Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave N.W.
Washington, D.C. 20004
December 23, 2004
VIA EDGAR CORRESPONDENCE AND E-MAIL
U.S. Securities and Exchange Commission
Division of Investment Management
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attn: James O'Connor, Esq.
RE: ISHARES, INC. FILE NOS. 33-97598, 811-09102
Dear Mr. O'Connor:
This letter is in response to comments that you provided via telephone call
on December 16, 2004 regarding Post-Effective Amendment No. 28 to the
above-referenced Registrant's registration statement on Form N-1A (the
"Post-Effective Amendment"), which was filed with the Securities and Exchange
Commission ("SEC") pursuant to Rule 485(a) under the Securities Act of 1933, as
amended, and Rule 8b-16 under the Investment Company Act of 1940, as amended, on
November 1, 2004, and which included the Registrant's Prospectus and Statement
of Additional Information ("SAI"). The comments of the SEC Staff and the
Registrant's responses are listed below:
PROSPECTUS - DISCLOSURE REGARDING THE USE AND EFFECTS OF USING FAIR VALUE
PRICING
1. Comment: Please confirm that the Registrant has provided disclosure
regarding the circumstances under which it will use fair value pricing that
is specific to each series of the Registrant as required by the Instruction
to Item 6(a)(1) of Form N-1A.
Response: The Registrant discloses the circumstances under which it will
use fair value pricing as required by the Instruction to Item 6(a)(1) of
Form N-1A in the "Determination of Net Asset Value" section on page 80 of
the Prospectus. The Registrant believes this disclosure is sufficiently
specific to each series of the Registrant.
Mr. James O'Connor
December 23, 2004
Page 2
2. Comment: Please confirm that the Registrant has provided disclosure
regarding the effects of using fair value pricing as required by the
Instruction to Item 6(a)(1) of Form N-1A.
Response: The Registrant discloses the effects of using fair value pricing
as required by the Instruction to Item 6(a)(1) of Form N-1A in the
"Determination of Net Asset Value" section on page 80 of the Prospectus.
PROSPECTUS - DISCLOSURE REGARDING PORTFOLIO HOLDINGS INFORMATION
3. Comment: Please confirm that the Registrant states in its Prospectus that a
description of the Registrant's policies and procedures with respect to the
disclosure of the Funds' portfolio securities is available in its SAI and,
if applicable, on its website as required by Item 4(d) of Form N-1A.
Response: Page 5 of the Prospectus states that a description of the
Registrant's policies and procedures with respect to the disclosure of the
Funds' portfolio securities is available in the Registrant's SAI, as
required by Item 4(d) of Form N-1A.
STATEMENT OF ADDITIONAL INFORMATION - DISCLOSURE REGARDING PORTFOLIO HOLDINGS
INFORMATION
4. Comment: Please simplify the following statement on page 8 of the SAI:
"The Funds' Board of Directors has adopted a policy regarding the
disclosure of the Funds' portfolio holdings information that requires that
such information be disclosed in a manner that...(c) does not advantage any
current or prospective Fund shareholders over any other current or
prospective Fund shareholders, except to the extent that 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, 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;...."
Response: The Registrant has revised the paragraph at issue to state:
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Mr. James O'Connor
December 23, 2004
Page 3
"The Funds' Board of Directors 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 "BGFA" or "Investment Adviser"), the Funds'
distributor (the "Distributor"), or any affiliated person of the Funds, the
Investment Adviser 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 include 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."
5. Comment: Please address the disclosure required by Item 11(f)(1)(ii) of
Form N-1A with respect to any conditions or restrictions placed on the use
of information about portfolio securities that is disclosed, including any
requirement that the information be kept confidential or prohibitions on
trading based on the information, and any procedures to monitor the use of
this information.
Response: The Registrant believes that the disclosure in the "Portfolio
Holdings Information" section on page 8 of the SAI, which describes the
Registrant's policies and procedures with respect to the disclosure of the
Funds' portfolio securities to any person adequately addresses the
requirements of Item 11(f)(1) of Form N-1A, including those of Item
11(f)(1)(ii).
6. Comment: Please address the disclosure required by Item 11(f)(1)(iv) of
Form N-1A with respect to any policies and procedures regarding the receipt
of compensation or other consideration by the fund, its investment adviser,
or any other party in connection with the disclosure of information about
portfolio securities.
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Mr. James O'Connor
December 23, 2004
Page 4
Response: The Registrant believes that the disclosure in the "Portfolio
Holdings Information" section on page 8 of the SAI adequately describes the
Registrant's policies and procedures with respect to the disclosure of the
Funds' portfolio securities to any person. As disclosed in the "Portfolio
Holdings Information" section of the SAI, the Funds do not provide
selective disclosure of portfolio holdings information, except through the
creation/redemption process. The Registrant believes that any compensation
received as a result of the creation/redemption process is adequately
disclosed in the "Purchase and Redemption of iShares" section beginning on
page 51 of the SAI.
7. Comment: Please address the disclosure required by Item 11(f)(1)(vi) of
Form N-1A with respect to the procedures that the Registrant uses to ensure
that disclosure of information about portfolio securities is in the best
interests of Fund shareholders, including procedures to address conflicts
between the interests of Fund shareholders, on the one hand, and those of
the Funds' investment adviser; principal underwriter; or any affiliated
person of the Funds, their investment adviser, or their principal
underwriter, on the other.
Response: As stated in the Registrant's SAI, the Registrant's Board of
Directors has adopted a policy regarding the disclosure of the Funds'
portfolio holdings information that requires that such information be
disclosed in a manner that, among other things, does not put the interests
of the Funds' investment adviser, distributor, or any affiliated person of
the Funds, the investment advisor or the distributor, above those of Fund
shareholders, and does not provide selective access to portfolio holdings
information except pursuant to the procedures disclosed in the Registrant's
SAI and to the extent appropriate confidentiality arrangements limiting the
use of such information are in effect.
The Registrant understands that it is responsible for the adequacy and
accuracy of the disclosure in the Post Effective Amendment; Staff comments or
changes to disclosure in response to Staff comments in the Post Effective
Amendment reviewed by the Staff does not foreclose the Commission from taking
any action with respect to the Post Effective Amendment; and the Registrant may
not assert Staff comments as a defense in any proceeding initiated by the
Commission or any person under the Federal securities laws of the United States.
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Mr. James O'Connor
December 23, 2004
Page 5
Please contact me at (202) 739-5654 if you have any questions regarding the
Registrant's responses.
Very truly yours,
/s/ W. John McGuire
W. John McGuire
cc: Richard F. Morris, Esq.
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