0000927016-01-503131.txt : 20011019
0000927016-01-503131.hdr.sgml : 20011019
ACCESSION NUMBER: 0000927016-01-503131
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010731
FILED AS OF DATE: 20011012
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISHARES TRUST
CENTRAL INDEX KEY: 0001100663
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 943351276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-09729
FILM NUMBER: 1757719
BUSINESS ADDRESS:
STREET 1: 45 FREMONT STREET
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94105
N-30D
1
dn30d.txt
GOLDMAN SACHS ISHARES
iShares Goldman Sachs Series
ANNUAL REPORT
July 31, 2001
[LOGO]
The way you invest now.
Only better.
TABLE OF CONTENTS
Shareholder Letter............................................... 1
Market Overview.................................................. 3
Managers' Discussion & Analysis.................................. 4
Schedules of Investments......................................... 12
iShares Goldman Sachs Technology Index Fund................... 12
iShares Goldman Sachs Networking Index Fund................... 15
iShares Goldman Sachs Semiconductor Index Fund................ 16
iShares Goldman Sachs Software Index Fund..................... 17
Financial Statements............................................. 18
Financial Highlights............................................. 21
Notes to the Financial Statements................................ 22
Report of Independent Accountants................................ 27
Supplemental Information (Unaudited)............................. 28
THIS PAGE INTENTIONALLY LEFT BLANK.
TO OUR SHAREHOLDERS
The iShares(R) Funds' annual period ended July 31, 2001 was one of continued
market volatility. Significant events during this period included:
- The Nasdaq Composite Index experienced its worst first quarter performance in
history, and the S&P 500 experienced its worst first quarter in 23 years.
- The Federal Reserve Board lowered short-term interest rates six times during
the first half of 2001, bringing the federal funds rate to 3.75% and the
discount rate to 3.25%.
- In April, the jobless rate reached 4.55%, its highest level in ten years.
- The federal government passed a 10-year, $1.35 trillion tax-cut package that
will provide tax rebates in the third quarter of 2001.
As you read through this report and review the performance of the Funds in your
portfolio, we encourage you to keep long-term goals in mind when making
investment decisions. While one fund's recent performance may be better than
another's, it is important to remember that past performance is no guarantee of
future results. Even as market conditions change, you should maintain your
investment strategy as long as it remains appropriate for your short- or
long-term objectives. One trait many successful investors share is the ability
to stay focused on their personal financial goals and fundamental long-term
market opinions, while ignoring temporary market swings. Also, please note that
three of the funds in this annual report have only three weeks of return
information to report as of July 31, 2001. These three are the iShares Goldman
Sachs Networking Index Fund, the iShares Goldman Sachs Semiconductor Index Fund,
and the iShares Goldman Sachs Software Index Fund.
We trust that the Funds are fulfilling your expectations as a simple,
cost-effective way for you to invest in your future, and will continue to do so.
We also encourage you to consider the appropriateness of other iShares Funds as
part of your long-term investment program. iShares Funds offer investors a wide
range of indexed investment choices based on market capitalization, investment
style, and sector exposure.
We appreciate your confidence and look forward to helping you meet your
investment goals.
iSHARES FUNDS SEPTEMBER 2001
--------------------------------------------------------------------------------
iSHARES SHAREHOLDER LETTER PAGE 1
THIS PAGE INTENTIONALLY LEFT BLANK.
MARKET OVERVIEW
Interest rate concerns dominated many investors' attention during the 12-month
period ended July 31, 2001. However, as the year unfolded and the economic
landscape moved from an inflationary environment to one of sluggish growth, many
investors' worries went from fears of an economy that was growing too rapidly to
fears of one that was growing too slowly, and the Federal Reserve Board ("the
Fed") reversed its stance from raising interest rates in an effort to stem
inflation to cutting rates in an effort to stimulate growth.
During the first few months of the annual period, signs of a slowing economy
quelled investor concerns about inflation. However, investors began to focus on
new areas for worry. In September, the price of crude oil reached a 10-year
high. At the same time, the euro dipped to an all-time low since its
introduction in January 1999. Many investors' concerns about the impact that
these factors would have on corporate earnings were realized as industry leaders
announced that they would fail to meet earnings expectations. By December 2000,
worries that the economy was heading for a recession began to mount. Economic
news suggested that the economy's growth rate had slowed from 5.0% in the first
half of the year 2001 to less than 2.5% in the second half.
The earnings warnings and revisions that had begun in late 2000 became
commonplace in the first quarter of 2001, as did layoffs. Markets reflected the
poor investor sentiment during the quarter: the S&P 500 Index logged its worst
first quarter in 23 years. On April 4, the Nasdaq reached 1638, representing a
loss of two-thirds of its value since its peak on March 10, 2000. Poor economic
indicators contributed to the bleak outlook.
In response to the signs of a faltering economy, the Fed launched an aggressive
campaign to avoid a recession. By June, the Fed had cut rates six times in six
months. The cuts represented a cumulative 2.75%, reducing the Federal Funds rate
from 6.50% to 3.75%. The federal government also acted to stimulate the economy.
In the second quarter, a $1.35 trillion tax cut was passed, including a tax
rebate that would inject capital into the economy in the third quarter.
Despite these actions, mixed economic signs and poor earnings growth weighed on
the markets. Industrial output figures reached their lowest levels in five
years. GDP growth dipped to 0.7% for the second quarter, a fraction of its 5%
rate a year earlier. Jobless claims reached 4.5% in July, and White House
economic advisor Lawrence Lindsay warned that the rate could reach 5% by the end
of summer. The Fed expressed continued concerns about the level of economic
weakness, indicating more interest rate cuts may come later in the year.
The impact of the slowdown hit technology stocks particularly hard. For example,
while consumer spending grew at a mere annualized 2.1% during the second
quarter, investment in equipment and software was reported at a negative 14.5%
annualized rate during the same period. As cutbacks in technology spending led
to increased inventories among technology companies, many posted earnings levels
that were significantly lower than in previous quarters. In July, Nasdaq short
interest spiked to an all-time high, reflecting the negative sentiment
surrounding technology companies.
--------------------------------------------------------------------------------
iSHARES MARKET OVERVIEW PAGE 3
MANAGERS' DISCUSSION & ANALYSIS
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
PERFORMANCE AS OF 7/31/01
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
INCEPTION TO JULY 31, 2001
-----------------------------------------------------------
FUND INCEPTION DATE INDEX MARKET* NAV**
---- -------------- ------- ------------------------ ------------------------
iShares Goldman Sachs Technology Index
Fund 03/13/01 (3.59)% 3.50% (3.76)%
--------------------------------------------------------------------------------
* Calculated based on the Fund's Market Price from the Fund's first day of
trading on the exchange (03/19/01)
** Calculated based on the Fund's Net Asset Value (NAV)
Total returns represent the iShares Fund's change in value during the periods
noted above. The Market and NAV returns assume that dividends and capital
gains distributions have been reinvested in the Fund at market price and net
asset value, respectively. Market price returns do not include brokers'
commissions. If brokerage commissions were included, market returns would be
lower. The Fund's past performance is no guarantee of future results. The
returns shown both in the table above and on the graph that follows do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of shares of the Fund will vary with changes in market
conditions. Shares of the Fund may be worth more or less than their original
cost when they are redeemed or sold in the market. The Goldman Sachs Indices
are statistical composites that track specified financial markets or sectors.
Unlike the Funds, the Indices do not actually hold a portfolio of securities
and therefore do not incur the management, administration, distribution,
transaction or other expenses incurred by the Funds. These expenses
negatively impact the performance of the Funds.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
TOP TEN INDEX HOLDINGS
Microsoft Corp. 8.9%
Intel Corp. 8.0%
AOL Time Warner Inc. 7.8%
International Business Machines Corp. 7.4%
Cisco Systems Inc. 5.6%
Oracle Corp. 4.1%
Dell Computer Corp. 2.8%
Texas Instruments Inc. 2.4%
Sun Microsystems Inc. 2.1%
Hewlett-Packard Co. 1.9%
The iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND seeks to track the Goldman Sachs
Technology Index. For the period from the Fund's inception on March 13, 2001
through July 31, 2001 (the "reporting period"), the Fund declined 3.76%,
compared with the Goldman Sachs Technology Index's decline of 3.59%.
The Fund's reporting period was marked with weak economic indicators, corporate
earnings disappointments, and job cuts. Against a backdrop of a slowing economy,
the Federal Reserve Board (the "Fed") continued to aggressively lower interest
rates in an effort to avoid a recession. By the end of June, the Fed Funds rate
stood at 3.75%, its lowest level in seven years. In July, Fed chairman Alan
Greenspan cautioned that another rate cut might be necessary to stem the
economic slowdown. Two key economic indicators supported the Fed's caution: the
jobless rate reached its highest level in ten years, and second quarter GDP
growth was a mere 0.7%, the slowest rate in eight years.
--------------------------------------------------------------------------------
PAGE 4 [iSHARES LOGO]
Not surprisingly, the bulk of corporate layoffs and earnings disappointments
came from the technology sector. Technology spending plunged throughout the
reporting period, and second quarter PC shipments experienced their first
year-over-year drop on record. Faced with contracting demand and increasing
inventory levels, many technology companies revised earnings estimates downward
and trimmed their workforces. In July alone, technology companies laid off
30,000 workers.
Within the Index, top holding Microsoft Corporation was the biggest positive
contributor to performance. Representing 8.90% of the Index as of July 31, 2001,
Microsoft rebounded during the period ended July 31, 2001 to return 22.15%.
Other positive contributors included AOL Time Warner Inc. (7.75% of the Index as
of July 31, 2001), which gained 11.67%, and Dell Computer Corporation (2.81% of
the Index at July 31), which rose 12.50%. However, technology bellwethers Cisco
Systems Inc. (5.63% of the Index as of July 31, 2001) and Sun Microsystems Inc.
(2.12% of the Index as of July 31) were a drag on overall fund performance,
losing 10.08% and 14.82%, respectively. Hewlett-Packard Co. also detracted from
performance, sinking 21.52% during the reporting period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
GROWTH OF $10,000 INVESTMENT
iSHARES GOLDMAN SACHS GOLDMAN SACHS
TECHNOLOGY INDEX FUND TECHNOLOGY INDEX
$10,000 $10,000
Mar-01 $9,053 $9,054
Apr-01 $10,776 $10,782
May-01 $10,344 $10,353
Jun-01 $10,361 $10,380
Jul-01 $9,624 $9,641
Past performance is no guarantee of future results.
--------------------------------------------------------------------------------
iSHARES MANAGERS' DISCUSSION & ANALYSIS PAGE 5
MANAGERS' DISCUSSION & ANALYSIS
iSHARES GOLDMAN SACHS NETWORKING INDEX FUND
PERFORMANCE AS OF 7/31/01
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
INCEPTION TO JULY 31, 2001
----------------------------------------------------------
FUND INCEPTION DATE INDEX MARKET* NAV**
---- -------------- ------ ------------------------ ------------------------
iShares Goldman Sachs Networking Index
Fund 07/10/01 4.64% (3.75)% 4.68%
--------------------------------------------------------------------------------
* Calculated based on the Fund's Market Price from the Fund's first day of
trading on the exchange (07/13/01)
** Calculated based on the Fund's Net Asset Value (NAV)
Total returns represent the iShares Fund's change in value during the periods
noted above. The Market and NAV returns assume that dividends and capital
gains distributions have been reinvested in the Fund at market price and net
asset value, respectively. Market price returns do not include brokers'
commissions. If brokerage commissions were included, market returns would be
lower. The Fund's past performance is no guarantee of future results. The
returns shown in the table above do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
The investment return and principal value of shares of the Fund will vary
with changes in market conditions. Shares of the Fund may be worth more or
less than their original cost when they are redeemed or sold in the market.
The Goldman Sachs Indices are statistical composites that track specified
financial markets or sectors. Unlike the Funds, the Indices do not actually
hold a portfolio of securities and therefore do not incur the management,
administration, distribution, transaction or other expenses incurred by the
Funds. These expenses negatively impact the performance of the Funds.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
TOP TEN INDEX HOLDINGS
Motorola Inc. 13.7%
QUALCOMM Inc. 11.1%
Cisco Systems Inc. 10.0%
Lucent Technologies Inc. 8.3%
Nortel Networks Corp. 6.9%
Corning Inc. 5.3%
Agilent Technologies Inc. 4.8%
JDS Uniphase Corp. 4.4%
Ciena Corp. 4.0%
Amdocs Ltd. 3.6%
The iSHARES GOLDMAN SACHS NETWORKING INDEX FUND seeks to track the Goldman Sachs
Networking Index. For the period from the Fund's inception on July 10, 2001
through July 31, 2001 (the "reporting period"), the Fund returned 4.68%,
compared with the Goldman Sachs Networking Index's return of 4.64%.
The Fund's launch came on the heels of an aggressive campaign by the Federal
Reserve Board (the "Fed") to revive a sluggish economy. In the face of weak
economic indicators and poor corporate earnings, the Fed sliced rates throughout
the first half of the year. In July, Fed Chairman Alan Greenspan warned that
additional cuts might be needed to stimulate the economy. Economic news released
in July confirmed his cautionary stance: second quarter GDP growth was a weak
0.7%, down from 1.3% in the first quarter and its lowest level in eight years.
In addition, the jobless rate rose to 4.5%, its highest level in more than 10
years.
The technology sector suffered the brunt of the economic slowdown, issuing
earnings warnings and laying off workers. During the month of July alone,
technology companies laid off 30,000 employees.
--------------------------------------------------------------------------------
PAGE 6 [iSHARES LOGO]
Despite the technology sector's malaise, some networking stocks posted healthy
gains during the reporting period, contributing to the Index's positive
performance. Motorola Inc., the Index's top holding and 13.71% of the Index as
of July 31, 2001, gained an impressive 20.58% during the reporting period. Cisco
Systems Inc. (10.05% of the Index as of July 31, 2001) rebounded from earlier
negative performance to gain 18.64% during the period. Other strong performers
included Lucent Technologies Inc. (8.34% of the Index) and CIENA Corporation
(3.95% of the Index as of July 31), which returned 11.48% and 13.13%,
respectively. However, JDS Uniphase (4.44% of the Index) continued to struggle,
losing 14.37% during the period. The world's largest maker of fiber-optic parts,
JDS Uniphase Corp. reported a full-year loss of $50.6 billion, the largest
annual loss in U.S. history.
--------------------------------------------------------------------------------
iSHARES MANAGERS' DISCUSSION & ANALYSIS PAGE 7
MANAGERS' DISCUSSION & ANALYSIS
iSHARES GOLDMAN SACHS SEMICONDUCTOR INDEX FUND
PERFORMANCE AS OF 7/31/01
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
INCEPTION TO JULY 31, 2001
-----------------------------------------------------------
FUND INCEPTION DATE INDEX MARKET* NAV**
---- -------------- ------- ------------------------ ------------------------
iShares Goldman Sachs Semiconductor
Index Fund 07/10/01 12.63% 1.72% 12.61%
--------------------------------------------------------------------------------
* Calculated based on the Fund's Market Price from the Fund's first day of
trading on the exchange (07/13/01)
** Calculated based on the Fund's Net Asset Value (NAV)
Total returns represent the iShares Fund's change in value during the periods
noted above. The Market and NAV returns assume that dividends and capital
gains distributions have been reinvested in the Fund at market price and net
asset value, respectively. Market price returns do not include brokers'
commissions. If brokerage commissions were included, market returns would be
lower. The Fund's past performance is no guarantee of future results. The
returns shown in the table above do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
The investment return and principal value of shares of the Fund will vary
with changes in market conditions. Shares of the Fund may be worth more or
less than their original cost when they are redeemed or sold in the market.
The Goldman Sachs Indices are statistical composites that track specified
financial markets or sectors. Unlike the Funds, the Indices do not actually
hold a portfolio of securities and therefore do not incur the management,
administration, distribution, transaction or other expenses incurred by the
Funds. These expenses negatively impact the performance of the Funds.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
TOP TEN INDEX HOLDINGS
Motorola Inc. 9.4%
Intel Corp. 9.1%
Texas Instruments Inc. 8.4%
Applied Materials Inc. 7.8%
STMicroelectronics NV 6.5%
Micron Technology Inc. 5.8%
Analog Devices Inc. 3.8%
Maxim Integrated Products Inc. 3.5%
Linear Technology Corp. 3.2%
Xilinx Inc. 3.0%
The iSHARES GOLDMAN SACHS SEMICONDUCTOR INDEX FUND seeks to track the Goldman
Sachs Semiconductor Index. For the period from the Fund's inception on July 10,
2001 through July 31, 2001 (the "reporting period"), the Fund returned 12.61%,
compared with the Goldman Sachs Semiconductor Index's return of 12.63%.
The Fund's inception came in the wake of a slowing economy and weak corporate
revenues. During the months preceding the Fund's launch, the Federal Reserve
Board (the "Fed") had aggressively cut interest rates in an effort to steer the
economy clear of recession. By July, Fed Chairman Alan Greenspan warned that
additional Fed easing might be needed to revive economic growth. During the
month of July, weak economic indicators echoed this sentiment. Second quarter
GDP growth was only 0.7%, compared with 1.3% in the first quarter and 5% in the
first half of 2000. Jobless claims reached 4.5%, with warnings that they could
go as high as 5.0%.
--------------------------------------------------------------------------------
PAGE 8 [iSHARES LOGO]
The technology sector, in particular, felt the effects of a slowing economy. As
corporate spending on technology slowed, many technology companies failed to
meet earnings estimates and were forced to lay off workers. Following layoffs in
the first half of the year, an additional 30,000 technology company employees
lost their jobs in July. However, the semiconductor sector, which had suffered
from declining demand during the first half of the year, began to show renewed
signs of life in July.
Index holdings reflected this renewed strength. Top holding Motorola (9.44% of
the Index as of July 31, 2001) posted a gain of 20.58% during the reporting
period. Semiconductor company Texas Instruments Inc., the Index's third largest
holding and 8.35% of the Index as of July 31, 2001, also fared well, returning
16.43% for the reporting period. Other strong performers were Analog Devices
Inc. (3.81% of the Index as of July 31, 2001) and Maxim Integrated Products Inc.
(3.49% of the Index), which gained 18.62% and 16.74%, respectively.
--------------------------------------------------------------------------------
iSHARES MANAGERS' DISCUSSION & ANALYSIS PAGE 9
MANAGERS' DISCUSSION & ANALYSIS
iSHARES GOLDMAN SACHS SOFTWARE INDEX FUND
PERFORMANCE AS OF 7/31/01
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
INCEPTION TO JULY 31, 2001
-----------------------------------------------------------
FUND INCEPTION DATE INDEX MARKET* NAV**
---- -------------- ------- ------------------------ ------------------------
iShares Goldman Sachs Software Index
Fund 07/10/01 (1.68)% (5.92)% (1.71)%
--------------------------------------------------------------------------------
* Calculated based on the Fund's Market Price from the Fund's first day of
trading on the exchange (07/13/01)
** Calculated based on the Fund's Net Asset Value (NAV)
Total returns represent the iShares Fund's change in value during the periods
noted above. The Market and NAV returns assume that dividends and capital
gains distributions have been reinvested in the Fund at market price and net
asset value, respectively. Market price returns do not include brokers'
commissions. If brokerage commissions were included, market returns would be
lower. The Fund's past performance is no guarantee of future results. The
returns shown in the table above do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
The investment return and principal value of shares of the Fund will vary
with changes in market conditions. Shares of the Fund may be worth more or
less than their original cost when they are redeemed or sold in the market.
The Goldman Sachs Indices are statistical composites that track specified
financial markets or sectors. Unlike the Funds, the Indices do not actually
hold a portfolio of securities and therefore do not incur the management,
administration, distribution, transaction or other expenses incurred by the
Funds. These expenses negatively impact the performance of the Funds.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
TOP TEN INDEX HOLDINGS
Oracle Corp. 11.1%
Microsoft Corp. 9.6%
Computer Associates International Inc. 7.6%
Veritas Software Corp. 6.0%
Siebel Systems Inc. 5.9%
PeopleSoft Inc. 4.9%
Check Point Software Technologies Ltd. 3.8%
Yahoo! Inc. 3.8%
Amdocs Ltd. 3.8%
Adobe Systems Inc. 3.4%
The iSHARES GOLDMAN SACHS SOFTWARE INDEX FUND seeks to track the Goldman Sachs
Software Index. For the period from the Fund's inception on July 10, 2001
through July 31, 2001 (the "reporting period"), the Fund declined 1.71%,
compared with the Goldman Sachs Software Index's decline of 1.68%.
During the months leading up to the Fund's inception, the Federal Reserve Board
(the "Fed") led an aggressive campaign to keep the sagging U.S. economy from
sinking into a recession. Despite the Fed's efforts, however, in July Corporate
America released poor second quarter earnings and announced additional job cuts.
Fed Chairman Alan Greenspan warned that additional interest rate cuts might be
needed to effectively stimulate economic growth. Second quarter GDP growth
figures of 0.7% -- the weakest numbers in eight years -- and a jobless rate of
4.5% supported the pessimistic sentiment.
--------------------------------------------------------------------------------
PAGE 10 [iSHARES LOGO]
The slowdown was probably felt most severely in the technology sector. Corporate
spending on technology slowed dramatically throughout the first half of the
year, causing technology companies to either miss second quarter earnings
estimates or revise them downward. As these numbers were released in July, many
technology stocks saw their share prices drop. Following layoffs earlier in the
year, a second wave of job cuts in July affected 30,000 technology workers.
Within the Index, performance was mixed. Index holdings Computer Associates
International Inc. (7.55% of the Index as of July 31, 2001) and PeopleSoft Inc.
(4.88% of the Index as of July 31, 2001) posted returns of 10.80% and 9.04%,
respectively, for the period from July 10 to July 31, 2001. On the other side of
the performance spectrum, Veritas Software Corp. (6.02% of the Index as of
July 31, 2001) and Siebel Systems Inc. (5.93% of the Index) lost 15.10% and
13.85%, respectively. Adobe Systems Inc. (3.40% of the Index as of July 31) also
continued to struggle, declining 12.71% for the period.
--------------------------------------------------------------------------------
iSHARES MANAGERS' DISCUSSION & ANALYSIS PAGE 11
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2001
SECURITY SHARES VALUE
-----------------------------------------------------------------
COMMON STOCKS - 100.03%
-----------------------------------------------------------------
Microsoft Corp.+ 106,395 $ 7,042,285
Intel Corp. 213,157 6,354,210
AOL Time Warner Inc.+ 135,005 6,135,977
International Business Machines Corp. 55,707 5,860,933
Cisco Systems Inc.+ 231,971 4,458,483
Oracle Corp.+ 177,928 3,216,938
Dell Computer Corp.+ 82,443 2,220,190
Texas Instruments Inc. 55,028 1,898,466
Sun Microsystems Inc.+ 103,233 1,681,666
Hewlett-Packard Co. 61,584 1,518,661
QUALCOMM Inc.+ 23,995 1,517,204
EMC Corp.+ 69,950 1,379,414
Motorola Inc. 69,615 1,301,104
Applied Materials Inc.+ 25,649 1,176,263
Automatic Data Processing Inc. 19,787 1,008,148
Electronic Data Systems Corp. 14,834 947,151
STMicroelectronics NV-NY Shares+* 28,115 895,182
First Data Corp. 12,414 860,538
Nortel Networks Corp. 101,033 803,212
Compaq Computer Corp. 53,460 798,692
Micron Technology Inc.+ 18,893 793,506
Lucent Technologies Inc. 107,929 723,124
Computer Associates International Inc. 18,275 630,122
eBay Inc.+ 8,569 536,162
Veritas Software Corp.+ 12,600 534,366
Analog Devices Inc.+ 11,386 523,756
Siebel Systems Inc.+* 14,365 495,018
Maxim Integrated Products Inc.+ 10,395 479,937
Paychex Inc. 11,821 464,565
Corning Inc.+* 29,504 462,033
Concord EFS Inc.+ 7,681 440,736
Linear Technology Corp. 10,059 438,371
Xilinx Inc.+ 10,447 417,880
Agilent Technologies Inc.+ 14,487 414,473
PeopleSoft Inc.+ 9,328 407,354
JDS Uniphase Corp.+ 41,725 385,539
Flextronics International Ltd.+ 14,107 383,569
Altera Corp.+ 12,279 369,107
Solectron Corp.+ 20,726 362,290
VeriSign Inc.+* 6,361 347,374
Ciena Corp.+ 10,365 343,496
Check Point Software Technologies Ltd.+* 7,235 320,076
KLA-Tencor Corp.+ 5,872 319,378
Amdocs Ltd.+ 7,036 317,113
Yahoo! Inc.+* 17,984 316,878
ASM Lithography Holding NV "R"+ 14,798 302,915
Adobe Systems Inc. 7,594 284,699
BEA Systems Inc.+* 12,456 274,655
Celestica Inc.+* 5,537 267,160
Juniper Networks Inc.+ 10,195 261,910
Broadcom Corp. "A"+* 5,729 249,956
LSI Logic Corp.+ 11,378 247,813
Electronic Arts Inc.+ 4,220 240,202
Brocade Communications System Inc.+ 7,176 236,162
SunGard Data Systems Inc.+ 8,525 232,477
Novellus Systems Inc.+ 4,512 229,977
Intuit Inc.+ 6,627 227,836
Fiserv Inc.+ 3,951 226,708
Sanmina Corp.+ 10,153 221,437
Tellabs Inc.+ 12,983 213,830
Apple Computer Inc.+ 11,082 208,231
Sabre Holdings Corp.+ 4,190 205,980
Advanced Micro Devices Inc.+ 10,835 197,847
Jabil Circuit Inc.+* 6,075 197,438
Citrix Systems Inc.+ 5,843 195,565
Computer Sciences Corp.+ 5,337 192,719
Teradyne Inc.+ 5,521 187,604
Lexmark International Group Inc. "A"+ 4,091 187,041
DST Systems Inc.+ 3,898 184,181
NVIDIA Corp.+* 2,217 179,355
National Semiconductor Corp.+ 5,518 176,852
Cadence Design Systems Inc.+ 7,902 174,318
Applied Micro Circuits Corp.+ 9,510 163,001
Compuware Corp.+ 11,698 160,263
PMC - Sierra Inc.+ 5,219 158,188
BMC Software Inc.+ 7,710 154,200
Comverse Technology Inc.+ 5,437 153,758
Microchip Technology Inc.+ 4,156 150,863
Atmel Corp.+ 14,748 147,627
Amazon.com Inc.+* 11,369 141,999
Sonus Networks Inc.+* 6,451 141,535
RF Micro Devices Inc.+* 5,163 141,260
Openwave Systems Inc.+* 5,347 136,669
SCI Systems Inc.+ 4,651 135,809
Scientific-Atlanta Inc. 5,152 131,118
Peregrine Systems Inc.+* 4,707 128,736
Network Appliance Inc.+ 10,308 128,644
Agere Systems Inc.+ 23,117 127,837
i2 Technologies Inc.+ 13,006 125,508
Integrated Device Technology Inc.+* 3,377 124,442
--------------------------------------------------------------------------------
PAGE 12 [iSHARES LOGO]
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2001
SECURITY SHARES VALUE
-----------------------------------------------------------------
COMMON STOCKS (CONTINUED)
-----------------------------------------------------------------
Affiliated Computer Services Inc. "A"+* 1,490 $ 123,432
ADC Telecommunications Inc.+ 25,069 123,089
AVX Corp. 5,523 121,506
CDW Computer Centers Inc.+ 2,777 119,328
Symantec Corp.+ 2,391 115,270
Vitesse Semiconductor Corp.+* 5,805 114,881
Unisys Corp.+ 10,019 114,718
Avaya Inc.+ 8,981 112,532
Marvell Technology Group Ltd.+* 3,652 112,080
QLogic Corp.+ 2,914 111,927
Cabletron Systems Inc.+ 5,977 110,993
Rational Software Corp.+ 6,430 110,082
Cypress Semiconductor Corp.+ 4,017 109,584
Lam Research Corp.+* 3,912 109,497
Gateway Inc.+* 10,220 107,208
Mercury Interactive Corp.+ 2,617 101,173
PerkinElmer Inc. 3,197 100,706
Extreme Networks Inc.+ 3,580 100,347
ONI Systems Inc.+* 4,319 99,985
Synopsys Inc.+ 1,929 99,826
Bisys Group Inc.+* 1,841 98,475
Micrel Inc.+ 2,885 97,167
American Tower Corp.+* 5,707 96,734
Palm Inc.+ 17,951 96,397
Homestore.com Inc.+* 3,407 94,033
Vishay Intertechnology Inc.+ 3,871 93,098
TriQuint Semiconductor Inc.+ 4,087 92,571
Symbol Technologies Inc. 7,175 89,042
Amkor Technology Inc.+* 4,830 87,906
Arrow Electronics Inc.+* 3,120 83,460
Lattice Semiconductor Corp.+ 3,428 82,958
CheckFree Corp.+* 2,743 82,729
American Power Conversion Corp.+ 6,171 82,383
Semtech Corp.+ 2,187 81,028
L-3 Communications Holdings Inc.+ 1,078 80,419
Ceridian Corp.+ 4,610 79,707
Foundry Networks Inc.+* 3,782 79,649
Parametric Technology Corp.+ 8,366 79,226
Jack Henry & Associates Inc. 2,797 79,071
CSG Systems International Inc.+ 1,671 78,804
Quest Software Inc.+ 2,772 77,810
Macrovision Corp.+ 1,582 76,458
Fairchild Semiconductor Corp. "A"+ 3,145 75,008
Intersil Holding Corp.+ 2,157 74,848
Expedia Inc. "A"+* 1,543 74,589
Conexant Systems Inc.+ 7,816 74,330
International Rectifier Corp.+* 1,986 74,157
Network Associates Inc.+ 4,328 72,884
Avnet Inc. 2,925 69,878
KPMG Consulting Inc.+ 4,987 69,619
EarthLink Inc.+ 4,139 67,755
Tektronix Inc.+ 2,973 67,457
Polycom Inc.+ 2,623 66,755
Crown Castle International Corp.+ 6,772 66,027
E*trade Group Inc.+ 10,103 65,467
WebMD Corp.+ 11,297 65,071
Advanced Fibre Communications Inc.+ 2,564 64,741
Autodesk Inc. 1,722 64,213
Finisar Corp.+* 5,577 63,745
C-MAC Industries Inc.+ 2,735 63,315
UTStarcom Inc.+ 3,060 63,281
Pixar Inc.+ 1,515 63,251
Harris Corp. 2,082 62,502
Cerner Corp.+ 1,102 62,087
Vignette Corp.+ 7,763 61,638
Emulex Corp.+ 2,588 60,740
Sycamore Networks Inc.+ 8,655 60,585
National Instruments Corp.+ 1,606 57,270
Andrew Corp.+ 2,574 56,731
Cree Inc.+* 2,305 56,380
TIBCO Software Inc.+ 6,220 56,291
Research in Motion Ltd.+* 2,362 55,578
NetIQ Corp.+ 1,668 55,027
Advent Software Inc.+ 973 54,994
Amphenol Corp. "A"+ 1,316 54,588
KEMET Corp.+ 2,770 53,627
3Com Corp.+ 10,705 52,454
Reynolds & Reynolds Co. "A" 2,289 52,418
SanDisk Corp.+ 2,154 50,921
West Corp.+ 2,043 50,564
Novell Inc.+ 10,047 50,135
Maxtor Corp.+ 7,548 49,817
Retek Inc.+ 1,543 49,499
Sybase Inc.+ 3,234 48,122
CNET Networks Inc.+ 4,317 47,487
Ascential Software Corp.+ 9,123 47,348
DoubleClick Inc.+ 4,141 47,000
McDATA Corporation "A"+ 2,566 46,573
Quantum DLT & Storage Group+ 4,785 46,415
Cirrus Logic Inc.+ 2,505 46,342
--------------------------------------------------------------------------------
iSHARES SCHEDULES OF INVESTMENTS PAGE 13
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2001
SECURITY SHARES VALUE
-----------------------------------------------------------------
COMMON STOCKS (CONTINUED)
-----------------------------------------------------------------
Manugistics Group Inc.+* 2,132 $ 46,286
Storage Technology Corp.+ 3,288 45,276
Edwards (J.D.) & Co.+ 3,551 45,275
Cognos Inc.+ 2,714 44,808
RSA Security Inc.+* 1,812 44,376
Corvis Corp.+ 11,361 44,308
Axcelis Technologies Inc.+ 3,075 43,573
Power-One Inc.+ 2,489 38,580
Tekelec+ 1,872 38,114
Mentor Graphics Corp.+ 2,019 37,654
GlobeSpan Inc.+ 2,326 37,216
Adaptec Inc.+ 3,117 36,718
RealNetworks Inc.+ 5,071 35,598
Wind River Systems Inc.+ 2,463 35,270
Micromuse Inc.+ 2,307 35,228
Powerwave Technologies Inc.+ 2,024 34,732
Interwoven Inc.+ 3,261 33,556
Acxiom Corp.+ 2,826 33,036
Ariba Inc.+* 8,045 32,260
Macromedia Inc.+ 1,865 32,078
Internet Security Systems Inc.+* 1,366 31,459
Redback Networks Inc.+ 4,890 31,296
BroadVision Inc.+ 8,656 29,604
Akamai Technologies Inc.+* 3,453 26,761
Newport Corp.+* 1,146 26,301
Rambus Inc.+ 3,149 24,688
Creative Technology Ltd. 3,027 24,519
Sapient Corp.+* 3,893 24,331
webMethods Inc.+* 1,518 23,696
Commerce One Inc.+ 6,219 23,259
Transwitch Corp.+ 2,690 22,166
CMGI Inc.+* 10,916 22,050
InfoSpace Inc.+ 10,279 21,483
Red Hat Inc.+ 5,331 21,111
Exodus Communications Inc.+ 17,531 20,511
Informatica Corp.+ 2,447 20,237
E.piphany Inc.+* 2,234 19,994
Digital Lightwave Inc.+ 971 19,876
StorageNetworks Inc.+ 3,050 19,063
Agile Software Corp.+ 1,491 17,952
MRV Communications Inc.+ 2,415 16,712
Inktomi Corp.+* 4,045 16,180
Portal Software Inc.+ 5,432 14,666
Avanex Corp.+* 2,059 14,331
SHARES OR
SECURITY PRINCIPAL VALUE
-----------------------------------------------------------------
Handspring Inc.+ 4,100 $ 13,858
At Home Corp. "A"+ 10,188 12,022
Transmeta Corp.+ 4,156 10,056
-----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $92,997,723) 79,166,202
-----------------------------------------------------------------
SHORT TERM INSTRUMENTS - 12.00%
-----------------------------------------------------------------
Dreyfus Money Market Fund++ $3,857,432 3,857,432
Goldman Sachs Financial Square Prime
Obligation Fund++ 1,781,607 1,781,607
Providian Temp Cash Money Market Fund++ 3,857,432 3,857,432
-----------------------------------------------------------------
TOTAL SHORT TERM INSTRUMENTS
(Cost: $9,496,471) 9,496,471
-----------------------------------------------------------------
REPURCHASE AGREEMENT - 0.07%
-----------------------------------------------------------------
Investors Bank & Trust Tri-Party
Repurchase Agreement, dated 07/31/01,
due 08/01/01, with a maturity value of
$54,701 and an effective yield of
3.61%. 54,695 54,695
-----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost: $54,695) 54,695
-----------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 112.10%
(Cost $102,548,889) 88,717,368
-----------------------------------------------------------------
Other Assets, Less Liabilities -- (12.10%) (9,574,919)
-----------------------------------------------------------------
NET ASSETS -- 100.00% $79,142,449
=================================================================
* Denotes all or part of security on loan. See Note 5.
+ Non-income earning securities.
++ Represents investment of collateral received from securities lending
transactions. See Note 5.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
PAGE 14 [iSHARES LOGO]
iSHARES GOLDMAN SACHS NETWORKING INDEX FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2001
SECURITY SHARES VALUE
---------------------------------------------------------------
COMMON STOCKS - 100.02%
---------------------------------------------------------------
Motorola Inc. 181,283 $ 3,388,180
Cisco Systems Inc.+ 129,200 2,483,224
Lucent Technologies Inc. 308,468 2,066,736
QUALCOMM Inc.+ 22,768 1,439,621
Ciena Corp.+ 36,698 1,216,172
Corning Inc. 76,343 1,195,531
Agilent Technologies Inc.+ 41,360 1,183,310
Amdocs Ltd.+ 24,878 1,121,251
JDS Uniphase Corp.+ 119,217 1,101,565
Nortel Networks Corp. 118,462 941,773
Juniper Networks Inc.+ 36,048 926,073
Broadcom Corp. "A"+ 20,346 887,696
Tellabs Inc.+ 45,975 757,208
Comverse Technology Inc.+ 19,216 543,428
Sonus Networks Inc.+ 22,791 500,034
Openwave Systems Inc.+ 18,994 485,487
Scientific-Atlanta Inc. 18,305 465,862
Agere Systems Inc.+ 81,690 451,746
ADC Telecommunications Inc.+ 88,668 435,360
Avaya Inc.+ 31,895 399,644
Cabletron Systems Inc.+ 21,205 393,777
Extreme Networks Inc.+ 12,728 356,766
ONI Systems Inc.+ 15,321 354,681
Foundry Networks Inc.+ 13,404 282,288
Advanced Fibre Communications Inc.+ 9,104 229,876
Sycamore Networks Inc.+ 30,716 215,012
Research in Motion Ltd.+ 8,392 197,464
3Com Corp.+ 38,001 186,205
Corvis Corp.+ 40,336 157,310
Micromuse Inc.+ 8,206 125,306
Redback Networks Inc.+ 17,384 111,258
Digital Lightwave Inc.+ 3,452 70,662
Avanex Corp.+ 7,298 50,794
---------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $24,509,009) 24,721,300
---------------------------------------------------------------
SECURITY PRINCIPAL VALUE
----------------------------------------------------------------
REPURCHASE AGREEMENT - 0.02%
----------------------------------------------------------------
Investors Bank & Trust Tri-Party
Repurchase Agreement, dated 07/31/01,
due 08/01/01, with a maturity value of
$4,787 and an effective yield of
3.61%. $ 4,787 $ 4,787
----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost: $4,787) 4,787
----------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.04%
(Cost $24,513,796) 24,726,087
----------------------------------------------------------------
Other Assets, Less Liabilities -- (0.04%) (9,987)
----------------------------------------------------------------
NET ASSETS -- 100.00% $24,716,100
================================================================
+ Non-income earning securities.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
iSHARES SCHEDULES OF INVESTMENTS PAGE 15
iSHARES GOLDMAN SACHS SEMICONDUCTOR INDEX FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2001
SECURITY SHARES VALUE
---------------------------------------------------------------
COMMON STOCKS - 99.99%
---------------------------------------------------------------
Motorola Inc. 168,084 $ 3,141,490
Intel Corp. 101,790 3,034,360
Texas Instruments Inc. 80,469 2,776,181
Applied Materials Inc.+ 56,583 2,594,896
STMicroelectronics NV-NY Shares 67,896 2,161,809
Micron Technology Inc.+ 45,630 1,916,460
Analog Devices Inc.+ 27,540 1,266,840
Maxim Integrated Products Inc.+ 25,128 1,160,160
Linear Technology Corp. 24,327 1,060,171
Xilinx Inc.+ 25,254 1,010,160
Altera Corp.+ 29,601 889,806
KLA-Tencor Corp.+ 14,193 771,957
ASM Lithography Holding NV "R"+ 35,694 730,656
Broadcom Corp. "A"+ 13,860 604,712
LSI Logic Corp.+ 27,432 597,469
Novellus Systems Inc.+ 10,899 555,522
Advanced Micro Devices Inc.+ 26,127 477,079
Teradyne Inc.+ 13,338 453,225
NVIDIA Corp.+ 5,355 433,219
National Semiconductor Corp.+ 13,275 425,464
Applied Micro Circuits Corp.+ 22,995 394,134
PMC - Sierra Inc.+ 12,555 380,542
Microchip Technology Inc.+ 10,044 364,597
Atmel Corp.+ 35,514 355,495
RF Micro Devices Inc.+ 12,483 341,535
Agere Systems Inc.+ 55,638 307,678
Integrated Device Technology Inc.+ 8,181 301,470
AVX Corp. 13,365 294,030
Vitesse Semiconductor Corp.+ 14,031 277,673
QLogic Corp.+ 7,056 271,021
Marvell Technology Group Ltd.+ 8,829 270,962
Cypress Semiconductor Corp.+ 9,729 265,407
Lam Research Corp.+ 9,459 264,757
Micrel Inc.+ 6,984 235,221
Vishay Intertechnology Inc.+ 9,369 225,324
TriQuint Semiconductor Inc.+ 9,884 223,873
Amkor Technology Inc.+ 11,673 212,449
Arrow Electronics Inc.+ 7,551 201,989
Lattice Semiconductor Corp.+ 8,289 200,594
Semtech Corp.+ 5,292 196,069
Fairchild Semiconductor Corp. "A"+ 7,614 181,594
Intersil Holding Corp.+ 5,229 181,446
Conexant Systems Inc.+ 18,909 179,825
International Rectifier Corp.+ 4,788 178,784
SHARES OR
SECURITY PRINCIPAL VALUE
----------------------------------------------------------------
Avnet Inc. 7,074 $ 168,998
Cree Inc.+ 5,562 136,047
KEMET Corp.+ 6,705 129,809
SanDisk Corp.+ 5,202 122,975
Cirrus Logic Inc.+ 6,048 111,888
Adaptec Inc.+ 7,542 88,845
Rambus Inc.+ 7,605 59,623
Transwitch Corp.+ 6,507 53,618
Transmeta Corp.+ 10,044 24,302
----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $30,895,348) 33,264,210
----------------------------------------------------------------
REPURCHASE AGREEMENT - 0.03%
----------------------------------------------------------------
Investors Bank & Trust Tri-Party
Repurchase Agreement, dated 07/31/01,
due 08/01/01, with a maturity value of
$8,857 and an effective yield of
3.61%. $ 8,856 8,856
----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost: $8,856) 8,856
----------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.02%
(Cost $30,904,204) 33,273,066
----------------------------------------------------------------
Other Assets, Less Liabilities -- (0.02%) (5,558)
----------------------------------------------------------------
NET ASSETS -- 100.00% $33,267,508
================================================================
+ Non-income earning securities.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
PAGE 16 [iSHARES LOGO]
iSHARES GOLDMAN SACHS SOFTWARE INDEX FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2001
SECURITY SHARES VALUE
---------------------------------------------------------------
COMMON STOCKS - 99.99%
---------------------------------------------------------------
Oracle Corp.+ 163,504 $ 2,956,152
Microsoft Corp.+ 38,456 2,545,403
Computer Associates International Inc. 58,113 2,003,736
Veritas Software Corp.+ 37,664 1,597,330
Siebel Systems Inc.+ 45,694 1,574,615
PeopleSoft Inc.+ 29,645 1,294,597
Check Point Software Technologies Ltd.+ 22,979 1,016,591
Yahoo! Inc.+ 57,167 1,007,283
Amdocs Ltd.+ 22,319 1,005,917
Adobe Systems Inc. 24,112 903,959
BEA Systems Inc.+ 39,567 872,452
Electronic Arts Inc.+ 13,409 763,240
Intuit Inc.+ 21,043 723,458
Citrix Systems Inc.+ 18,623 623,312
Cadence Design Systems Inc.+ 25,080 553,265
Compuware Corp.+ 37,092 508,160
BMC Software Inc.+ 24,563 491,260
Peregrine Systems Inc.+ 14,982 409,758
i2 Technologies Inc.+ 41,448 399,973
Symantec Corp.+ 7,623 367,505
Rational Software Corp.+ 20,493 350,840
Synopsys Inc.+ 6,149 318,211
Parametric Technology Corp.+ 26,642 252,300
Network Associates Inc.+ 13,783 232,106
Autodesk Inc. 5,434 202,634
Cerner Corp.+ 3,509 197,697
Vignette Corp.+ 24,739 196,428
National Instruments Corp.+ 5,126 182,793
TIBCO Software Inc.+ 19,833 179,489
Advent Software Inc.+ 3,113 175,947
NetIQ Corp.+ 5,324 175,639
Reynolds & Reynolds Co. "A" 7,293 167,010
Novell Inc.+ 32,021 159,785
Retek Inc.+ 4,906 157,384
Sybase Inc.+ 10,285 153,041
Manugistics Group Inc.+ 6,776 147,107
Edwards (J.D.) & Co.+ 11,308 144,177
Cognos Inc.+ 8,635 142,564
Mentor Graphics Corp.+ 6,446 120,218
RealNetworks Inc.+ 16,159 113,436
Micromuse Inc.+ 7,359 112,372
Wind River Systems Inc.+ 7,843 112,312
Interwoven Inc.+ 10,373 106,738
Ariba Inc.+ 25,641 102,820
SHARES OR
SECURITY PRINCIPAL VALUE
----------------------------------------------------------------
Internet Security Systems Inc.+ 4,345 $ 100,065
BroadVision Inc.+ 27,588 94,351
webMethods Inc.+ 4,829 75,381
Commerce One Inc.+ 19,833 74,175
Red Hat Inc.+ 16,984 67,257
Informatica Corp.+ 7,788 64,407
E.piphany Inc.+ 7,117 63,697
Agile Software Corp.+ 4,763 57,346
Inktomi Corp.+ 12,903 51,612
Portal Software Inc.+ 17,292 46,688
At Home Corp. "A"+ 32,450 38,291
----------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $27,681,804) 26,554,284
----------------------------------------------------------------
REPURCHASE AGREEMENT - 0.03%
----------------------------------------------------------------
Investors Bank & Trust Tri-Party
Repurchase Agreement, dated 07/31/01,
due 08/01/01, with a maturity value of
$7,358 and an effective yield of
3.61%. $ 7,358 7,358
----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost: $7,358) 7,358
----------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.02%
(Cost $27,689,162) 26,561,642
----------------------------------------------------------------
Other Assets, Less Liabilities -- (0.02%) (5,900)
----------------------------------------------------------------
NET ASSETS -- 100.00% $26,555,742
================================================================
+ Non-income earning securities.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
iSHARES SCHEDULES OF INVESTMENTS PAGE 17
iSHARES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2001
iSHARES GOLDMAN SACHS
-------------------------------------------------------
TECHNOLOGY NETWORKING SEMICONDUCTOR SOFTWARE
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
-------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $102,548,889 $ 24,513,796 $ 30,904,204 $ 27,689,162
-------------------------------------------------------
Investments in securities, at market
value (Note 1) $ 88,717,368+ $ 24,726,087 $ 33,273,066 $ 26,561,642
Receivables:
Investment securities sold - 2,214,346 - -
Dividends and interest 6,868 - 1,711 -
iShares sold 14,994 - - -
-------------------------------------------------------
Total Assets 88,739,230 26,940,433 33,274,777 26,561,642
-------------------------------------------------------
LIABILITIES
Payables:
Investment securities purchased - 2,219,034 - -
Collateral for securities on loan
(Note 5) 9,496,471 - - -
Advisory fees (Note 2) 100,310 5,299 7,269 5,900
-------------------------------------------------------
Total Liabilities 9,596,781 2,224,333 7,269 5,900
-------------------------------------------------------
NET ASSETS $ 79,142,449 $ 24,716,100 $ 33,267,508 $ 26,555,742
=======================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 92,981,813 $ 24,528,584 $ 30,898,646 $ 27,683,262
Undistributed net realized loss (7,843) (24,775) - -
Net unrealized appreciation
(depreciation) (13,831,521) 212,291 2,368,862 (1,127,520)
-------------------------------------------------------
NET ASSETS $ 79,142,449 $ 24,716,100 $ 33,267,508 $ 26,555,742
=======================================================
iShares outstanding 1,450,000 650,000 450,000 550,000
=======================================================
Net asset value per iShare $ 54.58 $ 38.02 $ 73.93 $ 48.28
=======================================================
--------------------------------------------------------------------------------
+ Includes securities on loan with market value of $9,045,356.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
PAGE 18 [iSHARES LOGO]
iSHARES TRUST
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JULY 31, 2001
iSHARES GOLDMAN SACHS
--------------------------------------------------------------------------------
TECHNOLOGY NETWORKING SEMICONDUCTOR SOFTWARE
INDEX FUND (A) INDEX FUND (B) INDEX FUND (B) INDEX FUND (B)
--------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Dividends+ $ 54,565 $ - $ 1,710 $ -
Interest 2,350 7 13 11
Securities lending income 4,395 - - -
--------------------------------------------------------------------------------
Total investment income 61,310 7 1,723 11
--------------------------------------------------------------------------------
EXPENSES (NOTE 2)
Advisory fees 181,622 5,299 7,268 5,900
--------------------------------------------------------------------------------
Total expenses 181,622 5,299 7,268 5,900
--------------------------------------------------------------------------------
Net investment loss (120,312) (5,292) (5,545) (5,889)
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from
investments 1,437,130 (20,359) - -
Net change in unrealized appreciation
(depreciation) on investments (13,831,521) 212,291 2,368,862 (1,127,520)
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (12,394,391) 191,932 2,368,862 (1,127,520)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(12,514,703) $186,640 $2,363,317 $(1,133,409)
================================================================================
--------------------------------------------------------------------------------------------------------------------------
+Net of foreign withholding tax of: $ 582 $ - $ - $ -
--------------------------------------------------------------------------------
(a) For the period from March 13, 2001 (commencement of operations) to
July 31, 2001.
(b) For the period from July 10, 2001 (commencement of operations) to
July 31, 2001.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
iSHARES FINANCIAL STATEMENTS PAGE 19
iSHARES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JULY 31, 2001
iSHARES GOLDMAN SACHS
--------------------------------------------------------------------------------
TECHNOLOGY NETWORKING SEMICONDUCTOR SOFTWARE
INDEX FUND (A) INDEX FUND (B) INDEX FUND (B) INDEX FUND (B)
--------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment loss $ (120,312) $ (5,292) $ (5,545) $ (5,889)
Net realized gain (loss) 1,437,130 (20,359) - -
Net change in unrealized appreciation
(depreciation) (13,831,521) 212,291 2,368,862 (1,127,520)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (12,514,703) 186,640 2,363,317 (1,133,409)
--------------------------------------------------------------------------------
iSHARES TRANSACTIONS:
iShares sold 135,257,842 24,529,460 30,904,191 27,689,151
iShares redeemed (43,600,690) - - -
--------------------------------------------------------------------------------
Net increase in net assets from iShares
transactions 91,657,152 24,529,460 30,904,191 27,689,151
--------------------------------------------------------------------------------
Increase in net assets 79,142,449 24,716,100 33,267,508 26,555,742
NET ASSETS:
Beginning of period - - - -
--------------------------------------------------------------------------------
End of period $ 79,142,449 $24,716,100 $33,267,508 $26,555,742
================================================================================
iSHARES ISSUED AND REDEEMED:
iShares sold 2,250,000 650,000 450,000 550,000
iShares redeemed (800,000) - - -
--------------------------------------------------------------------------------
Net increase in iShares outstanding 1,450,000 650,000 450,000 550,000
================================================================================
--------------------------------------------------------------------------------
(a) For the period from March 13, 2001 (commencement of operations) to July
31, 2001.
(b) For the period from July 10, 2001 (commencement of operations) to July
31, 2001.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
PAGE 20 [iSHARES LOGO]
iSHARES TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD ENDED JULY 31, 2001
iSHARES GOLDMAN SACHS
--------------------------------------------------------------------------------------
TECHNOLOGY NETWORKING SEMICONDUCTOR SOFTWARE
INDEX FUND (A) INDEX FUND (B) INDEX FUND (B) INDEX FUND (B)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 56.71 $ 36.32 $ 65.65 $ 49.12
--------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.08) (0.01) (0.01) (0.01)
Net realized and unrealized gain
(loss) (2.05) 1.71 8.29 (0.83)
--------------------------------------------------------------------------------------
Total from investment operations (2.13) 1.70 8.28 (0.84)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 54.58 $ 38.02 $ 73.93 $ 48.28
======================================================================================
TOTAL RETURN (NOT ANNUALIZED) (3.76)% 4.68% 12.61% (1.71)%
======================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $79,142 $24,716 $33,268 $26,556
Ratio of expenses to average net
assets(c) 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income
(loss) to average net assets(c) (0.33)% (0.50)% (0.38)% 0.50%
Portfolio turnover rate(d) 0%(e) 9% 0%(e) 0%(e)
---------------------------------------------------------------------------------------------------------------------------------
(a) For the period from March 13, 2001 (commencement of operations) to
July 31, 2001.
(b) For the period from July 10, 2001 (commencement of operations) to
July 31, 2001.
(c) Annualized for periods of less than one year.
(d) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Units.
(e) Rounds to less than 1%.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
iSHARES FINANCIAL HIGHLIGHTS PAGE 21
iSHARES TRUST
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
iShares Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company. The Trust was established as a Delaware business trust pursuant to an
Agreement and Declaration of Trust dated December 16, 1999. As of July 31, 2001,
the Trust offers over 40 investment portfolios or funds.
The funds offered by the Trust, along with their respective Exchange trading
symbols are:
iSHARES S&P SERIES iSHARES DOW JONES SERIES iSHARES RUSSELL SERIES
------------------ ------------------------ ----------------------
- iSHARES S&P 100 INDEX FUND - iSHARES DOW JONES U.S. TOTAL - iSHARES RUSSELL 3000 INDEX
(OEF) MARKET INDEX FUND (IYY) FUND (IWV)
- iSHARES S&P 500 INDEX FUND - iSHARES DOW JONES U.S. BASIC - iSHARES RUSSELL 3000 GROWTH
(IVV) MATERIALS SECTOR INDEX FUND INDEX FUND (IWZ)
- iSHARES S&P 500/BARRA GROWTH (IYM) - iSHARES RUSSELL 3000 VALUE
INDEX FUND (IVW) - iSHARES DOW JONES U.S. INDEX FUND (IWW)
- iSHARES S&P 500/BARRA VALUE CONSUMER CYCLICAL SECTOR INDEX - iSHARES RUSSELL 2000 INDEX
INDEX FUND (IVE) FUND (IYC) FUND (IWM)
- iSHARES S&P MIDCAP 400 INDEX - iSHARES DOW JONES U.S. - iSHARES RUSSELL 2000 GROWTH
FUND (IJH) CONSUMER NON-CYCLICAL SECTOR INDEX FUND (IWO)
- iSHARES S&P MIDCAP 400/BARRA INDEX FUND (IYK) - iSHARES RUSSELL 2000 VALUE
GROWTH INDEX FUND (IJK) - iSHARES DOW JONES U.S. ENERGY INDEX FUND (IWN)
- iSHARES S&P MIDCAP 400/BARRA SECTOR INDEX FUND (IYE) - iSHARES RUSSELL 1000 INDEX
VALUE INDEX FUND (IJJ) - iSHARES DOW JONES U.S. FUND (IWB)
- iSHARES S&P SMALLCAP 600 INDEX FINANCIAL SECTOR INDEX FUND - iSHARES RUSSELL 1000 GROWTH
FUND (IJR) (IYF) INDEX FUND (IWF)
- iSHARES S&P SMALLCAP 600/BARRA - iSHARES DOW JONES U.S. - iSHARES RUSSELL 1000 VALUE
GROWTH INDEX FUND (IJT) HEALTHCARE SECTOR INDEX FUND INDEX FUND (IWD)
- iSHARES S&P SMALLCAP 600/BARRA (IYH) iSHARES RUSSELL MIDCAP INDEX
VALUE INDEX FUND (IJS) - iSHA(IYG) FUND (IWR)
- iSHARES S&P GLOBAL 100 INDEX INDUSTRIAL SECTOR INDEX FUND - iSHARES RUSSELL MIDCAP GROWTH
FUND (IOO) (IYJ) INDEX FUND (IWP)
- iSHARES S&P EUROPE 350 INDEX - iSHARES DOW JONES U.S. - iSHARES RUSSELL MIDCAP VALUE
FUND (IEV) TECHNOLOGY SECTOR INDEX FUND INDEX FUND (IWS)
- iSHARES S&P/TSE 60 INDEX FUND (IYW)
(IKC) - iSHARES DOW JONES U.S. iSHARES COHEN & STEERS SERIES
TELECOMMUNICATIONS SECTOR INDEX -----------------------------
iSHARES GOLDMAN SACHS SERIES FUND (IYZ) - iSHARES COHEN & STEERS REALTY
---------------------------- - iSHARES DOW JONES U.S. MAJORS INDEX FUND (ICF)
- iSHARES GOLDMAN SACHS UTILITIES SECTOR INDEX FUND
TECHNOLOGY INDEX FUND (IGM) (IDU) iSHARES NASDAQ SERIES
- iSHARES GOLDMAN SACHS - iSHARES DOW JONES U.S. ---------------------
NETWORKING INDEX FUND (IGN) CHEMICALS INDEX FUND (IYD) - iSHARES NASDAQ BIOTECHNOLOGY
- iSHARES GOLDMAN SACHS - iSHARES DOW JONES U.S. INDEX FUND (IBB)
SEMICONDUCTOR INDEX FUND (IGW) FINANCIAL SERVICES INDEX FUND
- iSHARES GOLDMAN SACHS SOFTWARE (IYG) iSHARES MSCI SERIES
INDEX FUND (IGV) - iSHARES DOW JONES U.S. -------------------
INTERNET INDEX FUND (IYV) - iSHARES MSCI EAFE INDEX FUND
- iSHARES DOW JONES U.S. REAL (EFA)
ESTATE INDEX FUND (IYR)
The investment objective of each fund is to seek investment results that
correspond generally to the price and yield performance, before fees and
expenses, of its underlying index, as indicated in the name of each fund. The
investment advisor uses a "passive" or index approach to try to achieve each
fund's investment objective.
--------------------------------------------------------------------------------
PAGE 22 [iSHARES LOGO]
iSHARES TRUST
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
These financial statements relate only to the iShares Goldman Sachs Index
Funds (each a "Fund", collectively the "Funds"). Each of the Funds is classified
as a non-diversified fund under the 1940 Act. Non-diversified funds generally
hold stocks of fewer companies than diversified funds and may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence.
The following significant accounting policies are consistently followed by
the Trust in the preparation of its financial statements in conformity with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") for investment companies. The preparation of financial statements in
conformity with U.S. GAAP requires management to make certain estimates and
assumptions. Actual results could differ from those estimates.
SECURITY VALUATION
Equity securities are valued at the last sales price on the primary
securities exchange or national securities market on which such securities are
traded. Securities not listed on an exchange or national securities market, or
securities for which there was no sale price, are valued at the latest quoted
bid prices. U.S. Government obligations are valued at the latest quoted bid
price. Debt securities maturing in 60 days or less are valued at amortized cost,
which approximates market value. Mutual fund shares are valued at net asset
value. Any securities, including restricted securities or other assets for which
market quotations are not readily available, are valued at fair value as
determined in good faith in accordance with policies approved by the Board of
Trustees of the Trust.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income is
recognized on the ex-dividend date, and interest income is accrued daily.
Realized gains and losses on investment transactions are determined using the
specific identification method.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income, if any, are
declared and distributed at least annually by each Fund. Distributions of net
realized capital gains, if any, generally are declared and distributed once a
year. Distributions are determined on a tax basis and may differ from net
investment income and net realized capital gains for financial reporting
purposes.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
It is the policy of each Fund to qualify as a regulated investment company by
complying with the provisions applicable to regulated investment companies, as
defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and
to annually distribute substantially all of its net income and any net gains
(taking into account any capital loss carryforwards) sufficient to relieve it
from all, or substantially all, federal income and excise taxes. Accordingly, no
provision for federal income taxes was required for the period ended July 31,
2001.
For the period ended July 31, 2001, the iShares Goldman Sachs Technology
Index Fund incurred net realized capital losses in the amount of $6,226. As
permitted by tax regulations, the Fund has elected to defer these losses and
treat it as arising in the year ending July 31, 2002.
For the period ended July 31, 2001, each Fund reclassified certain
components of net assets to reflect permanent differences between financial and
tax reporting. These differences are primarily attributable to net investment
losses and gains or losses on in-kind redemptions. These reclassifications have
no effect on the net assets of the Funds.
--------------------------------------------------------------------------------
iSHARES NOTES TO THE FINANCIAL STATEMENTS PAGE 23
iSHARES TRUST
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
For the period ended July 31, 2001, the iShares Goldman Sachs Technology
Index Fund realized net capital gains resulting from in-kind redemptions of
large blocks of 50,000 iShares ("Creation Units"). Because such gains or losses
are not taxable to the Fund and are not distributed to existing Fund
shareholders, the Fund reclassed these gains in the amount of $1,448,642 from
accumulated net realized gains to paid-in-capital.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with banks and securities
dealers. These transactions involve the purchase of securities with a
simultaneous commitment to resell the securities to the bank or the dealer at an
agreed-upon date and price. A repurchase agreement is accounted for as a loan by
the Fund to the seller, collateralized by securities, which are delivered to the
Funds' custodian or to an agent bank under a tri-party agreement. The securities
are marked-to-market daily and additional securities are acquired as needed, to
ensure that their value equals or exceeds the repurchase price plus accrued
interest.
The repurchase agreements held by each Fund at July 31, 2001 were fully
collateralized by U.S. Government obligations with an interest rate of 5.50%, a
maturity date of 05/15/09 and aggregate market values as follows:
-----------------------------
AGGREGATE
MARKET
iSHARES INDEX FUND VALUE
-----------------------------
Goldman Sachs
Technology $ 62,665
Goldman Sachs
Networking 10,444
Goldman Sachs
Semiconductor 10,444
Goldman Sachs
Software 10,444
-----------------------------
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Investment Advisory Agreement with the Trust, Barclays Global
Fund Advisors ("BGFA") manages the investment of each Fund's assets. BGFA is a
California corporation indirectly owned by Barclays Bank PLC. Under this
agreement, BGFA is responsible for all expenses ("Covered Expenses") of the
Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except interest, taxes, brokerage commissions
and other expenses connected with the executions of portfolio transactions,
distribution fees and extraordinary expenses. Expenses related to the
organization and initial registration of the Trust were borne by BGFA.
For its investment management services to each Fund, BGFA is entitled to an
annual advisory fee based on the average daily net assets of each Fund as
follows:
----------------------------
ADVISORY
iSHARES INDEX FUND FEE
----------------------------
Goldman Sachs
Technology 0.50%
Goldman Sachs
Networking 0.50
Goldman Sachs
Semiconductor 0.50
Goldman Sachs
Software 0.50
----------------------------
Investors Bank & Trust Company ("Investors Bank") serves as administrator,
custodian, transfer agent and securities lending agent for the Funds. As
compensation for its services, Investors Bank receives certain out-of-pocket
costs, transaction fees, and asset-based fees, which are accrued daily and paid
monthly. These fees are Covered Expenses as defined above.
--------------------------------------------------------------------------------
PAGE 24 [iSHARES LOGO]
iSHARES TRUST
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SEI Investments Distribution Company serves as each Fund's underwriter and
distributor of the shares of each Fund, pursuant to a Distribution Agreement
with the Trust. The distributor will deliver the Prospectus and Statement of
Additional Information, if so requested, to persons purchasing Creation Units
and will maintain records of both orders placed with it and confirmations of
acceptance furnished by it.
Barclays Global Investors Services ("BGIS"), a subsidiary of Barclays Global
Investors, N.A., may serve as a broker-dealer for the Funds. For the period
ended July 31, 2001, BGIS received brokerage commissions from the iShares
Goldman Sachs Technology Index Fund in the amount of $50, related to the
purchases and sales of portfolio investments.
Certain of the officers of the Trust are also employees of Investors Bank.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments (excluding in-kind transactions and
short-term securities) for the period ended July 31, 2001, were as follows:
------------------------------------------
iSHARES INDEX FUND PURCHASES SALES
------------------------------------------
Goldman Sachs
Technology $ 201,841 $ 185,103
Goldman Sachs
Networking 2,219,034 2,214,346
------------------------------------------
In-kind transactions for the period ended July 31, 2001 were as follows:
---------------------------------------------
IN-KIND IN-KIND
iSHARES INDEX FUND PURCHASES SALES
---------------------------------------------
Goldman Sachs
Technology $141,308,115 $49,764,260
Goldman Sachs
Networking 24,524,680 -
Goldman Sachs
Semiconductor 30,895,348 -
Goldman Sachs
Software 27,681,804 -
---------------------------------------------
At July 31, 2001 the aggregate unrealized appreciation and depreciation
based on cost for federal income tax purposes were as follows:
----------------------------------------------------------------------------
NET UNREALIZED
TAX UNREALIZED UNREALIZED APPRECIATION
iSHARES INDEX FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------------------------------------------------------------------------
Goldman Sachs
Technology $102,550,506 $ 1,313,178 $(15,146,316) $ (13,833,138)
Goldman Sachs
Networking 24,538,571 1,190,779 (1,003,263) 187,516
Goldman Sachs
Semiconductor 30,904,204 2,737,720 (368,858) 2,368,862
Goldman Sachs
Software 27,689,162 762,706 (1,890,226) (1,127,520)
----------------------------------------------------------------------------
4. iSHARES TRANSACTIONS
At July 31, 2001, there were an unlimited number of no par value shares of
beneficial interest ("iShares") authorized. iShares are issued and redeemed by
each Fund only in Creation Units or multiples thereof. Except when aggregated in
Creation Units, iShares are not redeemable. Transactions in iShares for each
Fund are disclosed in detail in the Statements of Changes in Net Assets.
--------------------------------------------------------------------------------
iSHARES NOTES TO THE FINANCIAL STATEMENTS PAGE 25
iSHARES TRUST
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The consideration for purchase of Creation Units of a Fund generally
consists of the in-kind contribution of a designated portfolio of equity
securities constituting a substantial replication, or a portfolio sampling
representation, of the stocks involved in the relevant Fund's underlying index
and an amount of cash. A purchase transaction fee and a redemption transaction
fee are charged to offset transfer and other transaction costs associated with
the issuance and redemption of Creation Units of iShares.
5. LOANS OF PORTFOLIO SECURITIES
Each Fund may lend its investment securities to approved borrowers such as
brokers, dealers and other financial institutions. The borrower pledges and
maintains with the Fund collateral consisting of cash, an irrevocable letter of
credit issued by a bank, or securities issued or guaranteed by the U.S.
Government. The initial collateral received is required to have a value to at
least 102% of the market value of the loaned securities. The collateral is
maintained thereafter, at a value equal to at least 100% of the current market
value of the securities on loan. The risks to the Funds of securities lending
are that the borrower may not provide additional collateral when required or
return the securities when due.
As of July 31, 2001, the iShares Goldman Sachs Technology Index Fund had
loaned securities which were collateralized by cash. The cash collateral
received was invested in money market mutual funds. The market value of the
securities on loan at July 31, 2001 was $9,045,356 and the value of the related
collateral was $9,496,471.
6. NEW ACCOUNTING PRONOUNCEMENT
In November 2000, the American Institute of Certified Public Accountants
issued a revised Audit and Accounting Guide, Audits of Investment Companies,
which is effective for fiscal years beginning after December 15, 2000. The
requirements of the new audit guide did not have a material impact on the net
assets of the Funds, or on the presentation of the Funds' financial statements.
--------------------------------------------------------------------------------
PAGE 26 [iSHARES LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders
iShares Trust:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the funds comprising the iShares
Goldman Sachs Index Funds (the "Funds"), as listed on the table of contents at
July 31, 2001, and the results of their operations, the changes in their net
assets and their financial highlights for the periods then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2001 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 31, 2001
--------------------------------------------------------------------------------
iSHARES REPORT OF INDEPENDENT ACCOUNTANTS PAGE 27
iSHARES TRUST
SUPPLEMENTAL INFORMATION (UNAUDITED)
The chart below presents information about the differences between the daily
closing price on secondary markets for shares of an iShares Fund and that Fund's
net asset value. Net asset value, or "NAV", is the price per share at which each
Fund issues and redeems shares. It is calculated in accordance with the standard
formula for valuing mutual fund shares at the close of regular trading (normally
4:00 p.m. Eastern time) every day the New York Stock Exchange is open. The
"Closing Price" of each iShares Fund is the price of the last reported trade for
shares of such Fund on any major market. Each Fund's Closing Price may be below,
at, or above its NAV. The NAV of each Fund will fluctuate with changes in the
market value of its portfolio holdings. The trading price of each Fund will
fluctuate in accordance with changes in its NAV, as well as market supply and
demand.
Premiums or discounts are the differences (generally expressed as a percentage)
between the NAV and Closing Price of a Fund on a given day. A premium is the
amount that a Fund is trading above the reported NAV, expressed as a percentage
of the NAV. A discount is the amount that a Fund is trading below the reported
NAV, expressed as a percentage of the NAV. A major reason for differences is
that timing discrepancies can exist between the NAV and Closing Price of a Fund.
Trading activity varies and it is important to note that the date/time of the
last trade (which is recorded as the Closing Price) may not take place at
exactly 4:00 p.m. EST when the iShares Funds normally calculate NAV. Each Fund
normally trades on one or more exchanges until 4:15 p.m. EST. "Price Discovery"
is a term for the constant flows of information among investors, corporations
and financial institutions, and can cause market prices to change and evolve
throughout the trading day, even after markets are closed. Price Discovery
between 4:00 p.m. and 4:15 p.m. EST may result in a difference between the NAV
and Closing Price of each Fund.
The following information shows the frequency distributions of premiums and
discounts for the iShares Goldman Sachs Technology Index Fund. The information
shown for this Fund is for the full calendar quarter completed after the
inception date of the Fund through June 30, 2001, the date of the most recent
calendar quarter-end. Charts for the iShares Goldman Sachs Networking,
Semiconductor and Software Index Funds are not presented as these Funds did not
commence operations until July 10, 2001 and did not have any performance to
report as of June 30, 2001.
THE VERTICAL COLUMN OF THE CHART SHOWS THE PREMIUM OR DISCOUNT EXPRESSED AS A
PERCENTAGE OF NAV. THE HORIZONTAL COLUMN INDICATES THE NUMBER OF TRADING DAYS IN
THE PERIOD COVERED BY THE CHART. EACH BAR IN THE CHART SHOWS THE NUMBER OF
TRADING DAYS IN WHICH THE ISHARES FUND TRADED WITHIN THE PREMIUM/DISCOUNT RANGE
INDICATED. ALL DATA PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT BE
USED TO PREDICT FUTURE RESULTS.
--------------------------------------------------------------------------------
PAGE 28 [iSHARES LOGO]
iSHARES TRUST
SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED)
iSHARES GOLDMAN SACHS TECHNOLOGY INDEX FUND
PERIOD COVERED: APRIL 1, 2001 THROUGH JUNE 30, 2001
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
[CHART]
PREMIUMS/DISCOUNTS NUMBER OF DAYS
6.0% 0
5.5% 0
5.0% 0
4.5% 1
4.0% 0
3.5% 0
3.0% 1
2.5% 1
2.0% 1
1.5% 3
1.0% 2
0.5% 4
Less Than 0.5% - Greater Than -0.5% 38
-0.5% 7
-1.0% 1
-1.5% 3
-2.0% 0
-2.5% 0
-3.0% 0
-3.5% 0
-4.0% 1
-4.5% 0
-5.0% 0
-5.5% 0
-6.0% 1
--------------------------------------------------------------------------------
iSHARES SUPPLEMENTAL INFORMATION PAGE 29
THIS PAGE INTENTIONALLY LEFT BLANK.
[LOGO]
45 Fremont Street
San Francisco, CA 94105
www.ishares.com
1-800-iSHARES
1-800-474-2737
iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund
Advisors serves as an adviser to iShares and is a subsidiary of Barclays Global
Investors, N.A., neither of which is affiliated with SEI.
IBT serves as administrator, custodian, securities lending agent and transfer
agent for the iShares Goldman Sachs Series.
iShares are not sponsored, endorsed, issued, sold or promoted by Goldman, Sachs
& Co. Nor does this company make any representation regarding the advisability
of investing in iShares.
(C)2001 Barclays Global Investors. All rights reserved. iShares is a registered
trademark of Barclays Global Investors, N.A. All other trademarks, servicemarks
or registered trademarks are the property of their respective owners.
BGI-F-013-01 (7/01)
Not FDIC insured Have no bank guarantee May lose value