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