: iShares MSCI Japan Index Fund
Account Number: 17177
3
Cash Account Number (US$): 23510302
Other Reference Number: 6028575
iShares MSCI Malaysia (Free) Index Fund:
Account Name: iShares MSCI Malaysian Index Fund
Account Number: 17179
Cash Account Number (US$): 23510502
Other Reference Number: 6028591
iShares MSCI Mexico (Free) Index Fund:
Account Name: iShares MSCI Mexican Index Fund
Account Number: 17178
Cash Account Number (US$): 23510402
Other Reference Number: 6028583
iShares MSCI Netherlands Index Fund:
Account Name: iShares MSCI Netherlands Index Fund
Account Number: 17180
Cash Account Number (US$): 23510602
Other Reference Number: 6028617
iShares MSCI Singapore (Free) Index Fund:
Account Name: iShares MSCI Singapore Index Fund
Account Number: 17182
Cash Account Number (US$): 23510802
4
Other Reference Number: 6028641
iShares MSCI South Africa Index Fund:
Account Name: iShares MSCI South African Index Fund
Account Number:
Cash Account Number (US$):
Other Reference Number:
iShares MSCI South Korea Index Fund:
Account Name: iShares MSCI Korea Index Fund
Account Number: 19655
Cash Account Number (US$): 23760601
Other Reference Number: 6033443
iShares MSCI Spain Index Fund:
Account Name: iShares MSCI Spain Index Fund
Account Number: 17173
Cash Account Number (US$): 23511502
Other Reference Number: 6028534
iShares MSCI Sweden Index Fund:
Account Name: iShares MSCI Sweden Index Fund
Account Number: 17181
Cash Account Number (US$): 23510702
Other Reference Number: 6028625
5
iShares MSCI Switzerland Index Fund:
Account Name: iShares MSCI Switzerland Index Fund
Account Number: 17171
Cash Account Number (US$): 23511302
Other Reference Number: 6028518
iShares MSCI Taiwan Index Fund:
Account Name: iShares MSCI Taiwan Index Fund
Account Number: 19654
Cash Account Number (US$): 23760501
Other Reference Number: 6033435
iShares MSCI Thailand (Free) Index Fund:
Account Name: iShares MSCI Thailand (Free) Index
Fund
Account Number:
Cash Account Number (US$):
Other Reference Number:
iShares MSCI United Kingdom Index Fund:
Account Name: iShares MSCI United Kingdom Index
Fund
Account Number:
Cash Account Number (US$):
Other Reference Number:
6
iShares MSCI USA Index Fund:
Account Name: iShares MSCI USA Index Fund
Account Number:
Cash Account Number (US$):
Other Reference Number:
7